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Property’s Golden Run

Property’s Golden Run

How Australian property has been the top performing asset over the last 20 years in Australia.

Australians love property and it’s no wonder. Housing prices in Australia continue to climb making owners and investors incredibly happy with the overall performance of the property market.

Even when comparing Australian property to other investments, it’s clear to see that for the last two decades, investing in residential property has been a big winner.

Over a 20 year period, Australian housing prices have on average returned 10.5% per year.

Average Returns: 1995-2015 – Source: Russell Investments/ASX

Those levels of returns are nearly 2% higher than Australian Shares and 3.7% higher than Australian bonds.

In areas like Sydney and Melbourne, property prices have doubled in the last decade and the strong returns are continuing in 2017.

So why is property in Australia such a strong performer?

Low interest rates

Since the GFC, interest rates not only in Australia but worldwide have fallen to record levels.

In Australia you can get a variable home loan with an annual interest rate of less than 5%. The same goes for fixed rate home loans.

Low interest rate home loans encourage investors and potential home buyers, to borrow money to purchase property. The leverage available for housing in Australia is often far greater, than what you’re able to get with shares.

In terms of the interest rate cycle if you’re looking to invest in property or buy your first home, consider talking to a mortgage broker about how you can get the best deal on a cheap home loan, while interest rates are so low.

Population

Australia’s population continues to climb with net migrations at slightly over 250,000 new arrivals each year.

The bulk of those newcomers to Australia are ending up in our largest two cities – Sydney and Melbourne. Last year Sydney alone had more than 100,000 net arrivals, with Queensland also having more than 60,000.

The mining states of Western Australia and the Northern Territory have started to experience a population decline in recent years, as the mining and construction booms have slowed.

Population is one of the key drivers of house price growth and one the main reasons we’ve seen strong growth particularly in Sydney and inner Melbourne.

Source: Australian Bureau of Statistics (ABS)

As we can see from the chart from the Australian Bureau of Statistics (ABS), migration has been spiking here in Australia since 2006 and continues on an upward trajectory.

The Share Market

Since the Global Financial Crisis, the Australian Share market has really just been treading water.

Without including dividends, the ASX200 still hasn’t regained ground from the highs of the mining boom in 2008.

ASX 200 – Weekly Chart (Market Index)

Because of the low potential for returns, investors have been looking elsewhere for yield. And for most Australian’s that means looking firmly at residential property as a potential investment.

Tax Benefits

It’s long been known that Australian property investors can achieve a significant tax advantage by using negative gearing.

Negative gearing allow investors to claim and difference between their rental returns and home loan expenses, as a tax deduction. This can significantly reduce your tax expenses each year and all make it easier to pay off a rental property in the long run.

If you’re interested in finding out how you can setup a loan that will give you tax benefits,, consider getting advice from a mortgage broker.

Chinese Investors

It’s well known that wealthy Chinese citizens are looking to move their money out of China and into, so called safe-haven countries like Australia, Canada and New Zealand.

As such much of the increase in prices over the last five years has come on the back of international investors, wanting to park their money in property in both Sydney and Melbourne.

And there’s good reason. Australia property has had a long term track record of high returns.

Get started investing today

Investing in property is considered one of the best options for people looking to build long term wealth.

For both investors looking to build long term wealth or homeowners wanting to get started with their first home, it’s best to start by speaking to a mortgage broker and working out your budget and home loan requirements.

Variable and fixed interest rates are at an all time low, so if you’re looking to secure a home loan for a first home or an investment, speak with a mortgage broker to get the very best deal on your home loan.

About Author

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Collins Mayaki

Collins Mayaki is the Managing Director of Wealthy You – helping Everyday people, Businesses and foreign investors navigate through the competitive and ever-changing mortgage landscape to find the right loan for them. Wealthy You goes into bat and negotiate on your behalf, making the process as simple as possible for you, geared up to deliver fast results. Our Mortgage Brokers help you avoid the pitfalls, and we'll find loan features to suit your personal circumstances. Collins has more than 12 years of sales, management and marketing experience across a diverse group of companies.

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