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Investing

Is Now a Good Time to Buy an Investment Property?

Deciding to buy an investment property is a big move, especially in today’s uncertain market.

However, if you’re in the right financial position, now could be a smart time to make that investment.

Here’s why.

Interest rates and market expectations

Interest rates are a crucial factor for any investor to consider. While they’re currently on the higher side, there’s a consensus among market commentators that they’ve probably peaked and we might see a decrease in the latter half of 2024.

This anticipated drop in interest rates is expected to fuel property price growth across Australia’s capital cities with:

  • ANZ predicting a 6.0% rise in capital city property prices. Perth is expected to lead the charge with growth of up to 11%. Brisbane (9-10%) isn’t far behind, followed by Sydney (4-5%) and Melbourne (2-3%).
  • Commonwealth Bank expecting a 5% increase in capital city prices, with Brisbane standing out with 6% growth pencilled in.
  • NAB forecasting a 5.4% average rise across the capitals, with Brisbane (6.5%), Perth and Adelaide (6.2%), Melbourne (5.5%) and Sydney (5%) all seeing increases.
  • Westpac predicting prices to climb 6% across the combined capitals. Perth has been earmarked for the highest growth at 10%, followed by Brisbane at 8%, Sydney at 6%, Adelaide at 4% and Melbourne at 3%.

Supply and demand dynamics

Another factor supporting the market’s strength is the ongoing imbalance between housing supply and demand.

Despite a recent increase in listing activity, the supply of homes for sale remains strained.

For example, while PropTrack reports that January was the busiest start of the new year for new listings in Sydney since 2011, the total number of properties listed for sale was still about 10% below the decade’s average.

In cities like Brisbane, Adelaide and Perth, the shortfall is even more pronounced, with the total number of properties advertised for sale down more than 40% relative to the prior-decade average.

But while supply is low, demand remains extremely high, fuelled by rapid population growth that’s seen our country add more than 600,000 people over the year to June 2023, according to the Australian Bureau of Statistics.

As most new arrivals rent rather than buy, the Australian rental market continues to tighten, with the national vacancy rate dropping to an all-time low of 0.7% in February, according to Domain.

Limited supply has increased competition among renters, pushing rents up with CoreLogic reporting that national rents grew 0.9% in February, marking the highest monthly jump since March 2023.

Why this suits investors

Let’s break down why all these factors make it a prime time for property investors.

  • High rental demand: Right now, lots of people are looking for places to rent, but there aren’t enough properties available. This high demand means your investment property is likely to be rented out quickly, producing a steady flow of rental income.
  • Rents are going up: Because so many people are competing for so few rentals, the amount they’re willing to pay is going up. For you, as an investor, this means more money coming in from your property. Higher rent can help cover your costs and make owning the property more profitable.
  • Interest rates expected to drop: If you’re borrowing money to buy your investment property, lower rates mean you’ll pay less interest. This makes the overall cost of buying a property lower and could increase your profits.
  • Potential for capital growth: With all four major banks forecasting property price increases across most capital cities, investors have the potential to enjoy capital growth. Buying before these predicted price rises means investors can get ahead of the curve, maximising the potential for capital appreciation.

Investing in property now could be a smart move, but it’s important to think about your own financial situation and do your homework before jumping in. An expert mortgage broker, like Shore Financial, can help with this.

Looking to buy an investment property? Shore Financial can help. To discuss your scenario, call us on 1300 416 700, email us on info@shorefinancial.com.au or fill in this online form.

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