There’s no doubt about it. Australia’s red-hot property market is booming, with national home values rising by another 1.5% in September, according to CoreLogic. That takes prices 20.3% higher over the year to September – the fastest annual pace of growth since 1989.
But there’s one big problem with a booming market. It increases the likelihood of property investors making three common mistakes.
1.Letting ‘FOMO’ guide their purchase decisions
It’s easy to get swept up by your emotions when scarcity is driving property prices up (as it has this year in Australia). But jumping into a purchase without doing all your research is something you want to avoid when you’re a property investor, otherwise you might buy a poor-quality property. So don’t let the fear of missing out (FOMO) cloud your judgment.
- Buying in the wrong area
Don’t assume that a booming national market means all properties are rising in value. Some lower-quality properties in lower-quality markets aren’t.
Capital growth isn’t the only thing to consider when you’re a property investor. You also need to think about rents. It’s hard to attract quality tenants when you buy a property in a location with high vacancy rates and a poor local economy.
- Trying to time the market
When the market is booming, it can be tempting to wait for a correction and to then buy in at that lower price. But no one owns a crystal ball, so it’s impossible to know when a correction might occur. Also, if prices rise another 25% before correcting 5%, you’d actually cost yourself money by purchasing after the correction.
So rather than trying to time the market, it’s better to take action when you’re able, hold your property for the long term and let ‘time in the market’ work its magic.
How to succeed with property investment
Property investment can be lucrative. But it doesn’t come without its pitfalls. The best way of avoiding these common mistakes is by doing your homework and adopting a smart investment strategy.