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Market Update – February 2014

27 Feb 2014 coolangatta 0 Comment

The market still continues strongly with buyers and sellers coming together, somewhat reluctantly at times. However, it is important to note that volume of sales activity continues to increase. The market is still well behind 2009 levels, although, there is more confidence in the market. We are at the bottom of the property cycle with early indications that prices are slowly rising and that will continue while confidence remains in the market place. So we have passed from a buyers’ market to a more balanced one where there are enough buyers to meet sellers realistic expectations. There is an emerging trend of a shortage of property for sale, however, this may be short lived. I believe it will be several years or more before we return to a robust market and many pundits are predicting a decline in the market in the latter part of the year.

Now is a good time to sell!

Again this month Michael Matuzik, from Matuzik Property Insights, has a pertinent blog on his website which talks about the current issue of Hot Spots. Often there is quite a bit of media hype about buying in hot spots but, as you will read, investors experience greater return the longer the investment is held.

Mr Matuzik says, “I don’t like the term hot spots. For me, it doesn’t really ring true when it comes to property. There are very few instances in which investment “heat” is induced to a very specific location or property type.

“Residential property investment is a long-term hold.

“The statistics show that most buyers make more money on resale, the longer they hold the property. The cost of buying and selling property, coupled with our current tax system, makes short term property hols quite expensive; often cost prohibitive.

“Those who try to “hotspot” often miss the mark. Many are, for mine, speculators – not property investors. This is fine. It is just that most investors don’t have the time or experience to sufficiently profit from property speculation. For those who do – then good luck to you.

For us mere mortals, I think it is more important to consider property investment from a wider point of view first.

“Most readers should consider buying an investment property in locations with:

⦁ Established population based – say over 100,000 permanent residents plus population growth/increasing household formation.

⦁ Consistent rental returns, typically over 5% or $1 in rent for every $1,000 spent.

⦁ Improving employment prospects – 5+ pillars of economic growth.

⦁ Rising incomes – ability to upgrade locally.

⦁ Increasing home renovation activity – shows local owner re-investment, which means more owner-residents.

“Often how an investor actually structures their investment – owner-identity/gearing/depreciation etc – has as much bearing on the outcome as does the property’s location; product type or even purchase price/initial rental return.

“I think it is best to discuss property in these terms rather than trying to elevate a location’s investment potential based, on, more often than not, a once off set of circumstances or events.”

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