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Bryce Holdaway Blog post by Bryce Holdaway

Will the Property Market crash in 2013?

Well folks, it is December 21, or as the Mayans call it, April Fool’s Day.” – Jay Leno

What a relief to know that the Mayans predictions didn’t come true in December last year despite the huge media exposure it received.  But sometimes you could be excused for thinking that the reporting of property in the Australian media is similar to this “end of the world” propaganda… lots of discussion and opinion flying around but at the end of the day all to no avail.

If you’re a bit like me, you’re probably a bit sick of hearing the negative news that is often force fed to us by some attention seekers looking for a profile in the media using a sensationalist headline to get noticed.  Despite predictions of (so-called) housing bubbles bursting or the unavoidable property market crash, the facts about 2012 are that it was a “recovery” year for house prices in Australia with Darwin, Sydney, Canberra and Perth all recording positive growth for the 12 months period (Darwin in particular up 11.7% according to RP Data-Rismark which Ben Kingsley predicted back in Feb 2012) and the remaining capital cities having declines with Melbourne recording the largest fall at 3.3%.  Furthermore, some of the regional areas throughout the country secured double digit growth which begs the question… what happened to the property “collapses” that were predicted?

The conclusion – to be a successful property investor in 2013 you should stop reading the newspaper and filling your head with negativity and seek the opinions of those who are actively involved in the industry and have a track record of “walking their talk!”

So is there any reason to be excited about property in 2013?  I think so, and here are some of my reasons why:

  • Interest rates – are historically low and likely to fall further meaning that affordability is good in most markets
  • Stable economy – the Australian economy continues to be the shining light for the developed world as inflation is in the RBA’s preferred zone of 2-3%, unemployment is stable at just above 5%, a return to the low interest rate environment, a stable banking system and, with the exception of a few minority markets, we are not currently oversupplied.
  • Finance restructure – opportunities exist to free up cashflow using optimal account structure and potentially locking in a portion of fixed rates with the view of retiring additional debt.
  • Counter cyclical investing  – great opportunity for the long term investor to add quality property to your portfolio when the conditions favour the buyer
  • Regional opportunities – some of the star performers for this year are likely to be in certain parts of regional areas across the country for growth and yield
  • Supply – not a lot of brand new stock is being built as finance is proving more difficult to obtain for developers which will tighten supply.  Beware of House & Land estates and inner city apartment market where there has been huge activity in the last couple of years – potential for oversupply in these markets.

However, I don’t think that 2013 is the year for the speculators.  It will be a market for those investors looking for moderate growth, who have a long term vision with adequate cash flow buffers in place, are open minded when it comes to location and those focused on buying established property rather than brand new.

Finally, once you’ve identified the area you want to invest in, it’s important to develop the skills to identify which properties are the “A” grade ones in the area as you will give yourself the best chance of outperforming the local market because this year more than most, the “B” and “C” grade properties are likely to struggle.

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