Kylie Purcell* notes that while property values are falling around the nation, new opportunities are popping up as well.
With national property values continuing to slide, the real estate downturn has become a heavy burden for many investors and homeowners alike in the market.
But despite the sorry news, it has also created new opportunities.
“There’s always winners and losers in the property market and whether you win or lose depends on how savvy you can be,” property investment adviser Margaret Lomas of Destiny Financial Solutions told Your Money Live .
“The writing was on the wall, and it was pretty obvious that the good times couldn’t roll on.”
Lomas says there are five key winners to come out the current property slump – which she adds is mostly affecting the Sydney and Melbourne markets.
These are first home buyers, renters, upsizers, property stylists and ‘alternate market’ investors (properties in areas not affected by the slump).
Winners
1: First home buyers
For people that have yet to buy their first home, the property downturn could be seen as a boon, so long as they get in the short to medium term.
With median property values falling, homebuyers will need less of a deposit and lower mortgage repayments ahead.
That’s particularly true of the Sydney market, where median dwelling values have fallen by up to $100,000, with lower-end properties now available for around $500,000, says Lomas.
Lomas says the biggest winners in this scenario are first home buyers that had already been saving for a deposit when the slump first started.
“With any downturn, investors tend to flee the market… so first home buyers are actually finding there’s a lot less competition in the market right now.”
- Alternate region investors
As investors exit major cities, more often than not regional towns or other areas not facing the downturn grow in popularity.
“Alternate markets are the last winner in a property downturn because whenever there’s a property downturn, any market that isn’t in a downturn does really well.”
Investors turn to smaller alternative markets in the hunt for a higher return on investment, which is a boon for property owners already in the market.
Lomas says that first home buyers also help these markets to grow because they often choose to ‘rentvest’ – live in major cities and buy more affordable investment properties in regional areas.
- Upsizers
People looking to upsize to a more upscale property will find the property slump offers more opportunities for them than usual, Lomas says.
“In booms like the one we’ve just had it’s usually the higher end market that becomes most affected and it can fall the most.”
Toward the end of a boom, as less people are able to afford the higher-end properties, the lower-end properties rise at a faster rate.
“This means that the gap between levels of property will be slightly reduced and for some buyers it will become marginally easier to upsize into that next level.”
- Renters
For the almost 30 per cent of the population who rent (according to the Australian Bureau of Statistics), the downturn is mostly positive news.
Lomas says first, there will be less competition to find a rental property because more people will be looking to get into their own home.
And second, rent isn’t expected to rise thanks to the big influx of new dwellings that came onto the market during the boom.
“Many [which were] bought by investors that are now competing for the dwindling supply of renters that there are. And many of these investors are starting to offer rent incentives, like a week of free rent to attract a tenant,” she says.
“[And] even more supply is in the pipeline, which should continue to see rent in some areas remain low for a time to come.”
- Property stylists
With competition to attract buyers heating up at all levels of the market, Lomas says property stylists are the big winners.
When there are less buyers in the market, it makes more financial sense for sellers to make sure their properties stand out from the rest.
“Styling can actually add artificial value to a property and make one property sell for more than a similar property which isn’t styled.”
“Styling can help people to have that greater emotional buy in. When buyers get emotional. They negotiate less well.”
Losers
Among those who will have been the worst affected by the property downturn are:
Buyers during the final six months of the book
Retirees downsizing
Investors relying on leverage
People with loans over 80 per cent
Property flippers
“Whenever a big property boom starts to come to an end we often see various buyers start to get scared that they’re going to miss out and it’s only going to become more unaffordable for them and so they rush in,” Lomas says.
“They often pay whatever it takes to get in and the result can be that they often pay more than what the property is worth.”
So when prices soften and begin to fall over time they can find themselves in a bad position.
The others on the list will also see a lack of growth on their property, meaning they can’t leverage off the equity and they may become limited to that property as an investment, until the market moves again.
While it might seem grim for anyone in these categories, Lomas says it’s important to stay calm and not panic sell.
“This is a normal cycle and we’ve been in this exact cycle many times over the past years. It will change though at some point in the future.”
That might require a little patience, however. Lomas predicts that market to return to its upward swing in about five to seven years.
* Kylie Purcell is a Senior Digital Journalist at Your Money . She can be contacted at www.yourmoney.com.au .
This article first appeared at www.yourmoney.com.au
