Key takeaways
With inflation now under control and interest rates likely to drop another two through or even four times over the next year, Australia’s real estate markets are moving into the next phase of the property cycle, and strategic investors are asking, “What’s the right type of investment for this stage of the cycle?”
And while property invest value user increasing around Australia be cautious of anyone claiming to have found a “perfect investment”—it’s often a sales pitch.
The best investments typically tick multiple boxes, and are both strong and stable.
With inflation now under control and interest rates likely to drop another two through or even four times over the next year, Australia’s real estate markets are moving into the next phase of the property cycle, and strategic investors are asking, “What’s the right type of investment for this stage of the cycle?”
One thing is certain; there’s no such thing as a “perfect” investment.
If somebody tells you they have found “the perfect investment” be very sceptical, and ask lots of questions, because chances are they’re trying to sell you something you just shouldn’t buy.
The things I look for in investments are:
- Strong, stable rates of capital appreciation
- Steady cash flow
- Liquidity (the ability to take my money out by either selling or borrowing against my investment)
- Easy management
- A hedge against inflation
- Good tax benefits.
Examining the major categories of investments, you’ll recognise that not many fit the bill when it comes to all of these criteria.
Note: To grow your wealth in the current challenging economic environment you’re going to have to invest in assets that are both powerful and stable.
By powerful, I mean that they must have the ability to appreciate in value at wealth-producing rates of growth. This usually comes from the ability to borrow and leverage against them.
By stable, I mean your investment should grow in value steadily and surely over the long term, without major fluctuations in value.
Many investments are powerful and many are stable, but only a few are both.
Prime residential real estate is one of the investment vehicles with power and stability in spades.
That doesn’t mean it’s perfect because property’s not as liquid as many other investment classes.
It can take months to get cash out of your portfolio if you sell a property.
You may be able to get funds a little quicker by refinancing against the increased value of your properties, but even this takes time to organise.
While some might see this relative lack of liquidity as an issue, I would argue that it’s one of the virtues of property as an investment vehicle.
Why?
Because the only way for an investment to achieve liquidity is to relinquish some of its stability.
If it’s liquid – easily sold, like shares – it is more likely to have wide, more volatile fluctuations in value.
The stock market is another potentially powerful investment vehicle because you can borrow against the shares you own, but in order to achieve the liquidity the stock market provides you give up some stability.
Share prices are volatile.
Sure you can get your money out quickly, but you also run a bigger risk of making a loss.
What about putting money into a savings account?
While this type of investment is both very liquid and pretty stable, it won’t give you a wealth-producing rate of return.
If I had the choice, and I do, I’d take stability over liquidity every time.
Invest in assets that are both powerful and stable
Over the last few decades we’ve been troubled by a number of world economic crises, experienced geopolitical problems, lived through periods of both high and low interest rates, and been governed by six prime ministers.
During those years, the properties in my real estate portfolio have more than doubled in value and then doubled again, but have been relatively illiquid — it would have taken time to sell up.
However, over the same period, the value of many shares that were very liquid experienced a range of ups and downs, influenced by various global and domestic factors and many haven’t even doubled in value.
I’ll stick with property any day.
When-To vs. How-To Investments
Many of the new breed of so-called “advisers” recommend chasing what I would call “when-to” investments, which means you have to know when to buy and when to sell.
The problem is that timing is crucial with these investments: if you buy low and sell high, you do well, but if you get your timing wrong, your money can be wiped out.
Shares, commodities and futures tend to be when-to investments, and so is chasing the next property “hot spot”.
I’d rather put my money into a “how-to” investment such as established capital city real estate, which increases steadily in value and doesn’t have the wild variations in price, yet is still powerful enough to generate wealth-producing rates of return over the long term through the benefits of leverage.
While timing’s still important in how-to investments, it’s nowhere near as important as how you buy and add value.
How-to investments are rarely liquid but produce real wealth.
Most when-to investment vehicles produce only a handful of large winners but there tend to be many losers.
On the other hand, investing in well-located capital city residential real estate produces many wealthy people (homeowners and investors) and only a handful of losers.
Why Now Is a Window of Opportunity for Strategic Property Investors
I believe we’re in a window of opportunity for property investors who take a long-term view.
Right now, we’re seeing what some would call a “perfect storm” of fundamentals that are aligning to support strong property markets in the years ahead:
- Continued rapid population growth is putting pressure on housing.
- An acute undersupply of dwellings,
- A chronic shortage of skilled labour, making new development slower and more expensive.
- Inflation has moderated, now sitting within the RBA’s target range.
- Interest rates will keep falling – bringing more buyers into the market
- Government first homebuyer incentives will pour fuel on the flames of our undersupplied housing market.
As interest rates keep falling and confidence returns among both buyers and sellers, we’ll enter the next phase of the property cycle.
And historically, this stage has delivered some of the best capital growth for those who act early.
To be clear, I’m not suggesting anyone try to “time the market”—that’s near impossible to get right consistently.
However, many successful investors built significant wealth by buying during the early stages of an upturn, when fear still lingered and competition was low.
Looking ahead, demand will continue exceeding supply for the foreseeable future. Strong immigration, restrictive planning regulations, and the slow delivery of new housing stock will keep upward pressure on prices.
Meanwhile, the cost to deliver new dwellings is rising and will continue to rise.
It’s not just supply chain issues or labour shortages—it’s also financial viability. Developers won’t launch projects unless the numbers stack up, and right now, that means new stock will need to enter the market at significantly higher prices than existing homes.
Eventually, as interest rates ease further and media headlines turn positive, consumer sentiment will rebound.
Pent-up demand will be unleashed. And just as it always does, greed (FOMO) will overtake fear (FOBE – Fear of Buying Early) as the cycle kicks into gear.
So if you’re in a financially stable position and thinking of buying your next home or investment property—this may be your moment.
Because in property, like in life, you don’t get rewarded for waiting. You get rewarded for acting with clarity while others are uncertain.
Fact is, the smart money is already on the move.
But what about you? Are you clear on how to take advantage of these market conditions — or are you still waiting for “certainty”?
That’s where our Complimentary Wealth Discovery Session comes in. We’re offering you a 1-on-1 chat with a Metropole Wealth Strategist to help you:
- Clarify your financial goals
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- Build a personalised, data-driven property strategy
- Get ahead of the curve — before everyone else piles in
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