The secret to creating wealth through property

Are you making investment decisions based on where the future will be, or based on the last 30 days of news?

When driving your car, focusing on the bugs stuck on your windscreen will result in missing where you want to go, or worse, you’ll crash! When it comes to creating wealth through property, the same concept applies – let me explain.

Right now, you can be forgiven for feeling anxious about investing in property. After all, the current environment can be perceived as bleak with negative news being thrown at you here, there and everywhere.

So of course you may have fallen out of love with property as an investment choice given that we’re experiencing some headwinds right now - which include;

• a softer property market (generally speaking)
• rising interest rates (although the peak is here, or very near!)
• high inflation (resulting in the RBA taking harsh action to curb inflation)
• a significant reduction in your borrowing power (when compared to a year ago)
• higher home loan repayments
• a fixed rate home loan cliff (which is just about to start)
• new stringent rules which landlords must abide by
• talks by State governments on how to tackle the issue of rising rents (landlords may be restricted on how often they can increase rents)
• higher land tax for Victorian investment property owners (announced in the FY23/24 Victorian State Budget)

For some, the above issues have taken the shine off property as an investment choice. For others, they welcome the above issues as it presents a golden opportunity to set the foundation for the next property boom.

Markets go through cycles, and property is no different. Cycles are driven by many factors, however the two main drivers of any market are Fear and Greed. Right now, the market is fearful in light of the above issues.

Here’s the thing, each cloud has a silver lining. Savvy investors know very well that “this too shall pass”. In fact savvy investors love market cycles like we’re experiencing right now as this is where more property millionaires are made, during the down time.

Here are the stages of a property cycle:

If we consider Melbourne and surrounds for a moment, the property market appears to be at the “bottom” stage (green) – as shown above.

There are many factors to support this view, which include – but not limited to – lower property prices achieved when compared to 2021/2022, higher rental returns, more affordable property values, an increase in vendor discounting activity, and days on market starting to reduce.

Then of course there is a bridge that will take us from the “bottom” of the cycle to the “rising” stage of the property cycle – and this is where I believe we’re at right now. There are signs to support my views here, which include; stronger prices being achieved for A grade properties (with many selling above reserve), a consistent increase in auction clearance rates, and an ongoing low supply of quality properties available to buy.

If you’re currently making investment decision based on the last 30 days of news, then you’ll most likely miss an amazing opportunity to capitalise on the current market cycle and you will miss the upturn – potentially leaving large sums of capital gains on the table.

I have been invested in the property market for over three decades, and have been involved in the property and finance game for the same time. A common theme I have witnessed during this time is that many people sit on the sidelines feeling anxious about the noise around them. Then when the media starts blasting positive news, this group of people get FOMO (Fear of Missing Out) and they rush out to buy an average property with average prospects for capital gains, and they usually always pay above intrinsic value!

The moral of the story is this. Make your investment decisions on where the world is going, and not where it is right now. If you play the long game, you can't lose. And this is the secret to creating wealth through the power of property!

I hope that my blog today helps you in some way. If we can help you buy your next property led by strategy, please contact us and leverage our depth of experience and as we are ready and willing to assist.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.