Mum and dad investors are set to become less active in the property market, if Andrew Winter’s predictions come true.
He’s shared his forecasts for 2015 with News.com.au and I have to say, some of them were surprising. For instance, while every man and his dog seems to be touting the benefits of investing in capital city properties, Winter has a feeling that our CBDs won’t be our best performers.
Rather than our “big cities and prime suburbs seeing massive growth this year”, he believes that it could be “the more reasonably priced, left-behind markets that see some value gains”.
Read on for more of his insights, including his opinion on fixed interest rates and SMSF investors:
In his first column for 2015, agent-turned award-winning TV host, Andrew Winter looks at interest rates as the Reserve Bank of Australia made the first rate move in 16 months.
Last year, with no rate change at all, it was a pretty unique 12 months in Australian financial history.
For buyers, especially upsizers, this meant great, cheap, almost affordable lending. Many shopped around for the best rates and even swapped lenders.
It’s a pretty healthy mortgage market from the buyer’s perspective. It helped the seller too; their property suddenly became more affordable within the market and allowed capital growth in some cases. Even the fixed rate deals started to really get attractive and possibly worth the punt.
So how about 2015?
Looking at markets such as the US and UK, their rates have been considerably lower still and for longer periods.
It is predicted that both these markets may start to see rises. Some experts say the US economy is starting to get back on track so that could be a sign of rate increases and UK economic commentators are expecting rates to rise.
However in each case the rates are way below our levels. So for Australia I believe if we do see rises in 2015 they will be slight and only a few.
It does seem the fixed long-term deals are still available and to me that is a great barometer of the future.
Secondly, let’s look at the buy-to-let market. I increasingly come across many disgruntled property investors, unhappy about how their investment has panned out. In simple terms it is costing them money each month and the capital growth if any to date is simply not enough to cover holding costs and that is with current favourable rates.
I think the conventional mum and dad property investor is likely to become less active.
We have had price increases in our big cities that have resulted in those wanting to invest in prime areas finding rental returns so weak, it literally can kill off this purchasing group.
The flip side of this is the possible increase of property investment courtesy of SMSF investors. This is seeing mum and dad basically trying a new trick! But it’s not an easy process. It’s also a costly one and should not be entered into lightly.
However, for those who have substantial superannuation stashed away that will allow for a minimum 30 per cent deposit, and ideally a 40 per cent deposit plus costs; this is still an attractive, long-term option.
SMSF may start to rival the other form of traditional purchasing. Either way selling your property to a buy-to-let investor may not be quite so easy for many during 2015.
My final thoughts address typical home values across Australia. I genuinely believe the growth in the property market in 2014 is sustainable, in fact it could be argued it was long overdue.
I also believe that rather than the big cities and prime suburbs seeing massive growth this year, it could be the more reasonably priced, left-behind markets that see some value gains. There may be the odd case of a property bought in a boom somewhere not being able to be resold at a profit or breaking even in 2015 but quick profits in property are very, very rare so if you don’t expect it you won’t be disappointed.
That’s it from me. I look forward to sharing the year ahead with you and as I nervously sign off I’m wondering if this article will come back to haunt me in 2016?
Til next time, happy investing!