Property investment opportunities generally come in waves. Prices were out of reach in ’03 and ’04, high interest rates and low rental returns stopped us in ’05 and ’06 and the world economy had us all worried in ’07 and ’08.
As a result, Australia is today producing far too few houses and apartments to accommodate our population growth - resulting in the panic we’ve all seen for affordable rental stock over the past year or two.
A balanced market generally has around a 3% vacancy rate - enabling an orderly process of moving out, freshening up, advertising and letting and the new tenant moving in.
But with current vacancy rates as low as 1.2% as at March 20091 and the alarming ongoing shortfall in housing construction in most markets, the available stock position is likely to only get worse. For the investor, this may result in rising rents, better investment affordability and rising prices - your reward for the exercise.
With today’s moderate interest rates, and significantly higher rental returns, an average mortgaged $400,000 property investment could cost as little as $602 per week to purchase- compared to over $2503 per week only a year ago. Remember that the tenant and the Tax Department can help with up to 85% of the ongoing investment costs.4
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But obviously the key interest is in making money through the investment property’s value increasing.
This is where things are shaping up really well. Price growth is related to 3 things- demand exceeding supply, investment affordability, and positive market sentiment.
We know that the first two things are generally under control- and that the best time for the investor to take a position is before the majority of the market wakes up. That could be very soon.
Remember, in 1980, the Sydney medium house price was just $68,000. Today it is approximately $547,0005. Most markets have had this type of growth rate over time, just at different price points. If property prices grow at a similar rate in the future, this is where property investors could potentially gain their true financial security. 6
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Being prepared and ahead of the pack is the first step in getting yourself into the market - so that you are ready to move as soon as you feel confident.
The key thing is to understand your funding capacity, comfortable investment price range and likely after tax costs. This is where your local RAMS Home Loan Specialist can help - to explain exactly how funding works and give you a good understanding of the investment environment.7
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The RAMS IO (Interest Only) Maximiser Home Loan may be the perfect loan to get your investment portfolio started, with a low variable interest rate plus up to 10 years interest only repayments to help you minimise and control your outgoings.
Why not call in now, and explore your investment position?
Call a RAMS Home Loan Consultant today on 13RAMS, that 137267.
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