Whether we’re in a bubble, heading for one, or just experiencing a growth spurt in a normal cycle, you should be aware that prices are rising. You should also be prepared for the possibility that they will fall at some time in the future. In a bubble (or nearing the peak of a cycle), you need to have a long term view. You need to be able to ride out the ups and down to realise significant profits. Over the long term, the trend will be up.
For all investors, it is worth looking at a number of scenarios. What would happen if the value of your current investments dropped 20%? What would that do to your overall LVR (loan to value ratio)?
What does this mean for you? The answer depends on your individual circumstances. Bear in mind that as long as your rents are covering your loan repayments, you should be fine. Now might be a great time, though, to review your overall portfolio. Is it performing well? Can it withstand change? Is it best to stay with what you have, or should you build in more diversity (say, invest in several areas, rather than one metropolitan area)?
We’re happy to talk to you about your personal plans.