As safe as houses

Ques­tions al­ways ex­ist about the vi­a­bil­ity of the prop­erty mar­ket, but there’s no rea­son for in­vestors to be con­cerned in 2017, writes Grae­meMcDon­ald

ABC (Australia) - - DELIVERIES -

Hello, ev­ery­one. By now you will be knee deep in the rst term, won­der­ing when the chaos and madness will end. You will be look­ing at the book­ing sched­ule won­der­ing how you will cover yet an­other round of swim­ming ac­tiv­i­ties, school ex­cur­sions and the like.

You’ll prob­a­bly also be won­der­ing just what you will do with the ever-grow­ing pile of lost prop­erty that no-one ever seems to claim. The thought of the sum­mer break mem­o­ries are well in the past and busi­ness is now front of mind.

As al­ways, there are things that are hit­ting the news­pa­pers and re­port­ing ser­vices that keep you won­der­ing where the econ­omy is head­ing. One of the big and al­most weekly re­ports we see, and I have writ­ten about on a reg­u­lar ba­sis, is the prop­erty mar­ket. Head­lines such as ‘Prop­erty mar­ket will con­tinue to rise’, ‘First home buy­ers priced out of the mar­ket’ and, of course, the one that brings the most in­ter­est: ‘Prop­erty bub­ble set to burst’.

Let’s put some com­mon sense be­hind all this. Is the prop­erty mar­ket ris­ing? Yes. Is it likely to burst? Prob­a­bly not. Will it slow down at some stage? Yes. Are some types of prop­erty bet­ter to buy than oth­ers? Yes.

Let’s be frank. Will prop­erty con­tinue to rise in value? Yes. And, his­tor­i­cally, it has for as long as records have ex­isted. The only time it re­ally goes back­wards is when we have a ma­jor eco­nomic down­turn – ala the GFC, when ev­ery­thing went pear shaped.

Houses in good ar­eas with ac­cess to trans­port and ser­vices will al­ways rep­re­sent a good buy. Apart­ments and the like are a dif­fer­ent thing. Most ma­jor cap­i­tals have a large num­ber of th­ese com­ing up for sale in the next year, and val­ues are at best stag­nant. Many of th­ese are built to max­imise the num­ber in a build­ing, and many banks have said they will not fund any of them that are less than 50 square me­tres. If you have ever looked at a 50sqm apart­ment, you’ve won­dered why any­one would buy one in the rst place. The big con­cern is from a re­sale point of view; at best they are a short-term stu­dent ac­com­mo­da­tion op­tion, in my opin­ion.

The other side of this story is that rent is go­ing up again. This is true in some ar­eas, and when you think about it log­i­cally, so it should. More peo­ple rent be­cause they can’t af­ford to buy, with de­mand out­strip­ping sup­ply.

Just on the ris­ing rents for apart­ments and the like – in ma­jor CBD cen­tres there is a ris­ing preva­lence of Airbnb avail­abil­ity be­cause land­lords can make more in a day us­ing this model than they can in a week with rent­ing.

It prob­a­bly won’t be the last time I cover this topic as it is a con­stant head­line and talk­ing point. In all cases, make sure you do your re­search to en­sure you are clear in what you are buy­ing when talk­ing to your fun­der.

A good bro­ker will be able to source and walk you through a num­ber of sce­nar­ios that will t your cir­cum­stance. If you need as­sis­tance, feel free to con­tact me and I can get our res­i­dent prop­erty nance ex­pert to walk you through the op­tions.

Any­way, enough from me. If you would like to in­ves­ti­gate any­thing raised to­day or dis­cuss any other is­sue, give me a call.

The views ex­pressed above are those of the writer and not those of the Pub­lish­ers of this mag­a­zine. If you want to know more on this, or you have a sug­ges­tion for an ar­ti­cle please feel free to email me on

graeme@mon­eyre­sources.com.au. The above in­for­ma­tion and/ or sce­nar­ios are for in­for­ma­tion pur­poses and should not be treated as­specic ad­vice. Please re­fer to your ac­coun­tant or nanci al advisor for in­for­ma­tion re­lated to your own par­tic­u­lar cir­cum­stances.

Graeme McDon­ald A mem­ber of the Money Re­sources Group

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