It’s no secret that the real estate market has come under the spotlight lately, with the stories about the Western Sydney property making it into mainstream media. What is creating this sudden interest in real estate and the surge of property prices?
It’s a striking combination of factors that are motivating property investors - and owner occupiers - to buy. Motivators in descending order of importance to “portfolio” investors (who own a median of eight investment properties):
- Increasing property values
- Tax efficiency
- Better returns than deposits
- Low finance rates
- Better returns than stocks
Portfolio investors aren’t the only ones with confidence in the property market. A Household Survey conducted by Digital Finance Analytics reveals the following about casual (those who own one or two properties) investors’ attitudes towards the real estate market.
Property growth: 95% expect an increase in house prices within the next year.
Property purchase: 67% plan to buy within the next year
Finance: 44% will need to borrow more and only 38% will consider using a mortgage broker
Just like the “portfolio” investors, these individuals are motivated by appreciating property values, tax benefits, low finance rates and better returns in both shares and deposits.
Martin North, Principal of Digital Finance Analytics provides keen insight into what recent loan data can reveal about the actions of property investors.
“Interestingly, the mix between investment and owner-occupied loan stocks has remained static over the past decade (this was a surprise as I would have expected to see a shift towards investors, but not so). In March 2012, 32.7% were investment loans, in September 2013, it was 33.1%.”
“There has been quite a rise in the value of interest only loans being written (which APRA does not split out to investment loans) but DFA modelling suggests about 70% are investment loans,” continued North.
As the data shows, property investors are on the move in a big way - boosted by confidence in the markets, access to low finance costs and the added perk of great tax benefits.
Sam Saggers is CEO of Positive Real Estate and Head of the buyers agency which annually negotiates $250 million-plus in property. Sam's advice is sought-after by thousands of investors including many on BRW’s Rich 200 list. Additionally Sam is a published author and has completed over 2000 property deals in the past 15 years plus helped mentor over 2200 Australian investors to real estate success!
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Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
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