A basic guide to market shifts for potential property buyers
When owning an investment property, understanding the market is a great way to have a better handle of the performance of your property.
Part of knowing the market is understanding that there will always be shifts and changes. This is a natural part of any investment and can be expected.
When can they happen?
Traditionally, the property market will go through ebbs and flows. These changes are often reflective of the economic conditions that surround the country and can be measured on a monthly, quarterly or yearly basis.
The current economic climate, due to the COVID-19 pandemic, has caused a great deal of uncertainty in the property market as a whole.
This is a great example of the unpredictability that can come with owning an investment property.
A once in a century virus isn’t something that would have been heavily considered when purchasing a property.
Generally, market shifts can be closely tied to the overall performance of the economy.
They can also just be seasonal changes.
Spring and summer, for example, are considered the prime time to sell your property. With nicer weather and an abundance of light, potential buyers will get to see the best of a property in the best conditions.
For landlords, January is one of the best times to bring their investment property to the market because they can take advantage of the increased number of applicants looking for rental properties at this time of year.
There can be a general sense of gaining a fresh new start at this time of the year that can bring people to the rental market.
Prospective renters may be beginning new employment and relocating closer to their workplace. Students are beginning their studies and will be moving nearer to their university and TAFE.
Property market shift causes?
There are many factors that can contribute to or cause a shift in the property market. Though there are many different variables that can influence the shifts of the property market, some important ones to note are:
Demand for housing can be dependent on income. With higher economic growth and rising income levels, people can spend more on houses. This increases demand and has potential to see a better price for those that are selling.
When incomes fall this can mean people won’t be able to afford to buy property as they tend to be more frugal and unwilling to commit to such a large purchase as a property.
The fear of unemployment can also discourage people from entering the property market.
Interest rates affect the cost of monthly mortgage payments. A period of high-interest rates will increase cost of mortgage payments and has potential to cause lower demand for buying a house due to repaying more for the property.
Consumer confidence is vital when finding whether people are looking at buying a property. The vibe of the housing market is particularly important; if there is a thought housing prices could fall, those looking to enter the market will be more attentive.
Someone looking to sell might hold off if a sales forecast looks unfavourable in a couple of months when they will finally sell.
Those looking to invest may be deterred buying due to the importance of capital gains.
A shortage of supply has potential to increase prices. Excess supply can cause prices to fall.
Different legislation regarding housing that is passed by the Government has potential to cause changes to the market.
First home buyer schemes are an example of how this can help the market be more friendly for owner-occupiers.
Legislation like negative gearing can shift the market to be more friendly to investors.
Reviewing your property’s performance
Reviewing your property’s performance on a regular basis is an essential part of owning an investment asset and is vital in a changing landscape like the property market.
At the end of every financial year can potentially be a good time for you to examine your goals if you wish to be an investor that monitors their property’s performance at a basic level.
One of the best ways to do this is to talk about it with your property manager. They are in a fantastic position, with their strong knowledge of market trends, to know where the market might be heading and what can be best for your property.
When examining a property’s performance, there are some important indicators to look at. They are:
Examine these in terms of change. Ideally, and obviously, as an investor the best thing for you would be to see these increase on a steady and regular basis.