Real estate remains a popular portfolio addition for many Australians, with recent ING Direct figures showing one-fifth of people in the country own an investment property.
This is despite the latest CoreLogic Home Value Index showing that property prices jumped 7.5 per cent in the year to October 2016, meaning it is increasingly cost-prohibitive to enter the market.
Here are some of the reasons why people are still attracted to real estate in Australia. However, if you'd like to learn more about property purchases and the relevant tax arrangements, contact an experienced accountant.
1. Record-low interest rates
The Reserve Bank of Australia decided to maintain the cash rate at the current level of 1.5 per cent on 6 December – an all-time low. Reduced interest rates mean investors often enjoy a drop in monthly mortgage payments, making rental properties more lucrative, particularly when rents remain stable or rise.
2. Banks lending to investors
Australian Bureau of Statistics figures revealed the number and value of home loans for investment properties climbed between September and October this year. While owner-occupier finance slipped month on month, the value of investor loans jumped 0.7 per cent, suggesting banks are still willing to lend to this category of borrowers.
3. Properties surprisingly affordable
House prices may be rising, but the Real Estate Institute of Australia and Adelaide Bank claimed affordability is close to seven-year lows. The proportion of family income required to pay the average monthly mortgage payment was 29.5 per cent in the September quarter, just 0.1 percentage point higher than in the three months to June, which was the lowest since 2009.
Capital city property prices have risen 42 per cent over the last 4.5 years.
4. Sydney and Melbourne continue to impress
The CoreLogic Home Value Index found that capital city property prices have risen 42 per cent over the last 4.5 years, with Sydney and Melbourne leading the pack. During that time, values have increased 65.9 and 48.6 per cent respectively in the two cities, with Brisbane a distant third on 19 per cent.
5. Demand on the rise
Despite ongoing price increases, Australians are still eager to take a step up the housing ladder. The REA Group Property Demand Index jumped 35.1 per cent between November 2015 and November 2016, with both houses and apartments increasingly attractive to buyers.
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