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The slowing property market changes the rules for investors.

Whether you plan to buy a property investment or your next home, it’s important to understand that we are moving into a slower capital growth phase of the property cycle.

While the market slowdown could provide breathing space for home and property investment buyers, it will also mean they shouldn’t count on capital growth to bail them out if they buy badly.

”We’ve come through a strong cycle, particularly in Melbourne,” says the head of property research at Macquarie Bank, Rod Cornish reported in Domain.

”But growth over the next 12 months will be significantly slower than last year.”

The impact will be greatest in Melbourne, he predicts, because of the triple whammy of slowing immigration, lots of new housing and the hit to affordability from price rises so far.

”Melbourne, for the first time ever, is less affordable than Sydney,” he says, referring to how much income is required to meet the cost of housing in each city.  In Sydney, slowing immigration will also affect demand but prices haven’t run so far, for so long, and housing starts are only just above 30-year lows, he says.

Cornish says it is always important to make sure you pay a sensible price for property ”but in an environment where prices are not rising strongly, that’s more so”.

“’A rise in the market isn’t going to correct for you if you do pay more than it’s worth,” he says.

The bottom line is that to ensure the property that you buy enjoys significant capital growth over the next few years you will need to research your geographic patch carefully and buy the right property at the right price.

I suggest buying a property below it’s intrinsic value, in an area that always outperforms the averages and one to which you can add value through renovations or redevelopment.



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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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