home value growth, property market, brisbane, gold coast

Property Market Australia-Are The Current Values Going To Overshoot?

Property Market Australia-Are The Current Values Going To Overshoot?

In a recent news article on the ABC website the statement read out, “The International Monetary Fund has cautioned that the recent surge in Australian property prices and rising investor expectations could cause values to “overshoot”. ”

The Astute Investments Team decided we should put this news past the desk of our Director, Phil Game, who is a licensed Financial Planner with a Masters of Business and a financial Diploma. Here’s what he had to say –

“What the IMF is saying is very true and something I’m sure we’d all like to avoid.  It would be far more beneficial for all investors if we were to see a steady growth in the markets rather than boom periods followed by slow or negative periods of growth.  It’s good that they’re warning investors of these dangers but the Australian property market has not performed well at all for about 4-5 years.  This has caused a pent up demand for property and now that conditions have improved buyers are flocking back into the property market.  So the property market is due for some good growth and hopefully it is a more sustained period of consistent growth rather than a boom.  Although the IMF is asking investors to be cautious this process is all part of a healthy property cycle and nothing to fear.

Another good control in Australia is our banking system.  Most banks are quite cautious and use a very thorough process for determining if a client can borrow for a property purchase.  As such our systems alone tend to hold and curb the property market booms which is a good thing.

Having said that, investors should always be cautious when considering the growth of their property portfolio.  Here are some tips to consider when buying to avoid being caught out:

  • Look at your servicing and loan repayments at a higher interest rate than the current levels
  • Apply a good vacancy rate to the property to ensure you can afford to hold it for periods without a tenant
  • Seek financial advice to ensure affordability and that the purchase is inline with your goals
  • Research the purchase area thoroughly
  • Try to avoid following the crowd, by the time the media is talking up a place it’s probably too late
  • Look for locations that have been under performing for a while as these have the greatest chance of a rise
  • Look at a long term window for the property and not short one as seeking returns in the short term carries higher risks

So please be cautious when entering the property market but at the same time enjoy the positive outlook as it’s been a while since we’ve seen this level of confidence.  Happy shopping!

If you would like to seek financial advice to ensure affordability and that the property purchase is inline with your goals, then contact Phil Game of Astute Investments online or call 1800 044 429

Reference to the ABC article
http://www.abc.net.au/news/2013-11-21/imf-issues-property-warning/5107090