Terry’s View – Strong Buying Window Emerging
Amid the orgy of sensationalist news media that’s occurred since the Federal Budget was delivered on 12 May, the best course of action for investors is to look for the opportunities that will emerge when the dust settles.
And make no mistake – there will be opportunities.
The festival of clickbait headlines, fed by economists and analysts seeking to exploit the opportunity for some cheap limelight, has dealt with the apparently dire consequences of the changes to CGT, negative gearing and the taxation of trusts.
But many of the reports are based on an overreaction to the short-term outcomes in this limbo period between Budget night and firm outcomes.
The government’s proposed changes still have to pass through both houses of parliament before we will have any certainty.
Given the considerable outcry over the broken election promises of the Government to justify what is nothing more than a tax grab dressed up as thoughtful policy, there may well be compromises. Although even with some likely changes in the Senate, it is likely that the key taxation changes as they impact real estate, will become reality.
As a result, what investors buy may change, and the entity they use to invest may change.
The key thing that WON’T change is the fundamental importance of location.
Whether an investor opts to buy established or invest in a new build, residential or commercial, the importance of choosing a location with growth credentials does not change.
While waiting for the changes to come to fruition, investors can use the period of uncertainty to find the best locations for future action.
As Reventon founder Chris Christofi commented recently, market uncertainty may be creating one of the strongest buying windows seen in years.
The upcoming changes will make high-yielding properties and locations more appealing. Buying a positive cash-flow property makes negative gearing changes irrelevant – and this points investors primarily towards regional locations with lower prices and higher rental yields.
Just be careful that you’re not lured towards high-risk locations like mining towns or small country towns with vulnerable economies.
