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The president of one of Australia’s largest bodies of professional buyer’s agents says it is possible to find value in the property market post boom.
Rich Harvey, president of the Real Estate Buyers' Agents Association of Australia (REBAA) said buyers should be purchasing investments that will provide long-term price growth, as it is impossible to maintain the price growth seen in Sydney and Melbourne markets.
He also said buyers need to take on board the warning signs from the Reserve Bank of Australia and could find themselves in difficult situations if they overleverage.
“Generally speaking, property is a good safe investment but not every investment performs the same. “What’s happening now is that we’re starting to see some good warning shots being fired across the bow by the Reserve Bank,” said Mr Harvey.
“We’ve all had this fantastic low interest rate environment for some years now and the natural economic reaction to that is for people to leverage high and leverage hard. It’s very easy for home buyers and investors to overleverage at this stage of the cycle and then get themselves into trouble by anticipating that their property will grow 10 per cent next year which it probably won’t.
“Certainly, as the market cools people have to watch how much they’re spending on their debt and realise that we simply can’t sustain the level of growth we’ve had.”
In order to find value in the property market post boom, The REBAA has provided the following tips:
1. Moderate growth expectations
In order to survive in a post-boom property market, especially in Sydney and Melbourne, the market must be observed from a long-term point of view, and manage expectations from there. It is a good idea to go after property in growth areas that can survive through to the next property cycle.
2. Value adding
Renovations can be an easy and simple way to increase the value of a property, such as replacing carpet or floor boards, updating the kitchen, repainting, or adding another room.
Taking up a building project from scratch and subdividing or constructing granny flats are two other options to consider.
3. Branch out
Buying property close by is good to start with, but do not let that familiarity stop you from buying property located in regional or interstate locations, as good deals could be missed if you adhere to just within your own back yard.
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