Five Property Secrets for Buying a Home in Australia
Buying a home is always one of the most important in a person’s life decision. There are many homes for sale below market cost and the major price adjustment exceeds 30% on average and reaches 60% in some sites due to a significant price depression and this has also reduced the investment risk. The home buyer can now choose to their liking.
There are all kinds of properties for sale in all areas and rates are most varied and affordable.
Five reasons why to get your own place!
Changing economic cycle:
The expected change in economic trend advocated by some analysts indicates that the economy has bottomed out and this would result in greater confidence and, without doubt, an effect called the purchase fever. The cycle is turning around and purchasing a home today is to do it at the lowest point of the crisis prices, so it would start from a point of high appreciation
The attitude of banks has also changed and investing in Treasury Bills or Bonds is no longer a good business for them and they need to go back to loans and mortgages. The boom lows are not coming back and that are now marketed respond to a normalized situation. Experts are of the view that it will be very difficult to see lower rates in property prices because the banks have changed their credit policies towards loans and mortgages.
Investing in property is cheaper than renting it:
It’s cheaper to buy than rent and this is easily seen with only a little bit of elementary mathematics that the amount of interest paid on a mortgage is less than the payout for a rental. It is estimated that today it is necessary to spend an average of about $ 350 per month as interest, an amount well below the average monthly rental payouts. Moreover a home ownership means greater peace of mind for families, who continue to see home ownership as a heritage for old age.
Risk Perception by Wealth Management Companies:
According to AMP which is a 160 year old Australian wealth management company, the value of Australian properties have been appreciating at rates which are comparable to the share market valuations. Statistical analysis of the average growth of equity investment since 1926 has been 11.46%. This was despite a series of world wars, natural disasters, economic crises and recessions.
When the risk to return analysis is made for property investment and equity investment then the former is definitely a safer alternative. Although shares give a slightly higher capital growth the portfolio can have wild swings from +40% in one year to -40% in one week. This wide volatility in valuations is not observed in the property investments and hence this is considered a much safer option.
Advantages in Rating the Investment:
The process of evaluation of a property is very simple and can be done by the average citizen without resorting to specialist knowledge. Many Australian investors have made fortunes without planning to do so. They had simply purchased for living purposes and not with investment in mind. Only after the prices started rising, they went on to become proactive investors in property through the process of leveraging from one to the next.
Risk Perception by Banks
Research in property valuations has become a lot simpler with the advent of online resources which are mostly free or very inexpensive. It is also possible through personal visits or even by attending open houses without any special training or qualification. Banks are willing to lend on valuations margins as low as 5% in the case of financing for properties. In the case of a share portfolio due to the inherent volatility of valuations of a portfolio lenders never exceed the 40% to 50% margin limits.
This greater power of leveraging for a bigger asset increase the capital growth possibilities to a greater extent with an asset which is exposed to lower volatility. For example a bank having two clients having the sane risk rating will give $450,000 (say) for buying a house and only $ 300,000 for a share portfolio financing. Assuming that there is a 10% per annum growth in both investments the investment in property has got $45,000 from capital gain, whereas the share portfolio has registered only $30,000 which is significant considering the fact that both investments are made with borrowed funds.
On top of this the rate of interest is also lower for housing finance and if both investments are squared off at the end of one year the home investment portfolio gains much more.
Live the Aussie Dream!
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