Is 2019 the year to invest in property?
By Bill Savellis
Are you planning to buy a home or invest in a property in 2019?
If you are, read on. A recent Property Investor Sentiment Survey conducted in November 2018 found most property pundits opine that property prices would either reduce or remain the same in 2019.
The survey was conducted by speaking with 1, 802 everyday Australians from all walks of life who had already expressed an interest in investing in a property.
Of these, 3.4% had a combined family income less than $50,000 and 26% had more than $200,000. Most participants had an income between $100,000 to $200,000.
Additionally, 12% of the participants did not own a property, while 59% had up to 3 properties. Only 5% had a staggering +10 property portfolio. Clearly a diverse group.
Over 50% of the participants believe it’s a good time to invest in property, despite the majority not expecting any capital growth over the next 12 months, indicating that people are taking a longer-term view.
This buyer optimism was significantly lower than last year, where 61% of the participants thought it was a good time to buy.
Interestingly, the number of participants who expressed uncertainty over buying property in the coming year had also increased to 23%, from 16% the year before, suggesting the recent slowdown in property was discouraging potential buyers, and
48% of participants thought it was a good time to fix their interest rates, suggesting they believed interest rates were likely to increase.
Whilst we found the survey to be an interesting insight into the minds of investors, there are factors that have yet to truly materialize and will, undoubtedly, impact buyer sentiment when they do.
Changing Tax Policy: With Labor’s policy to limit Negative Gearing to new properties only and their policy to reduce the Capital Gains Tax Concession from 50% to 25%, common strategies, such as rentvesting and renovate to flip, will have limited value in this new world order.
Could these changes result in lower capital gains and rental returns, experienced in previous decades? And if so, how will this play out in the minds of buyers (and sellers) when the impact of these policies are finally felt in the hip pockets of investors?
While it is too early to assess the implications on such moves, given that an election is being held in the first half of 2019, one might argue a wait and see strategy will make the most sense.
Tougher Lending Standards: What impact will higher interest rates have on household budgets (and your budget)? Even if you don’t believe the RBA will raise interest rates, could tougher lending standards imposed on banks, result in investors unable to refinance, seek lower interest loans or borrow from non-bank lenders at higher interest rates? Time will tell.
To Sum It All Up
All indicators suggest that property investors are cautiously optimistic, at least for now. The survey also indicates that most investors are happy to look beyond the short-term uncertainty, and plan for the long term, which is sensible.
However, there are always risks involved.
Potentially flat or negative growth, lower return yields and higher interest rates could undermine the effectiveness of this long term strategy, and put you under unnecessary financial pressure.
Going back to basics, is a sensible way of ensuring you don’t get blindsided by adverse market conditions. Looking at a more comprehensive strategy towards building, and protecting your wealth may save you from unnecessary heartbreak in the future.
You might want to consider downloading the Strategy Planner tool, as it can help evaluate a wide range of cash flow strategies you can utilize, to adapt to the changing climate of the property market.
Information published on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in this document is General Advice and does not take into account any person's particular investment objectives, financial situation and particular needs.
Before making an investment decision based on this advice you should consider, with or without the assistance of a qualified adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. Past performance of financial products is no assurance of future performance.