Investor Toolbox | 16 March 2021

Is now the right time to invest?

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With property values starting to skyrocket around the nation (2), is it a good time for investors to jump into the market? Here’s what to consider.

Australians love property. Almost seven out of ten of us own our home3, and more than 2.2 million people back it up with a rental property4

There’s certainly plenty of appeal to an investment property. Tax savings through negative gearing plus ongoing rental income can provide extra cash to help pay the investment loan. Long term capital gains can boost personal wealth.

And right now, the potential returns on a rental property could be extremely attractive.

Double digit returns

The latest figures from CoreLogic show that in February 2021, property values nationally rose at the fastest rate in 17 years, jumping 2.1% in a single month5

Rents are also climbing in Perth and Darwin where annual rental growth is above 10%6. And CoreLogic believes rental markets across Sydney and Melbourne looks to be turning, with recent mild gains recorded for rents7.

The result is that in some areas of Australia, investors have enjoyed double digit gains over the past 12 months – most notably in Darwin (19.4%), Canberra (14.6%), Hobart (14.0%) and Adelaide (11.8%)8

Investment lending jumps 23%9

With these sorts of returns up for grabs, it’s no wonder we’re seeing a resurgence of investor activity.

Lending for investment properties leapt ahead 9.4% in January, rising 23% over the previous 12 months10.

What’s driving investor interest?

Dirt cheap borrowing costs are a key factor bringing property investors back to the market. But it’s not just about low rates.

Returns on savings accounts are at rock bottom levels. The share market has experienced significant volatility in the last year, and a number of blue chip companies put a freeze on dividend payments. It all adds up to make property an even more compelling investment.

There are pitfalls to avoid

If you’re thinking about investing in residential property, it is worth stressing that the best returns are often earned over the long term. 

As a guide, CoreLogic’s latest Pain & Gain report11 found that among properties resold for a profit in the September 2020 quarter, the median holding period was nine years. Properties re-sold for a loss were held for just six years.

Remember too, rental properties aren’t always smooth sailing. There may be periods when the property is vacant. Or, you could face unexpected repair and maintenance bills. Your personal cashflow needs to be able to handle these possibilities.

When it comes to investing in property, expert advice matters

The good news is that if you’ve owned your home for a few years, you may have built up some solid home equity.  We can help you know for sure how much home equity you have, and how you might be able to use it to buy an investment property. It can be an opportunity to preserve cash savings for other purposes.

Knowing your borrowing power is an essential step that lets you hone in on the suburbs and properties that fall within your buying budget. In a seller’s market, this can help you move quickly when you’ve found the ideal property. We’ll take the guesswork out of your borrowing capacity so you can plan with certainty.

And while interest rates are at historic lows, you still need to be confident that your investment loan ticks all the boxes for the features you need as well as having a competitive rate.

That’s where our partners Mortgage Choice come in. In just minutes, they can pinpoint the loan that’s best-suited to your situation, so you can make the most of an investment property.

Call Mortgage Choice today to know if you can join the millions of other Australians who are growing wealth with a rental property. They’ll get the ball rolling, so you can start achieving your goals sooner.

Visit mortgagechoice.com.au to find out more. 

Sources
1. https://www.mebank.com.au/news/positive-sentiment-booming-in-aussie-property-mark/
2. https://www.corelogic.com.au/news/Feb21Index
3. https://www.aihw.gov.au/reports/australias-welfare/home-ownership-and-housing-tenure
4. https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Taxation-statistics/Taxation-statistics-2017-18/?anchor=Individuals#Table6 
5. https://www.corelogic.com.au/news/Feb21Index
6. https://www.corelogic.com.au/news/Feb21Index
7. https://www.corelogic.com.au/sites/default/files/2021-03/210301_CoreLogic_HVI.pdf
8. https://www.corelogic.com.au/sites/default/files/2021-03/210301_CoreLogic_HVI.pdf
9. https://www.abs.gov.au/statistics/economy/finance/lending-indicators/latest-release
10. https://www.abs.gov.au/statistics/economy/finance/lending-indicators/latest-release
11. https://www.corelogic.com.au/news/pain-gain-january-2021
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www.mortgagechoice.com.au

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