Why Invest?
Property in Australia has unofficially grown on average 10% per year in metropolitan Australia for the last 150 years, despite natural disasters, recessions, stock market crashes, wars, depressions and changes of government. When we analyse properties for clients, we use a conservative 7% historical growth rate. This essentially means that property prices will double approximately every ten years.
The true wealth creator has always been property and the experts predict it will continue to be. In the 2009 edition of the Business Review Weekly (BRW) Rich 200 List, “Property” dwarfed the other categories where people made their wealth, with 61 of the 200 wealthiest Australians making their fortunes in property. Property allows you to leverage yourself more than any other asset class, giving you the opportunity to maximise capital growth over time. That means banks will typically lend you 20:1 or 95% of the value of a property (depending on your financials and the banks criteria).
Another major factor why property is a favourable investment option is that there continues to be an undersupply of property in Australia. The population is increasing faster than homes are being built and the undersupply figure fluctuates around 120,000 homes. The majority of them fall into the $350,000 to $500,000 price range. With immigration numbers forecast to be very strong and with a significant increase in new born babies combined with limited housing supply, the increase in demand will continue. This is great news for property investors as rents increase and property prices should also follow.
If you have owned your own home for a few years, chances are you have managed to accumulate some equity. This means that the value of your home is now significantly greater than the loan that you owe on the property. If do not use this equity then it in financial terms it is like stuffing this money under your mattress at home and never getting any return on it. If you can utilise this equity to buy more property, then you have affectively leveraged your assets to create more wealth and are now playing the game that all wealthy people play. Just think for a moment on how much your home has gone up in value and then ask yourself, “What if I could have bought 7 properties when I bought my first? How wealthy would I be right now?” The answer to that question should be enough to help you make a positive move towards building a property portfolio. According to the Australian Bureau of Statistics (ABS), the median house price in Brisbane in March 2002 was $185,000 and in September 2010 the median house price was $460,000. If you held 7 investment properties during that period, then your net worth would be $1.925million, and you could retire in the top 1% of wealthiest Australians.
If you don’t own a home or property yet, then the above paragraph should explain why you getting yourself in the market might be a great idea. Always remember that there is always the option of getting an investment property before you buy your own home. In fact you may never need to buy your own home depending on your circumstances. At Property For Wealth we call this strategy “Rent Your Way to Riches”. This is just one of the many strategies that may suit people who don’t want the burden of a huge mortgage.
Property has stood the test of time and even in difficult economic conditions during the Global Financial Crisis (GFC), property was the shining light and held strong.
