The start of a new year inevitably brings a wave of market predictions from all range of ‘experts’. While some of these predictions might turn out to be accurate, they don’t necessarily mean they’re the right fit for your portfolio or your long-term goals.
In property, finding success is often less about chasing trends and more about strategy, patience and working towards your own goals.
When you hear forecasts about strong growth in markets like Western Australia, South Australia, and Queensland, it’s easy to get caught up in the excitement. These are no doubt great areas for investors, and many locations within these states are likely to see further price increases in the year ahead.
However, just because a market is experiencing growth doesn’t mean it’s the right place for your next investment. You need to ask yourself, how does this fit with my overall strategy and what will this property do for my portfolio? Investing is not a short-term game. While trends might look attractive in the moment, the real winners are those who take a long-term view.
Whenever I talk to a client I always remind them that every investor’s circumstances are different. A strategy that works for someone else might not align with your goals. For example, I’ve worked with clients who own multiple properties in Melbourne. Even though Melbourne is at the bottom of its cycle and looks like a great opportunity for growth, it didn’t make sense to buy a third property in the same market.
The main reason for that was land tax. For these clients, the additional holding costs in Melbourne would have been $8,000 to $10,000 per year. Instead, we looked at markets like Brisbane, Perth, and regional Queensland. Areas that offered better diversification and were more aligned with their financial goals.
When thinking about where to invest, it’s easy to focus on growth. But growth isn’t the only factor that matters. Investors need to balance their portfolios with a focus on affordability and cash flow. A property that’s at the “top of the cycle” might seem attractive because of recent price rises, but the holding costs could be a lot higher with rental yields likely lower.
That’s why the first step for new investors is always understanding their own financial position. How much deposit do you have? What’s your borrowing capacity? Most importantly, how much can you afford to be out of pocket on a monthly basis? If you’re stretching your budget to its limits just to chase growth, you could end up in a difficult position if things change.
To find the best markets and avoid what the media are talking about, I like to use data. Media predictions and general market sentiment often fail to take into account the nuances within individual markets. Growth predictions might refer to a state or city, but there are always markets within markets. While one suburb may be seeing incredible demand, another just a few kilometres away could be oversupplied and underperforming.
When selecting properties for clients, I focus on fundamentals like supply, inventory levels, demand trends and vacancy rates. These give a clearer picture of where growth is likely to occur in the short and medium term. For example, some suburbs in Melbourne, despite the broader market being flat, have shown 6-10% growth over the past year.
This is why relying solely on predictions isn’t enough. You need to dig deeper into the data and understand what’s happening on the ground.
So if you’re interested in investing this year make sure you’re doing it for the right reasons. Have a goal and then find a property that fits into your long-term plans. Take the time to reflect on where you’re at, where you want to go, and what strategy will help you get there.