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In this article, I thought it might be interesting to review and reflect upon some of the reasons why we invest in property.

It might help reinforce why we believe property is a fantastic investment vehicle and look at the advantages of property over other investment classes.

Below are some brief aspects that we believe make property, in investment terms, our first choice of investment.

√ Buying property enables us to use leverage to invest, which in turn means we can obtain higher rates of return on our investment. It is possible to borrow up to 100% on a property, which you cannot do against other asset classes. The reason why lenders will allow us to borrow using property as security is due to property being considered a low risk investment with potential for capital growth.

√ Australia’s increasing population and declining household size will generate demand for thousands of additional properties to house these people. This expanding demand will continue to push property prices up.

√ Australian property has enjoyed consistent growth with an average annual growth rate of 7% per annum in the last 40 years. The properties our Property Friends members have purchased have been easily exceeding this 7% benchmark for capital growth.  However we use the industry annual growth rates, property tends to double value every 7 to 10 years, compounded with the leverage that property offers, this is a fantastic Return on Investment.

√ Demand for rental properties is at an all time high and this pressure will force up rents to reflect this demand. Hence our income from property will grow with inflation…..perhaps even out grow it over the next few years.

√ The most significant difference between property and shares over the last 78 years is that many of the properties upon which that gain is calculated still exist today. Many of the companies upon which the share based returns were calculated on have disappeared. Unlike shares, property is a tangible asset that won’t vanish as a result of poor management or changing market forces. On the other hand, companies and jobs that exist today can be obsolete tomorrow. As building and labour costs continue to rise, so will land and property values.          

√ Australian tax law offers generous tax advantages to property investors. The tenant and the taxman help us pay off our property…..how good is that!

It’s good to reaffirm this stuff into our psyche. We feel comfortable in the knowledge that our choice to invest in property, above other asset classes, is sound and makes a lot of sense.

 

Property Friends is a specialist Property Investment Advocacy that has been operating for the last 13 years on the basis of 3 principles: Trust, Community & Progress. www.propertyfriends.com.au (03) 9758 5331

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Uwe Jacobs Property Strategist

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