Growing your wealth in the New Year through property investments is highly achievable despite the heat going out of the Sydney market, explains Richard Sheppard.
Property booms can’t last forever – and, as we enter the New Year, there is clear evidence that Sydney’s incredible growth run has stalled.
A clampdown on investor lending by the Australian Prudential Regulation Authority (APRA) has taken the steam out of the market and buyers are baulking at record home prices, leading to Sydney home prices falling 1.4 per cent in November. This is the biggest drop since December 2010.
So what now for investors eager to grow their wealth in 2016 and beyond? Well, the first point to make is that when a property boom ends in a city, it typically follows that investors will not get much or any growth in that market for five to eight years. That means you have to be smart, look for new options and invest based on a sound strategy and trustworthy market research. There is little place for sentiment if you want to succeed.
Use your equity
While Sydney is off the radar, investors should still be using their equity in existing properties to buy other properties and maximise their wealth. Speak with a specialist investment broker who can assess your borrowing capacity and revalue your properties every six to 12 months so you know your true equity position. An advisor can also help you pick your target market, with all the reputable research quite clearly showing that for now Brisbane is the capital city with the most positive forecast. The Queensland capital is more fully supplied for units than was the case in Sydney at the start of its boom about five years ago, which indicates Brisbane won’t register growth in the order of 14 per cent to 18 per cent that has been the norm in Sydney in recent years. But, importantly, there is still an under-supply of property in Brisbane.
Brisbane’s growth promises to be more moderate, with investment apartments in blue-chip suburbs such as Kelvin Grove, West End, Toowong and Indooroopilly leading the charge. Affordability is the key issue for investors at the moment, outweighing any supply considerations. Sydney’s median property prices are more than double those of Brisbane. Yields in Brisbane are also 20 per cent to 30 per cent stronger than in Sydney.
Get good advice
With a sound investment strategy and on the back of trusted advice and some property investment education, you can use your equity to buy extra properties for less than $50 a week. In fact, in Brisbane such units can be either cost-neutral or cash-positive if you follow the right advice. So don’t procrastinate just because Sydney has come off the boil. It could cost you hundreds of thousands of dollars, or even millions, in lost opportunity before you retire. While some people may baulk at investing interstate, in my next column I will explain the benefits of targeting non-Sydney markets – and how to do it intelligently and safely.
This article was originally written for the January 2016 edition of Peninsula Living Magazine.