‘Window of opportunity’: Is it time to jump into property investment? - Sydney Morning Herald

Property experts say there is a window of opportunity for cashed-up investors who have been keeping their powder dry during the pandemic to take the plunge before house prices start another cycle of growth.

With most of the slide in prices likely over, interest rates not expected to rise by much more, and rents to remain elevated, analysts say the stars are aligning, however, much will depend on what the Reserve Bank of Australia (RBA) does from here.

After the falls in prices since the start of COVID-19, property investors who make their move could get in at bargain prices before the next upswing in prices.Credit:Simon Schluter

SQM Research founder Louis Christopher expects prices to start to recover in the second half of this year as long as the cash rate set by the RBA peaks below 4 per cent. Currently, the cash rate is 3.1 per cent.

He expects Australia’s central bank may lift rates in February and perhaps also in March as inflation peaks, and then leave rates on hold. The RBA’s next meeting is on February 7, with markets expecting the cash rate to peak at 3.5 per cent in the first half of this year.

Christopher says the fundamentals are getting in place for higher prices, which include stronger migration, a strong economy with low unemployment and good jobs growth and rents that are likely to remain elevated.

Lloyd Edge, the founder and managing director of buyers agents Aus Property Professionals, says despite the property market facing challenges – with consecutive interest rate rises making it a tougher environment – it’s definitely a buyer’s market right now.

“This means that buyers have more options to choose from, and have more room to negotiate on price,” he says. “For savvy investors, this presents a great opportunity to make smart, strategic purchases.”

AMP chief economist Shane Oliver thinks prices nationally could fall another 9 per cent or so as rate hikes continue to impact the local market, resulting in a total fall of 15 to 20 per cent – its greatest ever peak-to-trough fall.

However, he expects prices to bottom out in the September quarter of this year, before starting to recover late this year as our central bank moves towards cutting rates.

Andrew Wilson, the chief economist at My Housing Market, agrees, saying consumers appear to be shrugging off the doom and gloom that took hold at the start of the pandemic. Consumer confidence is up, the economy is doing well and rents are likely to stay elevated, he says.

Units are often popular for both first time owners and property investors.Credit:Peter Rae

“I think we will see ... home prices, particularly in Sydney and Melbourne, end 2023 higher than at the start of the year,” Wilson says.

Since the start of the upswing in September 2020, rents have lifted 22.2 per cent, marking the largest rental upswing on record, figures from CoreLogic show. Rents are still rising in most capital cities and regional areas and vacancy rates are low, though the pace of the growth is slowing.

Arjun Paliwal, the founder and head of research at investor buyers’ agency InvestorKit, says the ongoing rental crisis will drive more renters to become home owners.

Changes in NSW that mean first home buyers can pay an annual tax instead of up-front stamp duty on purchases up to $1.5 million will see more first-time buyers enter the market in Sydney, he says.

Paliwal says there is an opportunity for cashed-up investors with secure employment over the next few months to take the plunge before prices start to trend higher.

Investors often prefer to buy units in the middle and inner rings of our big cities. It is not only that they have lower prices than freestanding houses, but units can be easier for landlords to manage with the outsourcing of the maintenance of common areas as part of the strata fees. Lower-priced units in Sydney and Melbourne are usually sought by both investors and first-time buyers.

As it takes months for investors to get organised and to find a property, by starting their search now they could buy before other investors and first-time buyers come into the market in numbers, Paliwal says.

He says it is important to note that if the cash rate was to hit 4 per cent or more, borrowing capacity would be reduced – outweighing the other factors that would be expected to drive prices higher.

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.