Is now actually a good time to invest in many Australian cities?

Little known by most people  per sq. metre rates of new Australian properties are among the lowest in the world. Rent returns are also among the highest in the world. (Source: Global Property Guide and Citylife, new build property)

These factors, combined with the population growth mentioned earlier, are compelling enough investment reasons. 

AUSTRALIAN REAL ESTATE AS AN INVESTMENT

Australian property has long been proven as a safe, secure and profitable investment.

Firstly, let’s see what, in fact, Australian property can offer overseas investors:

  • A freehold, secure title.
  • Opportunity to achieve Capital Gains.  
  • A reasonable 30% deposit is all that is needed to enter the market.
  • As owner, you can control many aspects of the investment.
  • There is a ready and increasing supply of quality tenants.
  • There is fair landlord/tenant legislation – the "sitting tenant" concept is virtually unheard of.
  • There are exceptional tax benefits.
  • You can "add value" as the property ages, increasing dramatically the market price.
  • You don't have to watch it every day. It needs very little monitoring. There are professional Property Managers.
  • You do not need to actually sell to get your money out.
  • Unlike shares, it is much harder to make a truly poor direct property investment, which decimates your capital.
  • Many banks accept Australian property for security.
  • Real Estate is a necessity, people need shelter, and they need someone to provide it.
  • There has been enormous demand in the past, and there will be huge and continuing future demand.

HOW LONG IS A PROPERTY CYCLE? 

New data now shows that the Australian capital cities property cycle generally spans 18 years.

That’s is, a 14 year UPTURN, followed by a 4 year DOWNTURN.

Well located properties have historically doubled in value over the upturn period.

By the use of “gearing” returns can be extraordinary.

Assuming a 30% deposit, and borrowing 70 %,( the figure readily available to foreign investors) simple math tells us that if a property doubles in say 14 years, your return on capital outlaid (and costs of 5%) would be a huge 271%.

FINANCING

To maximise returns always consider the benefits of leverage as mentioned above. Foreign investors can choose an 70%  loan to mean the rent will cover most of the Bank interest.

PLUS with a new property, expect at least 50% of the price to be given back to you in the form of a tax deduction.

Depending upon how fast rents rise, and the amount of your down payment, it will most likely cost investors very little to hold the property. .

THERE'S PROFIT IN NEW

There's additional profit to be made by buying brand new, or "off-the-plans". 

As well as the obvious benefits of locking in at today's prices is a rising market, there are the additional benefits of high tax deductions, new appliances, the latest in construction and building methods, the latest Internet technology incorporated in each apartment, new facilities and designs, high rents, and strong tenant demand for these type of properties if well selected.

WHAT ABOUT THE AUSSIE DOLLAR?

The Aussie has depreciated against many currencies over the past 2 years by as much as 30%, meaning there is strong potential currency upside as well.

And even though the AUD appreciated around 62% against the USD between 2001 TO 2009, foreign investment into Australia increased by over 200% during that same time.

AUSSIE HOUSE PRICES: THE HIGHEST IN THE WORLD?

Actually, they are amongst the lowest in the world on a per square metre rate for new build, with the exception perhaps of core Harbourside and CBD Sydney.

It is a fallacy that Australian house prices are expensive on a world scale.

AUSSIE RENT RETURNS AMONGST THE HIGHEST IN THE WORLD.

Data for the world’s cities rental returns from Global Property Guide has shown that Sydney sits at the seventh highest in the world at present for gross rental yield. (This is what a landlord can expect as return on his investment before taxes, maintenance fees and other costs.)

And other Australian cities have even higher rent returns than Sydney.

THE “SECRET” TO AUSTRALIA

Many Investors looking at Australia are not aware of another critical, but often overlooked, fact that helps protect against a downturn as was seen in the USA.

  And that is that investors make up approx. 25% -30% of the property market in big cities like Melbourne and Sydney. Foreign buyers account for around 10%.

So, around 60%-70% of all properties are therefore in fact purchased by "owners."  

That is, people intending to live in them. NOT buying for investment, and who require at least a 10%, if not as is usual a 20% deposit.

Not buying to rent them out. But for their own use.

That is, in a downturn, they do not rush to sell, as this is their own home not an investment.

This provides a natural "buffer" against panic selling, such as occurs in the stock market. And as the Banks have only lent around 80% of the price they do not rush to recall the loans, and this has been one of the secrets as to why the Australian housing market did not collapse during the financial crisis.

This 70% home ownership rate has hardly varied for the past 50 years.

However, around 1/3 of all these people actually have no mortgage at all.

They do not care what happens to interest rates or the market as they have no outstanding loan.

For them to panic and sell or have the banks repossess them is unheard of. The opposite again of what happened in the USA.

PROPERTY TAXES FAVOUR INVESTMENT

Always buy new to maximise tax deductions. The Australian tax office allows the full construction cost of a new property, plus all the fitting and furniture to be claimed as a tax deduction against rent, plus they allow mortgage interest and all other running costs. The bottom line in all this is, if investors buy new, plus take a mortgage, they can greatly reduce any potential Capital Gains or tax or rental.

AUSTRALIA WELCOMES FOREIGN INVESTORS

Like many countries, Australia has rules relating to foreign buyers. They simply need to buy new, not yet completed or off the plan property. They may also purchase raw land and build a homes.Therefore, resale must be to Australia residents, which is seldom an impediment if property has been well selected as Australian make up around 90% of the market.

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Note: No person should rely solely on the information provided. Investors are advised to seek professional advice before making any decisions. To the extent that this report contains information for investors Citylife does not warrant that it is accurate or complete and no responsibility or liability is accepted for the consequences of any actions taken on the basis of this report.

www.CitylifeGroup.com                Email us: info@citylifeproperty.com          ©Copyright 2018. No reproduction without written Permission.

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