Pick­ing the right time to buy is cru­cial

Port Douglas & Mossman Gazette - - FRONT PAGE - David Koch

LIKE ev­ery other in­vest­ment, res­i­den­tial prop­erty fol­lows a cy­cle.

Pick­ing the best time to buy and sell to max­imise profit of­ten de­pends on un­der­stand­ing where you are in a cy­cle.

Con­ven­tional wis­dom is that res­i­den­tial prop­erty fol­lows a seven to 10-year cy­cle be­tween peaks.

Within those cy­cles are the usual value, growth, peak and cor­rec­tion phases.

But un­like other gen­eral as­set classes, prop­erty is so seg­mented that in­di­vid­ual res­i­den­tial prop­erty blocks can have a dif­fer­ent cy­cle to a sur­round­ing post­code.

Know­ing where you are on a prop­erty cy­cle means fol­low­ing a strict process of un­der­stand­ing the macro and mi­cro ele­ments af­fect­ing your de­ci­sion. In many ar­eas lo­cal in­flu­ences can be as nar­row as be­ing on the ‘‘right’’ or ‘‘wrong’’ side of the street when it comes to in­vest­ment re­turns. New in­fra­struc­ture like roads can boost or de­flate val­ues de­pend­ing on your prox­im­ity and ac­cess. Like­wise the re­lease of new hous­ing ar­eas can af­fect de­mand and sup­ply and, there­fore, prices. A build­ing boom means more stock and a damp­en­ing of prices. Chang­ing de­mo­graph­ics within an area can ei­ther turn new buy­ers on or off and can nar­row the ap­peal of properties. Hav­ing the right prop­erty for buy­ers at­tracted to that area is a key el­e­ment. As­sess­ing the suit­abil­ity and con­struc­tion of an in­di­vid­ual prop­erty de­ter­mines the risk of any fu­ture costs to rec­tify prob­lems. Those rec­ti­fi­ca­tion/mod­i­fi­ca­tion costs can be pretty hefty if they are un­planned, un­ex­pected and un­bud­geted. Res­i­den­tial prop­erty tends to be a good barom­e­ter of a coun­try’s eco­nomic health. Maybe that’s why on a com­par­a­tive global scale Aus­tralian prop­erty prices are among the most ex­pen­sive in the world. The most im­por­tant eco­nomic in­di­ca­tors which af­fect prop­erty mar­kets are:

Un­em­ploy­ment - the more peo­ple out of work the less likely they are to be able to af­ford to buy or up­scale.

In­ter­est rates - lower in­ter­est rates mean lower re­pay­ments or abil­ity to bor­row more to trade up.

Pop­u­la­tion growth - a baby boom fu­els de­mand for big­ger houses w h i l e mi­gra­tion in­creases the num­ber of po­ten­tial new buy­ers.

Ex­change rates - a fall­ing Aus­tralian dol­lar makes our prop­erty prices cheaper for ex­pats and for­eign buy­ers us­ing other cur­ren­cies.

Con­sumer con­fi­dence - buy­ing prop­erty is a big-ticket item. Low con­sumer con­fi­dence means buy­ers are less likely to take the risk of stay­ing and more likely to stay put.

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