5 Reasons to Invest in the Australian Property Market
If you spend some time looking at the last 30 years of direct property investment, you will see that it has been overall a highly successful activity.
Certainly, for anyone seeking a comfortable retirement lifestyle, it is a sensible decision as excellent returns can be had and within a reasonable duration. Investing in Australian property in particular comes with certain advantages.
Tax Efficiency
Australia may not be known for having low tax rates but there is more to it than what you may have heard.
When you pay interest on a loan that you took out to purchase an investment property, it is 100 per cent tax deductible. Further, if you own the property for more than a year, you are only liable to pay capital gains tax of more than 50 per cent of the gain.
Combined with a number of allowances for depreciation, you have the foundation for a highly tax efficient property investment. If you have conducted the necessary research, you may find that your bank will provide you with 80 or 90 per cent of what you need to purchase your investment property.
Once it is yours, both the tax man and your tenant will pay your rent and interest. And you get to keep any capital gains.
Sustained Growth
Australian property prices have a tendency to move in cycles and they have historically performed well, doubling in cycles of approximately 7-12 years.
This is equal to annual growth of around 6 to 10 per cent. Property prices in Australia have been recorded for 120 years and those figures have risen by 10.4 per cent per year, on average.
Growing Income
Rental income from Australian property investments has risen over the years, an increase that has outpaced inflation.
There is a decrease of home ownership, partly due to the continuous rise in property prices. An increasing number of Australians are renting, according to statistics from the Australian Bureau.
A number of commentators on the industry have suggested that there will be a 40 per cent increase in the number of tenants in the not-too-distant future. There is also a limited supply of high quality rental properties and the government is struggling in providing public housing.
Room for More Investors
Only thirty per cent of residential property is owned by investors as opposed to owner occupiers. Residential property, therefore, is the one investment market that investors haven’t managed to dominate.
This means that a natural buffer occurs in the market that is unavailable in the shares market. So should value of property crash by 10 per cent, 20 per cent and so on, we will still want a home and most owner occupiers will wait for the crash to come to and end as opposed to selling up and renting.
Values of property can go down certainly but the level of volatility is not at the level as it is in the share market and it also offers far more security.
Investing with Other People’s Money
Also known as gearing or leveraging, this is an important step in wealth building. Further, the leverage that you can use when investing in property is significant. Banks like residential property as a form of security and will happily lend you 80 or 90 per cent of the value (known as loan to value ratio).
Property investment in Australia has been booming because of the tax efficiency. I enjoyed reading the blog and got some great knowledge. Thanks!
Valid reasons in my opinion. The same reasons can be pretty much said for New Zealand real estate investment as well.
Thanks for sharing such amazing tips on investing in property! It indeed sounds time consuming and a lot of headaches, but in the end it is totally worth it.
This is where you caught my attention, “an increase that has outpaced inflation.” Of all benefits, an income from rental property that earns long-term and outpaces inflation is a solid investment, especially in today’s economic times.
Australia is a perfect place to invest your money because their economy is showing a very evident sustained growth, which is a great indication that your investment will surely earn a good profit.
At this juncture, Australia is one of the best countries to secure your investments. Its economy is absolutely showing a sustainable progress, which gives you the assurance that your investment will prosper.
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Indeed, Australia is a great country to grow your investment, especially in terms of property market. Their sustained economic growth can give every investors the assurance that their money investment will gather a significant ROI in the future.