Inflation has increased by 4%, Australia is in a cost of living crisis, and the major news headlines around the country never looked scarier for property investors. But, they aren’t telling the whole story. At Teach Me About Property, we believe in taking the long view, and also the data driven view. Here’s our reasons why it is still the right time to buy property – as long as you’re strategic.

1. Increasing Inflation isn’t the Whole Story

Headline inflation has risen to 4%, which is above the target band and moving in the wrong direction, causing concern among some analysts who suggest that the Reserve Bank of Australia (RBA) may need to consider rate increases at their August meeting. 

However, it is important to note that this increase partly results from a lower inflation figure from the previous year dropping out of the 12-month calculation, artificially raising the current figures. 

The more comprehensive June quarterly data, which is more reliable than monthly data as it measures the full Consumer Price Index (CPI), will provide a clearer picture of inflation trends. This quarterly data will significantly influence the RBA’s decisions in August. While inflation remains stubborn and persistent, the upcoming data will offer better insights into the economic landscape.

2. Borrowing Capacities and Strategic Purchases 

As inflation rises, so do the interest rates charged on borrowed money, and in turn the borrowing capacity available to you. For property investors, with a Wealth Game mindset, the solution is strategy and opportunity over fear. 

At Teach Me About Property, we encourage students to explore Low Money Down deals. This means you enter the property market with a smaller initial investment, sometimes as low as $5,000, locking in an asset that can appreciate over time. 

3. Rising Rental Incomes

Inflation can have a positive impact on property investors who already own, and for those that enter late in the game. For those early, rising inflation can push property values higher due and increase the amount of equity available. Similarly, higher interest rates can reduce buyer demand, and increase the number of renters seeking properties to live in; which in turn means higher rental returns.

Property investors entering the game late, are best positioned when they explore their options with regards to equity on previously bought properties, and if they’ve not purchased before, place an even bigger emphasis on the return on investment and rental yield of the properties they are exploring.

4. Hedging Against Inflation

Real estate is often seen as a hedge against inflation. As the value of money decreases, the value of tangible assets like property tends to increase. This means your investment can grow in real terms, protecting your purchasing power.

Diversifying is the age-old rule of investment, but there are other strategies to be considered when it comes to property and hedging against inflation. Considering fixed-rate mortgages, interest only loans, properties in high-growth areas can mitigate the impact of rising costs. 

Conclusion

Despite rising inflation, there are still compelling reasons to invest in property. By understanding the current data, the effects on borrowing capacity, market fluctuations, and adopting smart investment strategies, investors can navigate these challenging times successfully. Staying informed and adaptable is crucial for making the most out of property investments during inflationary periods.