Sydney, Melbourne investors should protect equity, says mortgage expert

protect equity, mortgage, Sydney, Melbourne, property investment, investors

Sydney, Melbourne investors should protect equity, says mortgage expert

By Bianca Dabu | 03 August 2018

While the property market of Sydney and Melbourne have been in a consistent state of decline after the property boom, mortgage expert Son Pham believes that investors can profit from their assets if they play the ‘game of finance’ well.

Experts have said time and again that the ‘premier market’ of Sydney and Melbourne are well past their prime. After years of astounding growth, both capital cities have been subject to a downward cycle and it could take time before they go through any significant rebound.

Naturally, the current state of the markets is worrying investors who have put their money in two of the biggest cities in Australia. Those who have bought at the top of the market are particularly more affected as growth becomes scarcer, leaving them with no equity to capitalise on.

Despite this, Mr Pham said that there are still wealth-creation opportunities in Sydney and Melbourne. In fact, there will always be investment opportunities for people who know just where to look.

According to him: “Property investing isn't a short-term game. We go through cycles, and we're just going through one now.”


“If affordability is there, you can manage your risks, I think you can get in because you've got a lot of infrastructure works happening, particularly in Sydney and this should help in the long-term to drive prices up again,” he added.

At the end of the day, the strength of the national economy and the ‘big love affair’ of Australians with property will prevent any big crash from happening in two of the country’s biggest property markets.

Growth drivers

While other investors are concerned about the decline in the capital cities, others saw it as an opportunity to buy more properties as the prices continuously decrease over time.

Both markets have been notoriously expensive, particularly during the height of the property boom, but now that they are entering the softening phase, Sydney and Melbourne have transformed to become buyer’s markets.

Aside from the relative affordability, the population growth and the increase in the level of infrastructure in these cities are also expected to drive growth.

“The long-term projections or rationale for why properties should grow in value, it's all there,” Mr Pham highlighted.

Strategy: Low LVRs

Despite the good projections for Sydney and Melbourne, experts advise investors to be careful before jumping into any new investment.

In fact, instead of purchasing a new asset, they recommend staying put and avoid stripping too much equity out of their properties in the capital cities.

It is also advisable to keep a low loan-to-value ratio (LVR) in order to be prepared for any market movements in the future, whether positive or negative. Typically, investors aim for an LVR of 80 per cent or lower to reduce risks.

According to Mr Pham: “It's a long-term game. For those who have bought in at the high, you're just going to have to ride it out.”

Moving forward, investors must make sure to buy within their means so they don’t run the risk of being deep in debt when prices go down.

Moreover, engage property professionals to help you navigate the property markets and its changing lending environment. Mortgage brokers, in particular, can help you identify possible financing solutions and determine the ones that will suit your goals, capabilities and limitations as an investor.

Tune in to Son Pham’s episode on The Smart Property Investment Show to know more about the state of finance, mortgage and serviceability in today’s property markets.


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Sydney, Melbourne investors should protect equity, says mortgage expert
protect equity, mortgage, Sydney, Melbourne, property investment, investors
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