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Property market proving a lucrative investment

The residential property market is Australia’s single largest and most valuable asset class with a total estimated value of $5.2 trillion. In comparison, the total value of listed equities is almost 3.5 times smaller at $1.52 trillion.

On top of being Australia’s largest asset class, the residential property market is also proving very lucrative for buyers.

According to recent research conducted by RP Data, dwelling values climbed 10.1 per cent over the 12 months to July. Furthermore, interest rates continue to hover around record lows and lender competition is running hot.

In a bid to grab market share, many of Australia’s lenders are offering cash and other incentives as well as significant home loan discounts.

In fact, over the last few months, home loan discounting has hit unprecedented levels, with banks cutting advertised rates by more than one per cent.

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And while the biggest discounts are still reserved for those taking out higher value loans with big deposits, a borrower looking to borrow $500,000 for a $625,000 property can now get more than one percentage point off the standard variable rate. Just months ago, discounting a home loan rate by more than 0.7 per cent for this type of loan was unheard of. Now, discounts of one per cent are fairly commonplace.

With that in mind, it is fair to say the property market is ripe for the picking – a fact investors understand all too well.

According to recent data from Mortgage Choice, investors currently account for more than 30 per cent of all loans written – significantly higher than the 25 per cent we saw a few years ago.

Investors acutely understand the benefits of jumping on the property ladder now. According to Mortgage Choice’s recent First Time Investor Survey, one in three investors are looking to purchase property as a way to “secure their financial future”.

They see benefit in purchasing property now while rates are low and the market is enjoying a spike in dwelling value growth.

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The only problem investors face is finding the right property.

Indeed, as per the survey’s findings, 50.6 per cent of investors who purchased their first investment property within the last two years admitted that finding the right property was the hardest part of investing.

Looking at the data, it is clear that Australians are quite particular about what they want from their investment property.

When purchasing an investment property, investors look for a dwelling that is not only located in the right suburb and is close to essential amenities, but also a property that is located in an area that has proven high tenant demand.

For investors, it seems location is everything. A property that is located in a good suburb and near the necessary amenities including cafes, restaurants and local transport, is likely to attract more tenants, which can help to increase the rental income generated by the property.

Investors are a savvy bunch – they have done their due diligence and investigated not only what locations are attractive to potential tenants, but what types of properties are in hot demand.

More than 60 per cent of recent investors admitted to purchasing either a small house (one to three bedrooms) or a small unit (one or two bedrooms) because they know these types of properties are in the highest demand.

Today’s first time investors are switched on. They know what their potential tenants are looking for in a property and they aren’t prepared to buy something that doesn’t meet these requirements.

But while investors understand the benefits of getting their foot onto the property ladder, that isn’t to say they are the only ones who are or can purchase property.

Provided buyers do their due diligence, the property market is proving favourable for almost everyone.

 

Property market proving a lucrative investment
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