Brisbane property investment: should we change our thinking?
Watching the marketplace is essential if you’re going to make money from Brisbane property investment. Prices, rents, all tiers of legislation and changes to the tax environment can all impact our decision-making and potential returns. But when are we too caught up in the ‘now’ and unable to focus on the long term which is, after all, the kind of investment we’re making with real estate.
I once sold a South Bank apartment to a Chinese gentleman. Like most property in that precinct it was leasehold, and he was uncomfortable with the 110 year term. Through more than 300 to 400 buyer enquiries he was the only one questioning what would happen to his (his family’s) asset at the end of the government-granted lease. While he was considering his options I called him one day with great news: the lease term had been amended and would now be 999 years. His response: “Yes, but what happens to my property then?!”
Election campaigns are the worst at feeding our short-term thinking. Labor wants home prices to fall and will dump negative gearing and double the tax on capital gains. John Howard said this week that with home prices across much of Australia already dropping Labor’s policies are “like holding a drowning man under water”. LNP supporters (and real estate agents) are horrified but we won’t get into the coulds or maybes of their policies here.
Similarly official interest rates may drop next week. Or next month. With inflation so low they’re now likely to drop we’re told. So maybe then will be the time to buy?! Access to home finance is a rising issue in Brisbane, despite what we could see just a couple of months ago. But with whispers of a change to APRA’s assessment benchmarks (servicing capacity on 7.25% rumoured to be dropping to 6.75%) that one change could move market momentum into positive gear fairly quickly.
There will always be a reason to invest, or to not invest. But we do wonder if Brisbane property investors shouldn’t be focussed on the bigger and much longer term picture. Where are home prices and returns now and where will they be in 5 and 10 years? The drop in home prices post a Labor election victory might be a buying opportunity. Especially if rents rise as they would if there’s less investors/supply. Market commentators already have Brisbane’s prices at the bottom (or near bottom) of the current cycle, the REIQ today reported the inner-city’s vacancy rates are at a very low 2.1% and rents are starting to lift with Brisbane setting a new record high in the March quarter.
The latest data from CoreLogic highlights how little the cycles can really mean: “Brisbane dwelling values are $7,796 or -1.6% lower than they were at their peak.” The media and online hunger for property data is understandable. For most of us our homes are our biggest assets and at the push of a button we all expect an instant estimate of value, insight into upcoming changes and ways to beat the trends. But does a little up or down make much difference if you own the property for 7 to 10 years (the Brisbane averages)? Are we really making half million dollar decisions for our financial futures based on a couple of percentage points? Or worse, never making worthwhile investments because we can never find that perfect time.
Our agency is a working part of this property watching frenzy and we really do understand the need for investors to stay across the issues. But I often think of that Chinese owner and his incredibly long perspective. I wonder what his apartment will be worth in the year 3002!
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