It is possible to still successfully invest in property even though APRA has tightened the lending criteria from Australian property.
Ryan: Okay, so Chipmo is asking, “Do you think it’s possible to build a property portfolio in 2017, compared to if you started years ago? What would be the strength to be successful in properties in this difficult time?” So I guess-
Ben: I mean there’s people in Melbourne that have made 17% in the last 12 months. Just from buying and holding high quality houses. So people making as much money as they’ve ever made in the past in any other cycle in Australia in the last 200 years.
Ben: There’s people making 14% this year in three marketplaces probably. Like Hobart, Canberra and Melbourne. There’s people making cash everywhere. Nothing’s really changed. The media’s just hammering property at the moment.
Ryan: Yeah. The thing is with the new APRA guidelines, that may or may not affect you. So don’t just assume that because APRA has new lending guidelines out, and that some people have been hit hard that it’s necessarily going to affect you. Because maybe if you’re just getting into property, you might be buying your first home, not actually an investment that you’re going to rent out and so the lending criteria-
Ben: It doesn’t affect first time buyers in any way, man. It’s really lenient on them.
Ryan: Yeah that’s what I’m trying to say is like, if you’re trying to do that, then lending criteria is pretty good for someone in that situation versus someone who might have five properties in their portfolio and they’re trying to borrow to go again.
So it’s very different from person to person, so don’t just assume, like Ben said, because the media’s hitting it hard and talking about lending crisis and all of this sort of stuff, and because some people have had it hard, you’re not necessarily going to have it hard.
Ben: This is what I honestly am thinking right now. Slow down the investor market, which they’ve had a good effect on and have been doing. Stoke up the first home buyer market, which they’re very actively doing at the moment. Melbourne and New South Wales under certain thresholds now have free stamp duty on existing properties.
Queensland’s got a huge first home buyer’s grant. Stamp duty-wise plus a concession for building. Watch this first home buyer market come into the market over the next couple of years to make sure things don’t slow down.
You’ve got to remember the people writing these policies have a very strong vested interest in property and most of them own a lot of property. They don’t really want to see things stop completely, if you know what I mean, or go down by 30%.
Ryan: Yeah well and even the government making money off stamp duty and taxes on property and things like that, if the market were to crash and people were to sell properties for less, or to stop selling properties, that would have a serious impact on the economy and on tax revenues and stuff as well.
So there does tend to be a vested interest in keeping the property market going. Now that doesn’t necessarily mean it’s always going to keep going-
Ben: It will.
Ryan: The house of cards will crumble eventually, maybe. But who knows, so-
Ben: 100% at some point or another.
Ryan: But I think the fact of the matter is there’s still a lot of opportunities in today’s market. There’s still a lot of ways to make money as well if you’re smart. But the stuff that we keep saying over and over, is don’t just hope to just buy any random property and hope the market goes up.
Do your suburb research, buy in a good area, get positive cashflow if you can. Get something that you can increase the value of, like the same stuff we’ve been saying over and over. Have multiple ways to make money from your investment. And that’ll increase your chances of actually succeeding.
Ben:I think a really good place to start if you’re just thinking about where to buy at the moment, is that Heron Todd White Month in Review Report where you can just read about all of Australian residential property.
It might take you half an hour to read over the next week, and it’s a really good just quick gauge on where the marketplace is at in Australia. Just because Sydney’s winding down, doesn’t mean that there’s not other opportunities in the marketplace at the moment.
Ryan: Hey guys, I hope that you enjoyed the answer to this question which came from a live Q&A episode with Ben on YouTube. We will be doing more of these in the future. If you want to check out Ben, then he is offering free strategy sessions to On Property listeners.
To find out more about that, go to onproperty.com.au/session and you can see all the details over there. That’s it for today, and until next time, stay positive.