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What Returns Can You Expect from Property Investment?

What returns can you expect? Investing in property is based on one simple fact that people will always need somewhere to live. This means there will continue to be a demand for housing, whether owned or rented. This isn’t just based on the natural desire to have a roof over your head. But are other factors that mean the home is very much where the heart is.

Home Owners Delight

For those who can afford it, owning your own property offers the opportunity to stamp your personality on a little piece of the world that is yours, whether it’s by doing up a few rooms and painting the walls and the colour you like. Or by doing something structural like knocking down walls to make more space.

There are many good reasons to become involved in property investment. If you are a first-time buyer, the very fact of purchasing your first property starts you on the steps of the property investment ladder—a fantastic feeling for anyone. That is is why over 1.4 million Australians are property investors.

Protecting your future

Each has to make their fortune or make a decent monthly income, so they no longer have to rely on the superannuation when they reach retirement or even better, or ultimately achieve financial independence and security for themselves much sooner.

  • Despite the ups and downs of the property market, there are reasons to believe;
  • That despite the ups and downs in the market,
  • Our economic woes in the wake of the global financial crisis,

The property game will continue to be a good investment for those who are willing. Understanding what’s going on in the market, investors can use that knowledge to their advantage. For a start, property prices have a track record of increasing consistently over time. In fact, on average, the value nearly doubles every 10 years.

Don’t believe all that the media write

And despite what the media portrays, you might read in some sectors of the press or hear on the media property prices. Property is not as volatile or unstable in the same way as other forms of investment, such as stocks and shares, commodities or foreign exchange.

Stability and Volatility Investment Comparison

Stocks, shares, commodities and foreign exchange the worth continually fluctuate from one minute to the next. So, if you aren’t constantly on alert, the very big profit you are holding one minute can be replaced by a significant loss the next as there are in every market. So, while there may be fluctuations as there are in every market, property prices generally recover fairly rapidly from any dip, drop, rising to where they were before and then beyond.

This means that if you hang on to your property in the medium and long term and any short-term dip drops will be ironed out. This makes the property prices market highly resilient. So, even when many predicted as much as 40% fall in property values after the global financial crisis, prices stayed largely stable.

Relative low volatility in property value

What is ideal with the property market is that which means you don’t need to be continually watching the market every day, reading charts, scouring the financial press or endlessly on the phone with your broker.

In general, because so many people already own homes, most people are aware of buying and selling property. Most of us have a pretty good understanding of the basics of buying and selling real estate, something you can use to your advantage when taking your first steps in property investment.

Ease of access to funds

Perhaps, because we live in houses and units that we can see and touch, the property also seems more natural in a way that paper-based investments never can, such as shares. That solidness also appeals to lenders, so they’re happy to use it as security against which additional loans can be arranged.

Of course, you can use other assets as collateral, but banks are more willing to lend as much money as they are against bricks and mortar? What’s more, you can add value to a property in a way that you can’t with stocks and shares or saving accounts. They are what they are, no more and no less, and their value is beyond your control.

Continual Increase in Demand for Housing

And because a property is something everybody needs to buy or rent, there’s always a market for it. On the other hand, with a house property, you can increase its market value by renovating internally or externally or by adding extra space with an extension. This makes it a good investment now and into the future.

Of course, stories appear periodically in the press about plummeting house prices or an imminent crash that makes people uncertain about going into the property market. But it’s important to realise that these scare stories are just scary stories that really come true despite what sensationalist journalists would have you believe. There are excellent reasons to remain positive about the Australian property market. The most crucial reason that property is a good investment is the fact that the Australian population continues to rise. Meaning there will be an ever-increasing demand for properties.

Changing culture increasing demand

And as we have seen, the laws of supply and demand are fundamental to the property market. Also, knowing the fact that either through choice or personal circumstances, either as a result of divorce or bereavement, more and more people are living on their own. This means that an even greater number of households are being created, leading to an increasing number of people looking for property.

Thankfully, whether they are looking for a unit or townhouse somewhere out there in the country or right in the city centre, the vast majority of Australians have a job. With an unemployment rate of only around 5%, people are still able to buy and rent houses, which means the property market remains healthy. People’s disposable income has also been rising, with some improvements in tax rates and wages growing faster than inflation. This means that most homeowners are now better able to keep up with their mortgage repayments or are confident about renting or buying the first home. Again, another reason to think the housing market will stay strong.

What about high-interest rates?

There is yet another side to the property market. If property prices are too high, or loans become too expensive to take out, afford, more people will choose to rent out. And for the property investor, this ensures there is a ready rental market for their investment. So, whatever the market is doing at any one time, there’s always the opportunity to make money.

Although many Australians invest in property, many don’t maximise the returns for their investment because they don’t have a well thought out and structured plan.  In fact, many people believe they’ll make money just because they bought the property. And while it may seem like this is when the property market is thriving, without a well thought out strategy, it can be all too easy to buy the wrong property at the wrong time.

At best, this means you’ll miss out on some potentially good opportunities, and at worst can actually mean you’ll lose money or have to wait a long time for a particular investment to come good.

Finally

But get things right, and you can. You’ll be well on your way to achieving a financially independent future for yourself and your family. Taking all this into account, whether just by owning your own home or investing in property long term, you have the opportunity to create a savings account that’s as safe as houses.

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