OPPORTUNITIES ABOUND FOR THOSE WHO LOOK BEYOND THE SCARY HEADLINES

By Jennifer Hansen Read, 20th August 2008

Some property investors, well and truly spooked by the hype, seem to be waiting for the sky to fall, while cooler heads have much to gain by looking behind median statistics to identify genuine property opportunities.

For the average punter, it has been a challenging quarter trying to make sense of the market, when media reports vary from those who say the market has another 10% to fall to those who believe it has bottomed and is now on the way up.

There's ample evidence that the onslaught of grim statistics and sensational headlines are spooking the market and industry professionals are concerned investors might be missing opportunities as a result.

Residential property advisory company Braxton Chase says the change in clients' perceptions of the market has been rapid and extraordinary.

"The first thing many investors approaching us ask now is will the market implode? - many are clearly having difficulty understanding all the interpretations on where prices are heading," says Braxton Chase director Andrew Donnelly.

"Generic predictions of price plunges are doing little but scaring the daylights out of both investors and home owners. The broader psyche of the property market is taking an undeserved battering."

One of the key problems, according to Braxton Chase, is the "frequent and broad use of data - in particular median and average figures - depicting the Australian residential market as being on the precipice of calamity".

Braxton Chase recently sampled 50 suburbs across Sydney and discovered that median prices for units grew an average 7.5% over the past three years. The difference between the best and worst performing suburbs, however, was massive - the best growing 18.7% and the worst falling 11.4% in value.

"Plucking out one or two average or median figures and using them to describe the market broadly is futile," Donnelly says.

"While many parts of the market are flat and in decline right now, a combination of solid research and a medium-to-long-term outlook will easily lead buyers to countless markets and sub-markets experiencing or close to experiencing good capital growth."

Mark Armstong, director of property and financial planning strategists Property Planning Australia, agrees.

In a recent article in The Age, Armstrong debunked the popular image of the property market as a bubble saying it was more like bubble-wrap - a series of submarkets driven by a range of economic factors, supply and demand, land value, building style and age.

Armstrong says simply dividing the market into two sectors, home buyers and investors, will reveal dramatically different perspectives - each requiring different strategies for profitability.

Armstrong predicts a good year for investors. Those who bought investment property in the late 1990s and early 2000s will now be approaching a positively-geared situation, with returns relative to the price they paid doubling over the past 10 years -and now about 8-10%.

The ducks are also lining up for those looking to buy now. Armstrong says that with Reserve Bank indications of a fall in interest rates investors are entering a market where rents are rising and the cost of money is falling. "There is no better market for investors," he says.

While inflation, petrol price increases and high interest rates have taken a toll on potential home-buyers, the outlook is not as grim as median statistics would have us believe for those looking to buy now.

Armstrong says: "While falling interest rates will certainly have a positive impact for home buyers, there will be a significant lag period. Home affordability will not return until interest rates have actually fallen, rents have stopped rising and property prices in home-buyer areas have hit the bottom. I expect it will take at least a year before these factors have any real impact."

The savvy investor will seek opportunity in a slow market with decisions based on research and a considered interpretation of tailored statistics.

Donnelly says: "One irony is that we've also had a surge of experienced investors coming forward, trading off the back of all the negative sentiment. Doom and gloom is usually a magnet for investors who know that capital gains are likely if you do your homework."

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The above article can be found at www.hotspotting.com.au.

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