Investment – Why do it?

Direct investment into residential property is a popular form of investment.  Financial institutes will often lend a higher proportion of funds against the property value over other asset classes. It’s bricks and mortar, not just numbers on a screen. It’s also considered one of the more solid, less volatile forms of investment. Investors like property for:

• Potential capital growth (increase in value)
• Ongoing rental return
• Tax benefits.

Lenders consider the potential rental income you’ll get from the property when calculating how much you can borrow.

Have you got reasonable equity in your existing home? Most lenders will accept equity in an existing property as a deposit for the investment property.

An investment property can be an ideal way to enter the property market. Whilst you won’t be able to access First homebuyer’s government grants applicable to buying a home you’re going to live in, you won’t have to wait until you can afford somewhere that suits your personal accommodation needs. This option is attractive to young people living with parents or fly in-fly out workers, who are not fully utilising the home due to employment conditions.

Not only is there potential capital growth to look forward to, but you’ll also have income from the moment the home is rented.

Property Investment in the news....

•  20th April -  Perth Now
• 20th April - The Adviser (industry news for mortgage and finance brokers)
• 25th April - OPP
• 5th May - The West Australian
• 11th May - Perth Now
• 11th June - Perth Now

Why Now? Why Perth?

Affordability

Affordability is improving in Western Austalia and in Perth.  This means that now is a great time to get into the property market. Click on the graph below to see a full size version

Interest rates

Interest rates are at historical lows meaning the most affordable loans are available right now.

Rental Vacancy Rates

Rental vacancy rates are at historical lows in Perth – 1.7% in the quarter to May 2012 (visit REIWA to get the latest data). A vacancy rate of around 3% or above is considered healthy and leaves a margin for properties out of the market (ie for repairs etc). So there is an urgent requirement for more rentals.

Rental Demand

The median rent in Perth has moved from $380 this time last year to $420 in April 2012 - the lack of available rental properties is pushing this up as what’s available cannot meet what is currently needed - visit REIWA to get the latest data.

Population Growth

Due to the explosion of mining and oil and gas projects in WA, we are experiencing a net population gain. Click on the first graph on the right to see latest data from ABS | Housing Industry Association (HIA).

Housing Shortage

Over the past few years post GFC, the number of new properties being constructed has fallen significantly below demand, meaning that there is now a considerable shortage of property available in Perth due to our rapidly increasing population. The second graph on the right, from ABS | HIA shows that underlying demand for housing is outstripping supply (completions = completed houses)

Advantages of building new

Building in new developments:

Building a new property in the latest design is attractive to purchasers and many new growth areas have solid rental demand as purchasers prefer to rent in the area they are building in, to secure local schools and engage in community activities.

Control:

As a property investor, you have total control over the investment.

Tax benefits:

New homes benefit from excellent tax deductable building depreciation allowances and a number of other costs associated with ownership of an investment property are tax deductable.

Turnkey products in new growth areas:

Turnkey investment properties eliminate delays and prevent budget blowouts because you don't need to fit it out yourself before finding a tenant. Most professional property investors now choose turnkey products as the most time and cost effective option.

The house is finished to a level where as soon as you have the key, its ready for renting (i.e. all floor coverings, window treatments, etc. are already fitted). 

Early this year, LWP launched a new lifestyle product, Urbano. LWP recognised that there is a need for compact properties, co-located with urban facilities such as delis, coffee shops, recreation space etc. Yes this is available in inner city areas, but it is not affordable for the many people who would like to access this lifestyle. These Urbano properties are also a great investor product – a turnkey product that can be built by a quality builder in a growth area – and ready to rent out at completion. Urbano is available at these projects: