Good time for PPOR, bad time for IP

I've seen several posts on this forum where in a down-trending market (e.g. Perth) people have said its not a good time to invest, and only to consider buying if its a PPOR.

What is the rationale for this? Is a bad time to invest not a bad time to buy regardless of PPOR or not (is leverage is equal)?

 

Investments succeed if they make you money - if the market falls, you risk underperformance or a loss. Your PPOR on the other hand depends more on serviceability. Assuming you can afford your loan and do not need to move, you can live comfortably regardless of market cycles.

 

Understood, however if you think its a bad time to invest (i.e. market fall), would you not also wait to buy a PPOR for cheaper?

 

It's a good time to upgrade a PPOR as the higher end of the market is down significantly more than the lower end in percentage terms.

Generally, people invest in the lower end - the discounts aren't currently good enough on the whole to warrant the risk, and the vacancy rate is too high. For me, it's not so much the pricing but the vacancy rate that's making it a no go zone for new investment purchases.

With a PPOR, you're not going to be renting it, so there's no risk of an empty house and it's an opportunity to buy great properties that you may not have been able to afford previously.

Re - buying a PPOR for cheaper, this tends to be an emotional buy so when you find 'the one' you don't want to wait and see if it's going to be cheaper in a couple of months.

 

Among many smaller reasons, the two biggest for me are:

(1) In a downward market typically the "emotional cost" is not so high. In a booming market when you see something you want to live in you're more likely to make an irrational decision, whereas even in a boom an IP comes with a more rounded consideration.

(2) you have much more selection when the market is saturated, so you can find something that suits you in particular and not a generic please-all rental.

I have heard some people use it to justify a slightly more risky investment time (ie. top of the market or as a cylcle is tanking), because even if you loose it is mentally comprehendable because its "not much different to paying rent". if it was bought for the purpose of pure investment and looses, that is more emotionally incomprehensible. This of couse is total cr@p, because it lost you money either way.

 

Thanks that clarifies where people are coming from on here.