Fall in shares and commodity price is good news for property investors

0
130
A businessman's increasing property portfolio. A metaphor on successful property finance.

After a two-month gap, the Reserve Bank of Australia (RAB) has announced that it is going to decide on interest rates.

Share markets (ASX 200) is at the 5,000 mark. The 2005 Australian share market was at 5000 points and in 2016 we are at the same level. Brent crude oil prices are at $30 a barrel, which is a 12-year low. Commodity prices are at all-time low. The markets are in the red. Reserve Bank will not be changing the cash rate. They will be sitting at 1.75 per cent.

This fall in shares and commodity prices is welcoming news for property investors. The property will be viewed as a safe haven, weathering all the odds of investing. Investors, who have lost confidence in share and commodity markets, will be heading towards property investments.

Future markets are assigning 100 percent cut in the second half of the year. Investors or owner-occupiers will have some relief for most of 2016. It is time for home owners to decrease their mortgage and investors to focus on buying more properties to save up the buffer (money saved up for any changes in interest rates or expenses to manage the property).

Unemployment is lower than last year — it has fallen from 6.1 per cent to 5.8 per cent. And the population is greater. That means 350,000 more people have jobs.

The Melbourne market is showing more resilience with the auction market. Last week Melbourne was at 74 per cent clearance rate. Melbourne coped with the interest rate rises last year and is still a sellers’ market. Sydney though is a slowing market. Last quarter, Sydney property prices fell -3.2 per cent.

In Melbourne, 19 suburbs have joined millionaire club in 2015, which means a total of 84 million-dollar suburbs in the area. By 2020, there will be at least 100 million-dollar suburbs in Melbourne. By 2025, it won’t be surprising if half the Melbourne suburbs join the million dollar club. So investing wisely in suburbs that have potential capital growth is the main key for investors.

At any point, only 5 per cent of the properties are investment grade properties. Not all the properties or suburbs will perform the same. Some will out-perform others. So having a talented team behind you will make a lot of difference.

table