In a recent conversation with a friend, I was asked for my thoughts when the property market will soften. I was quite surprised by his question, as in my mind the property market isn’t that high for investors. It turns out that he has been searching for an investment property in the inner city, doesn’t want to get involved in strata and therefore looking for an established semi.

In my opinion I explained to him that, those looking to buy this type of property are competing with owner occupiers. Here there is emotion involved and it isn’t really an objective buy for these purchasers:

  • Yield is irrelevant
  • Short term capital growth is irrelevant

In this case, the market is likely to stay strong and will be assisted by the Bank’s increased propensity to lend on these types of properties. I further explained to him that, if he wanted to get value in the investment market then there are abundance of investment opportunities in the unit sector currently held by developers due to the result of overseas buyers forfeiting settlements, the difficulty in borrowing to purchase these properties and also due to the negative press surrounding quality of construction.

Therefore, we are finding developers very much prepared to negotiate and this is where the value exists in the investment side, both in yield and future capital appreciation. This has also helped by the Liberals promise to keep negative gearing.

Martin Speiser, Director at Masu Group.

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