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Six tips for investing now in Covid markets

If you’ve invested in a blue-chip suburb in the past decade, you probably read with horror the hogwash predictions – even from the Commonwealth Bank – of a catastrophic fall in property prices because of Covid-19.

The 32% cliff-fall in the CBA’s crystal ball never happened!

The most recent figures released by industry researcher CoreLogic say the median prices in all city markets except Perth remain in growth territory compared with the corresponding period last year.

Of course, prices have dipped in the past few months so you’ll find some good buying in these blue-chip areas, although not at the prices expected of a market in distress.

Blue-chip areas are suburbs where you’ll find high net-worth individuals and families. Generally, this segment of the market has been able to work from home and avoid the worst of the Covid downturn. 

They’ve not been hurt financially as much as young adults, many of whom found their first jobs and career-starts in service sectors such as hospitality, events, travel and tourism.

While their plight has dampened the rental market, record low mortgage rates will power up property prices in wealthier suburbs next year. The Reserve Bank says low rates – cheap money – is here for at least another three years.

On top of this, first homeowner grants from the state government are keeping the lower end of the market buoyant and all boats rise on a high tide.

If you’re looking to invest, we recommend moving quickly. Nationally, we’ve had the lowest supply of listings for a decade, and that’s another factor that has prevented price falls, although some apartment markets have a lot of stock. 

More property is now coming on to the market thanks to the spring and summer selling season, and this will help your negotiation position in the short term.

However, you should target specific areas and be thorough in your research. Property supply will remain comparatively thin until owners see at least three months of strong results across multiple markets.

Here are a few guiding thoughts to help you consider how to tackle the current market as an investor.

1. There is not one real estate market in Australia, or even in our State.

The landscape is made up of thousands of micro-markets, so focus on your target areas and block out the media noise. If you need help understanding our local market, speak to one of our experienced agents. 

2. Understand that headlines about median prices reflect mostly residential suburbs rather than only those with popular rental markets.

Ask your agent what’s going on for landlords in the areas that have captured your attention.

3. Some suburbs could hiccup if they experience high unemployment.

Maybe in six months, some pundits will bang on about the two-speed real estate market. Buying opportunities may exist in these adversely affected areas.

4. Constrained supply inflates prices.

That fear of missing out – the FOMO emotion – could cost you dearly. Supply in any suburb eases eventually, so don’t be afraid to play a waiting game.

5. Don’t expect bargains on every corner.

The market is not distressed. Be prepared to pay fair market value. 

6. It’s what you buy, not when.

Unless you’re flipping a property, this will all feel like ancient history when you’re still holding the property in a decade.