Property buyers need to take stock of their situation, capitalise on the property trends and enlist the help of a buyers agent in the post-COVID era, says Pete Wargent.
Pete Wargent, one of Australia’s top investment experts, believes that now is the time for property buyers to take action and secure their investment future.
He told KnowHow founder Bushy Martin on the Get Invested podcast that low interest rates and a greater borrowing capacity for individuals will lead to a rise in the property market.
“[The Reserve Bank has] essentially pledged that interest rates will stay where they are at for the next three years … so essentially, the Reserve Bank has given people the green light to expect no rate hikes for the coming years, and also, they’ve encouraged lenders to get out there and keep the flow of credit moving,” he said.
“So, there’s a lot of indications there that we’re going to see an increase in borrowing over the next few years and that will drive property higher.
“How long it goes for? It’s always hard to say … I think the thing that will eventually bring the next cycle to a close is probably that the rents won’t increase as quickly as prices, so just make sure that the cash flow stacks up if you’re going to buy property.
“But it looks to me like we’re heading for a big up cycle over the next few years. So potentially a good time for property buyers looking to pull the trigger.”
With these changes in mind, Pete recommended that investors review their long-term strategy.
“Generally, I think it’s a confusing time for a lot of people, so I think this is a really good time to take stock of your situation and actually put together a plan for the coming ten years, because the landscape has changed a great deal over recent years,” he said.
“We’ve gone from a time when, certainly before the financial crisis, the cash and term deposits were a big part of what people wanted to do. But now, there’s a real reach for yield. So, I would say it’s probably a good time to put together a ten-year plan and try and begin with the end in mind.”
He also emphasised that this plan needs to include a strategy to ensure your money is delivering good returns and opening you up to any opportunities that arise.
“The big challenge for people these days is that cash in the bank, or even term deposits, just aren’t delivering in terms of returns,” Pete said.
“I think probably the most popular strategy in Australia over the next decade will be property buyers investing heavily in property but using mortgage offset facilities or redraw facilities to park their extra cash. So, if mortgage repayments are low, people are going to build up a nice buffer in their offset accounts, so at least the money is not completely lazy as cash in the bank might be.
“Then, when big opportunities come around to deploy that fund, then they will look to deploy it potentially into stocks or elsewhere. But it serves useful purposes for people. It keeps your money working for you, but it also gives you a buffer and also an optionality value when better opportunities come around.”
With a strong demand for good quality properties already present, Pete said investors ready to secure property need to know exactly what they’re after and be able to make quick decisions.
“The first thing is you’ve got to be clear on what it is you’re searching for, because if you need to move quickly, you need to be in a position to make an offer where the right property does come along and at the right price,” he said.
“If there really is no stock and you are just surfing the listing portals every day, then you probably need to go a step beyond that and actually get into the air of local agents about what you’re looking for so you can get a first look at it.
“We’re often finding at the moment if you just wait for properties to be listed online, well, it could be too late by then and you’d be competing with numerous other potential buyers. And then before you know it, it goes on to offer and you’re onto the next. So it’s really being prepared, but also being proactive.”
Finally, Pete also encouraged property buyers to team up with a buyer’s agent to reduce risks and save on time, costs and stress.
“A buyer’s agent tends to save time because market research shows that most property buyers, they take several months to buy a property. On average, they make six offers before they finally get one accepted. And then they very often tend to overcompensate and overpay, so it can save you cost as well in terms of negotiation skills,” he said.
“A big thing for a lot of buyers is simply saving stress because the market surveys and research show that about half of buyers find the process very stressful or even overwhelming.
“And I think if you don’t really know what you’re doing, you can end up buying a suboptimal property, but also potentially buying properties with structural issues or special levies or maybe the block of apartments being built next door. There’s a lot of stuff that you might not think about if you’re not in the market every day. So, it’s those unseen risks that buyers agents can help you to avoid.”
Listen to the full interview here.
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