The Australian real estate market continues to show its resilience amid the pandemic, and after soaring sales in Q4 of 2020, things are looking up for property buyers and investors in 2021.
Several factors are contributing to the rising sales. First, mortgage interest rates are at an all-time low. When prices fell 10% in some areas last year, people who had been saving for a deposit realised that it was cheaper to apply for a mortgage than to rent.
The economy is also on track to recovery with the spread of the virus contained allowing more businesses to reopen.
Finally, cashed-up households are leading the improvement of the economy. Work-from-home arrangements and travel bans prevented people from spending on vacations in 2020. This, coupled with the government stimulus package, has increased savings for many. And they’re looking to multiply those funds by investing in a property.
If there’s one thing to learn from the events of last year, it’s that financial security is vital when life gets uncertain. That’s why it’s important to secure your future by finding ways to diversify your earnings and grow your savings.
With how the Australian property market has defied predictions, its sustainability is looking positive. One way you can build your wealth is through passive earnings from a real estate investment.
Like any financial decision, it’s important to research thoroughly and buy what’s best for you. In this blog, we’ll take a closer look at why now is the right time to invest in a property in Australia and how to do it to ensure you maximise returns and achieve financial independence.
Why Australian property is strong
The local property market is experiencing this new boom thanks to first-time homebuyers. Reports from CoreLogic show housing values across Australia rose 2.3% in Q4 last year. The median house price in Sydney has risen 4.8%, while certain areas in Melbourne, such as the Morning Peninsula (3.4%) and Maribyrnong (1.8%) are also up.
But even with less properties on the market, those that are listed are getting snatched up faster than ever.
What’s known as an “escape from the city” phenomenon is increasing prices in regional areas as well. Being in lockdown caused many people to rethink their living conditions, and now there’s renewed interest in spacious houses within suburban areas.
Economists predict regional towns within a two-hour radius of Sydney and Melbourne could expect house price growth of up to 10%. Areas like Kwinana (8.7%), Burnside (7.0%), and Scenic Rim in Brisbane (6.5%) are already experiencing bounce backs in early 2021.
Consumer confidence remains high
The latest MeBank Quarterly Property Sentiment Report shows positive property sentiment increased 11% in Q1 2021 compared to Q4 2020. Of those surveyed, 61% plan to buy a property in 2021.
One big factor in this growth in sentiment is that first-time buyer incentives have made investing an attractive option. The HomeBuilder Grant provides $25,000 to eligible first home buyers and other owner-occupiers wanting to build or renovate a home. The grant has also recently been extended by the local government to March 31, 2021.
According to Gareth Aird of Commonwealth Bank, 2021 is looking positive for the economy as long as there are no more widespread lockdowns. Despite having been through a recession, the federal government stimulus has kept a lot of money sitting around in many families. This gives them cash that they can spend immediately, which in turn will help speed up the recovery of the economy.
Additionally, COVID vaccines have begun to rollout in the country which means that more industries can reopen. “By the time we get to the second half of next year, COVID shouldn’t be an issue for the domestic economy,” Aird says.
Property investment is better with experience
Australian property has proven its ability to weather even the darkest of storms, and now it’s leading Australia’s recovery from recession.
Property has always been known as a wise, secure option available for first-time investors. But because there’s a higher learning curve, it’s not always the easiest. That’s why it’s best to engage in this kind of a commitment with the help of experts.
We developed LE.A.P. – a roadmap that has helped more than 400 people secure their financial future – to give guidance to beginners in real estate investment follow a six-step strategy. The L.E.A.P. roadmap helps provide knowledge to make smart decisions when buying and managing property.
Here’s how it works:
L – Leverage
Leverage is a strategy of using borrowed money to potentially increase the returns of an investment. Leveraging means you can deploy larger amounts of capital to reduce your debt fast. That way, you’ll also be able to enjoy your investment sooner and avoid paying a massive amount of interest.
E – Equity
Equity is the total value of your assets minus the debt you owe on them. Any amount that you’ve already paid back on a loan or a debt increases your equity. When making an investment, you can use your equity as a security with banks when you’re borrowing to make big purchases.
E – Earnings
Earnings is your income after tax deductions. Most people depend on their jobs to earn, and while it pays for your living necessities and daily expenses, only a small amount is left for you to actually invest. But, through disciplined saving, you can grow moderate amounts into large investment portfolios that will allow you to purchase a source of passive income down the road.
E – Emotions
Controlling emotions is critical when it comes to investing and building wealth. When your own hard-earned money is on the line, emotions can often dictate investment decisions and result in losses (and the more than likely recovery in that investment) that could have been avoided.
A – Accounting
Knowledge of accounting helps investors calculate profitability, determine an asset’s value, and understand the current state of their investment. A strong grasp of financial accounting will help avoid problems down the line, because you’ll be able to identify key risk areas that can point to potential losses.
P – Portfolio Plan
Building a portfolio plan is essential in ensuring that you are making smart investment decisions with minimal risks. Essentially, the plan will be your guide for making day-to-day decisions on investing for the long term.
During a global crisis like the COVID pandemic, it’s essential to take additional steps to ensure your financial stability. And positives in the property market indicate that now is the best time to invest.
If you want to know how to start your journey to financial success with the right guidance, contact us today.