What happened to the property crash everyone spoke about?

The old saying is ‘don’t let the truth get in the way of a good story’. I guess that is the generation we are a part of. A high speed, 24/7 connected, instant gratification and highly media-driven society, which often causes news to travel fast, allowing for public opinions to be formed quickly and inherently with a minimal amount of factual information needed. As long as there are more people who think the crash happened or is happening, than know it didn’t or isn’t, then that by default becomes the ‘new common truth’. How many times have you been told ‘the economy has crashed’ in your lifetime? How many recessions have you lived through or, even worse, how many times have you had to hear someone blame the GFC?

Housing Numbers

Well, we have learned that people lie but numbers don’t. If you had been heavily invested in 2007 before the GFC in property or shares and you were sensible enough not to sell your investments in the downturn but instead still own them today, would you be happy with your 13-year returns?

Average Sydney Property Price 2007 = $512,300

Average Sydney Property Price 2020 = $873,000

Growth = 70.4%

Average Growth Per Year = 5.42%

It feels like 1990 all over again. We were in the middle of the last recession that this country had been through, interest rates were alarmingly high as opposed to 2020 where they were at record all-time lows. We are being told by every media channel that the bubble has burst, and Australian property prices were about to crash. At that time, in 1990, there were some fantastic news reporters talking about people in the Western Suburbs of Sydney setting their houses on fire to stay warm because it was not worth the timber that it was made out of. The property prices at that time in 1990 in Sydney were at an average of $140,000 per property. Now I question you to speak to anybody who invested in a property in the middle of the recession of 1990 in Sydney that still owns that property today that is disappointed with the investment that they made. Who regulates the information that Channel 7, 9 or 10 share with us during the news hour? Mass media often cause us to have fear. Fear leads to procrastination and procrastination causes people to miss opportunities.

The important part of this small article is to get people into the mindset and understanding that Investing super in property is a long term investment, it will have boom and bust cycles, it will have hyper-growth years as well as having years of stagnation, whereby it grows very little and potentially even declines by a small percentage in that short term period. But looking through history, there has never been a circumstance where the average property price in this country has declined over a medium- or long-term period of seven years or greater.

So just like this year in 2020, everybody has now become property enthusiasts as we saw a huge growth year with a renewed demand in the property market that has continued to be stimulated by the government incentives that were being offered. First home builders in most states receiving $15,000 or greater in the form of a grant and a further $25,000 under the COVID-19 stimulus package offering a ‘new home builders grant’, allowing first homeowners to enter the $400-500,000 property market with less than $10k cash, which many of them had just removed from their super, which is a big ASIC nightmare the country will be dealing with in 9-12 months time. Keep eyes and ears posted for another article from me on that in the near future.

Fun Facts

Cities and pockets of cities in Perth, Hobart, South East Queensland and in Darwin had over 10% growth in a single year, something that hasn’t been seen since pre GFC times. But many people will say now’s not the right time to buy because the markets are too hot. Well, they were telling you in April last year that it wasn’t the right time to buy because we were about to face global depression. And we were going to see unemployment statistics the highest they had been since 1929.

So, as I said at the start, sometimes they don’t want to let the truth get in the way of a good story. And the truth is the best time to buy an investment property will always be yesterday. Seek independent news channels to get a ‘balanced view’ on the current timing of the market and hope we are positioned as a nation-leading into the future, always do your research and try to let the facts outweigh the feelings.

For more information on property investment, contact us today!

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How Do the Returns from Property Compare to a Standard Retail Fund?

By Dawn Akenhead • January 16, 2023

So, how does investing my super in property compare to the returns I'm seeing from my existing retail fund?

Meeting with Advisor — The Investment Property Guys in Broadbeach Waters, QLD

Common Mistakes When Buying an SMSF Property

August 25, 2022

Buying property through your SMSF is quite complex, but there are many common mistakes when buying an SMSF property that can be easily avoided. The key is to ensure you understand the detailed regulations surrounding SMSF investing before diving in. For a smooth and uncomplicated SMSF investment property purchasing experience, you should also engage the help of a licensed financial advisor. How Hard Can It Be? If you have ever bought property before you might be tempted to think that SMSF property investment will be just as straightforward. However, purchasing a residential property through your self-managed super fund comes with many rules and regulations that must be strictly adhered to. Investing through your SMSF is heavily regulated by APRA, the ATO and ASIC. Failure to comply with these regulations can lead to heavy fines and possible jail time so it is critical to approach SMSF investing from an informed and cautious position. 6 Common Mistakes When Buying an SMSF Property So, what are the major pitfalls to avoid? Failure to seek qualified professional advice: A financial advisor and a mortgage broker are not the same things. When it comes to advice surrounding your SMSF you need to ensure you are speaking with an experienced and fully licensed financial advisor that understands the ins and outs of SMSFs. Poor property selection: Not spending ample time researching a property and whether it will offer the return on investment you want is a mistake. One of the most common mistakes made when buying an SMSF property is that buyers go with their emotions over proven numbers. Remember, you’re not buying to live in it but to earn from it, there are also professionals that are there to support you through the process of choosing your property. Inadequate lending advice: SMSF loans or LRBAs are vastly different from a standard mortgage loan. Ensure you only speak to someone experienced in these loans and not a standard mortgage broker when seeking a loan or you may run into difficulties. Paying too much for financial advice: Expertise is vital, but it shouldn’t be exorbitantly expensive and drain your SMSF of vital funds. It is normal to budget a few thousand for advice, however, if it runs into the tens of thousands, you are paying too much. Overstretching your fund to make the purchase: All your investments need to be in the best interests of fund members and the long-term goals of your SMSF. Overstretching is a risk as it may leave you without essential funds to pay out a member if needed or cover the ongoing costs of your investment property. Not choosing the right solicitor or conveyancer: Just as with lending or SMSF advice, you should only engage legal representation that understands SMSF regulations in depth. Failure to do so could lead to delays and breaches of compliance.

House Key — The Investment Property Guys in Broadbeach Waters, QLD

Can You Buy Multiple Investment Properties With SMSF?

August 25, 2022

If you’ve ventured into property investment via your SMSF and are ready to expand, you may be wondering if you can buy multiple investment properties with your SMSF? The good news is that you can grow your property investment portfolio through your SMSF. Are There Limitations to How Many Properties You Can Buy Through Your SMSF? The only real limitations are how much you have available to invest and whether or not you can gain finance approval should you need additional funding. You can buy multiple investment properties with your SMSF. You will also need to factor in your fund’s ability to meet the ongoing costs associated with each property to ensure that additional properties are not detrimental to your fund’s investment goals. Are the Investment Conditions the Same on Subsequent Properties? Yes, the same rules apply to each property purchased. That is: It must meet the ‘sole purpose test’ which stipulates that the investment must only benefit fund members It must not be purchased from anyone related to a fund member It may not be lived in by any of the fund members or any related parties It may not be rented out to a fund member or any related parties ‘Related parties’ is a broad term that covers several groups beyond just relatives and friends. Ensure you understand this regulation in full to avoid any issues with compliance. Failure to be compliant can result in fines and possible jail time. Financing Additional Investment Properties Via Your SMSF Should you not have enough funds in your SMSF to cover the full purchase of additional properties, you will need to enter into a new LRBA (limited recourse borrowing agreement) for each property you purchase. You can learn more about your borrowing options via our blog on this topic. Keep in mind that the same complexities will apply to each new LRBA application, and you may find it harder to get approval as your portfolio grows. To avoid this, it is recommended that you seek expert financial advice, to ensure your SMSF is managed properly and it keeps an adequate balance. With multiple loans and properties with ongoing expenses, you will want to ensure you have an expert handling your SMSF. This will keep you compliant and help to avoid any issues during audits. Can I Use My Super To Buy an Investment Property? Unfortunately, no, this strategy is not permitted when expanding your SMSF property portfolio. While this is a commonplace avenue in normal property investment, the regulations and legislation set up to govern self-managed super funds stipulate that equity may not be used. If you prefer to use equity to grow a property investment portfolio, you will need to do this outside of your SMSF.