One of the most common questions we get asked by our clients is “when is the best time to buy property” and the answer is, whenever you can.
Our biggest asset to build wealth is our time, that is our ability to earn income during our working lives and hence have serviceability for borrowings. Of course, in addition to this we need access to deposit and costs from cash or available equity.
As we know, blink and it is next Christmas not this Christmas and doing nothing delivers the same result.
So time is our enemy as well as our friend and we need to use this wisely.
Please remember that everything cycles… interest rates cycle, and for some, we have now come to expect to have interest rates in the 3’s and early 4’s… in fact 7.5% is the norm.
Then rents cycle, property prices cycle and right now, we are starting to see finance and bank lending cycle again. This is worth understanding and focusing on as bank lending and the instructions to the valuer and how they assess / calculate equity can dramatically effect your borrowing capacity and ability to purchase property.
The banks are getting pressure from the Australian Prudential Regulation Authority (APRA)to slow down investor lending. The way they do this is with their “leavers” of interest rates, how they calculate serviceability for lending and their favourite… how they instruct the valuer.
In the last few weeks, we have seen the same property go from being valued at – $81,000 (this simply ends the prospect of this purchase occurring) to then, on the same property, coming in at + $900 over purchase price. How do we explain a $81,900 difference in valuation – we just can not.
This week we have seen a – $50,000 valuation then come in on the money and the same with a -$30,000 short valuation then coming back on the purchase price with another bank.
I do think we are in for a cycle with lending as it tightens up and we will simply have to navigate our way through this as sticking our heads in the sand is just not an option – especially as we see current opportunities that are well worth exploring.
The real truth of the matte is that having everything cycle is what in fact makes property work.
If we can have solid, safe investments that are cash flow neutral or cash flow positive whilst delivering tax deductions and capital growth, then this is what safe property investing is all about.