5 Tips for Understanding the Property Market

Although it is recognised as something important and worthwhile, to many people the property market can seem an absolute mystery. With highs and lows of the global and national economy, understanding how the crashes and fluctuations affect the property market can be challenging, but a better understanding of the property market does not have to be difficult to obtain.

No one wants to make an error of judgement in entering the property market at the wrong time or by purchasing the wrong investment property. Similarly, those pursuing property investment need to ensure that they are not over-committing financially while still buying a property that will enjoy solid capital growth.

It is indeed a precarious balance and there are a number of factors to consider. To help property investors with this, we give an overview of five tips for understanding the property market.

1:  Property markets have always moved through cycles. Sometimes trends lead property prices to dramatically increase, but these periods are followed by times of little, no or even negative growth. However, recovery occurs eventually and an upwards move results. The point here is that slower periods are normal and, when an investor is in the right position to do so, they are able to take advantage of them, because despite prices remaining low, rents continue to rise and returns on investment increase.

2:  A number of Australian cities are now considered unaffordable for property investors. However, some deeper analysis of the situation reveals some interesting insights:

 

  • Multiple property markets exist in every state; this means that some properties increase in value and do so more rapidly than others, while others experience a reduction in value.
  • Different markets are determined by geographical locations and different price brackets.
  • Sometimes, properties at the more affordable end of the property market hold their value better than higher end properties. In part, this is because properties of lower value have typically experienced less erratic price changes. The trade off is that these properties have also created less capital growth.

3:  It is often the case that would be investors (as well as investors already in the market), avoid taking action because they are worried about crashes in the property market. While it is human nature to fear financial loss and hardship, failing to take action sometimes results in great and potentially lucrative opportunities being lost.

4:  Obtaining sound advice is critical as, depending on the property market, strategies used in different economic times will not always be as effective. This means that some of the strategies that are used for sound property investment in prosperous economic times will not necessarily be the most sound strategies for use in more unstable economic contexts. To be a successful property investor and to capitalise on the opportunities presented by a changing market, different approaches may need to be adopted over time.

5:  To be most successful in the property market, investors need to be clear about their property investment goals. Not only will this assist them to identify and purchase the most appropriate investment property for their needs, it will assist with the process of securing finance in the face of a changing economic climate.

Having an at least basic understanding of the property market is useful for existing and new investors. In order to make wise and lucrative decisions and to take advantage of opportunities, investors benefit from an understanding of how the property market fluctuates and falls and the impact of this for property owners.

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