Normally when someone mentions a “perfect storm” they’re referring to something that is bad.
An example might be some property markets over the past few years which were negatively impacted by a combination of tighter lending conditions, poor consumer confidence levels as well as higher interest rates for investors… just because.
However, in the space of just a few months, that perfect storm of market woe has become one of market positivity because of a number of upbeat changes.
Good times aplenty
You see, at the start of this year, property prices were falling in most major locations, borrowers couldn’t access money, and most of us were worried about who would ultimately wind up in the top job in Canberra.
Now, of course, we all know the election result, which clearly was a favourable one for the real estate sector.
On top of that, and almost at the same time, APRA finally loosened its vice-like grip on the lending sector with banks soon announcing they were reducing their serviceability calculations.
If that wasn’t enough good news, we also had two cash rate cuts in two months, which sent interest rates down to two to three per cent, depending on whether you’re an owner occupier or an investor.
Those two factors, in particular, means more people are eligible to borrow, and can often borrow up to 15 per cent more than they could this time last year.
Lower interest rates also mean that saving your hard-earned cash in the bank is not so attractive, which will motivate more people to seek better returns elsewhere – such as through strategic property investment.
Now, I’m not saying there is dancing in the streets, but at least there are now people on the streets attending open homes compared to a few months ago, because now they’re ready – and finally able – to buy.
In fact, three of our clients who were struggling to secure finance last year have been approved in recent weeks because of the more positive lending environment.
Auction clearance rates are already starting to strengthen from this renewed activity and optimism, especially in Sydney and Melbourne.
I actually know of a property in western Sydney that didn’t make it to its first open home recently before it was sold.
Brisbane all the way
So, there are early signs that prices are firming in those locations, but my pick for the best investment location remains Brisbane.
There are many reasons why, including its affordability and superior yields to Sydney and Melbourne.
The Sunshine State is also welcoming thousands of new interstate migrants every month – and many of these new “locals” have sold in the most expensive southern markets so have money to spend.
Plus, its capital has a multibillion-dollar, jobs-boosting major infrastructure program that is very good news for its local economy.
I believe that between now and when interest rates hit zero that Brisbane will be the strongest market in the land.
Part of this reason for my thinking is that the Brisbane market was poised to take off just before the APRA lending crackdown ground it to an unnecessary halt.
Now that that handbrake has been released, it’s kicking into gear once more.
So, there is no doubt in my mind that we’re entering a positive perfect storm.
Buyers are coming back out of the woodwork because they have access to finance and the confidence to buy.
Of course, it’s early days yet, but the smartest investors are always the ones who make their move ahead of the pack.