While the pandemic and lockdowns have made it hard for many of us to plan for the future, investing in property has never been more relevant or important.
The prevailing social and economic trends in Australia suggest real estate remains an excellent investment in your future even with strong price trends.
A recent Treasury document, called the 2021 Intergenerational Report, suggests Australia will continue to need a strong immigration policy to maintain economic growth, and that means there will be an ongoing demand for property.
By 2060, Treasury estimates almost 40 million people will live in Australia – a spectacular jump from the 25 million currently residing here.
The takeaway is simple: we need a healthy property sector, and we can expect continuing pressure on the supply-and-demand equation. A combination of both factors points to sustained and robust growth in property values, especially over the longer term.
While it’s never wise to rush into property investment, a delay could mean paying more. Big four bank NAB has predicted city property could see an annual jump in values by 18.5% by the end of the year.
With this opportunity in mind, here is a quick list of seven tips for property investment to help stimulate your thinking:
- Define a strategy – Understand the level of investment and your ultimate long-term approach. Are you going to put a lot of time into this project, or is it a sideline for you?
- Do your sums – Rental income doesn’t necessarily cover all your expenses. It’s best to talk to a professional financial adviser to assess your capacity for property investment.
- Where to start – If you’ve never invested before, it’s a good idea to begin with residential property. The trends and values are easier to understand than those of the commercial sector. Once you’ve become confident, there’s nothing to stop you from diversifying your portfolio.
- Do your research – This is a critical discipline in property investment. Check out selling price trends, typical rents and rental vacancies in your target suburbs.
- Know what rents – It’s not enough to buy any property. Your investment should meet the market demand of renters. Who lives in the suburb and what type of property do renters want to live in?
- Worst house, best street – This is a cliché that references where you’ll likely find the best capital gain. You can always renovate an apartment or house, but not the street.
- Don’t prioritise your tax strategy – Making a loss on a property to pay less tax on other income shouldn’t underpin your approach. If rental income doesn’t cover all your expenses, you should be satisfied the likely capital gain on the property will keep you in the black.