How will the election impact the property market?
Many investors are waiting eagerly to see what effect the federal election outcome will have on property markets throughout the country.
While there has been a boost to the market provided by low interest rates, investor confidence still remains at an all-time low in the lead up to the election; there is still a level of uncertainty around who will lead the next term and the effect it will have on the country’s economy.
Recently, research analysts RP Data and onthehouse.com released their separate findings on the market movements in capital cities following previous elections.
The findings provided some interesting insight as to what could be in store for the national housing market in the coming months.
RP Data found that Coalition election wins in 1998, 2001 and 2004 were all followed by increases in house values over the following 12 months.
The most recent two elections – 2007 and 2010, when Labor took power – saw house price fall over the following 12 months.
This doesn’t necessarily mean we should associate growth with a Coalition government – Labor had to deal with the GFC during the last two terms. House prices in capital cities have risen 4.9% in the 12 months to July this year, according to RP Data. With the election imminent, the market appears to be in a positive position.
Although the winning party is not yet a sure bet – based on the current interest rate environment, expectations point to housing markets continuing to strengthen amidst renewed consumer confidence and increase investor activity.
Seen once every four years, this pre-decision marketplace offers the savvy investor an ideal opportunity to secure the very best picks, whilst the majority sits on the fence.
Benefits of buying positive property off the plan
There is significant new development occurring in some of Australia’s positive property hotspots such as the Northwest and Central Queensland, offering investors a variety of opportunities to invest off the plan.
Many consider off the plan property to be a high risk investment but with thorough due diligence it can generate excellent returns with low cost entry.
One of the major draws of buying off the plan is that a deposit of around 10% will secure the property. Pre-approval on finance will be required but the balance is generally not be payable until settlement.
With construction completion often taking six to 12 months, there is an extended timeframe for settlement and investors can take advantage of this to improve their financial position and benefit from any capital growth. As the property is purchased based on a fixed price contract, any equity the property generates between the deposit payment and settlement is the investor’s capital gain.
New properties also command top rents and investor profits can be further increased by taking advantage of tax depreciation, which is maximized for new properties. They also have minimal maintenance costs.
In addition to conducting comprehensive market research, it is vital that investors conduct due diligence on the developer. The developer’s track record, design and quality of projects, and capacity to deliver on schedule should be analyzed before committing to buy.
This includes investigating factors that can significantly affect a property’s value and rental yield such as floor plans, fittings, finishing’s and appliances.
Workmanship and products should be of high quality with suitable warranties. Ensure the process for rectifying defects is clear and assess the options for the customization of floor plans and fittings if it will add value and attract quality tenants.
Investors should review the contract carefully and seek legal counsel if they need clarification on the term and conditions.
Off the plan purchasing typically offers a low cost entry into the property market and in some states investors can avoid paying full stamp duty, making it a desirable option for first time investors.