Why you need to start your property investment portfolio in 2017

Thursday, 9th Feb 2017

If you haven’t yet kicked off your property portfolio, here’s why you should start your property investment in 2017.

Most people are aware that property investment can be a great wealth creator, however many of us fail to act.

The reasons for this are varied, but typically centre on short-term matters.

For example, when property markets are booming people are typically concerned about property bubbles – they don’t want to buy at the peak and be part of a market ‘crash’, so no action is taken.

On the other hand, when the market is in a slump many are not imagining any recovery, believing that prices will only continue to fall, and again no action is taken.

While it would be great if property prices rose steadily in a straight line, the cyclical nature of property markets – as demand and supply drivers move up and down – means that this is not the case.

Although there are ebbs and flows in the property cycle, history has shown us that property prices in Australia’s capital cities have continued to rise over the long term.

Therefore, investors need to take a long-term view when considering investing in property and put the short-term matters into context.

So why should you start your property investment in 2017?

Two reasons.

1) the earlier you start the better, and;

2) the stats are indicating that 2017 will be the year to invest.

Get in as early as you can

The sooner you start the more time you’ll have in the market to capture compound growth on your property (i.e. you’ll have more time to create greater personal wealth).

So a $500,000 property acquired today that achieves 5% per annum growth over 10 years will be worth $818,334. That’s an additional $318,334 from the initial purchase price.

But hold that property for 20 years and it will be worth $1,339,341. That’s an additional $839,241 from the initial purchase price.

By holding the property for 20 years (instead of 10 years), the property can make a further $520,907.

Therefore, the sooner you start investing the more opportunity you’ll have to capture compound growth.

As the saying goes, it’s about time ‘in’ the market, not ‘timing’ the market.

While starting your property portfolio sooner rather than later is beneficial to achieve greater wealth, investors need to ensure they acquire high-quality properties that will outperform the market over the long-term.

2017: The year to invest

An increasing number of experts, media and recently released statistics have suggested that the Perth residential property market is primed for investment in 2017.

The latest data released by the Real Estate Institute of Western Australia (REIWA) shows that Perth’s preliminary median house price for the December 2016 quarter did not change from $520,000, which is a positive sign, as historically once all sales have settled this preliminary median generally increases, so Perth could in fact record an increase in price over the quarter.

Sales activity is increasing with the preliminary dwelling sales for the December quarter 2016 five per cent higher than the same time in 2015. For the week ending 31st of January 2017, property listings were down about 2% year on year, indicating that some of the excess supply in the market is starting to be absorbed.

Great time to buy right

Buying strategy is just as important as timing in order to maximise the benefits of any approaching upswing. Investors who examine potential demographic, social, infrastructure and planning changes will have the best chance in purchasing a property that will outperform the market.

For example, in 2007, our research team identified the City of Belmont as an investment-grade suburb with strong short and long term growth drivers exposing many of our clients to the rapid price growth that occurred in this area.