lowerriskofapricefall.Waitingforapricecorrectionso
you can pick up a bargain later is a dangerous strategy
that may cost you when prices keep increasing.
Ifyouareinthemarkettobuyrightnow,myadviceisto:- Look in Queensland and Victoria, as both locations
willcatchuptoSydneypricessomeday. - Sticktopricesthatarewellbelowthemedianprice
for the location. - Staytruetothefundamentalslistedhereandmake
sure the cash flow works for you. - Makesureyoucanholdthepropertyforatleast10
years, or don’t buy at all.
Negative or positive cash flow doesn’t matter but it needs
toworkforyourindividualcircumstancessoyoucan
hold the property if there are tough times along the way.
Get the fundamentals right and you won’t be kicking
yourself in 10 years if you buy now. But staying out of
the market and waiting for prices to drop could cost you
big time.M
have seen significant capital growth in the past decade.
Theupperendofthemarket–propertiesthatare
significantly above the median price for the area – are at
amuchhigherriskofapricefall.That’sbecausethere’s
perceived value in those properties.
Take a Melbourne house selling for $1.5 million, $700,000
above the $800,000 median. Why will it sell for so much?
Becausethemarketdemandsaysitwill.Thatisthe
perceivedvaluethemarkethasset–itdoesn’tmeanthe
bricksandmortararereallyworththatmuch–andthat
perception can change. A 10% or 20% correction means
a drop in value of $150,000 to $300,000.
At the other end of the market, a $500,000 house-and-
landpackageis$300,000belowthemedianpricefor
Melbourne. That price is the cost of the land, the cost to
build the property and a reasonable margin for the builder.
There’s not much perceived value at that range and, I
think,littlechanceofthatpropertyhavinga10%to20%
price correction. I believe this end of the market has a much