Are we really in a property boom period just now?
Maybe, but is it really a property boom?
What I believe we are seeing just now is the largest, most concentrated cheap money boom that I for one have ever seen in my entire life and I’ve lived a lot of my life, so that’s a looong time. I believe the crux of this ‘property boom’ quandary that everyone is talking about is: what is actually driving this boom?
- Is it that suddenly everyone wants to be a property investor? In a way, yes.
- Is it that suddenly everyone has become property aware and suddenly understands that paying rent is really just buying a house for someone else and so want to buy their own home? In a way, yes. or
- Is it that there is sooo much cheap money around at the moment that everyone wants to get into property before the cheap money runs out……..in two months time? In a way, definitely.
Personally, I believe that what we have here ladies and gentlemen is a property boom, but mainly because it is riding the crest of a wave that is really a ‘cheap money boom’.
A first home buyer, building or buying a new home was until very recently handed, free of charge, $40,000 courtesy of the Federal and State Governments. Even today such buyers are still able to receive $30,000……..but only for about two more months. Do you think there are going to be a lot of busy Buyers Agents in the next two months? You bet there are! One of my current clients is luckily, in this boat as we speak. They will receive $30,000 in free Government grants to buy their home. This means a huge 6% of his budget is paid for by the Govt. BONUS!!
I recently discussed the point that if the current predictions come true, i.e. that property prices in Brisbane increase by even up to 30% in the next 1-3 years, according to some experienced pundits, then buying your property now, even if not the ideal house in the ideal location, could make you a LOT of money very quickly just by riding the wave. Even if you have to take out mortgage insurance with certain institutions, other than maybe a 95% loan, the difference made up in the next 1-3 years would still be HUGE! Naturally, the amount of “hugeness”, is up to you and your finance professional to ascertain prior to making a purchase.
Here’s a good example (approximate figures):
Desired property price – $800,000
Deposit – $100,000
Salary -$120, 000
Client borrowing capacity falls a little short of the required $700,000 so they decide to keep working and save more money for a few months to make up the shortfall.
3 month’s salary – $30,000
Amount bank uses in calculations – $9,900
Amount their property would grow in that time (averaged) – $ 27,700
Put simply, the client’s choices are:
- Buy a property within their current budget, getting them in the market and allow the current ‘boom’ to make money for them; or
- Keep working towards their original budget, work a few more months and watch their goal become further and further away, so work a few more months, maybe get second/part time jobs and watch their goal become further and further away, so work a few more months………….I think you get the story.
Here are the choices I would offer you:
- Buy now, even if under your goal and let the money work for you; or
- Keep working, work some more, then work more again and still fail to keep up with inflation and the current booming property market.
Which choice would you like to take? Sit down, close your eyes and think how good it would be to be making money while you’re sitting there with your eyes closed thinking.
To quote the author of one of the most successful investment books of all time, Rich Dad, Poor Dad, Robert Kiyosaki, “The poor and middle class work for money, the rich have money work for them”. Simple, yes, but also very true. Personally, I work a little of each day figuring out ways to make my money work for me, so I certainly wouldn’t be taking the second option above.
When you’re ready to make your money do the heavy lifting, give us a call at PPBA. We’ve got a great gym to train your money in power lifting. 0490 020 801