How do I know when to invest in property?

Property investors often wait until the time is just right before making their next purchase, but just how do they make sure this is the case? The fact is that there’s no definitive answer, with many investors relying on intuition to decide when to expand their portfolios.

However, there is some key data that can be relied upon to get an insight into the market. The Reserve Bank of Australia (RBA) considers current market conditions at its monthly meeting, and its July 7 gathering was no exception.

The Governor of the RBA acknowledged that during the three months to March, dwelling investment increased 9 per cent from a year earlier. This suggests that there’s no shortage of investors who consider now to be a good time to buy, while the market is avoiding boom-like conditions that some experts have speculated about.

One factor that might be encouraging people to enter the market at the moment is the fact that the official cash rate remains low. Buyers have benefited from reduced interest rates since May, and it’s possible they won’t not be changing any time soon.

The Real Estate Institute of Australia (REIA) recently analysed the Consumer Price Index (CPI) and concluded that it’s likely to encourage a low cash rate for at least a while longer. The CPI is currently below the RBA’s target zone, so they will be unlikely to make any drastic changes.

REIA President Neville Sanders said: “With inflation under control combined with a slowdown in housing finance, it’s reasonable to expect that the RBA board will not be increasing interest rates in the medium term, providing a stable outlook for home buyers.”

The low cash rate has apparently had a positive effect on consumer confidence as well, with the latest ANZ/Property Council Survey pointing to two consecutive quarters of stability. Readings of 100 on the index suggest neutrality and the results from the past six months have stood at 131.

Some parts of the country have witnessed greater rises in confidence than others, suggesting that they might become hot beds for investment home loan activity. Tasmania’s reading increased from 130 to 143 quarter on quarter, while the ACT’s result rose from 119 to 131.

Although there may be no exhaustive guide to knowing when a good time to make a property investment is, there are some key indicators that you can keep an eye on. Having the right home loan in place is a good place to start, as this will ensure you’re ready to strike when the market conditions seem right.