Property is a long-term game


13/09/2013

Property is a long-term game

 

By Catherine Cashmore

Tuesday, 13 September 2011

 

 

Statistics are beginning to show an increase in the number of property investors taking advantage of what has widely been spruiked as a “buyer’s market”.  Not only is this evident in the increased numbers of buyers lining up outside open for inspections and attending auctions, AFG (the country’s largest mortgage brokering group) reported their mortgage sales hitting an 18-month high in August – that’s some $2.7 billion, with 38% going directly to property investors. Owner-occupiers are also on the increase, and according to the ABS, they have been for the past four months.  Even first-home buyers are coming back to the fold.  Mortgage Choice recentlyreported a marked increase in first home loans making up 35% of all loan approvals in June compared with an average 27%.

Considering all the evidence points towards purchasers increasing, not decreasing, why then is turnover 20% down on this time last year and also roughly 6% lower than this time during arguably the worst period of the GFC in 2008?

It’s true there’s still a lot of overpriced stock and vendors not willing to reduce expectation.  These are the vendors who don’t need to sell, and therefore can afford to hang out for weeks on end hoping some hapless purchaser will love the home so much they’d be prepared to pay a premium.  Vendors love reaping the benefit while the market is suffering unsustainable booms such as the 20% rise we had at the beginning of 2010 – however these booms are always followed by market corrections as part of the typical ebb and flow of the property cycle and thus leave many unprepared to moderate expectation. It’s easy to spot the overpriced listings – just watch for the properties that change agency hands every four to six weeks as each agent attempts to “educate” the vendor on price.  In the end agents often have no choice but to shed the listing and concentrate on the stock they can sell.

However, there’s another problem hounding the market – an abundance of poor-quality stock marketed principally for investors and has little attraction for owner-occupiers.  It’s an old adage in real estate, but one that holds up to scrutiny:  “Good real estate sells well in all markets” – and in the current market there’s a surfeit not ticking the right boxes – hence the reason turnover has been so low. There’s plenty of stock available, but with the emphasis firmly focused on low quality rather than low quantity.

The Australian Housing and Urban Research Institute recently reported that 25% of investors sell within a year of purchasing. The exact reasons for such a high percentage is not specified, however it’s a concerning statistic and an indication large numbers are not seeking the right advice.  If a vendor is trying to sell after only one or two years of property ownership, a market correction can have serious implications on their profit and loss scenario. It’s one of the reasons property ownership should always be viewed with long-term spectacles. Until you’ve held property through all stages of a market cycle, you can’t call yourself a seasoned investor and you risk your best intentions of property ownership failing miserably.

Building wealth in property has its key firmly locked in long-term capital appreciation and considering owner-occupiers principally fuel the market, it’s imperative to focus on property that holds lasting appeal for this demographic. Get this formula right, and even on the sliding side of the property cycle, losses will be minimised and gains maximised.  However as a property investor you’ll face a mine field of advice from financial advisors, sales agents, property planners, developers, not to mention numerous magazines and books all promising the road to riches – and never more so than in a downward phase of the property cycle. Some advocate buying apartments, others land, and everyone has their own opinion on the “hot” suburbs.  But understand that there’s no one golden egg to property investment, and everyone’s individual needs must be assessed based on their own financial circumstances.  Furthermore, the landscape has changed rapidly over the past few years with a marked increase in high-rise accommodation marketed mainly at investors, over standard single-level subdivisions, which is where most home buyers would rather locate.

However, it may not be wise to hold back, because if you think we’re heading for further falls any time soon, think again.  We live in a country with a rising population, where the best seats in our major cities have been taken and no one’s all that eager to move into the outer-metropolitan or regional areas where land is arguably overpriced due to hefty development overlays.   The housing market is both fragmented and fickle.  It’s made up of individuals like you and me with different needs and different budgets. Each piece of real estate has its own intrinsic quality – and with a lack of good stock, it’s reasonable to assess that there are always going to be areas of the market that outperform.

Therefore, before you purchase take some time to think about what stands out about the property you’re interested in.  It could be located in the best street in the suburb, or situated on the largest north-facing block of land – have the best light and biggest balcony in the block, or hold the lasting attraction of period appeal.  Whatever the reason, be careful what you choose and if you do find yourself selling in a soft market, it’s more likely you’ll still come out winning.

Catherine Cashmore

 

 

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Catherine worked tirelessly in finding me a great property at a good price. She did things that I wouldn't have done (hours and hours of legwork) and more importantly, couldn't have done (organising the purchase before anyone else had even put in an offer). When I was ready to give up, Catherine kept working. I'm certain that I never would have been able to buy the same property within 10k of what we eventually settled at.... David
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Cashmore & Co are experts in market cycles and property investment 

Catherine Cashmore has accrued many years experience working in the Australian real estate market. She is President of Australia's oldest economics organisation (Prosper Australia) and has lectured widely on the real estate cycle and the economics of land.

it's this knowledge that sets Cashmore & Co apart from other real estate agencies. 

Cashmore & Co won't 'spruik' the market, or try and convince you that it's always a good time to buy.

Rather, Cashmore & Co use their expertise to assist investors, home buyers, and developers to make wise decisions based on their individual budgets and unique circumstances. 

They simplify the buying process saving buyers thousands in negotiation, as well as preventing costly mistakes.

Many of our clients benefit from insider secrets we have gleaned from years of experience that buyers, sellers, and developers, simply do not have access to. 

You can’t help but accrue this kind of on-the-ground knowledge when you’re involved with literally dozens of purchases and sales each year.(And also when you have a rare knowledge of the long-term property cycle as your framework.)

Whether it’s getting into a suburb you thought was out of reach, saving a hundred grand by avoiding a too-good-to-be-true apartment pitch, or getting a foot through the door in a hot market, Cashmore & Co has all the practical property ‘hacks’ to place you ahead of the competition.

Investors not only gain assistance with their property investments; with Cashmore & Co they have access to a treasure trove of advice and strategies that help extract the maximum amount of wealth creation from the 18-year cycle that you will not get anywhere else. 

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About Catherine

Catherine Cashmore

Owner & Director

Herald Sun Pic .jpg

Catherine Cashmore has been working in the Australian real estate market for over 14 years.

Originally from the UK, and having also lived in the US, Catherine has extensive experience across a range of international real estate markets.

As a buyer and seller advocate, Catherine has assisted hundreds of home buyers, investors, and developers, find, assess, and negotiate, quality real estate for great prices throughout Australia.

She is President of Australia's oldest economics organisation, Prosper Australia - an organisation that has conducted vast amounts of research into the economics of land, market cycles, and the intricacies of how tax and government policy affect the markets.

Catherine is a regular and highly respected media commentator. She has often been called upon to guest lecture at universities and educational institutions (including RMIT and Sydney University) on how tax policy affects the real estate market, the design of cities, and the economy.

She is the editor of Fat Tail Investment Research's Cycles, Trends, & Forecasts, Catherine Cashmore's Land Cycle Investor, and Catherine Cashmore's Real Estate Wealth Course – publications that teach real estate and stock market investors about the land cycle, its impact on the economy, and how to create wealth from property and stocks using this knowledge.

She is also one of the former editors of the extremely popular The Daily Reckoning Australia (or the ‘DR’ as it's affectionately known to its 60,000 subscribers).  The DR is an independent financial news broadcaster that has been in the business of reporting financial trends that shape the economy since 1999.

Previously authoring the annual ‘Speculative Vacancies’ report, the only study in the world that analyses long-term vacant housing based on water usage data (Australia-focused), Catherine has an in-depth knowledge of the Australian real estate market and economic environment few can rival.

You can contact Catherine directly on 0458 143 089 or at cc@cashmoreco.com.au 

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