As the COVID-19 pandemic continues to impact everyday life, investors with security might’ve been presented with the perfect buying opportunity, an industry expert has found.
During a webinar on Real Estate Business' sister publication Smart Property Investment, Pure Property Investment founder and director Paul Glossop explained to viewers that potentially falling property prices and incredibly low interest rates creates a buying opportunity for property investors.
Highlighting the importance of sorting out finances and job security first, Mr Glossop said, “Buyers with intention to purchase in September, I couldn’t think of a better scenario that someone could be in right now than staying true to that.
“If anything, be prepared to be a bit more nimble with that time frame. If you are in a position to go a little bit sooner in June, July that could be the perfect time to buy,” Mr Glossop said.
With investors likely to see interest rates over the next three to five years at 3 per cent, and owner-occupiers closer to 2.5 per cent, Mr Glossop believes it is providing a unique opportunity for buyers.
Investors with a principal and interest repayments in a 4.5 per cent gross rental yield residential asset could be cash flow neutral, according to the property investor.
“You’re going to be in a position that is so unique that you could start paying off your debt immediately and ultimately have zero impact on your cash flow even if you borrow at 100 per cent,” Mr Glossop said.
While asset prices could fall, Mr Glossop highlights how quickly the property market is likely to bounce back just as quickly should it fall due to the impacts of COVID-19.
“Over the last five downturns, the time it took to get to the bottom is almost the equal time to return to equality before it comes down.
“As much as we don’t know how long it will take to find the bottom, what history has shown is that by the time we find the bottom, it will take almost the same time to get back to the top,” Mr Glossop said.
Despite the troubling times and the opportunity for some investors, the overall impact on the property market is predicted to be low as owners have options in the short term.
“I expect to see three to six months of immediate pausing on the market, whether that is going to reflect on downturn in prices, I think it will be swayed a lot by volumes and desperations,” Mr Glossop said.
However, Mr Glossop highlighted that even in troubled times with predicted job losses, home owners are unlikely to need to panic sell as they still have options.
“We don’t see a huge amount of people having to panic sell because we still have a sub 25 per cent LVR right across the country.
“The vast majority of owner-occupiers and investors are in a very strong space, so liquidity is still there, people don’t need to panic sell even if they don’t have an income for a period of time.”
“We have banks pausing potentially mortgage rates, we could have a package that will support renters, which will allow landlords not to panic sell if they don’t have an income on a property.
“And remember investment properties are a unique asset class that allows people to insure their income for loss of rent for two to 16 weeks. So, they will have a lot of levers to pull to be able to hold in these times,” Mr Glossop concluded.