Aug 01, 2016
Why property is the best investment
Like all popular sayings, “As safe as houses” is based on fact. Here’s why property is the most trusted investment by ‘mums and dads’ and major corporations alike:
1. ‘REAL’ ESTATE
Property is called ‘real estate’ because you can see and touch it. Even if you buy ‘off the plan’, the land exists – and the building soon will!
On the other hand, the only evidence of owning shares is a piece of paper or an email message. And you can never be sure what’s going on behind closed boardroom doors.
As investments go, the property markets are easy to understand. There isn’t a lot of jargon to confuse the average buyer.
Of course it’s wise to do some research before investing in property, but it isn’t rocket science. The fundamentals apply to properties everywhere.
3. LONG-TERM GROWTH
Australian property has increased in value at an average of 11 percent since the early 1900s.
That’s comparable to the stock market, but historically property has been more stable even than ‘blue chip’ stock indexes. And unlike companies, land can’t go broke in an economic downturn or through poor management.
There will always be demand for land and housing, in well located areas that people actually want to live and work. Again, you can’t just buy anywhere, but well chosen and well located property is a good investment.
The fact that property takes longer than shares to sell, even by auction, makes it a less volatile form of investment.
4. LENDER'S FAVOURITE
Banks and other financial institutions lend more money for property purchases than any other investment.
Property loans are the biggest component of every bank’s profit, because property has proved to be the safest type of investment. The typical bank’s loan-to-value ratio (LVR) is 80 percent and higher, and interest rates are lower than for other types of assets.
And property is ideal for ‘leveraging’ – taking advantage of your portfolio’s rising capital value to obtain more loans, increasing your holdings even faster!
5. MULTIPLE STRATEGIES
Property is a more flexible form of investment than many people realise.
Different strategies can be used for different financial situations and property types. They include long-term capital growth, cash flow, renovating for profit and developing.
Banks offer different types of loans to suit different strategies too.
When it comes to types of properties, the sky’s the limit! Houses, duplexes, villas, townhouses, apartments – and that’s just the residential market.
Locations and prices range from exclusive inner-city at the top end, to regional and rural towns that can offer great value for the canny buyer.
6. TAX BENEFITS
Property is an essential commodity in the community, so Governments encourage ‘bricks and mortar’ investment and development.
Tax benefits include deductible expenses such as the interest on loans, repairs, maintenance and management fees. Depreciation on buildings up to 40 years old is another benefit.
Investment properties can be negatively geared to reduce your income tax – what a bonus!
7. GOVERNMENT ASSISTANCE
First home owners are eligible for special one-off grants in most Australian states and territories. There are also incentives for off-the-plan and new constructions.
8. SUPPLY & DEMAND
This is the key driver of investment property growth.
Demand for rental accommodation is increasing as Australia’s population continues to grow faster than the supply of new housing. That puts pressure on property values and rental prices, forcing them higher.
The message for anyone with the ability to invest in property market is clear: buy now!
But it’s important to buy carefully to maximise the financial return and minimise risk. Prices can be volatile in some locations – mining towns for instance – so it’s best to seek professional advice.
In a nutshell, investing in property is a great way to accumulate wealth over the medium to long-term. It’s a great way to achieve the lifestyle you want for yourself and your family.