How to get into Property Investment amid rising interest rate - February 2023
Australian home values have tumbled 8.4% since they peaked in May 2022, the largest decline on record, according to CoreLogic. But while it’s natural to assume this means it's best to delay your investment journey until the market improves, think again.
That’s because successful property investment is all about making smart decisions. And what could be smarter than seizing the opportunity the current market presents (if your financial circumstances allow)?
For 0ne thing, property prices in many Australian markets are declining as interest rates rise and buyer demand falls. So it’s a great time to pick up a quality investment property, as you have more options to choose from and more room to negotiate on price.
For another, the demand for rentals is high while supply is short. As a result, landlords have the upper hand in every capital city, with national rents seeing their fastest-ever annual rise over the 2022 calendar year, according to Domain.
That situation is unlikely to change anytime soon either, thanks to the ongoing return of migrant workers and students to our shores, as the PropTrack graph below shows.
High rents and falling property values are, in turn, increasing gross rental yields.
According to Domain, over the three months to December 2022:
● House yields saw the greatest quarterly increase in 11 years
● Unit yields saw the highest quarterly and annual jump on record
The four golden rules of investing
While it might be a great time to get into property investment, there are some risks, including the threat of more interest rate rises on the horizon.
So how can you make the most of the opportunities the market presents given the current lending environment? By following these four golden rules:
1. Have a strategy in place – so you know where you are heading
2. Do your homework – so you buy the right property at the right price
3. Crunch your numbers – so you don’t end up in financial hot water
4. Make sure you have the right people on your team – so you can benefit from expert advice
Think long term
Here’s one last piece of advice. If you want to be a successful property investor, you need to learn how to block out short-term noise and negative media chatter.
That’s because Australia’s property market is cyclical, moving through times when prices grow to other times when they decline (like now). That said, the long-term trend is undeniably upward – as the CoreLogic graph below clearly shows.
So if you focus your efforts on buying a quality investment property and holding onto it for as long as you can, history suggests you’ll be richly rewarded.