Buying Australian property is always a fantastic investment. Traditionally, it has been one of the best ways to build wealth for many people. With capital appreciation and rental income, investment properties are one of the best ways to build wealth over the long-term in a $7.2 Trillion dollar market. Over the past 30 years, home prices have risen by approximately 7.25% per year, outpacing many other asset classes within the country. When you invest in Australian property, you are tapping into one of the best ways to build wealth, boost cash flow, and create a long-lasting legacy.
Given the most recent situation with COVID-19, the pandemic that is upending life worldwide and creating financial insecurity, many Australians are wondering if they should invest in property right now. Investing during times of uncertainty can feel scary and intimidating. However, even with the pandemic, 2020 is shaping up to be a fantastic year to buy Australian Property. Here are nine reasons why 2020 is the year you should consider buying your first investment property, or you should consider adding another one to your portfolio.
Invest In Australian Property: Properties Hold Their Value Well, So Buy On The Dips
Despite an economic outlook that looks incredibly bleak, home prices are still holding up well during the COVID-19 pandemic. Despite experts predicting that the housing market would crater with this recession, the evidence so far, at least, is pointing to a relatively resilient market. That doesn’t mean there are no good deals, however. Builders are still looking to sell new construction homes, people still need to move, and there are fewer buyers out. Therefore, it is reasonable to expect that there will be some excellent deals on the market even though it is resilient.
This data is consistent with previous recessions. Even though stock markets and other types of equity get hammered, usually property values remain reasonably steady. They may go down, but those declines are often short-lived and dwarfed by future gains.
Therefore, buying in 2020 makes perfect sense. With the help of a trusted property partner, you can find excellent deals due to the pandemic, but if history is any guide, once COVID-19 subsides, the Australian housing market will heat up once again.
The Most In-Demand Areas Have Some of The Best Deals
High-demand areas like Sydney and Melbourne have seen some of the most significant discounts with COVID-19. For example, in Sydney, 6.7% of listings had discounted prices in 2019. This year, in 2020, that figure has doubled. Similarly, Melbourne had 3.7% of listings with lowered listing prices in April 2020, but once the coronavirus hit 10.7% had discounted listing prices as of April 2020.
Large cosmopolitan cities like Melbourne and Sydney have not lost their overall desirability though. People from all over the world still want to come here to live, work, and raise a family. These properties are going to be fervently in demand once the pandemic subsides.
Given how rarely these housing markets experience a downturn, this is a once-in-a-lifetime opportunity to invest in Australia property at a reasonable discount. Once the demand for these areas picks up, you will see both rents and prices increasing, which will mean a substantial return on investment for you!
There’s Less Competition for Purchasing
Right now, people are not buying many homes. With orders across the globe to stay at home, moving isn’t at the top of most people’s minds, unless they absolutely must. The fact that fewer people are buying homes means that you have a unique opportunity to invest in Australia property without facing stiff bidding competition.
Generally, when this happens, you can score a deal as an investor by finding a property with a motivated seller who’s willing to do what it takes to offload the property fast (Perhaps they’ve accepted a job in another country, and they need to sell ASAP).
Given that the outlook for 2020 suggests that this virus will very much be a part of our lives, it’s reasonable to assume that there will be less competition for a good portion of the year. Even though restrictions will be ease in July (at least according to the current plan), buyers and sellers have already indicated they would be cautious for some time after that. Therefore, if you are looking to get into investment properties, most of the year 2020 could be the perfect time to do so.
Mortgage Rates Have Plummeted
Mortgage rates in Australia are near record lows. Given the fact that the economic data is not looking incredibly positive for our country, people can reasonably expect these rates to continue to remain low for the rest of the year.
If you are buying an investment property and require a mortgage, getting one in 2020 might be your best bet for a while. Once the economy picks up again, you may find that rates rise to match the increased economic output.
Even if you are looking at purchasing a property all-cash, the fact that interest rates are so low means that, if necessary, you will be able to take out a home equity line of credit at minimal interest rates.
With that said, banks are also tightening mortgage requirements in response to the pandemic. Therefore, if you are looking to invest in Australia property, you may wish to consider applying for and locking in a mortgage now. Eventually, banks will become even more careful.
Contractors Will Be More Affordable
The economic downturn will ultimately affect the ability of Australians to renovate their homes. Fiscal pressures will make many people put off their new kitchen or bathroom. As such, contractors and tradespeople will undoubtedly be offering discounts for work.
Whether you’re looking to invest in Australian Property to flip it or to rent it out, you’ll very likely need some repairs before doing so. Perhaps the property you have has peeling paint, or it has a problem with some of the plumbing. These types of issues may wind up costing less in 2020 than they would have in years prior.
If you’re flipping, even saving 10% on labor costs can boost your profits substantially. If you’re renting, then reducing these costs means that you can save more of your initial rent money. That’s much better than paying off these renovation debts. Either way, having to pay less for repairs will make your investment more likely to be a positive endeavour.
Lots of Renters for When You Invest In Australian Property
Recessions tend to mean that people rent instead of buy. Economic instability makes people re-think those home purchases that they were initially going to do and consider renting instead. After all, it is much easier to change your housing when you’re on a lease than a long-term mortgage.
Given this, if you buy an investment property now with the intent of renting it out, you will likely find it reasonably easy to find tenants assuming you pick the property correctly. It’s essential to do due diligence with a trusted property partner to ensure that the suburb in which you’re buying has sufficiently low vacancy rates to make it a worthwhile investment. All too often, investors look at places they know or like, which does not always translate to the best investment. With a property partner, you can remove some of the emotion and buy a place that will offer you the best bang for your buck!
Rents May Even Increase
As a result of the above point, rents may even increase. It sounds counterintuitive to think of poor economic conditions contributing to rising rents, but it often does happen.
It is worth noting that, as of right now, rental vacancies have increased substantially. However, that’s likely temporary as people face an unexpected surge in unemployment. Additionally Airbnbs are going back on the rental market since nobody can travel to Australia for tourism. Once COVID-19 begins to subside, and tourists can come to Australia freely, people will likely move back out. Airbnbs will go back on the site again. At that point, the pent-up demand may result in a surge in rents. This demand will bode well for your new investment.
Economic Headwinds Are Temporary
The consensus is that these economic headwinds are temporary. While we should not expect a sharp economic rebound given that this pandemic is still raging in the world, we should also not expect this recession to last for years.
Before COVID-19, QBE predicted that significant cities would see a median house price growth 2019-2022 of 4.1% to 12.7%, depending on the location. These are excellent ROIs.
The underlying fundamentals that caused those projections have not changed. The same people still live and work here. Our housing market is still attractive to people from all around the globe.
What did change, however, is that COVID-19 forced governments around the world to initiate procedures to protect their populations. While a rebound will not be sudden, it’s reasonable to assume that once the pandemic begins to subside, people will go out. Consequently, the economic activity will pick up and march its way back to where it was before the virus.
When you invest in Australia property in 2020, you’ll be in prime position to take advantage of that economic upswing. While returns are never guaranteed, it’s logical to assume that your profits will be better if you buy before the increase and not afterwards.
Australia Will Continue to Be Desirable
The COVID-19 crisis has shown that Australia is a desirable place to live. Our nation handled the crisis reasonably well, and we have a relatively low number of cases. Certainly, we have fewer than other large nations like the United States, the UK, Canada, or Italy. The fact that we have few instances demonstrates that we can manage crises as a country. It also exemplifies to the world how Australia is a safe, desirable place to live, work, and raise a family.
As the crisis begins to subside, in the coming years, people will likely reflect on this experience and use it when determining places to move and invest their money. This crisis has proven that Australia is a quality place to live. The fact that Australia will remain desirable means that your investment in 2020 should have sustainable returns over the coming years.
Invest in Australian Property: There’s Never Been A Better Time
With all the economic uncertainty, trying to invest in Australia property might be the furthest thing from your mind. However, the data and circumstances are pointing to this being a once-in-a-lifetime buying opportunity. Over many years (think a ten or twenty-year timeline) the impacts of this virus will be a blip. Otherwise the housing market is fundamentally-sound.
There are many comparisons between the 1918 Spanish flu pandemic, and this pandemic, floating around the internet. It is worth noting that the decade after was the roaring 20s in which Australians lived, loved, and enjoyed life. It was a decade that had a significant impact on future generations. There is no guarantee that we’ll have another roaring 2020s after this pandemic. Still, if history is any guide, then we should not expect to see a protracted economic fallout from the coronavirus. Instead, we should expect the economy to march upwards once this virus is under control.
Australia, much like other countries, is looking at easing COVID-19 restrictions. The current plan is to lift them by July. This timeline means that during the last half of 2020, the economy will presumably begin its march back up into prosperity. If you want to get an investment property before everything starts opening back up again and prices start going up, you can still do so.
In short, now’s the time to invest in Australian property!
If you’re interested in buying an investment property anywhere in Australia, please contact me. Buy Australian Property Investments prides itself on being your Trusted Property Partner. We work with clients all over the country to find the perfect investment opportunities that will satisfy their goals.
Contact us today and let us find the right opportunity that will enable you to build wealth through real estate!