What to do if the market bursts
Predictions that the Australian property market will burst continue to run rampant as the country faces the greatest credit-fuelled real estate market it’s ever seen. The market has seen a drop off in investor confidence and the repercussions of this are being felt from buyers to sellers with falling auction clearance rates and plateauing property prices in Sydney and Melbourne.
Here are our tips for property investors to ride out any significant market changes.
Recalibrate your thinking
Firstly, it’s important not to panic but rather be patient, recalibrate your thinking and reset your expectations. Revisit your financial strategies and projections. Once you have a clearer indication of your overall investment status and performance, it becomes easier to make decisions to achieve or maintain growth.
Invest in Property Management
Savvy property investors invest in a property manager to maintain their assets long term. In an ever changing environment, a good property manager can ensure an investor is achieving the best rental yield. Property managers secure quality tenants, coordinate rental reviews and manage maintenance and repairs, ultimately helping drive value for your property portfolio.
Secure long term, quality tenants
When tenants sign longer term leases, investors have a more secure income stream with fewer gaps in their rental income. Good property managers will build rapport and an ongoing professional relationship with your tenants, earning mutual respect and trust for both parties which reduces the risk of any issues arising. As an investor, it’s important to know your property is being looked after and that repairs, maintenance and any structural or physical issues are minimised by sourcing low-risk tenants.
Look outside of Sydney and Melbourne
For investors who have been comfortable and successful in the Sydney and Melbourne markets for numerous years, now is the time to invest elsewhere. There are thriving markets around the country which have proven to be stable and reliable all while maintaining growth and return on investment (ROI). Brisbane is a great example of a smart investment choice, with the largest rise in dwelling value during the December quarter. Furthermore, should the market burst the investment landscape will be exposed to new and emerging areas to invest, creating new opportunities.
Have an appreciation for depreciation
The ATO allows investors to claim the decline in value of a property by way of a tax deduction. This deduction varies depending on the age and value of the building, but usually sits between 2.5% and 4%. As an investor, being able to claim these tax benefits is highly valuable as it can inject thousands of dollars into your tax return. Depreciation can be claimed on both positively and negatively geared investment properties. In fact, if you own a negatively geared property, you can claim up to 60% of your investment (the property purchase price) with the help of depreciation and other appropriate tax benefits.
Review your property portfolio
If you have multiple investment properties, now is the time to review their performance in terms of capital growth, rental yield, costs and consider selling any non-performing assets. From here you can reinvest into a higher yield or higher growth property to generate a more profitable long-term asset.
While property investors may not be able to expect the same capital growth and low interest rates in the years ahead, the market will turn around again as it always does. To discuss your investment opportunities and how to maintain your asset growth, contact CPS Property today.
