Why a cool market can be a hot time to invest

When long-term capital growth is the goal, there’s never really a wrong time to buy.

20 May 2019

What goes up must come down, it’s a truth we know all too well. But as with the economy or the tides, the ebb and flow of the property market is fairly cyclical and something to be expected. The last 45 years have seen six national housing price downturns of 5% or more (adjusted for inflation), including two in the last decade alone. While the current market conditions in Sydney and Melbourne might pale in comparison to the peak of July 2017, for savvy investors there is a whiff of opportunity in the air. Flipping houses for a quick buck might be off the table (for now), but those with a long-term investment strategy and a stable income find themselves in a buyer’s market.

Investment Sales Manager at Frasers Property Australia, Anthony Lai, says that there’s no use in trying to predict the market cycles. “It’s all about your level of confidence in yourself and what you want from your own financial plans,” says Anthony.

“The reality is you can’t predict either the top or bottom of the cycle. It’s better to take a longer-term view where any bumps in the cycle tend to get ironed out in the long run.”

It’s a sentiment echoed by 26-year-old investor Ben Huang, who recently purchased a three-bedroom apartment in Ed.Square, a new urban mixed-use development located in Edmondson Park in Sydney’s South West. “When it comes to good markets or bad markets, it really is just the consumer confidence level,” Ben asserts. “If it’s a down market, which it is currently, then consumer confidence is definitely low and everyone feels like ‘oh, this is not good. I don’t want to buy right now’. But to me, I see this as the best opportunity to buy.”

Nathan Kerr, Head of Sales at Astute Financial Management is also quick to warn against the perils of the good market / bad market debate. “I don’t think speculation is ever good,” says Nathan. “It all depends on what you want to achieve. If you have a plan and you have good guidance around that plan, then that’s the most important thing.”

Arguably, more crucial than when and what you buy is where you choose to buy it. A quality product in an area with high projected population growth will almost always be a smart investment. When assessing potential investment properties, it’s important to take a look at the suburb profile and surrounding amenities, current or planned.

Anthony Lai says that many investors are missing out on great opportunities by staying close to home. “Many investors like to invest where they live, but it doesn’t have to be that way. One of the things I think the current market conditions offer up is portability,” says Anthony. “The Inner Suburbs of Sydney might be down, but by contrast Perth or Brisbane look appealing.”

Ben Huang also chose to take an objective approach and invest away from home. “I currently live in the city, so if I was to live all the way out at Ed. Square… I can’t imagine that,” he explains. “But that’s not the case for people who are currently living out in the Western Suburbs. For them, their work and families are already close by.”

Widening the lens of opportunity beyond even your own city and state might reveal greener pastures. “If you look right across Australia as your opportunity then Sydney’s in a downturn off an incredible high, but Brisbane’s quite consistent and Perth’s bouncing back,” says Nathan. “It all depends on what you want to achieve.”

When it comes to whether or not you should invest in property, there is no one-size-fits-all answer. It’s a decision that’s best guided by your own confidence and capabilities. The best advice anyone can offer is to seek more advice from your mortgage broker, financial advisor, sales agent – use the resources you have access to.

“There’s no doubt that lenders are asking a high level of detail around getting loans approved,” says Nathan. “So it’s important to sit down with someone and make sure you understand the process and what you need to provide to get it.”

Investing in property comes with potential risks and rewards regardless of the market conditions, but it’s your own goals, expectations and preparation that will ultimately determine your experience. Ben Huang certainly isn’t letting the cooler market conditions deter him from pursuing his goals.

“My plan is to get a new investment property at least every two years, which is definitely manageable if I do my finance correctly,” says Ben. “I just want to build up a portfolio, so I don’t have to work the rest of my life, really.”