For many Australians, investing in bricks and mortar is considered a secure way to realise long-term wealth creation.
Property values have a long history of steady growth in Australia, exhibiting a lot less volatility than shares.
At Worth Property Investing, we strongly agree that real estate offers a far superior investment strategy compared to shares.
Here are some of the reasons we believe in real estate:
1. PROPERTY IS FUNDAMENTAL
Property is a necessity. After all, everyone needs somewhere to live.
For this reason, housing will always be in demand particularly with Australia’s strong population growth. The result is that property is more stable and carries less risk over time.
2. PROPERTY RETURNS RESULTS
Over the last two decades, property prices in our combined capital cities have increased in value by a mind blowing 252%.
Melbourne property prices grew 208% between 2002 and 2017.
Sydney property prices grew an impressive 64.4% in the five years to 2018 (source – CoreLogic).
These sorts of impressive growth rates are the envy of the world.
Over the last decade, the ASX200 index of Australian shares, has only recently caught up to where it was before the Global Financial Crisis struck.
There’s no doubt that property has been a better investment over the long-term than shares.
Yet despite all the stories in the news about unaffordable housing, prices have continued to perform strongly over a very long time.
These results speak for themselves. Property continues to outperform shares for most Australian investors.
3. OWNING PROPERTY IS PART OF THE AUSSIE DREAM
In Australia, almost 70% of us either own or are paying off our own home. Recent surveys show a huge number of us are also considering purchasing an investment property over the next few years.
As a tangible commodity, which you can see and touch, property offers a sense of security, comfort and safety.
With property, it is possible to become an expert in a specific sector of the market.
All this means real estate is far less daunting than trying to understand the share market and offers ordinary investors far more control over their investment.
4. INCREASE YOUR PROPERTY’S VALUE
Once you’ve secured the right property, you’re able to add tremendous value with carefully thought-through renovations.
A property with minor flaws, particularly if they are of a cosmetic nature, can offer tremendous opportunities to add value.
Property offers you unparalleled control over your investment that you will never have with shares. Buy buying the right property and adding value to it, you will increase the rate of capital growth, and pocket the additional value you’ve added.
5. YOU CAN LEVERAGE OFF PROPERTY
No other investment asset enables you to leverage +80% of its value, in order to acquire additional assets as a part of your portfolio.
This can all be achieved with relative ease and safety.
While you can also leverage with shares, using shares as security can be very risky because of margin calls. If you’ve borrowed heavily to purchase shares, and the value of your share portfolio drops, the lender may require you to sell the shares at a heavy discount to repay the loan. If the value of the shares is less than what you initially borrowed to buy them, you could be in serious financial difficulties.
Property is therefore a much more secure long-term strategy.
Once you own property, you can leverage off of the growing equity you have in it to buy more assets.
Example:
Imagine Mr. & Mrs. Smith have $100,000 and they have 2 choices, a) Invest in shares with capital growth of 8% pa with no leverage or b) Invest in property with capital growth of 8% pa with 80% leverage.
Which would be better?
The $100,000 could buy
a) $100,000 worth of shares, or
b) $400,000 worth of property
End of year 1 result
a) the shares would be worth $108,000
b) the property would be worth $432,000
End of year 3 result
a) the shares would be worth $125,971
b) the property would be worth $503,885
End of year 5 result
a) the shares would be worth $146,933
b) the property would be worth $587,731
The difference in capital growth is significant. After subtracting the investment home loan of $320,000, the property investment profit is outperforming the shares by over $120,000.
6. PROPERTY VALUES GIVE INVESTORS A SAFETY NET
Residential property is the only investment market not dominated by investors. This results in a floor in prices below which prices don’t fall.
People will always need homes to live in. But people will not always need to own shares. This is the great advantage residential property has over other asset classes.
7. PROPERTY IS MORE TAX EFFECTIVE
With property investments, you will benefit from a range of tax advantages.
As with all investments, you should obtain independent financial advice to ensure your strategy is designed to meet your needs and future financial goals.
How can Worth help you?
The team at Worth Property Investing can help you realise your ambitions with advice on the most advantageous property investing strategies.
If you’re considering investing in property, then it is WORTH doing well!
We can help you find the right property to meet all your financial needs. We use real facts, due diligence and solid research to locate the right investments, and we have the track record to help you succeed.
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