By Margaret Lomas

My Christmas message for you this year includes my usual batch of warnings for the silly season.  It’s at times like these that we tend to allow our focus to drift a little and it’s just after Christmas that I seem to get more than my fair share of tales of woe – hapless investors who are locked into investments made while they were at their most relaxed, which don’t seem to be as positive once the gloss of the holiday period wears off.

The recent property boom in some markets brought with it the usual batch of property opportunists – using the favourable circumstances as a way of marketing otherwise dodgy investments.  So, before you spring into 2016 with perhaps misguided ideas about where to head next on your property investment journey, here is my list of the 5 hot dangerous things to avoid in 2016!

1. Off-the-plan.  This has heated up again, and now is the worst time that you could be buying off-the-plan.  Mostly these are being marketed in capital cities, but there are some regional areas on the list.  Off-the-plan carries more than the usual degree of danger – just ask those poor people who bought years ago on the Gold Coast and were forced to settle on properties worth $100,000 less than they paid.

2. Inner city apartments.  We are headed for another glut of these in the coming years and this will result in a lowering of yields, an increase in vacancy and stagnating values.  The most important feature of house price growth in the next few years will be population growth, and one that is growing faster than the national average.  

3. Holiday properties.  With lending to investors having been sharply curbed through new APRA (Australian Prudential Regulation Authority) requirements, the resale market for such property is shrinking even further.  Many lenders are refusing to lend on such securities too, further impacting this market. 

4. Self managed superannuation fund investing.  This is a big one and I want you to take care.  Unless you have significant funds to roll over into super (in excess of around $300,000) then this one isn’t for you.  Oh, you’ll hear about the upside – the ability to use super funds to buy property.  But what is not outlined is the lengthy ATO compliance requirements, the costly maintenance of these funds, the fact that non-recourse borrowings severely limit the amount you can borrow and so the number of properties you can buy (being probably only one) and the fact that you can only secure each property once, which makes them unavailable for leverage.   Lastly, many people have public super funds which are performing quite well and which they have little hope to be able to match, or beat, by setting up a self managed super fund for property investing

5. And of course the big one is those overseas properties.  There’s not enough room here to list all of the reasons why you shouldn’t be buying an overseas property, even if it is cheap.  Remember, when locals won’t buy their own property, there has to be something very wrong!     

Instead of looking out for the next big chance, you’d be better served to use the next few weeks to get your head right, assess your current financial situation, and set some positive goals for property investing in 2016.  There are some great opportunities right here in your own back yard, to buy basic residential property which has all the signs of some fantastic growth prospects in the many parts of Australia which have yet to experience boom condition, yet seem set to deliver great 2016 results.

Have a great Christmas and happy investing!