Is it Smart to Invest in Property Now?

Posted by Tristan Angelini on 30 June 2022

Skyrocketing gas prices as a result of the conflict between Ukraine and Russia, inflation rate rises interest rate increases – are just some of the biggest and most talked-about issues the world is facing right now. It's much easier to think that things would only take a turn for the worst from here, but we should also remember that nothing is inevitable except change.

Many of us eventually see ourselves as investors or entrepreneurs. We all want that passive income when we're older. One of the most common investments is property.

Why is property a good investment?

First of all, it is lucrative. You can earn rental income just by investing, especially if the property is tenanted or rented for a particular time. Secondly, it is less volatile than, let's say, shares or stocks. Thirdly, the property is a physical asset, meaning it's an investment that you can literally see and touch. Most of all, it does not require expertise or some sort of specialized knowledge to become good at it.

For instance, you decide to invest in property right now. The big question is, with everything that's been happening in the world, is it now even a smart move to invest in property?

A new survey shows done by the Westpac Melbourne Institute of Consumer Sentiment survey, that in Australia, people believe that now is one of the worst times to invest. It's revealed that Australians have had a pessimistic response think that since the global financial crisis in 2008. This comes after the news of property price surges and interest rate increases. There is now less confidence in further price rises, however, experts still see further growth which would mean that there are investors that still have a strong interest in investing.

CoreLogic also announced that both Sydney and Melbourne have shown that the property market could possibly set for lower house prices with the Reserve Bank of Australia raising the cash rate/interest rate in order to manage the inflation Australians are currently experiencing. Lending standards have also been tightened as lenders or banks have decided to not allow buyers to borrow eight times their annual income.

Property is considered a major asset class no matter the size or type. It is a tangible property that drives the economy and personal long-term wealth. Values and the changes that occur may be a great motivator or a cause of concern. The big banks in Australia have made predictions that the property market prices would fall even more by the end of this year or early 2023. Major cities like Sydney and Melbourne may be the most susceptible to interest rate increases, thus, property price falls, but experts also think the effect would be widespread?

The brighter side

While things don't seem to be looking up for investors if we judge solely from these reports, it's also important to take note that the interest rate rises shouldn't be enough to cause serious distress to the property market. The labour market doesn't show signs that it's going to crash and burn, so sellers coming on to the market could still be a lot.

In addition, the resumption of the migration program in the country would invite new residents to flood into Australia for professional and/or personal reasons. Once they enter the country, they will search for the best place for them to live so they will definitely find a place to buy or a property they could rent. If you think long-term, the answer to whether now is a smart move to invest in property, is of course, yes.

Currently, experts are saying that interest rates are still low and there is still good strong capital growth. Interest coming from owner-occupiers is still solid and because there is less heat now in the market, many clients are seeing that it is a good time to buy right now. Because the market has slowed down a little bit, many investors are seeing that it is a good time to pick up opportunities. Those who are looking to purchase investment properties for their retirement have a strong interest as well, so first home buyers who are no longer interested in just renting are keen to buy property.

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