5 Reasons to Invest in Property
There are many different ways that you can choose to create a secure financial future, but for many Australians, property investment is the one that ticks all the boxes. And with good reason too. Our guide explains why investing in property could be the best financial decision you ever make.
Capital growth
Choose your property investment wisely and you can look forward to long-term capital growth. History is no guarantee of future performance, but until we develop a working crystal ball, it remains a useful tool for analysing the potential of various investment types. Property prices in Australia have tended to double approximately every seven to ten years. This is a trend that has been established over the last 100 years or so, so there is little to suggest that it will change any time soon. To maximise the growth potential of your property, thoroughly research the locale, so that you are certain that you are buying in a developing area and that you are paying a fair price for the property.
Rental income
Property investments give you more than just the promise of long term capital growth. The right property, purchased at the right price, in the right rental market, will also deliver well in terms of rental income. The key is to choose a property in a popular area with plenty of amenities. Do this and you will be able to command excellent rental values and keep vacancy of your property to a minimum, which is the key to maximising rental yield. Restricted supply of rental property and strong population growth in Australia continues to increase the rental value of property investment.
Lack of volatility
Residential property is a relatively stable investment. Of course it is true that property prices can go down as well as up, but compared, for example, to the stock market it is generally predictable. There are many reasons for this, though the main one comes from the very nature of the property market – in that everyone is in it. Although there are an increasing number of investors, the vast majority of properties remain owner occupied. So, regardless of whether prices go up or down, owner occupiers still need somewhere to live, so on the whole they will just react to changes stoically, by not selling in a downturn. This helps to even out any fluctuations in the market.
Tax efficiency
Property can be a very tax efficient investment. For a start, if you borrow money to purchase an investment property, the interest on that loan is fully tax deductible. Furthermore, as long as you own the property for more than a year you only pay capital gains tax on 50 percent of the gain. Always ensure that you seek guidance from a qualified taxation accountant.
Leverage
Leverage is an important tool in maximising your investment potential and property investment in a simple way to take advantage of it. Banks see property as reliable secure assets, so in many cases they are far more willing to lend up to 80 or 90 percent of the total value than they would be for other types of investment, such as stocks and shares. This enables you to make larger investments with greater returns. As the value of the property rises the percentage to which you are leveraged reduces, giving you the option to borrow again against the equity to fund another investment.