I am a big fan of owning direct property in one’s investment portfolio. However, property is such a clunky asset that the timing of your purchase needs to be right.
There is a lot of talk about at the moment as to whether property is in bubble territory. Time will definitely tell but do we have to wait before it’s too late before we know for sure?
There are plenty of reasons to worry.
In NSW, for example, Reserve Bank of Australia figures show investors now account for about 45 per cent of home loan approvals. The investor share of loans is at a record high. Worryingly, 45 per cent is much higher than the very exuberant times of 2003 which ended badly.
In another sign, experts say an apparent explosion in property investment seminars could be a warning that parts of the property market are overheating. Housing seminars are a common sight around hotel conference rooms where they pitch to retirees or younger investors. Direct telephone marketing is also on the up.
Spruikers have refined their pitches too.
They still use well-worn arguments to drum up business, such as negative comparisons to shares and a shortage of housing supply. You hear spruikers wanting to ‘create 10,000 millionaires before they die’ or ‘wanting to share their secrets on how they and their friends built fortunes in real estate. All you need do is attend a “property millionaires” tour where you can learn how to develop, renovate and churn property. They want to ‘teach you how you do that safely, securely and make money.” But they’re updating their pitch to emphasise affordability of property investments for self-managed super funds and the “globalisation” of Sydney and Melbourne as a haven for global capital. Investors are also promised double-digit returns, guaranteed tenancies, regular rental income and perks, such as ‘‘free’’ furniture.
Regulators fear much of the demand is being driven by big commission payments to those involved.
Aspirational investors should tread cautiously. Seek independent advice.
Bye for now
Source: The Australian Financial Review 2nd August 2014 Jacob Greber