B Invested

What’s Next For Property?


With a GFD on the horizon, many investors are asking what does the future of property hold?

Despite what the media may have you think, Nathan Birch says it’s not all doom and gloom.

Prices have been dropping.

In the July housing market update, CoreLogic research director Tim Lawless said,

“Nationally dwelling values continued their downwards trend last month; the seventh consecutive month on month decline since the national index series peaked in September last year.”

“While the national market has slid into reverse, many of the trends we have been following over the past five years have reversed.”

It is a trend most noticeable in Sydney, where auction clearance rates fell to 49.7% in the first week of July.

But this doesn’t mean that all is lost.

According to Nathan Birch, property investor and co-founder of Binvested, there is still much for property investors to get excited about.

“There will be lots of opportunities out there in the market place for the short term.”

“As for continued growth over the course of the next decade, I think that we’ll see another property cycle like what we’ve just seen.”

How will a recession bring about growth?

Nathan recalls Paul Keating famously saying back in 1992, “It’s the recession we had to have.”

Whether or not this was true is another story. But as Nathan says, “It cleared the deck for the next layer of growth.”

He expects our next recession to do something similar.

“I think that a recession is imminent, and I think that a financial crisis is 98% on the cards.”

“For me, it’s a good thing because we’re going to see debt become cheaper, the ability for people to obtain debt will become easier and we’ll see another phase of growth out of that.”

How? Let’s break it down.

Nathan believes we will see a deflationary time over the next 12 to 24 months. During this period, anything that can be financed will be affected. This will bring down the prices of things such as property, cars and luxury goods.

Food and necessities, on the other hand, will be subject to inflationary pressure. Commodity prices are likely to rise, making these items become more expensive.

“In the longer term, once we see the GFD we’re going to see lots of stimulus roll into the marketplace and the market will get popped up.”

“There will be more money flowing out there. People will be able to get easier credit. People will be able to get cheaper interest rates. There will be stimulus packages to encourage people to do things like investing.”

“One would expect that if you saw these stimuluses coming into the marketplace, then that would in turn push the prices up.”

Enter hyperinflation.

“The hyperinflation will occur after the next layer of stimulus,” says Nathan. He says it is likely to be at least three or four years before this occurs over the course of the next decade.

Hyperinflation will result in property prices rising at a quicker rate.

Major property investment opportunities.

“I think we’re going to see more of what we have seen over the last few years,” says Nathan.

The difference?

“It will be more amplified that what we’ve seen over the course of the last few years.”

So, while price growth may continue to decline over the next 12 to 24 months, another property cycle will mean prices will start going up again.

A period of government stimulus will probably be the catalyst for growth.

And once this ball starts rolling, hyperinflation will mean these cycles come in quicker and shorter bursts, creating higher price growth than before.

How should investors prepare?

Nathan says that his comments are not intended as financial advice. He simply follows the market and gets a real kick out of calling what will happen next.

And he is often right too.

He says now is the time to make sure investors have their cashflow in check, have access to liquidity and have a buffer in place. Those who need to sell should sell, and investors should make sure they have access to liquidity.

“You don’t want to be caught up in the mess, you want to be able to take advantage of the mess.”

“Don’t think that the sky’s going to fall in, just be prepared.”

Those who are confident to take action will be the ones who benefit during these volatile times, says Nathan.

He also cautions against buying doodads.

“This is not a time to go and buy consumeristic items, this is a time to take control of your financial position and in turn be able to strike while the opportunities are out there.”

Are you getting prepared? Are you finance ready? Whether you’re ready to buy property now or not, it has never been more important to get your finances in order. If you have equity … speak to a broker about whether or not you should be getting it released.

Speak To A Finance Strategist From Zinger Finance