Well as I write this the Corona Virus is hitting the works with vengeance, China, Italy, Europe the USA and now Australia. As an investor it is all shaky ground at the moment with the stock market going up and down like a yoyo and people unsure of what the property market will do?
The first think I want to remind you is that investing is a long-term strategy and weather you are in shares or property you should look at it over the long term. Unless you are developing property or flipping or trading shares on the market day to day, this is more like a business or job.
Over the long-term both shares and property will grow, when we have volatility and world events that affect everyone there will be some market movements where panic and fear enter the market. Now if you have shares in travel companies or airlines with the current conditions of Coronavirus it might be an idea to cut your losses and sell out. However, dealing with big companies with large balance sheets backed with asset then they will see out the storm. If in shares stick with the blue-chip shares such as banks, resources and supermarkets then your portfolio should survive and survive quite well. Shares are much more of a liquid asset and can be sold on the day and the moment in your bank account by the end of the day. But remember you are not in control shares; they are managed by what decisions directors and board of directors along with the shareholders make. This is also the market that makes up its mind as to sell or hold the share.
Property is a more secure long-term approach, it does see some ups and downs, however on the long term through the typical cycles of supply and demand we general see stable capital growth out of the property market. It does have rental which again is constant cashflow.
Property puts you directly in control of your wealth and when you choose to buy and sell the property, it’s on your terms. When property prices drop we tend to see drops of up to 5%-20%. These are usually only for a short time about 12 months. At the lower end of the market in Australia under $500,000 we do not see huge drops, as most people who are looking to buy sit in this affordable price point bracket. The area where we see the greatest drops are in the $1mil price bracket where someone who needs to sell and is under pressure, this is where the bigger drops happen. This tends to be the owner occupied market or high net worth investors who cannot weather out the storm, so it is the fire sale assets that this will happen, like with Coronavirus and it affecting someone losing their business and needing sell.
We are currently not seeing any drops in the market, some of the investors are sitting on the side line not sure when to move, but they will not want to leave it too long because when we get over the Coronavirus we will see property grow as it will be a safe investment after all the volatility of the share market.
As you often hear “Safe as Houses” well in Australia this is pretty true. We tend to see capital growth and a good rental return. Put together with a good strategy these returns can be very good.
So if you’re looking to invest, if you have some time off now is the best time to regroup, do some research, look for properties with good rental yields, in good location, blue chip areas and maybe something that can add value such as duplexes, granny flats, splitting blocks or renos.
If you are interested in buying an investment property call Chris on 0434 449 455 for more information on how you can make money throughout this time and co