Why you should consider property investment right now
In Australia, it seems like all we've been hearing about for the past few years is the real estate market. Whether it's the housing affordability crisis, interest rate fluctuations, a lack of supply or massively increasing development, there are any number of property issues that make the news on a regular basis.
One thing is undeniable however – owning property is always going to be a worthwhile investment strategy. That's why it's never a bad time to think about making a start on a property portfolio – the sooner you're able to begin, the greater your benefits could be.
Step on to the property ladder
While home ownership rates in Australia are no longer booming as they have in the past, census figures compiled by the Reserve Bank of Australia (RBA) show the levels across the country have been steady at around 70 per cent for the last 50 years. That's still over two-thirds of the country living in their own home, indicating that the great Aussie home ownership dream is alive and well.
It's never a bad time to think about making a start on a property portfolio.
Every one of those people in that 70 per cent of the population made the leap into their first home at some point, and while some may have reached that level through inheritance or some outside the norm good fortune, most people did what you will likely do – worked hard, saved a deposit and secured a mortgage.
Achieving first home ownership in Australia can be a daunting prospect, due to high median house prices, but thankfully there are government schemes in place to assist you. You only get to play your first home card once, but it can be just the extra incentive you need to take the plunge. First home grants – as much as $15,000 in NSW and Queensland – are set up to kickstart your step on to the property ladder.
Make the most of low interest rates
For most of us, borrowing money is a necessary evil when it comes to buying a house. Having ready access to potentially hundreds of thousands of dollars is rarely a reality, so we must all trudge down to our bank or mortgage broker, and resign ourselves to decades of repayments. It's a good system – really the only system that could work – but that doesn't mean it's always a joy to be involved in.
For this reason, knowing the right times to take on a new mortgage, or even refinance a current home loan, can give you a huge leg-up when you're looking at property investment. Over the last few years, Australia has been living with a very hot property market, mostly due to historically low interest rate decisions out of the RBA. When the Official Cash Rate is as low as 2 per cent – as it has been since May 2015 – locking in a fixed home loan rate for a few years can save you thousands.
Getting started early on property investment leaves you more time to potentially accrue a slate of properties.
Generate rental income
Borrowing is the most effective tool we have for making property investments, but obviously the major headache that comes from taking out a mortgage is the constant repayments. It's relentless, and at times overwhelming, as such a large chunk of your salary is snatched away from you every single month.
On top of being a terrific asset, owning one or more investment properties can work to top off your diminished salary. Even if you only own one house, it may be financially beneficial to rent it out to tenants to pay down your mortgage while you rent in another, more cost-effective location.
For example, perhaps you buy a multi-bedroom family home in a suburban area of Melbourne, but you personally don't need much space and it's more convenient for you to stay nearer the city centre. It could be a wise decision to find yourself a property manager, rent out your house to a family who have need of a larger place, and set yourself up in a small unit in the city. That way you can use the income from your investment to make your mortgage repayments, and you might find there's even a little leftover to help with your own rent.
Boost your retirement savings
According to the Measuring Adequacy of Retirement Savings paper, published by the Melbourne Institute in 2014, both couples and singles across Australia were experiencing substantial shortfalls in retirement savings. With life expectancy inching further into the 80s, it's not unreasonable to assume many of us will be living for a couple of decades on our superannuation or the aged pension, so larger savings are becoming more and more crucial.
Getting started early on property investment leaves you more time to potentially accrue a slate of properties, all valuable assets which can help see you through your golden years comfortably. By off-loading investments, or even downsizing from a large family home to a small unit or retirement community, any shortage of savings can hopefully be mitigated.