By Lucia McCabe, February 2021
Following a year of ups and downs in the property market, attitudes of savvy investors have shifted in recent months, indicating that 2021 could be the year to look at making an investment purchase.
According to the Property Investor Sentiment Survey for 2021, 74 per cent of respondents believe now is a good time to invest in residential real estate. In fact, 50 per cent of respondents plan to purchase an investment property in the next 12 months – the highest percentage in the last five years.
Michael Yardney, leading property advisor and host of The Michael Yardney Podcast spoke to Resimac about the market outlook for 2021, and shared his suggestions for investor success.
The property outlook for 2021 Despite the number of hurdles property investors faced last year, Michael believes confidence is returning, and suggests 2021 has the potential to be a great year for savvy property investors.
According to CoreLogic, values in all property markets (other than Melbourne) are higher than they were 12 months ago, and with a 1.32 per cent growth in value at the end of 2020, the coffee capital is already making up ground. "Growing consumer confidence thanks to relatively low numbers of COVID-19 in Australia, and a strong finish to the market across December and into January, has helped our economy improve faster than expected," says Michael.
This is reflected in data from CoreLogic, which shows consistent auction clearance rates across the combined capital cities, with an increase of 44.1 per cent in the December quarter compared with figures from 2019.
While some commentators have hinted at a potential property market bust, Michael disagrees. In fact, he believes there is a perfect storm of positive factors developing this year that will benefit property investors. "A confluence of multiple growth drivers, including the creation of new jobs, growing consumer confidence and business assurance, will lead to increased spending and employment. This will underpin house prices and propel property markets into 2021 and 2022," says Michael.
With the property market strengthening, Michael observes that banks and financial institutions are getting ready to become more flexible, following the National Consumer Credit Protection Act announced by Treasurer Frydenberg. This development will increase the borrowing capacity of many investors.
"Bank loan deferrals have been falling, suggesting there's little chance of a large wave of forced mortgagee sales as many other analysts were worried about."
"There is ample opportunity for first time investors to enter a demanding market that could offer long term financial benefits, while seasoned investors who are ready to take advantage of a prosperous market could reap the rewards of being ahead of the curve of this new property cycle," adds Michael.
Growing trend to follow One of the growing trends is "rentvesting", where people rent their home but own an investment property.
"Many Australians see rentvesting as a smart strategic move to grow their finances and get on the property ladder," says Michael.
Rentvesting can be a great strategy for people who want to live in a property that suits their lifestyle (for example, being closer to the CBD or beaches), while gaining momentum on the property market through an investment that fits within their budget.
Interestingly, according to the Property Investor Sentiment Survey, 50 per cent of the respondents would consider rentvesting as their first step on the ladder into the property market.
Tips for first time investors According to Michael, becoming a successful property investor involves more than just doing some research on the internet, inspecting a few properties, and purchasing.
"Those who are successful often have a long-term strategy in place and know how they are going to grow their wealth using the correct finance structures, such as having the right features on their loan including offset accounts and "rainy day" financial buffers".
"They have researched and thought about the correct protection and insurance to mitigate against risks and have spoken to a property expert when they need professional advice," says Michael.
With all indications pointing towards a positive year for property value growth, Michael is hopeful for the year ahead.
"It can be really tricky to read the market, and even seasoned experts struggle to pick the top and bottom of a property cycle, but there is a jigsaw puzzle of pieces that seem to all be coming together to create the biggest property boom Australia has seen in a generation," concludes Michael.
Insider secret Michael says that having the right location can mean 80 per cent of the hard yards is already done.
Finding a property that offers a particular lifestyle such as near the beach or a destination rental can usually outperform other properties on capital growth.
The opinions expressed in this article are the opinions of the author(s) and not necessarily those of Resimac. The above is general commentary only and is not advice tailored to any individual's financial situation. We recommend seeking advice from a finance professional before implementing changes relating to your finances.
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