The Perfect Investment Recipe.
Wow hey. “Perfect”. That’s an interesting concept. Strictly speaking, the perfect deal took place in 1788 when the British empire acquired Australia for free. But even that bargain has had a historical cost…
When you examine the growth of a state like Melbourne on a macro level, you quickly discover that each decade, prices climb. The general rule of thumb is that the average price of a dwelling will double over a ten year period. This growth is driven by a familiar concept. Supply & Demand. ‘They’ keep bringing out humans, but ‘they’ aren’t making any more land! Interestingly, 2018 was the first year that Melbourne actually met demand, meaning that we built as many homes as we bought.
This issue is what drives growth in Melbourne and keeps prices rising. So in short, the ‘perfect’ time to buy a property is as soon as you can afford it. The market may slow, but it will never stop in a capitalist framework.
That being said, we think that right now, due to the current macro-economic climate, is the perfect time to invest.
Yep, that’s right. Three paragraphs on why there is no perfect recipe and then a whole piece on why now is perfect.
I’ve done this to help you understand how rare these opportunities are and why now is the time to move. The current market slow down has been engineered by the government as a result of the COVID-19 protection measures, (Thank you Captain obvious), but it’s not real. It’s a phantom decline. Market crashes like the Great Depression come from “the horse bucking its jockey”. Something terrible happens that causes investors or consumers to lose faith. In this circumstance, the government has strategically “knocked the economy into idle”. They have a plan of action for stimulating economic productivity ‘ post-COVID’.
The great news for investors is that the plan is to stimulate Real Estate! Property & Construction make up almost 17% of Australia’s GDP, making it the ideal vehicle for economic prosperity. The $25,000 Home Builder Scheme has just been extended by three months as a means of continuing the stimulation.
The economic slowdown has also affected retail pricing. That means that there are bargains to be had! We’ve heard that average prices are down by around $30,000. If you were to build a new home for $550,000 today, by the time you factor in the $25,000 grant, it would be around 10% more affordable!
Every great recipe always needs butter, and ‘the butter in the property cake’ here is low-interest rates. The RBA has set the cash rate at 0% for a few months now, and we’ve begun to hear reports of negative interest rates. As debt becomes easier to access, more purchasers will flood the market and the prices will start climbing again.
The growth that we touched on earlier plays a huge factor in this opportunity. Melbourne’s South East alone is bracing for a further 230,000 homes over the next 30 years. As Melbourne grows, so does its Real Estate value.
So we feel that; right now prices are down and growth is low, but as the government is looking to inject the Real Estate industry with ‘an upper’ and ride it to prosperity, there has never been a smarter time to invest in property.
