Why Does Property Investment Continue to Attract So Many People? (And How Is The Australian Market Faring?)

You spend money to make money. That’s certainly the case in the real estate sector. You purchase a property in the hope of returning high rental income and value growth over time.

Property real estate is a relatively stable and safe asset class. While property prices tend to go up and down, it’s fair to say that most property investments will return a positive value in the long run. 86% of the world’s millionaires hold their wealth in real estate. Real estate is certainly not a new form of investment. It’s been around since day dot. From caves to lavish pent houses, astute investors have long looked to property for solid financial gains.

Whether it’s the old-school nomads trading food, stock and maybe a daughter for a piece of land back in the day, or more contemporary dealings with lawful contracts, sales agents and money handling today, real estate has always been looked upon as a title-staking claim and an accomplishment of success.

Australia’s promising housing market

Unlike the stock market, real estate doesn’t go to zero overnight. You can touch and see your asset in bricks and mortar. You can create an income in the form of rental income, and there are many tax advantages to owning an investment property. Most importantly, real estate doubles every seven to 10 years – even when the market dips, that is still the average return over time. It’s one of the most stable asset classes going around.

What’s even more promising is that Australia’s housing market is showing signs of recovery, backed by lower interest rates and improving affordability. The house price index for the eight capital cities has risen by 2.6% (0.1% in real terms) during 2012-2013, according to the Australian Bureau of Statistics (ABS).

Darwin had the highest price increase during the year to end- Q1 2013 (8%), followed by Perth (6.1%) and Sydney (3.6%). Smaller price increases were also recorded in Canberra (1.5%), Brisbane (1.4%), Melbourne (1.1%), and Adelaide (0.9%). Out of Australia’s eight capital cities, only Hobart experienced a price decline of 1.9%. You can make money quickly in real estate. This is attractive to investors who are after a quick win. The Massland Group’s own Mark Rolton is a fine example of a savvy investor who has gained big in a short turnaround. He made $1.1 million in just 34 days, connecting property developers with investors, and debt-free, Mark has been able to acquire properties
and pay off the mortgages quickly, setting up an attractive nest egg and a prospering business.

Real estate is generally considered a fairly low-risk investment choice, compared with shares or cash deposits. One of the most effective ways to build your riches is to accumulate a portfolio of investment properties over time. Most investors (like Mark) will purchase a property, only to use the capital from this purchase to secure a second or third property, and the cycle usually continues. The high leverage offered on an investment property means your hard-earned money is able to be stretched further. Now, we all like the sound of that!

How is the Australian Real Estate Market Faring?

The Australian market is in recovery and in a definite upswift. Over the past 12 months, the property market has performed relatively well, given it has been subject to elevated exchange rates, confidence-sapping job losses, tight credit conditions and uncertain global and domestic economies.

Data from Australian Property Monitors shows strong price growth over the June 2013 quarter. Between April and June, house prices jumped by 2.8%, which is the best result since March 2010 when the market was booming.

Investors and home buyers are flooding back to the local market with confidence as is evident from the auction clearance rates.

This acceleration and heightened level of activity has been jet – propelled by the lowest interest rates in decades, rising buyers confidence and continued solid economic performances.