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The possible continued downturn of Australia’s property market has investors split on whether this is a moment for optimism or doom and gloom.
New research from TaxTank shows that while 54 per cent of Australian investors consider a property market crash among their top three concerns, only 22 per cent list it as their primary concern. With this in mind, the tax software company reports that those who have more experience in the market are actually seeing this as a potential moment to pounce.
TaxTank founder Nicole Kelly said that many investors appear to have learned from previous market fluctuations how to weather this current downturn and even set themselves up to come out better in the end.
“Some clients see this market change as a potential buying opportunity and are watching property prices closely for a decline. It’s a real balance between managing the investment properties they have and taking the opportunity to expand their portfolios,” she said.
The company’s research indicated that market-crash concerns were higher among younger investors, suggesting that anxiety might be heightened for those new to the game.
Ms Kelly stressed that the best thing investors could do to calm their fears was to get a thorough grasp on their financial standing – an activity a surprising number seem to be neglecting.
The study revealed that only 34 per cent of investors felt they knew their cash position well, and only 21 per cent understood their tax position well. One in five property investors responded that they knew little about their current equity position.
“From our study we know solid rental returns are a major consideration in the decision-making process when buying, and rental demand is not likely to slow anytime soon. Likewise, understanding the difference between the cash and tax position, which is amplified by rental returns and depreciation, is imperative when comparing property performance. This is particularly important when considering which properties to sell,” Ms Kelly said.
She encouraged investors to take this moment to assess the aim of their investment portfolios and align that with how they might react – or not act – at this juncture.
“Whether it’s to reduce tax or set yourself up for retirement, understanding why you’re buying and holding investment property is paramount, so too is monitoring the performance of each property to ensure they are working hard for you,” she said.
“Reducing tax requires negatively geared property so you’ll need to know your tax position and how to maximise those soft dollar expenses like depreciation. However, knowing how much cash you need to support each property is just as important, especially if you’re planning to expand your portfolio and beef up your borrowing power.”
Whichever way they decide to go, she suggests Australian property investors be prepared to make some decisions in the coming months, as interest rates continue to climb while property prices are tipped to fall.
Property refers to either a tangible or intangible item that an individual or business has legal rights or ownership of, such as houses, cars, stocks or bond certificates.