Why are property prices rising – and how you can profit in this market?
To describe the current property market as “booming” is almost an understatement.
Real estate values are on the move. Many are wondering why property prices are climbing so fast and there are a number of factors at play here. The good news is, none of them need to stand in your way of getting your foot on the property ladder.
What the drivers are of property price growth?
Property prices are rising in many markets across the country right now. In Sydney, we’re seeing dozens of registered bidders at auctions and properties are selling for six-figures above reserve prices.
In other cities and suburbs, homes are being snapped up within days of hitting the market, people are camping out for land again and buyers are anxious that if they don’t act now, they might miss out.
Why is this happening so soon after the pandemic, which stripped hundreds of thousands of people of their jobs pushed our economy into a recession?
It boils down to a few reasons, including:
- Pent-up demand. When the pandemic hit, demand for housing didn’t disappear. It simply got put on hold. People still got married, had babies, split up, moved out – in other words, our housing needs continued. Their ability to act on their desires was temporarily put on hold.
- Very low interest rates. Mortgage interest rates are the lowest they’ve ever been, with home loans available for less than 2% per annum. This means mortgage repayments are more affordable than ever – often, cheaper then rent.
- Greater spending power. Over the last 12 months, people have spent less money on travel and shopping, giving many people an opportunity to save money for a property deposit. At the same time, lower interest rates mean your borrowing increases. Where you may have been approved for $500,000 18 months ago, you might now be eligible to borrow $550,000.
- Low stock. The number of properties available for sale right now is quite low, which means the homes that are listed are snapped up very quickly. Developers are low on stock and trying to accelerate the release of new projects and land, but these things take time and the cost of their acquisitions are also increasing.
What are the risks of buying property in a booming market?
If you would like to invest in property 2021, there are plenty of upsides to buying into this market. But, there are a few risks to be aware of as well.
The biggest risk of buying during a property boom is the chance that you’ll pay too much for a property. This can happen if you get too emotionally attached to the idea of buying (especially if you have your heart set on a specific home), so you keep increasing the amount you’re willing to pay for it – even if the numbers don’t really make sense.
The key to property success here is a careful strategy and a clear plan. The people who will look back on 2021 as one of their most successful years as an investor will not be those who jumped in, made rash decisions and over-paid for property.
It will be those who plan, budget, strategise and make well-informed investing decisions that will enjoy the most success as an investor.
How to profit when property prices are rising
To mitigate the risks of buying property in the current booming market and to move forward, you need a strategic property plan to grow your wealth.
Navigating the property investing world can be intimidating. When you engage with our experienced consultants and researchers, we’ll help you to plan, find and purchase not just one investment property, but a sustainable portfolio of quality properties that will set you up for future wealth.
We do this with our clients in all markets, regardless of what current conditions are like. If you want to get your foot on the property ladder and learn how you can profit from profit in a rising market and beyond, contact our friendly team today on 1300 449 974.