“My mortgage broker tells me that many property investors whose interest only terms are due to expire will be forced to sell their properties, making them desperate vendors. So, should I buy property now or wait for this to happen?”
Well, this can be a great reason to hold out on buying a property. I’m off for an extended holiday to wait out the market crash… see you all in a couple of years. But, hang on… does this logic really hold up under scrutiny? Should I buy property now or wait?
Let’s first address the issue raised by this mortgage broker (and many others, I might add). It’s a fair point, after all. The lending landscape in Australia certainly has changed a lot over the past 12 months and there has been an increased focus on the serviceability of loans, and talk of some investors needing to sell when their interest-free periods expire. The question to ask is: is this the type of property I should be buying and are they worth waiting for?
Here are my thoughts on this:
1. The areas of Sydney where mortgage stress is most keenly felt is the outer suburbs. The inner areas, where we buy, are not typically impacted in the same way. Of course, this very fact underpins why we invest here in the first place – because quality property in good areas is effectively “market-resistant”.
2. Once you have identified a location where there is always demand for quality property, the next step is to make sure you are able to identify a quality property. We focus only on properties that will perform well in flat markets as well as buoyant markets, so, even if vendors are stressed, there will always be competition for their properties when they sell. This means that there won’t be any quality bargains to be had.
3. The vast majority of property that is on the market at any given time is not what we would call A-grade. We typically inspect only about 10% of what is available at any one time, and then we’d only recommend about 20% of what we inspect. If substandard property is available at bargain prices, we are unlikely to be tempted.
When asking yourself the question: should I buy property now or wait, it’s important to consider whether you are actually ready to buy a property.Should you buy a property now or wait for later? Click To Tweet
If you are buying a place to live in, then your personal needs really should dictate your timeframe. If you need a home now, whether it be your first home, an upgrade, downsize or relocation, are you really going to put your life on hold in case a market crash means you can get something better?
If you are buying an investment, then at least you won’t be putting your life on hold by waiting out the market. My advice is that you follow Warren Buffet’s lead: “Someone’s sitting in the shade today because someone planted a tree a long time ago.”
Property investment is a long game. At the same time, it’s risky. But you also need to take action if you want to invest. If you are asking yourself the question should I buy now or wait, the answer is maybe, maybe not. It’s critical that you buy a quality asset that will actually grow in value in the way you need it to.
Published 4 April, 2018.
DISCLAIMER: Good Deeds buyers tips are intended to be of a general nature. Please contact us for advice that is specific to your individual circumstances. You may also need to get advice from other professionals such as an accountant, mortgage broker, financial planner or solicitor.