Chris Gray began his property investing journey when he was 22 years old. With only $35,000, he spent the next nine years learning about investing firsthand, and applying that knowledge to his own portfolio now worth over $15m.
In my 25+ years as a property investor I've declared many times that I never try and time the market – I buy when (1) I've got the deposit (2) I can get a mortgage and (3) when I've got the cash buffer to take me through the next few years. However, most property buyers don't think like that and many of them are waiting for the bottom. If that's you, then like auctioneers often say at the auction 'I'm giving you fair warning…' – I'm saying the bottom could be almost here, so you might want to get ready and get moving. Changes in the property market are often caused by the softer side of things rather than hard facts and figures, so consumer sentiment – how people are feeling – often has more effect than the interest rate you are paying or the size of your tax rebate. So, what's happening?
1. THE ROYAL BANKING COMMISSION
The Royal Banking Commission seems to have been forgotten about and not many people are talking about it these days – it's last year's news. Sure, there are some changes coming up, especially around interest only loans changing to principal and interest (P&I) in the future, but for many that's a few years away and so it's not in our short-term worry horizon.
2. INTEREST RATES
The RBA is talking about interest rates dropping which excites most people with a mortgage. Even if the banks don't pass most of it on (by blaming wholesale funding rates or crying because they're not making enough money these days), it will still give people a positive feel.
3. RATE SERVICEABILITY
Banks are saying that the high P&I interest rate serviceability figures they're being recommended to use are now too high and need to be reduced. The banks need to make money, the governments need the banks to make money to keep their high international risk ratings and so that means they need to lend. No one thinks we're in danger of being in a bubble as prices have already fallen and so I think there's a good chance they'll relax the borrowing criteria and start lending again.
4. FEDERAL ELECTION
The election is upon us and whatever way the vote swings, at least it will be over. Most people are indecisive and sit on the fence over an upcoming decision. But after it's happened, people just take whatever medicine is being dished up and then they move on.
5. THE CHANGES TO NEGATIVE GEARING
Labor has been blasted about their proposed negative gearing changes. If they don't get in, it won't matter. If they do get in, then they still need to make those changes and we all know how often politicians deliver on their promises. And it could all be grandfathered anyway so the sooner you make a decision the better your chance of not being affected.
Many of our property markets haven't been that wildly affected anyway. Sydney is supposedly the worst at minus 14% but some areas are still rising. I know my market (median priced, blue chip, inner city, second hand) is potentially only down 5% on average and that's if you are forced to sell or refinance – for most they're sitting tight and won't even know about a short-term blip downwards. So, if you're not like me, and you still want to time the market, this could be the sign you've been waiting for.
ABOUT THE CONTRIBUTOR
Chris Gray is CEO of Your Empire, a buyers' agency that buys homes and investments for time-poor people – searching, negotiating, renovating and managing property on their behalf. Chris has spent over 10 years as the host of 'Your Property Empire' on Sky News Business channel, where he's interviewed various heads of property research companies and major industry figures. Chris is a qualified accountant, buyer's agent and mortgage broker. For more information visit www.yourempire.com.au,www.chrisgray.com.au and follow Chris on Twitter: @ChrisGrayEmpire.