Property ownership and affordable housing have already played a major role in the current federal election campaign, highlighted by the constant speculation of interest rate rises.
One issue out of left field has been the fast-emerging shortage of rental properties. Not only are tenants feeling insecure about their accommodation, but their rents are rising at an annual rate of 4.7% according to a recent survey.
Rental houses and units are needed quickly; and this could be a great opportunity if you’re thinking of creating or expanding a property investment portfolio.
The latest data is compelling for any investor. The 4.7% increase in weekly rents in the 12 months to March is the strongest growth in almost eight years.
According to the REA Group’s latest PropTrack rental report, we’ve experienced a 24% year-on-year fall in availability against a 37% increase in demand.
New listings are tracking 12.5% below the 10-year average, indicating insufficient stock. If your long-term wealth goals include a property portfolio, this could be a great time to jump into the market.
Below, we’ve listed six reasons why so many Australians have found property to be a great investment.
Stability
Compared with the stock market, the property sector is less volatile. While there are good and bad economic cycles, history suggests the average detached home can double in value over an eight to 12-year period, depending on its location.
Borrowing
Lenders can provide a mortgage to allow buyers to enter the property market, either as an owner-occupier or investor. It’s not so easy to access similar funds to play the stock market.
Earnings
Rental income can help offset the costs of maintaining or paying down a mortgage on an investment property.
Tax benefits
You may obtain tax advantages, such as negative gearing, when you invest. However, you should consult a financial professional to ensure you capitalise on the benefits available.
Capital gain
You may achieve a capital gain on your original purchase when it’s time to sell, although nothing in life is guaranteed. Again, talk to your adviser about what this would mean for you.
The myth
It’s a common belief that all investors negatively gear their properties to make a loss and use that deficit to minimise personal tax. That scenario is not true for everyone. In the right circumstances, making a profit may be just as beneficial. Again, seek financial advice.
NOTE: The information in this article is general in nature and provided as a general overview only. Always consult your financial advisor or accountant for advice specific to your personal circumstances.