Property Investment

The property market is ever changing characterised steady growth then booms, peaks and then long periods of stagnation.  If you have any though of benefiting form property growth the steady growth period is the time to be getting in.  When every man and his dog is talking it up its usually a boom and then its too late, you’ve missed the boat and will need to setytle if for the long period of stagnation that follows.

Well, at the time of writing in September 2019, in Perth the hibernation time is finished and its time to get out of the cave and satisfy that property hunger that has built up over the last 10-12 years of stagnation.  All the critical fundamentals for a strong growth market are in play right now:

  • Population is growing again at a solid rate with expectation of around 60,000 net population growth in 2020
  • New building approvals have dropped from around 38,000 dwellings 5 years ago to 14,000 in the last 12 month
  • Rental vacancy rates have dropped from around 9% of all available property 2 years ago to under 2% today.
  • Rental incomes are beginning to increase after years of being negotiated downward
  • Time on market for property for sale is dropping at a rapid rate
  • NOTE:        Building less homes
  • Less Homes available for rent, & rents going up
  • More people around wanting somewhere to live and not much left to offer them
  • More people out there in the marketing starting to buy property….. what do you think is going to happen to property values?
  • Unemployment in WA has declined in the last 12 month
  • Employment has grown by 1.7% in the last 12 month
  • East coast investors are cashed up after a mini boom over there and looking for a new opportunity to invest.

These circumstances very rarely all come together at the same time and when they do it usually results in an unexpected and rapid change to the market.  Getting in early is the bnest way to prosper from a property cycle

This FIFO Consultants site doesn’t generally promote or recommend any specific property investment opportunity unless we strongly believe the likelihood of a positive outcome for anyone who follows our commentary.  From time to time however a set of economic fundamentals align to present a significant buying opportunity and when this can be combined with the wholesale supply of specific property stock then it would be remiss for us not to bring it to the attention of our network of clients.

Successful Property investment is influenced by factors, including but not limited to:

  • Timing: Buying in at the right time in the property cycle.  Generally a property cycle will comprise of  3 stages. The 1st is best described as the stagnant stage and can last for many years.  The next and most important stage is the growth stage and these are usually pretty aggressive and short lived, running for perhaps 2 to 4 years, followed by the peak & correction stage.

Clearly the best timing would be to enter the market at or around the commencement of the growth stage so you benefit for the maximum growth in the shortest period of time.

Timing though is almost always camouflaged under a torrent of negative media and statistical information that looks to highlight prolonged and persistent negative position suggesting more of the same.  Often when it appears to be the worst time it can actually be the perfect time.  This said, care should be taken and research conducted to evaluate the true underlying economic factors in play and what influence these will have in the short term

  • Time In: For those investors who miss the timing, or have miss calculated on the entry point (timing) the only option is for time in, that is you need to stay in game for the long term to take advantage of the full extent of the property cycle.  Obviously this is not as ideal as getting the timing right but it’s a better option than a loss

 

This being said it should be noted that property in particular should be treated as a mid to long term investment.  The costs or entry and exit are greater than other investment opportunities and these expenses can only be diluted with a longer term strategy of capital growth and income yield

  • Where: Australia is a large continent with a vastly diverse economy from population centre to population centre.  At various times of the overall national economic cycle one location can be vastly different to another.  It’s not likely that each state and or capital city in Australia will be experiencing the same conditions, in fact its not uncommon for one or more states to be in recession while another is experiencing a economic boom

 

Often a Location or State that’s experiencing an economic boom will fall in line with the timing factor mentioned earlier.  For example, as Industry or mining is gearing up for expansion or greater capacity it will demand a greater number of workers to meet this demand, so “sub factors” such as population growth, rental vacancy rates and new building approvals for specific population centres also become critical factors to consider because these will impact of the supply and demand rules of any market place.

A combination of increasing population, diminishing rental vacancies and crashing new dwelling approvals and diminishing “time on market” outcomes would suggest that the availability of housing for the growing population is going to be in short supply putting pressure of both rental yields and the values of property stocks

  • Which: Here are some facts on the current conditions in the Perth property market, at the time of writing (September 2019)
  • Little or no capital growth in Perth market since around 2008, some 11 years ago.  This followed a period of growth in the previous 5 years that was in the area of 150%.  On Past evidence Perth is well overdue for capital growth and possibly will experience a degree of rapid “catchup”
  • Population growth in WA on the move again.  After stalling in 2015 with the contraction of the mining construction boom it has again bounced back to a growth of 3.65% in 2018 and projected to remain that way into 2019 & 2020 on the back on the back of a significant increase in mining production & construction of new mining operations.  See the statistics here http://www.population.net.au/perth-population/#targetText=Perth%20Population%202019,8.58%25%20of%20the%20national%20population.
  • New dwelling apporvals in WA have been steadily declining over the last 5 years from a figure of 38,000 new dwellings to a low 14,000 in the 12 months to 30th June 2019
  • Rental vacancy rates in Perth have dropped from around 8% two years ago to a low 2.7% in March 2019 making it the most rapidly tightening rental market in Australia.  A good explanation of the rental market in Perth is available here: https://www.domain.com.au/research/domain-rental-vacancy-rate-march-2019-814727/

 

Specific Product Recommendations.

Reduce the risk associated with property investment by ensuring you are purchasing a property that is massively discounted to the market, or at WHOLESALE PRICE.  The most effective way to profit in any venture is to ensure that you purchase low & sell high and that’s what we strive to achieve for our clients at GR8 FIFO Consultants.  If we cant tick this box then we don’t make a recommendation

GR8 FIFO Consultants is aligned with and affiliated with organisations who deal with the disposal of “distressed property stock”.  Distressed stock is where the banks stepping in and taking possession of projects and developments, or developers want to quite remaining stock and cut loss’s and then there are situations where the original buyers cant complete.  Whatever the reason these properties are offered at fire-sale process, well below accepted market prices and often under valuation.  They also do not ever get into the market place through the normal channels because the institutions do not this impacting on other property ventures they are associated with.  Their loss is your gain

Consider these examples:

  • Broome                 –         Original price $460,000           –          NOW $345,000
    –         $5,000 Positive Cashflow
    –         Property comes with tenant and leased to March 2020
  • Perth Metro          –         Original price $330,000           –          NOW $289,000
    –         $5,000 Positive Cashflow

You wont find these properties advertised in the normal locations, the suppliers prefer these to be released quietly into the marketplace so as not to impact adversely on the more conventional stock available to the general public.  These opportunities are by WORD OF MOUTH ONLY and for a LIMITED TIME ONLY.  If you are a FIFO individual or connected to a FIFO individual in some way you can gain access to these limited investment opportunities.

These properties are also available to individuals who wish to be owner occupiers

THE TIME TO ACT IS NOW!  Contact us today