Many people disillusioned with the share market may be thinking about bricks and mortar.
The past few years have shown that property is not immune to falling values, but the medium-term growth potential of a well-located and well-priced property remains solid.
According to a recent poll on www.hotspotting.com.au -- the website of property researcher Terry Ryder, 61 per cent of respondents believe it is a good time to buy residential real estate.
Terry reckons that flat price growth, lower interest rates, low vacancy rates and rising rents are creating opportunities for investors to benefit from the next property upswing.
Given the impact the crisis will have on unemployment, business and consumer confidence, I reckon property prices will fall in the short term, but Terry's sentiments are echoed by the latest
ANZ Property Market Outlook, which describes the undersupply of housing in NSW as ``critical'', adding that the situation is worsening by the day.
International migration is pushing demand well ahead of supply, and already rental vacancy rates in Sydney have fallen below 1.1 per cent. Advertised rents are up by 15.3 per cent over the past year.
A further expansion of skilled migrant numbers into Australia -- many of whom will make Sydney their home, looks set to tighten the supply of housing even further. In fact, the ANZ estimate rental vacancies could be at zero in the years ahead.
Like shares, property has a record of strong long-term returns coupled with ongoing tax breaks from negative gearing.
However, it's a buyer's market at present and, with plenty of properties to choose from and not many buyers to compete with, I don't see any need to rush into a purchase. If you are thinking about a property investment, give yourself time to research suburbs and be prepared to shop around.
If you see a property you're interested in, try making a low-ball offer. Then walk away. You never know, the vendor may surprisingly come to the party.
When it comes to selecting a property, Terry Ryder reckons there are some fundamental changes occurring within the market that are worth bearing in mind. The first is the growing importance of suburbs with railway connections -- and it's not just because fuel prices are going through the roof.
The cost of road tolls and dramatic increases to inner-city parking charges are adding to the cost of car travel, so proximity to decent public transport is a must.
In addition, more people, from families to older empty nesters, are opting for medium to high density homes rather than the traditional outer suburban house.
This is noteworthy because, as a general rule, land values rise over time while buildings depreciate though this maxim doesn't always hold, especially for apartments that have unique aspects like period features or great views. From an investor's perspective, apartments have the added plus that they're cheaper to buy and maintain.
No one can pinpoint when Sydney property will make a return to the days of price appreciation, but I reckon Doomsday-style speculation that suggests the floor is about to drop out of the market fails to take into account some of the basics characteristics of our city.
The trick to getting it right is to take your time to select a well-priced, quality property that will appeal to tenants (good for income growth) with the sort of location and features that will underpin long-term capital growth. And let me remind you: this crisis is about debt levels.
Companies and individuals with too much debt are broke or in real trouble, so be conservative with the amount you borrow.
PAUL'S RULES
1. Around 61 per cent of respondents in a recent property poll believe now is a good time to get into property
2. A slowdown in new home construction and increases in migration have left NSW with a chronic housing shortage. Vacancy rates are below 1.1 per cent and advertised rents have risen 15.3 per cent over the last year
3. Two successive rate cuts have made property more affordable but, in a buyer's market, it's worth shopping around for the right property
4. Lack of parking and high petrol prices/toll charges make proximity to public transport essential
5. More Australians are choosing low-maintenance apartment living in preference to traditional outer suburban houses. For investors, apartments also tend to be cheaper to maintain, with a lower upfront price cost
6. Be conservative with your debt levels
