Despite tighter lending conditions and interest rate rises, two brokers say there is no slowdown in the number of investors entering the property market.
Melbourne broker Nathan Massie (pictured above left), of Sprint Finance, said the power of owning an investment property can be life changing.
“An investment property is an asset,” Massie said. “However, people are often scared of debt, so when a borrower has a debt on their investment property’s mortgage, they want to pay it off as quickly as possible. It is all about changing that mindset and turning it around to make your debt work for you and not against you.”
Massie said many people try to reduce their standard mortgage term of 30 years by either paying higher mortgage repayments or a lump sum off the total owing.
“As a result, they might miss out on future capital growth, so I suggest taking advantage of the leverage because when you take on an additional asset, yes, it is debt, but the debt is an asset,” he said.
“For example, if you take on a $650,000 mortgage and you borrow $650,000 for the loan, then your net financial position is the same as when you first purchased the property. The best thing about this is the assets value increases over time, so the debt amount stays the same, so you can continue acquiring assets (providing the bank allows you to) and fund the purchases via your existing debt.”
Massie said the number one way Australians created wealth outside superannuation was the capital appreciation increase in their owner-occupied home.
“For many Aussies, their own home is their core asset. However, the problem is we always need to live in a home, so it’s not necessarily considered an asset in this instance,” he said.
“Look at your overall total net position and from a greater macro scale, consider your current assets and expenses. I have found when it comes to analysing this ourselves, we are terrible at this, so remove the emotion and look at your end asset value and forget about the debt in the meantime.”
Massie said he was not seeing clients being reluctant to purchase a residential investment property in the current market conditions.
“It comes back to people wanting to increase their wealth and looking for ways to do so,” he said.
The broker had recently dispelled the myth that people aged 50 or over were too old to invest in property, with banks becoming more open to the idea.
Massie said additional wealth creation through investment properties protected people during times of surging inflation, the rising cost of living and increasing interest rates.
“Your investment property holding costs might be a little more now, but holding on to the asset for five, 10, 15 years, it will start returning a positive cash flow which offsets your current financial pressures,” he said. “It is never a bad time to invest in property, the best time to invest was yesterday and the second best is today.”
In November, Property Investment Professionals of Australia (PIPA), the industry body representing property investors, found 19% of Queensland investors were considering selling in the next 12 months.
Andrew Mirams (pictured above right), Melbourne broker and director of Intuitive Finance, said he and his team were working with many investors wanting to enter the market or expand their property portfolios.
“I listen to a lot of (American business magnate) Warren Buffet who says, ‘be greedy when others are fearful and be fearful when others greedy’,” Mirams said. “Now is an opportunistic time for investors with the fear of further interest rate rises. Many longer-term investors have seen interest rate rises before, bearing in mind there were no increases for about 11 years.”
Mirams said the volatility of increased interest rates in 2022 had scared some people from the market but there had been a resurgence in activity in recent months with people returning to the market.
“Listing numbers in spring were the lowest they have been in 12 years and the market has shifted from a sellers’ market to a buyers’ market during the second half of this year, where savvy investors are making the most of these conditions.
“With rental vacancies next to nothing, there are no issues getting a tenant, plus those investors who have held onto their investment properties during the pandemic would now be enjoying a healthy increase as rents have lifted across the country.”
Meanwhile, CoreLogic recently crunched the numbers on the changing property market in Australia during 2022, revealing the strongest and weakest areas.
