Australian real estate is well known, as being a very effective inflation hedge over the long term but you would have to be living under a rock, to not be aware of all the current anxieties in the market at the moment.
Here are the top 10 biggest risks we see for investors at the moment:
• Systematic risk- market risks that cannot be mitigated through diversification
• Liquidity risk- limited opportunities to offload properties when required
• Unsystematic risk-risks associated with acquiring a loss-making property
• Rising interest rate- variable rate mortgages
• Currency risks- when the AUD appreciates, values of foreign investments increase
• Sovereign risk-un-favourable government action and social upheaval
• Credit risks-the possibility that lenders can become insolvent
• Call risk/margin call- investors with high exposure to interest rate fluctuations can be considered risky by mortgage providers
• Re-investment risk- when future coupons from a fixed investment, are not re-invested at the prevailing interest rate.
• Inflation-when the value of an asset/income stream, is eroded when inflation diminishes a currencies’ value.
Our view is that if investors can keep their heads, fix their rates and self manage, the savvy ones will be able to hold onto their properties.
If you need to fix your rate, contact firstname.lastname@example.org.
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Monday, 8 October 2018