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Building Shock: how to navigate the chaos for sustainable growth

When COVID first hit, there was a lot of speculation about property prices crashing… fast forward two years and what a different picture.

Danny Buxton founder of Triple Zero Property and Terry Ryder from hotspotting.com spoke in a recent webinar about the chaos that emerged from the last 18 months of accelerated growth.

‘Property Market To Crash by 40%’

Yes – this was the headline in March of 2020, but we know that the opposite turned out to be true. Unfortunately, those who listened to the headline panicked and sold off early and now struggling to get back into the market at much higher prices.

This is why Danny Buxton explains that it’s more important than ever to be fully informed before making investment decisions.

For your next property purchase here are five key points:

  1. Be strategic and take a long-term view
  2. Fine tune your finances (and why interest rate rises shouldn’t be an issue)
  3. Buy new
  4. Safeguard yourself when building
  5. Location and affordability are paramount

BE STRATEGIC

“The property market has been very aggressive in the past 18 months, but it hasn’t gone into reverse,” Danny Buxton says. “What it has done is it’s gone from fifth gear back into second gear; we’re still seeing that continual growth. We’ve gone into a more normalised market in growth as opposed to that aggressive ‘fear of missing out where people were paying silly prices.”

He says now more than ever, investors need to take a strategic, long-term view about what they buy. “Through smart investment, by building the right team, doing the right research, and being strategic in the way that we do it, we’re getting uplift still even in (the current) market,” he says.

WHY RISING INTEREST RATES ARE NOT AN ISSUE

While there has been a bit of a drop in consumer confidence, the economy is still growing, unemployment is at historic lows and wages are now starting to grow, as are household balance sheets.

“With $250 billion to $260 billion in aggregate savings nationally, much of that is in offset accounts, many borrowers are way ahead of their mortgage payments,” Buxton says.

“Honestly, if someone is concerned about an interest rate of 5% or if interest rates end up at 6%, historically, they’re still very low. So if you can’t afford a property at an interest rate of 5% or 6%, my advice is don’t buy a property.”

WHY NEW PROPERTIES ARE A GOOD INVESTMENT

“New is not the only way to invest in property, but it’s an area we do, and it’s how I invest,” Buxton says.

“The reason being is obviously we get increased rental demand and rent. Tenants prefer to have new properties. “We tend to achieve much higher rents with the new property and continue to get increasing rent because we are designing a home based on the needs of the demographics that are moving to that area.”


Buxton says cash flow is better with new properties as there is little maintenance and much more significant depreciation benefits. He says when building there is also the bonus in most states of only having to pay stamp duty on the land, not the finished house, which is a significant saving.

HOW TO SAFEGUARD YOURSELF WHEN BUILDING

While almost every category of building materials has become more expensive, Buxton says you can take steps to safeguard yourself.

“We’ve seen reports, where the average cost to build, has gone up in some areas over $100,000 for the average home,” he says. That’s why it’s important to know your rights and your builder.

“The worst thing you can have is a builder who’s partway through building your house who goes into administration,” he says.

“You need to understand their financial status so you can build with a financially strong builder who has those cash reserves and won’t compromise on the quality of your build and will finish.

“Look at (the builder’s) current builds under construction, start times, how many builds they are doing. Do your license checks with the QBCC here in Queensland and the different appropriate bodies in each state.”

LOCATION AND AFFORDABILITY ARE STILL IMPORTANT

“It’s all about finding the right area where there’s high and pent-up demand,” Buxton says.

“Those areas have school catchments, access to facilities, public transport and the like.”

After you’ve found the right location with those fundamentals, Buxton says affordability is another consideration.

He says the lower end of the property market tends to ride out price fluctuations better than the middle or upper end and investors may want to consider social housing.

“We like it as an opportunity for clients,” he says.

“There is a massive undersupply, and it gives real secure long-term rental security. Many of these social housing providers want to lock in long-term leases, whether it be a five-year lease or even a 10-year lease.”

If you are keen to know more, check out the video below:

To book your obligation-free consultation – call 1300 897 000 or email us at invest@triplezeroproperty.com.au. 

This content is general information only. Your situation is specific and individual; as such, you should always consult a registered and qualified professional within the particular area of advice needed.

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