The Australian property market is experiencing significant pressure to perform and with an average drop of 8% per annum since 2017, investors are in a tight spot whether to buy or not. While the rule of thumb for buyers is to buy when the property market takes a dip to capitalize on the price difference, economists are hesitant to recommend this based on the lack of interest in major property hubs. For investors, a drop in the ask price might also result in a drop in potential rental income and could even cause financing issues. But this could also just be the best time to buy...
Cash Could Be King
Investors who are cash flush and don’t need to negotiate with banks for finance, might be in a better position to further negotiate a good purchase price on a property. Cash could also be a game-changer for those who are required to make some improvements to the property before potential tenants move in, as this doesn’t place any pressure on repayments.
In a property market slump, investors might have the good fortune of picking up prime properties at a steal, but they also run the risk of entering a lowball rental market. Those who purchase their properties cash, start seeing a return on their investment a lot sooner as they don’t have the added expense of mortgage interest. While investors would need to wait for the yield to increase, they at least have the good fortune of buying their asset at the lowest possible price.
Lenders Might Just Come To The Party
With the Reserve Bank’s decision to cut the interest rates, property investors who opt for an investment loan might just get the better end of the deal, especially considering that the banks are loosening their lending criteria as well. This is a bid to stimulate the housing market, and this is usually a precursor for rising property prices. For property investors, this is the ideal time to get in while it’s still low, especially if their repayment calculations steer them in the direction of applying for an investment loan.
Now Is The Time For A Fixed Rate
With the lowered interest rates, mortgage lenders are in a tight position to remain relevant and have since reduced their lending rates too. In a bid to be competitive, this also includes their two-year fixed mortgage rates, which is a good time for property investors to leap in. The fixed rate not only makes budgeting a little easier, but also ensures that the investor has time to sell if the interest rates shoot up. The leeway gives them enough time to decide whether to carry on with a higher rate in future, or put the property on the market again.
The Australian housing market is in an interesting time right now, and for the investor, the question remains whether it’s a good time to go for it or not.