Which markets are forecast for 20% growth and which are forecast for 100% or more?
Property prices on the Northern Beaches are surging, fuelled by record low interest rates, a rebounding economy and improved confidence from the country’s success in containing the spread of the pandemic.
Median house prices on the Northern Beaches have risen 10.1 per cent in the past 12 months alone, up about $200,000 to a new high of $2.05m.
Upper North Shore houses also hit a new record high of $1,950,750, up 7.2 per cent for the past year. With this surge in capital growth, the difference between the value of your home and how much you owe on it has probably never been wider. In fact, many Sydney homeowners may have $300,000 to $600,000 or more of spare equity, also sometimes referred to as ‘lazy equity’ due to the fact that the asset is sitting relatively dormant rather than working for you to safely build future wealth and security.
Just recently, this 1960’s beachfront two bedroom unit in Mona Vale went for more than $1m over the reserve of $1.6m, selling for a whopping $2.61m. One year earlier, a similar apartment in the same building had sold for $1.4m. This is just one example of the suburb records that are being set right across the beaches.
Almost every property economist and forecaster are releasing some of their strongest property growth forecasts in many years.
Whilst forecasts for the next 2 years are good for almost everywhere in Australia, Sydney will almost certainly slow significantly from then, however markets like Brisbane, Adelaide and Canberra are forecast to continue growing by another 60 – 100 per cent over the following 5 – 7 years, while also having net rental returns of 40 – 80 per cent plus higher than Sydney’s, significantly lower vacancy rates and close to double the affordability.
How do YOU take advantage of this property BOOM?
For those just getting started:
For those not yet in the market with savings, or a guarantor that could help, the sooner you invest, the sooner you’re likely to start building equity. If you don’t have enough savings or borrowing capacity to buy your first home in Sydney or the Northern Beaches or North Shore, seek good advice about where else you could start investing now so you don’t get left behind the market. Even if you can afford to buy in Sydney, we advise to seek out other, more affordable markets for investment that are forecast for substantially higher growth over the coming years.
For those with LAZY EQUITY:
If you own property with 20 per cent equity or more, you can use this equity safely to not only purchase the property, but also to pay for the costs and even draw a little extra cash to use as a cash reserve buffer.
1. Invest in more property
Opportunities to tap into the investment property market rarely get better than now for existing Sydney property owners. But failure to use your lazy equity could cost you a small fortune. As a general rule, you only need about 20 per cent or more equity in your existing property to borrow against it for further investment.
Some people fear over-committing themselves financially if they buy another property. However, in the markets with far better rental returns than Sydney, most good quality investment properties are positive cash flow by $50 to $200 plus per week, even when you borrow the full purchase price plus costs. With a conservative 5 per cent capital growth, a single property worth $500,000 will grow by $25,000 per year. A number of markets are expected to grow by more than 10 per cent pa over the next 5 plus years, so each $500,000 of positive cash flow investment property has a very good chance of making you more than $50,000 per annum, or $250,000 plus each over the next 5 years.
2. Improve your cash flow and financial position
Many homeowners don’t realise they can simultaneously invest in another property and improve their cash flow, using equity in their house or apartment. With the help of an experienced property investment and finance strategist, it’s possible to structure your finances in a way that lets you not only invest further, but also pay off ‘bad debt’ such as credit cards and car loans.
3. Minimise risk and secure your financial strategy
Risk-management is one of the most important aspects of any property investment strategy, so savvy investors should also use spare savings and equity to minimise risk with a financial buffer. Many homeowners should have enough equity not only to borrow the deposit and costs on another property but also to access extra money to use as a cash-reserve buffer. You could, for example, borrow an extra $20,000 to $50,000 just in case something untoward happens, such as losing your job or your tenant. With this buffer – and having in place landlord insurance, income protection, and life insurance – you will have peace of mind. Another smart move at the moment is to lock in a fixed-rate loan. It’s not hard to find a three year, fixed-interest rate of about 2.7 per cent, which is historically very low and provides budgeting surety.