It could be easy to be put off at the notion of investing in property in the midst of a global pandemic, an economic recession, and the national unemployment rate approaching double digits. But for those with stable employment and financial positions, and a long-term view of creating wealth and financial security through property investment, there remains many strong reasons to invest right now.
1. Property values in select markets holding strong
Property values in markets with strong fundamentals have been holding strong and have actually increased slightly over the past 3 months according to Corelogic’s quarterly price values report. In particular Adelaide and Canberra demonstrated growth of 0.7 per cent over the quarter. These steady gains are anticipated to continue in selected markets.
2. Residential real estate historically strong
Terry Ryder, Chief Property Researcher of Hotspotting recently stated “In Australia, history teaches us during turbulent economic times people turn to residential real estate as a beacon of safety and solidarity”. Research shows that in the period following almost every major pandemic or economic downturn, a period of strong property growth follows.
3. Historical low interest rates
Lenders are offering historical low interest rates meaning it has never been cheaper to borrow money and easier on your cash flow to hold a property
4. Unprecedented government stimulus package
The government has invested historical stimulus package spending to support the Australian economy. To put this into perspective, the GFC stimulus was $2,600 per person (in today’s dollars), whereas the COVID stimulus is currently $7,600 per person and could increase further. This is almost 3 times higher than the GFC.
5. Decreasing property supply
The supply of properties available has been decreasing in most markets meaning there are less properties for people to buy which puts upward pressure on property values. This is the trend for both properties listed for sale and rent as well as new building commencements coming through the pipeline indicating a future housing shortage in certain markets will be set to continue for a few years yet.
6. Lost opportunity cost
Not investing in residential property markets with strong fundamentals could result in lost opportunity cost in capital growth and/or positive cash flow. Leaving your savings in a bank means lazy money, while in the current climate there is a higher level of volatility in shares, business investment, commercial real estate, and cryptocurrency
Whilst people may be concerned about what will happen to the property markets once the Government stimulus dries up, the fact remains that property transactions are our federal, state, and local governments “cash cows” and they have major financial incentives to see the industry and property transactions thrive.
Author: Simon Salotti, Property Research & Acquisitions Manager, inSynergy
Alongside Chief Advisor Richard Sheppard, Simon spends his days nose-deep in data, researching macro and micro property investment indicators to forecast future high-performance markets that will deliver maximum capital growth and cash flow for inSynergy’s clients.