For many of us, the main reason we buy a property is to provide ourselves with a family home that will over time become a long term asset. Others who have ventured into property investing may have bought a property to produce income by charging rent or longer term capital appreciation. For these reasons and more, property is a great investment. Let’s take a look at why property is often seen as one of the smartest and safest investments you can make.
Property experiences less volatility than stocks or commodities
Yes, the property market does have its ups and downs and experiences growth and slowdowns. However, historically the trend continues to reflect growth with property values doubling approximately every 7 to 10 years. Population in Australia and across the globe continues to grow, keeping demand for housing high.
Housing is also a basic necessity, so it will always be in demand and hold value giving property an advantage over shares and commodities by providing less risk and greater stability over time. Stocks on the other hand can be negatively impacted by a range of factors outside your control making it difficult to minimize risk.
Property provides steady capital growth
Property values increase over time and this is largely attributed to land and location. Land value appreciates over time as it is a limited resource. Therefore, as demand increases through population growth or interest in a particular area, land value increases.
Unlike stocks in companies which can dip to zero and fail to recover, your land and your home will always hold value despite slowdowns in the market. History has shown that the property market has always bounced back from past downturns that may have caused housing prices to slip. Those who weathered the storm and held on to their properties have benefitted from values returning to their normal appreciation. In general, the longer you hold onto your property, the more valuable it becomes.
Property provides you with leverage
Looking to diversify your investment portfolio? You can use property as collateral for new investments. Banks and lenders usually regard property as prime security, enabling you to borrow up to 90% or 95% of the property’s value. Leverage means that you can use the increase in capital value on your property to acquire new assets rather than using income or savings alone. Leveraging your property enables you to build your investment portfolio as your property value and your equity increases over time.
Property can provide useful tax benefits
You can claim tax deductions on mortgage interest, cash flow from investment properties, operating expenses and costs, property taxes, insurance and depreciation (even if the property gains value) as well as other benefits. All of these help improve affordability for property investors.
Making your property investment a success
Property is regarded as one of the safest long-term investments you can make, however, there are many factors that go into making your investment a success. For many people getting started, property investing can also be a daunting task. Going through the process, doing paperwork, and navigating through the unfamiliar market may be enough to discourage first time investors. If you’re just starting in property investment, consider working with a buyer’s agent.
A buyer’s agent can help simplify the process and provide strategic, market savvy advice that will increase your chances of greater returns. With their market knowledge, they can also give you access to unlisted properties and help you purchase from locations that are best aligned to your goals and budget.
Finally, a buyer’s agent will work solely for you as they have no affiliations with real estate agents and other vendors. This means you are working with someone who will prioritise your needs and objectives. Working with a buyer’s agent can help you get the best chance at property success.
Category: Property Investment
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