2017 proved to be a mixed bag for property investors with many doing well and others not reaching the targets that they would have visioned back in 2016. One thing is for sure the property industry on the whole, including us property accountants, can all learn lessons from 2017 and make for a positive 2018
We asked our own team of professional property accountants about the lessons we learnt in 2017 and how they can drive success into 2018 – and here’s what they said:
“CHANGE IS GIVEN AND SHOULD BE EXPECTED”
Our partner John Kukulovski (Chan & Naylor Insolvency) says the rules will change and will continue to change.
Even though change is given and should be expected, your main long term property investment strategy goal is to remain focused on Capital Growth. But at the same time taking into account the ever-changing rules in the property market.
Previously we recommended selling under performing properties but this year, due to market exposure, we’ve recommended keeping your cards close to your chest until we see more favorable credit extensions.
An investment needs to be self-sufficient and not purely based on tax breaks. Buying new makes more sense than renovating, given the circumstances. In the past it made sense to “rentvest” but due to first time home buyers stamp duty eligibility, first time home owners grants and the ease in obtaining finance for PPOR, its more logical to live in the property for at least one year.
Experienced property accountants are what separates the men from the boys, the rules of the game keep changing and if you don’t adapt to them you could fall behind, or worse, drop out of the game.
“NOT THE TIME TO PLAY THE PROPERTY POSTCODE LOTTERY”
Our Partner Janelle Bartlett (Chan & Naylor Redlands) says it should be about sticking to a proven investment strategy for the next few years or so.
2017 saw stricter borrowing conditions and affordability limitations which had a negative impact on the property market. This will result in a decrease in price growth in some locations with stable prices in other locations. But this is not the time to play the property postcode lottery, instead, heading into 2018, it should be a time to manage your assets and make bland investment decisions.
Why? You should play things safe and stick to locations which you already know work well for you. If you want to gamble a bit take a look at the figures and statistics of those areas taking into account jobs, population growth, demographics and socio-economics, ensuring there is indeed long-term growth.
“LET GO OF UNDERPERFORMING ASSETS, REEVALUATE YOUR PORTFOLIO”
Managing Partner of Chan & Naylor Sydney CBD Central office, Ershad Ullah, says you need to keep a close eye on the performance of your portfolio investments.
Implement stricter measures on yourself and invest more time to review your property portfolio. Make some important decisions. Let go of underperforming assets, reevaluate your portfolio so that it is positioned to perform better in the long-term.
For example, Brisbane only managed to see property values rising by 2.7% on average for 2017. But not all areas saw low figures with one suburb in particular seeing a 15.2% rise in values. You have to be smarter and invest in a more superior location – minimise the opportunity cost, why make $10,000 when you can make $90,000.
“STRICTER LENDING WILL HARM FUTURE PROPERTY INVESTMENTS”
Our Chan & Naylor North Sydney partner, Simon Perkovich, says 2018 will prove to be a difficult year for obtaining finance.
This was confirmed in 2017 where the lending market saw change after change after APRA’s tightening on credit extensions. This affects both local and foreign investors, while existing home owners looking to upgrade their next family home also taking a hit.
We don’t see the RBA changing interest rates for the next year and APRA has done their bit to curb the Sydney and Melbourne property booms. Tighter lending will harm future property investments so it is essential to make sure that your existing property investments are putting in good shifts for you and maximising every cent.
“CAPITAL GROWTH WILL PROVE KEY TO FUTURE INVESTMENTS”
Our Managing Partner (Chan & Naylor Property & Business Tax Accountants Pymble) Cindy Su says property performance is driven by local market factors.
Factors including economic development, population driven demand and government commitment in infrastructure. Capital growth will prove key to future investments. Sydney and Melbourne property markets have led the way in terms of capital growth – largely due to having flourishing economies and strong population growth.
A tip for 2018 from the property accountants is to invest where economic growth and job growth will lead to greater demand. Forecasts suggest that Sydney and Melbourne will continue to lead the pack in terms of growth and these property markets will continue to do well.
“CAN’T COMPARE ORANGES WITH APPLES”
You can’t compare oranges with apples – comparing the Sydney & Melbourne property markets with the others is unfair and inaccurate. Reasons being include each State being at different stages of the property cycle, there are multiple property markets in each State, geography places a crucial part in growth and demand, and there are different price points to take into consideration.
Saying, for example, that the market in Brisbane is doing well doesn’t speak for the whole of Brisbane – houses in good locations have grown in value whereas apartments in Brisbane have struggled.
“PLAY IT SAFE AND REDUCE RISKS, THE RETURNS WILL FOLLOW SUIT”
Peter Ristevski, Managing Partner at Chan & Naylor South West Sydney says reducing risk will maximise returns (strategic investing).
The lesson for 2018 is to not reinvent the wheel and instead make the wheel move more efficiently. A common investor mistake is to put little thought to who owns their properties. Used wisely, giving the right ownership will improve taxation outcomes and give you the flexibility you need especially when your personal circumstances change.
My outlook for 2018 is one where you have to review everything and minimise risk. So I ask the questions:
1. We are financial prepared for times when you need it?
2. Have you furbished a Will or Power Of Attorney?
3. Do you have sufficient life and income protection insurance?
4. Are your assets owned under the correct name?
“INVEST WITH A WIDE SET OF BINOCULARS”
Our Senior Partner at Chan & Naylor Melbourne, Sandro Bagnati, says there are benefits to buying property beyond your back yard and most importantly out of ones comfort zone.
One benefit of this strategy is that you will always have a few properties doing relatively well meaning you can approach the banks in a confident manner. Going into 2018 he suggests having an independent property strategist to help you with your portfolio and plan wisely for the future.
How Will You Stay Ahead Of The Game?
2018 and beyond appears to see growth steadying for the Australian property market and the need for independent professional property advice is ever more important.
Here at Chan & Naylor, our property accountants cater specifically for property investors and business entrepreneurs who want to grow and protect their wealth.
Being in the business for more than 25 years, Chan & Naylor has developed a wealth for life approach as a result of our partners’ passion for property investing and business enterprise. We are uniquely positioned to provide nationwide support and cutting edge tax and financial advice.
Request a FREE phone consultation with one of our expert property accountants and see how you can benefit from our wealth of experience and expertise. Alternatively, if you would like to contact one of our offices nearest to you visit our Contact Us page and choose from any of our offices, nationwide – New South Wales, Queensland, Victoria or Western Australia.
How Did The Property Market Treat You In 2017?
Let us know in the comments below – we’re waiting to hear your stories.