Why is property considered as one of the best vehicles to build wealth?
Residential Real Estate has historically been a popular investment option as it combines stability and excellent returns. According to the ATO, Australia has more than 2.2 million property investors, which means that around 20% of the households in the country hold at least one investment property.
Investment properties present an attractive set of benefits that can be used to serve different goals. In today’s blog, we list some irrefutable reasons that make property the preferred investment choice for most Australians.
KEY REASONS TO INVEST IN REAL ESTATE
It’s safe:
Properties are tangible assets and are traditionally less volatile than other investments, such as shares and cryptocurrencies. Large financial institutions like banks also consider properties as a secure asset class and are open to lend money for investing in properties.
Properties grow in value:
The property market works in cycles and has its own shares of ups and downs, but property prices generally appreciate over time. Historical data shows that Real Estate progressively becomes more expensive as the years go by. In Australia, the housing market has shown some extraordinary changes over the last 25 years, boosting median property values by more than 400%. Over the last 43 years, the median price of a house in Melbourne has appreciated over 23 times, from $37,088 to approx. $893,000 in March 2020, according to REIV.
Real Estate is of the most forgiving investments:
Even poorly selected properties generally grows in value over time as the demand and the population grows. Regardless of the location, it is difficult to find a cheaper property today than 20 years ago.
Residential Property underpins Australia’s wealth:
It is worth approx. $8.1 Trillion (as of May’21). State and Federal Governments protect the value of Real Estate by improving infrastructure and creating measures to ensure there is a roof over the head of all Australians.
Investment Properties offer tax benefits:
To encourage property investment, the Australian Government allows multiple tax incentives. Interest on loans, depreciation and other property-related expenses can be claimed to reduce tax liability and boost tax refunds.
Using the power of leverage:
Property only requires you to invest limited capital (usually 10-20% of the property purchase price) while the rest can be leveraged with bank’s money (mortgage). The advantage of leveraging your money is that, when the property grows in value, your earnings are calculated based on the total amount, not based on your invested capital.
It generates passive income:
Once rented, properties can become a reliable source of income. If you are a rental provider, your investment property works 24/7. Passive income can be used to cover all or part of your ownership expenses and mortgage repayments.
It protects your earnings against inflation:
In times of low interest rates and higher inflation, money sitting in a savings account loses its value. At the same time, lower rates stimulate home buyer and investor activity, which increases the demand for properties and, consequently, pushes property prices up. While money in savings tends to erode, money invested in properties tends to grow.
Unique way to utilise the gains:
Property is unique in the sense that you can utilize the capital gains without the need to sell the property. This is made possible by the fact that banks allow property owners to refinance their mortgage and use the equity (equity is the difference between the outstanding mortgage on a property and the current market price) for other investments.
Anyone can:
You do not need to be rich or have a lot of money to be able to invest in properties. Average Australians are the biggest group of people investing in properties. According to ATO figures, approx. 64% of property investors have an annual taxable income of less than $80,000.
Security during volatile market conditions:
According to the RBA figures, only 26% of occupied housing is rented. That means approximately three-quarters of housing is occupied by owner-occupiers, which provides greater security to investors. During hostile or volatile market conditions, owner-occupiers are unlikely to succumb to panic selling.
TEAM SONI CAN HELP
At SONI, we simplify property investment with our experience and knowledge. Whether you are looking to buy your First Home, your First Investment Property or to build on to your existing Portfolio, our team of experts are here to help.
Reach out to us today if you are looking for the right partner that is going to be there with you every step of the way.
Book your free Consultation NOW at soniwealth.com.au/free