Most of us make New Year’s resolutions. Drop some weight, call our mums regularly, see friends more often… we are full of good intentions at the beginning of each year.
Unfortunately for most, the motivation starts strong and then peters out as everyday happenings get in the way. It’s OK – resolutions are healthy waypoints on life’s roadmap. They’re moments for self-reflection and assessment but missing a few probably won’t be catastrophic.
However, there is one resolution you may have made last year that, if skipped, would have cost you plenty, both now and for years to come… and that’s the decision to invest in property.
So, here we sit on the precipice of 2022, and I have some special advice for anyone out there who planned to invest in 2021 but didn’t. I want you to be open and frank and ask yourself a very simple question…
How much did you lose this year by not investing?
That may sound blunt, but it’s important to be fearless in your analysis and bold in your actions because, by my reckoning, those distractions that stopped you from investing will cost you hundreds of thousands of dollars over the years to come.
But it’s still not too late to remedy the situation. Here’s my take.
Reasons to not be cheerful
Let’s look back over the past two years.
In the period immediately after our national COVID shut down in March 2020, the property market took a bit of a beating. Border closures saw some owners rush to sell, fearful the long-term fallout would see property prices get hammered. This wasn’t helped when a swathe of bank economists publicly forecast double-digit drops in real estate values.
I’d suggest that most who chose to sell a property between March and June 2020 saw a discount of between eight and 12 per cent on their pre-lockdown value.
Things started looking up toward the end of 2020, but there was still plenty of reluctance from investors. Apart from the prospects of values falling, question marks remained over the rental market. Were tenants going to be told they could forgo rent payments? How would banks treat the end of mortgage holidays? Could lockdowns see certain areas become a wasteland with no viable tenant base?
Yes – while things were looking better around this time last year, uncertainty was still a major factor, so a heap of potential investors put off purchasing. Many reasoned that the market wouldn’t go too much higher, so they had plenty of time to invest (or even jag a bargain). They essentially put their plan on hold and didn’t act.
The great leap forward
What’s happened since in property markets is now the stuff of legend.
The latest CoreLogic data showed that to 20th December 2021, property markets across the combined five largest capital cities saw prices rise by 20.9 per cent over the past 12 months. Select your location wisely (i.e., Brisbane, Sydney or Adelaide) and you could well have exceeded that figure.
Capital City Home Value Changes
(source: CoreLogic to 20th December)
So, for every $500,000 you didn’t invest in property at the start of 2021, you have missed out on around $100,000 in capital gains, plus extraordinarily hot tenant demand and growing rent returns in select locations.
It’s a painful lesson for some, but it should also be a great motivator for 2022.
That said, I can imagine there are plenty of people already sowing the seeds of doubt in their minds. They’re saying, “2022 will be different to 2021. Surely we won’t see those runaway prices again?”
That could be the case, but there’s every indication property won’t go back in price. The rate and pace of value growth might slow down, but it won’t be negative. There are several reasons for this (continued low-interest rates, reopening borders, an uptick in economic activity etc.) which I’ve discussed in a previous blog.
Also – and here’s the big thing – property is a long-term prospect. No one with decent knowledge about how markets operate is expecting to make their fortune in one year. On the contrary, the most impressive gains are made during multiple price cycles where compounding values and growing rents work like magic to boost your wealth.
But you get none of these benefits if you fail to act.
Making the most of your 2022
There are some essential moves you must undertake now to ensure you reap rewards in 2022 and beyond.
The first is securing the services of a qualified property investment advisor. Why is this key? Because they will guide you through the necessary steps to ensure you get going.
At ASPIRE, we have a very structured 5-step process to help you define your long-term goals and set out a strategy for achieving them because if you fail to plan, you are planning to fail.
Your advisor will also assist in setting out your financial resources and can instruct on the best types of investments to get you underway on your journey.
Next, an advisor can help you carefully select the location and property type that will ensure long-term value upside and secure rental income for at least a property cycle or two. Choosing a location and property from across Australia is laborious and is often the stage of ‘analysis paralysis’ which sees many solo investors give up. Yes, you must do the research and run the numbers, but you must also know when to act.
To overcome this, an advisor will do the heavy lifting around location and property selection. They can steer you away from markets that have already run hot, and toward those with the best growth potential.
Finally, an advisor will help you to take action and secure a property. They can handle the entire process from presenting an investment option, managing negotiation and settlement arrangements, establishing a relationship with a property manager and ongoing monitoring of your portfolio. They will make it happen, so you don’t miss out yet again.
So, make it your new year’s resolution to begin investing by first engaging an advisor.
History shows you will only achieve your dreams by getting out of the starting blocks.
Don’t delay your success another year and miss out on what’s to come. Instead, make the decision to act now so your future self can live without regret.
Wondering how you can turn you inaction into action?
Contact us for a free, no-obligation chat.