The Australian housing market is going gangbusters and the signs are that the boom is here to stay for some time.
But how do you profit from this current growth cycle?
In today’s podcast, I discuss 6 property trends that you’re going to see – and hopefully take advantage of – in 2021.
Then, in the second half of the podcast, I chat with property researcher John Lindeman, who will give his thoughts on how to profit from this stage of the growth cycle, because if history repeats itself, lots of investors will, unfortunately, lose money instead of profiting.
My aim is to ensure that at the end of this episode you’ll have more direction and certainty to take advantage of our property markets over the coming year.
- Demand from Homebuyers Will Remain Strong:
People have saved money, borrowing costs are lower than they’ve ever been, and interest rates won’t rise for a while. Plus, COVID is under control. These factors will inspire more people to buy and FOMO will continue to drive homebuyers into the market.
- Investors Will Eventually Squeeze Out Homebuyers:
Increased competition and rising property values will edge out first-time homebuyers as more investors get into the market.
- Property Prices Will Continue to Increase:
Consumer confidence, low-interest rates, economic growth, and a favorable supply and demand ratio will all help drive property values. However, some segments of the market will continue to struggle.
- Buyers Will Pay a Premium for the Right Neighborhood:
People want 20-minute neighborhoods, with the ability to live, work, and play all within a short distance of each other. And buyers will be willing to pay more to get that.
- Expensive Properties will Outperform:
Higher-end properties are leading the way in growth.
- Upgrading Will Be Common in 2021:
After lockdown, small apartments will seem to confine, and people who a deposit by not traveling or spending much on entertainment during the quarantine will be eager to upgrade to a bigger and better place, especially given the ease of borrowing money.
Profiting from this growth cycle isn’t as easy as it seems. Property researcher John Lindeman reminds us of Warren Buffet’s famous two rules that all investors must follow if they want to ensure their success.
The first rule is never to lose money and the second rule is never to forget the first rule.
But if history repeats itself, some investors will lose money even though overall our property markets are booming, Today, John Lindeman and I discuss the things you need to know in order to profit instead of losing money.
- Investors need to make sure they’re buying in markets where the growth is yet to come.
- You can’t measure growth by the length of time that price growth has been occurring or the amount of growth that has taken place.
- Growth is revealed by the types of buyers creating the demand.
- First home buyers, upgraders, downsizers, and investors have different motives and limits when it comes to buying property
- If we know which group is doing most of the buying, we can estimate when the growth is likely to end
- Investors are motivated by profit.
- Owner-occupiers are motivated by affordability
- In the current market, most buyer demand is being generated by owner-occupiers, not investors
- Investors can take advantage by buying property in areas that have not yet experienced growth but have the potential to.
- As first-time homebuyers reach affordability ceilings are reached and their growth slows down, growth will ripple to more affluent areas as upgraders take advantage of the market.
- So far, not much of this has happened yet.
- However, this means that suburbs in desirable locations are likely to be next to rising
- In general, it’s better to be in an area that’s going to be stable.
- You also want an area that’s in continuous demand.
- Capital growth has been stronger in the CBD and flattened out the further away you get from the CBD.
- It was predicted that a lot of people would move to the country post-lockdown, but that hasn’t panned out.
- Once the pandemic and the lockdowns passed, people realized they didn’t really want to relocate to the country and away from their work, family, and friends.
- Many banks, economists, and other analysts get their forecasts wrong last year.
- They looked at historical events like the Great Depression and the Global Financial Crisis, saw those caused property markets to slump, and assumed the pandemic would have a similar effect.
- That assumption was incorrect.
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“If Coronavirus has taught us anything, it was the importance of living in the right property in the right neighborhood.” – Michael Yardney
“Upgraders are now seeing the value of their home increase, and a lot of people after COVID, “I deserve a change. I’m looking for something different.”” – Michael Yardney
“You’ve really got to see property as a long-term investment.” – Michael Yardney
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