25 May 2017

How to find value post boom

Media Release

Australia’s largest body of professional buyer’s agents is reassuring home buyers and investors that it is possible to find value in the property market post boom.

Real Estate Buyers Agents Association of Australia (REBAA) president Rich Harvey said while it was impossible to sustain the level of price growth seen in the Sydney and Melbourne markets in recent years, buyers now needed to focus their attention on investments that offer sensible long-term price growth with the potential for value adding in the future.

He urged buyers to heed the warning signs from the Reserve Bank of Australia and not to overleverage themselves or risk ending up in ‘hot water’.

“Generally speaking property is a good safe investment but not every investment performs the same,” said Mr Harvey.

“What’s happening now is that we’re starting to see some good warning shots being fired across the bow by the Reserve Bank.

“We’ve all had this fantastic low interest rate environment for some years now and the natural economic reaction to that is for people to leverage high and leverage hard.

“It’s very easy for home buyers and investors to overleverage at this stage of the cycle and then get themselves into trouble by anticipating that their property will grow 10 per cent next year which it probably won’t.

“Certainly as the market cools people have to watch how much they’re spending on their debt and realise that we simply can’t sustain the level of growth we’ve had.”

So how do you find value in the property market post boom? Here are REBAA’s tips:

  1. Moderate your growth expectations

We’re coming out of a period where we’ve had massive price growth, particularly in the Sydney and Melbourne markets and the simple answer is you’ve got to look at it from a long-term perspective and manage your growth expectations. You need to be patient and invest in property which is in a growth area and can withstand the next property cycle.

  1. Look at ways to add value

Renovations are one of the easiest ways to add value to a property and don’t need to be extensive. It may be simply ripping up the carpet or the floor boards, redoing the kitchen, adding a bedroom or painting inside and out. Another option is to undertake a building project from scratch and look at property with subdivision potential or increase yield with a granny flat. They may sound like big projects but they can be achievable with a good team behind you.

  1. Be a borderless investor

Don’t just buy in your own back yard. You can buy borderless. Don’t be afraid to invest interstate or in a regional location, some of which are booming now and likely to continue to do so for the next 9-12 months due to the lag effect. We know that Sydney is at the top of the market and Melbourne is approaching it if it’s not already there. That doesn’t mean you can’t buy in Sydney and Melbourne but there are always other opportunities in other markets. REBAA has an extensive network of independent accredited buyer’s agents right around Australia who have the local knowledge and who can be your eyes and ears on the ground.