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It is no secret Australians love their bricks and mortar.
Whether it is a life-long dream home or a portfolio of income-earning properties to fund a lifestyle, real estate is Australia’s favoured asset type.
Nationally, property value is more than $6.7 trillion today, according to the latest CoreLogic Home Value index.
Superannuation is worth about $2.1 trillion. Listed equities are worth about $1.7 trillion right now.
A report on www.realestate.com.au says there are approximately 9.7 million residential properties across the country.
But is property a safe investment? Is it wise to spend thousands of dollars on a single land title?
The answer is a resounding ‘yes’.
And here are 5 reasons why investing in this country’s property market is ‘as safe as houses’.
- A growing population – According to the Australian Bureau of Statistics, Australia’s population grows by a net total of one person every one minute and 24 seconds. International migration is growing by one person every two minutes and 25 seconds. There are currently about 24.4 million people living in Australia. Everyone needs somewhere to live, which means ongoing demand for new housing is assured.
- A stable government – Yes, there have been more changes to Australia’s political leaders in the past decade than any time in the history of federation. However, in the global context, Australia is still viewed as a reliable and consistent democratic nation. Our track record for sound governance is respected. People want to live here because they are attracted to multi-cultural, stable and largely peaceful national community.
- Record low interest rates – The Reserve Bank dropped its official cash rate to its lowest level in history (1.5%) in August 2016. Many advertised mortgage interest rates are below 5%. And with Australia’s economic growth forecast to remain about 3% over the next few years, economists say the Reserve Bank is unlikely to lift its rates too much in the foreseeable future. This, in turn, means retail lenders’ interest rates should stay about the same. Many property investors choosing to borrow to buy are enjoying very low interest rates, and therefore greater rental income.
- Steady long-term capital value growth – Latest ABS data puts the mean price of residential property at $631,000, a rise of $9,000 year-on-year. Over the 30 years to 2015, Australian housing prices have grown by 7.25% on average every year. So while some alarmists may talk about ‘price bubbles’ and ‘crashes’, official figures tell another story. Australia’s property values do move through market cycles. That’s true. But supply and demand mean the long-term trend is up and this steady movement is forecast to continue this century.
- Favourable tax climate – Australia’s tax settings encourage investment in property assets. One example is negative gearing, whereby individuals may be able to offset losses from investment property against annual income tax debt. Speak to a qualified tax or financial professional for advice on how to make your investments work best for your individual circumstances and goals.