The potential of the new financial year

The start of a new financial year can be a time of great potential for investors, as long as you know what to expect.

With the recent increase in gold prices likely resulting in income growth and more employment opportunities, we can certainly expect to see a tentative increase in consumer confidence, which has the potential to stimulate consumer spending and demand for housing. 

Looking overseas, there is definitely continued potential in terms of migration.

Across Australia we have already seen around 162,000 new residents entering the country within the last year. This increase in population creates an extra demand for housing, especially in terms of the rental market.

Though most of these migrants tend to head to the east, Perth continues to be a popular option as it offers more affordable housing options and a relaxed, beachside lifestyle. This is a fact that many new developments in Perth have capitalised on.

The political climate in Hong Kong may also create a renewed global interest in the Perth property market, with many households potentially moving to Perth due to its affordability and proximity to Hong Kong.  

Looking closer to home, households will be using this time to evaluate their financial position and formulate an investment strategy for the next twelve months. 

Those who have acquired residential properties in the last five years have likely seen a decline in value by up to 20 per cent. While low interest rates have provided some relief, the declines in household incomes, assets valuation and tighter lending conditions, has restricted growth in the local property and building sectors.

An area of consideration for seasoned investors are properties purchased solely for their redevelopment potential, as these tend to have low rental yield and little or no depreciable value. 

In the recent month after the federal election, we have seen an improvement in investment enquiry, where property owners are keen to develop and/or renovate, but strict lending criteria remains a challenge.

As such, some individuals are reverting to private lenders or joint venture arrangements as they realised that “adding value” is the only option to regain lost equity or to increase their income yield and cash flows. 

Investors will be aware that the current tight lending conditions could result in a shortage of housing stocks when Perth begins to witness population growth and as such will be looking to non-traditional funding methods to keep ahead of this.  

Overall, I am confident in the potential of the Perth property market, with many global and domestic indicators providing a positive insight into the new financial year. I recommend investors use this time to reflect and plan for the future to ensure they capitalise on this potential.