Property 101: Five property traps to avoid in 2016: Margaret Lomas

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, says best-selling author Margaret Lomas in her recent column on Switzer. 

Here's a list of the five hot dangerous things to avoid in 2016 from Lomas.

1. Now might be a bad time to buy off-the-plan, she warns. Off-the-plan carries more than the usual degree of risk, the best example being those 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. Yields will decline, vacancies will rise and values will stagnate due to another glut expected in the coming years. 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.  The new APRA (Australian Prudential Regulation Authority) requirements has impacted lending to investors and as such the resale market for such property is shrinking even further.  

4. Self-managed superannuation fund investing.  Unless one has significant funds to roll over into super (more than $300,000), this one's best avoided, Lamas says. 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. 

5. 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!     

For more real estate traps and tips visit realestatetraps.com.au