WHY INVEST IN PROPERTY?
1. Strong historical performance
Property has performed strongly against various other asset classes over a period to 2003. Residential property outperformed the other investment types, including Australian Shares, Listed property, Fixed Interest, Cash and Overseas Shares (unhedged).
Residential property achieved annual gross returns of 15.1 percent during the 20-year period. In second place were overseas shares, returning 12.2 percent.
2. Control
One major benefit of property investment is that the investor determines how to manage the asset, rather than leaving decisions to a large corporation, as is the case with shares and listed property trusts.
3. Understanding
Another big advantage of property investment, and one which makes it so popular, is that people understand how residential property operates, as it is something they come across in their everyday lives.
4. Safety
Most people feel safe investing in residential property as it is an asset that is tangible (something they can see and feel) and is relatively free from uncontrollable external forces. People will always need somewhere to live.
5. Asset performance
Residential properties have the ability to produce income as well as providing capital growth. A negatively-geared property can be cash-flow positive, based on the original purchase price, over a certain amount of time via rental increases.
6. Leverage
Financial institutions offer attractive loan-to-valuation ratios (LVRs) for residential properties. This means that this means "other people's money" can be used to leverage an investment, thus yielding a higher return. In fact property can be purchased using no cash at all.
7. Tax advantages
It almost goes without saying that there are significant monetary benefits available through negative gearing or depreciating property.
8. Ageing population
Australia's ageing population as a strong argument in favour of residential property investment. In the future Australia's senior population is projected to increase due to factors such as improvements in medical technology and personal health.
The Australian Bureau of Statistics assumes that life expectancy for men will increase to 92.2 years of age and 95.0 years of age for women by the year 2050. Therefore, people must accept that they will live for longer which poses some challenges in relation to financial freedom and the enjoyment of retirement.
The Australian Bureau of Statistics indicates that 71 percent of Australians aged over 65 are living on incomes of less than $15,548 per annum. The report suggests that residential property investment is a strategy which can contribute to financial independence for retirement.
9. You will get there in the end
In the long term property investment always tends to pay off. Residential property is an asset that is best held with a mid to long-term investment strategy.
Rapid capital growth over a short period of time is not a permanent occurrence for residential property and it will only happen when the market is at the right stage of the property cycle.
The residential property cycle is generally believed to pass through all its various stages between a period of seven to 11 years dependant on various factors.
Between 1982 and 2004, median house prices for capital cities on the eastern seaboard experienced several price upturns and downturns over the years. However, the overall trend has always been upwards. If a property was held during this period for the mid to long-term, negative financial impacts during any of the downturns would generally have been redressed overtime.
The Jason Ryan Group works for you the buyer, unlike a real estate agent that is contracted to act on behalf of the seller.
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