7 Advantages to a downturn in the property market

What goes up must come down right?

According to articles I have read recessions don’t last long, certainly not relative to the booms that precede them. I have noted that typical human behaviour seems hardwired to regard change as a bad thing. The media seems to think we are addicted to bad news, they do rather love serving it up and more fool us we buy their papers and watch their bulletins at 6pm.

It’s true agents and investors alike don’t like downturns but for those of us who are not up to our necks in debt and the bank still returns our calls there is always an upside to the current property cycle:

1. This is an opportunity to learn about real estate cycles, remind yourself of the signs and develop a cycle for your existing portfolio. Don’t be caught by the next downswing, plan your exit strategy now.

2. A good time to look at maturing your property, does it need future-proofing? This is a good time to get building work done, upgrading, refurbishing and the tradesmen need the work!
3. A good time to look at upgrading your portfolio! If your LVR is ok it’s a very good time to trade up! If you are going to buy a new building at a high yield and you probably can because so there are fewer buyers out there brave enough to step into the market then remember you are going to have to sell in the same market too!
4. This is the best time to buy when vendors are motivated to sell!  You have choice out there!
5. Interest rate pressure is downwards so the outlook for finance cost is getting better!
6. The yields are at realistic levels, namely your cost of capital or interest plus a risk premium. So this risk premium should deliver you a cash flow positive property!
7. The market slows down, many of us have less work on, time to address your work/life balance! So maybe you can’t afford to upgrade your gas guzzling luxo-barge this year, enjoy our little luxuries, have they become the norm?

So things are no longer the way they were…. we now have time to consider the sustainability of our expectations, things couldn’t go on the way they were in 2006-7… the property market or our motoring habits….

Merry Christmas!

December 16 2008 05:14 pm | Uncategorized

2 Responses to “7 Advantages to a downturn in the property market”

  1. Deon Swiggs on 17 Dec 2008 at 9:42 pm #

    Nice Blog post, interesting points you have raised. I think this is a time for us all to upskill. Not just agents but property investors, renters, who ever if your interested in property this is a great time to upskill

  2. David Leggott on 18 Dec 2008 at 5:28 pm #

    What goes up must come down right?
    I’d say there appears to something to this. Residential property ownership peaked back in the eighties and its been a downhill ride since, the talk is of a 60% figure in the next 5-10 years. That means that even more investment [read rental] properties will be required. With the potential soon for some fantastic fixed rate loans to be locked in, its certainly a great time to be scanning out there.

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