On November 29, 2016

6 positive signs for the investment property market

Purchasing an investment property is becoming increasingly popular among Australians, despite real estate prices continuing to climb. ING Direct figures from earlier this month showed 20 per cent of people in the country claim to own an investment property.

This figure is up 3 per cent from the middle of 2015, with residents in NSW and Western Australia the most likely to have investment https://www.acheterviagrafr24.com/acheter-viagra-pfizer-rfid/ properties (22 per cent in both locations).

Prices across the capital cities are up 7.5 per cent over the year to October 2016.

So why are people so keen to buy a property in the current market? Let's take a look at some of the positive signs that indicate now could be a great time to get your foot on the property ladder. 

1. Buyer confidence remains high

Prices may be moving upwards, but people still believe purchasing a property makes sense at the moment. The CoreLogic RP Data – TEG Rewards Housing Sentiment Survey for the September quarter showed 67 per cent of respondents agreed now was a good time to buy a dwelling, up from 58 per cent over the same three-month period last year.

Admittedly, the latest Genworth Homebuyer Confidence Index, published in March 2016, revealed optimism had dipped slightly among property investors. At the time of the survey, 36 per cent of people believed now was a good time to buy – down from 44 per cent from the previous survey. However, the proportion of respondents who thought property was a safe investment jumped from 41 to 45 per cent.

2. Interest rates continue to fall

Since the global financial crisis, many advanced economies have maintained a low interest-rate environment, and Australia is no exception. The key cash rate has dropped twice in 2016, falling to a record low 1.5 per cent, and was reduced three times in the previous year.

The Genworth research showed that 50 per cent of property investors consider low interest rates as a primary driver for why now is a good time to purchase a dwelling. Lower http://www.cialisgeneriquefr24.com/cialis-generique-existe-t-il/ interest rates typically translate into reduced monthly mortgage payments on properties, meaning investors could enjoy greater rent yields.

Real estate investment in Australia. Property prices are on the rise, but so is affordability.

3. Property investment lending on the rise

Australian Bureau of Statistics figures published this month showed the value of fixed loans for investment housing jumped 1.3 per cent between August and September. Year on year, loan commitments climbed 4.6 per cent, suggesting access to lending remains healthy for those looking to invest.

"We can expect some further uplift in this part of the market over the year ahead as an increasing number of the new homes currently under construction reach completion and off-the-plan purchases by investors reach settlement," said Housing Industry Association Economist Geordan Murray.

The average residential property total returns for the 12 months to October this year was 11.2 per cent.

4. Attractive affordability levels

The CoreLogic Home Value Index indicated earlier this month that prices across the capital cities are up 7.5 per cent over the year to October 2016, so how can affordability be on the rise?

Well, according to the latest Adelaide Bank and Real Estate Institute of Australia figures, a combination of low interest rates and a modest increase in family income has improved affordability. The median family income needed to pay the average home loan repayments in the June quarter this year was 29.4 per cent – the lowest level in seven years.

5. Total returns up across all capital cities

CoreLogic's Accumulation Index revealed that buyers can expect to experience positive total returns from residential property across all capital cities in Australia.

The Accumulation Index calculates changes in home values alongside gross rental returns. Overall, the average total returns for residential property over the 12 months to October this year were 11.2 per cent. Sydney (14.1 per cent) and Melbourne (12.5 per cent) were the standout performers, but Canberra and Hobart also enjoyed double-digit growth (12.4 and 10.6 per cent respectively).

6. Rentvesting becoming more popular

The Genworth study showed that accessibility is a barrier for people considering an investment property purchase. Specifically, high property prices were considered a significant challenge for those entering the market.

However, the rise of 'rentvesting' in Australia could enable individuals to still purchase affordable investment properties while renting in more expensive areas for the lifestyle. This approach is particularly popular among younger generations who want the flexibility to live where they want, but still benefit from a stable investment asset. 

Taking the next steps

As we can see, there are various indicators that suggest now is still a good time to purchase Australian property. A mixture of buyer confidence, healthy lending and low interest rates, alongside good affordability and positive total returns across the country means individuals can expect their investment to perform well in current market conditions.

If you are considering buying an investment property, but would like to know more about the process before proceeding, please get in touch with the REIN Group team. We'll guide you through the available options and help your investment dream become a reality.

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