Interest rates are high compared to the same time last year, capital city median prices (Sydney, Melbourne and Brisbane) have been falling, economic growth for Australia and the world is forecast to be low over the next 3-5 years. These sort of headlines will cause most to sit on the sidelines with the fear of making the wrong move. Choosing to pay down debt rather than take on more debt.
However as any experienced investor understands or the wealthy know well there is a difference between good debt and bad debt and this knowledge can change your life in these uncertain times.
Good debt is one that produces you an income whereas bad debt cost you money and is a liability. Through uncertain times you want more good debt and to reduce bad debt to give yourself more liquidity.
This week CoreLogic released its March data showing that both Sydney and Melbourne had reached the bottom of the property cycle for now and last week the Reserve Bank of Australia decided to put interest rate rises on hold until it’s next meeting signally a peak in interest rates. Interest rates still look low when you compare them to the past 20 years. The economy is incredibly strong with unemployment at 3.7% and forecast to increase to 4.1% over the next 3 years.
Underneath all this, the perfect storm is brewing in the residential property sector with demand outstripping supply by so much that it is likely to take up to 5 years to correct the imbalance.
There are 600,000 immigrants moving to Australia over the next 12 months after a 3 year period of almost zero immigration. There was an influx of 43,000 Chinese students in just one month earlier this year increasing the number of international students in Australia to 573,000 in February. The vacancy rate in Sydney, Melbourne and Brisbane is already below 1%. These three capital cities have historically accounted for 60-80% of all immigration and there is limited supply coming on board to boost housing with most projects currently not feasible at current interest rates and extremely high build
This could be one of the best times to buy an investment property but it will need to be the right type in this market to account for potential market shocks and cash is always king in uncertain times. What is the right type of property? A strong positive cashflow property that gives you positive income after all expenses and is located in a high demand area that will always be in demand when the economy slows down. Those investors who own negatively geared properties are often forced to sell during periods of slow economic growth as unemployment rises and interest rates increase and properties become a burden to hold.
How would a property with $60,000 to $80,000 income per annum (10%+ yields) help you through uncertain times? One to two of these properties could easily replace your income and future proof you against high unemployment.
Don’t wait until your are 67 to retire and spent only 11 years to enjoy it. Don’t miss the bottom of the market again and regret it when you look back in 10 years still working 5 days a week.
Capital growth is returning and rents are rising rapidly making it ideal timing in the current market. Click here to find out about our Positive Cashflow Program where we show you how to achieve this now. We have experience with all types of positive cashflow properties and can find the best one for your strategy.
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