We received some interesting data during the week from Nerida Conisbee, Chief Economist Ray White Group. She reported that in Queensland the average number of groups attending our open homes are 18, which clearly supports what we have be saying in regards to demand in the market, which is reflective in the data in regards to listings. Listings in Brisbane are still well below historical levels, this has been the main driver for investors to sell up and take profits.
The old adage of sell when everyone is buying could not be truer at the moment. Buyer agents are calling and emailing daily as they cannot satisfy their clients. The biggest sweet spot price is the $1,000,000-$1,500,000, this market is so under supplied and the unit market is red hot.
Across our group, sales of investment properties is up around 16% on last year and we sense the motivation for investors to sell is to take profit and get ahead of the curve and reinvest elsewhere. Some are buying the future home when it is time to down or right size and others are getting into other investments to ride an upswing, but at a lower price point.
There was another interesting fact that partly explains the lack of housing. During and after Covid, we saw a huge rise in divorce and family splits. This has lead to further demand for housing as one had to become two and coupled with the lack of building and migration you have a perfect storm for housing, hence why prices rose despite rates being lifted in quick succession.
The conundrum for many home owners is where do they go if they sell? So many hang on, although the preference is to sell, so the classic Catch-22. That is why investors have been encouraged to sell as they do not face this problem and they recognise it is a great opportunity to profit. A question we often ask of an investor, what were your plans for this investment property when you purchased it? And, is you plan on track and if not, what needs to happen.
This may sound basic, but many investors don’t have a plan, they purchase a property as they have nearly paid off the house and think we should invest; they are not Robinson Crusoe, or they were told to set up a SMSF and buy a property, typically they heard this at a property seminar.
I am not here to judge anyone on how they invest, heck I have made poor purchasing decisions in the past. I only share what I have seen over a long period time and with the benefit of being at the coal face daily and reading the reports and data available to us.
Something you should be aware of in terms of property management, the government is pressing forward with Stage 2 Rental Reforms. Whilst all details have not been released, some of the items include, portable bonds, rent increases restricted to once a year, no matter the lease, so you could have 2 tenancies in the year, but the rent could not increase a second time, minor alterations to property and break lease fees being limited and not allowing tenants to offer more than the advertised price.
I understand the government is resisting calls to abolish or reduce the tax benefits on property and capital gains, but the pressure will come to make the changes inside their own ranks and unions, so don’t be surprise if it is on the agenda after the next election. However I say this, it’s a big storm in a tea cup. The notion you have to lose money to gain a tax break makes no sense and should never be the reason to invest in property, however it has been used as a way of convincing would-be investors this is a great strategy, “let the tax man pay for your property”.
Capital gains is the name of the game and to leverage the gains to buy more is how wealth is created. One property will not make anyone rich. So perhaps a conversation with a mortgage broker could be timely, investors who have owned a property for awhile have locked in good capital gains, it may be time to buy another or rethink your strategy??
This is the link to our latest Ray White Now magazine, enjoy the read. https://viewer.joomag.com/ray-white-now-february-2024/0592883001707711260
Until next week, stay safe and be kind.