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Need some reasons to investigate property as your next investment? Here are our top 5.
1. A trifecta of benefits.
Property combines capital growth with cash flow return and tax benefits. You can secure equity growth which you can further leverage at a later time, you can generate additional cash flow which can be used to reduce the debt on your own home much quicker, and you receive tax benefits through negative gearing which put your tax dollars to work for you. An additional benefit is that you can achieve this trifecta with a relatively small outlay. In simple terms, you can potentially control $300,000 worth of property assets with $30,000. This is the power over leverage.
2. Housing demand is strong.
When housing demand exceeds supply, prices trend upwards. According to ANZ economist Alex Joiner, population growth is running at a four-decade high, which is putting unprecedented pressure on national dwelling stock. This is being reflected in very low rental vacancies right across the capital cities. The ANZ estimates that current underlying housing demand is just over
180,000 per year. Recent building approval numbers have indicated that
house completions over the coming 18 months could be below 120,000.
Private approvals fell at the beginning of 2009 to a 26 year low with
detached house approvals down 23% and other approvals diving 53% over
the past year. An estimation is that in just over 12 months from now,
Australia will have an unprecedented housing shortage of 250,000 homes. This disconnect between supply and demand
can only spell more good news for investors as rents are pushed higher.
3. Consistent returns.
Historical data shows us that over the past 100 years or so, property in Australia has averaged 8 to 10 per cent in growth. This means that prices can be expected to double every 7 to 10 years on average. Since 1978, prices in Brisbane have doubled every 8.6 years, while in Sydney it has been 7.4. This suits a long term strategy to grow a portfolio that increases exponentially in value.
4. Property is a well trodden road to wealth.
The vast majority of millionaires have made their money through
property, by taking advantage of simple yet powerful investment concepts like compounding, leverage and time. In fact 86% of the
world's millionaires hold their wealth in property. Well known people
like Donald Trump, Warren Buffett and Robert Kiyosaki have used
property to amass their fortunes. A large portion of the Rich 200 in
BRW made and is continuing to create their wealth from property.
5. Government Incentives.
Currently, in order to attempt to alleviate housing shortages and affordability issues, the Government is encouraging property investors with tax breaks of over $80,000 over 10 years. The National Rental Affordability Scheme gives investors the opportunity to secure cash neutral or cash positive properties from day one.
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