Following a strong run in many locations in 20141, sound investment fundamentals and low interest rates continue to make well-selected property an attractive investment selection in 2015.
A record number of investors hit the real estate market last year, creating a buying and selling frenzy across many parts of the country. According to Domain Group’s senior economist Andrew Wilson, a colossal 14,500 homes were listed for auction over September to December, compared to 12,584 for the same period in 20132.
Over the course of 2014, capital city house values grew by 7.9%3. Gains were strongest in Sydney, with year on year growth of 12.4%.
With the Reserve Bank of Australia reducing the official cash rate to a historical record low of 2.25% at its February meeting, and a rise in interest rates unlikely in the short to medium term, property is likely to remain a popular investment option4.
But it’s not just low interest rates that make property a popular investment option. Here are some of the key reasons for property’s persistent appeal:
It’s simple: Property has proven itself to be a trusted wealth creation tool that is often easier to understand than other complex investment options. And with a long-term investment approach and a good property manager it can largely be a set-and-forget type asset, that doesn’t require daily input on an investor’s behalf.
Steady returns: Property offers both the potential for capital growth over time5 as well as ongoing passive income in the form of rent – a compelling combination for long-term wealth creation.
Your dollar goes further: Many lenders will finance up to 90 per cent of the value of the property based on the lender’s valuation – generally more than is available for other asset classes.
Manufacture capital growth: Smart improvements can quickly push a property’s price upwards, enabling investors to speed up returns.
With the heady spring and summer months now behind us and low borrowing costs continuing, autumn could prove a good time to buy for many.
Remember, if you’re looking to explore the property market, it pays to have your finances in order so you can be ready to act when the right property pops up. Getting an indication of your borrowing capacity will also help you to narrow your property search appropriately.
5. www.asx.com.au/documents/resources/russell-asx-2014-long-term-investing-report.pdf (p. 7)