There has never been a better opportunity to invest in Melbourne. See why that’s the case.
Have you been following everything going on in the Australian property market? If so, the word ‘downturn’ probably gives you nightmares. Many investors have had to put on the brakes.
Average home prices fell significantly in our biggest markets. Melbourne was no exception. While it still stood stronger than Sydney, many investors decided to hold off or jump ship.
But things are looking up for Melbourne and Victoria as a whole. With $6.2 billion in planned infrastructural improvements, the future is sunny. A variety of projects are underway, so it’s no surprise the market is slowly picking up. In the near future, Melbourne will become one of the new investment hotspots.
But hefty investments in state infrastructure are only one part of it. There are other reasons investors should turn their heads towards Melbourne right now.
Let’s take a look at some of them.
1. We’re at the Bottom of the Market
Market timing is a huge part of property investing. Every investor wants to find the perfect moment to buy for the highest returns. So what’s showing right now on the property market clock?
Based on the most important indicators, the market has bottomed out. Prices have gone down as much as they can, discouraging many investors along the way. But as the saying goes, it’s always darkest before the dawn. And light is certainly dawning for the Melbourne market.
Investors who decide to invest now will be able to take full advantage of the current low prices. They haven’t been this low in a long time, and seem to have reached their lowest point.
Naturally, investors can expect serious growth in the future. As Wealth for Life founder and CEO Anthony Peluso states:
‘…If you’re looking to get into the property market, now is the perfect time to do it. Because you’re never going to see conditions this good for investors wanting to get into the market.’
2. Market Uncertainty Caused By the Elections Is Over
Federal elections cause a lot of buzz in the property market. There’s no doubt it’s a stressful time for investors. The national market hit its bottom the day before the elections.
If you’ve been following the elections, you can understand why this was the case. Labor proposed many changes that would affect investors all across Australia. These included changes in negative gearing and CGT laws, which got many investors riled up. Many chose to sit on their hands and wait to see what would happen.
Naturally, market activity was very slow, causing home prices to drop even further.
But with the Coalition’s big win, certainty and confidence have come back. Knowing that there will be no major policy changes, investors have summoned up the courage to resume investing. As a result, the market has started to pick up.
3. Interest Rates Are at an All-Time Low
With the end of the elections came another huge win for property investors. While interest rates have been kept low for a while, cash rates got even lower in the past couple of months. To ease the 5.3% unemployment rate, the RBA decided on two interest rate cuts in June and July.
As a result, the current cash rate sits at only 1%. What does this mean for investors?
It’s actually quite simple – money is very cheap right now.
Those who haven’t had a chance to invest because of loan repayment issues will have a much easier time of it. If you decide to invest now, you’ll be spending much less money out of pocket.
Better yet, there’s a 78% chance we could see yet another rate cut in November.
Pair this with low Melbourne property prices, and you can see why it makes sense to invest right now.
As you can imagine, this will prompt many new investors to get into property. The competition will drive property prices up, which is why the market may keep going north in the future.
4. Strong Auction Clearance Rates in Melbourne
When looking at market sentiment, many people turn to auction clearance rates for an indicator. Over the past couple of years, they hadn’t been very encouraging.
But right now, things are changing for the better in the biggest markets, including Melbourne. Just last week, auction clearance rates in Melbourne reached 74%, which is higher than they’ve been in a long time. This is yet another sign of overall market health.
In addition, lenders are seeing high demand for investment loans. The demand hasn’t been this high since 2017, so it’s safe to say things are starting to move forward.
5. Lender Assessment Criteria Has Eased
If you need more proof that investment hasn’t been this easy in a long time, these indicators should give you the confidence you need. In the past few weeks, banks have eased assessment criteria, making people much more optimistic.
Up until now, if you wanted to get a loan, the lender would stress test it to 7.2%–7.5%. This means they wanted to see if you’d be able to service the loan if the rates were that high. Needless to say, many potential investors were excluded out of the market.
The APRA saw this and decided to do something about it. Since interest rates have been sitting at 3%–4% for a while, it made no sense to keep these criteria. So the APRA stepped in and revised it.
Some lenders have lowered their assessment criteria to as low as 5.25%. Anthony thinks that this will open the floodgates for investors. Many people who couldn’t get a loan in the past will be able to do so in the current climate. And then market activity will pick up in earnest.
This doesn’t mean the banks have loosened up a lot. Their lending criteria are still tight, but that’s the way it should be. There has to be some filter to prevent saddling people with loans they can’t afford.
As Anthony explains:
‘You still need to manage your money very, very well. Looking at your assets, your liabilities, and especially your expenses. But the assessment criteria now does make it a little bit easier for Australians to actually service a loan.’
6. More People Going Into the Marketplace as Renters
According to research, only 66% of Australians own their own homes. In today’s market, it just doesn’t make sense to many of them. They’d have to spend their entire life paying off their home loan. Forget about any investment homes.
This is why many people are becoming renters rather than owner-occupiers. And this is music to investors’ ears.
The demand for rental properties should continue to go up, so there will be more opportunities for a reliable source of income.
The Time Is Now
As you can see, all signs are pointing to great market potential. Early investors may have the most to gain.
‘Don’t wait for the market to take off to a point where you’re reading about it in the media or in the newspapers. Because at that point, when you jump in with the rest of the herd, it’s too late,’ Anthony says.
So, are you ready to start building your wealth? If so, get in touch with us and we’ll show you how to get a head start.