The appeal of property
Lisa Llewellyn, December 2013
'Comfort factor' important for investorsWhen it comes to investing, it appears that many of us still believe firmly in property as a smart venture, as opposed to putting our money into the stock market. But what are the main reasons property is more appealing? The recent Homeloans Home Buyer Barometer has found a key reason investors prefer property over shares is the ‘comfort factor’ provided by bricks and mortar. According to Will Keall, Homeloans’ executive head of marketing, the online survey of 600 consumers shows they are more comfortable putting their money into property. “Residential real estate is generally a good medium to long term investment and is often seen as less volatile than shares,” Keall says. “A good residential investment property can provide an income-producing asset with a long term rental income stream, plus it can represent solid wealth creation through capital growth and, down the track, collateral security for further investment.” Capital growth and rental returns were listed as further reasons for its appeal. “And when it comes to the location of a property, over two thirds consider rental demand,” Keall says. “That can be a good strategy, because these properties will also generally be attractive to other investors and even owner occupiers should you ever decide to sell. “Top of the list, though, is a property that’s close to local amenities and transport to appeal to more tenants.” Longevity is obviously important for many investors. Homeloans’ survey also found that unlike owner occupiers, who on average move home once every seven years, property investors are more likely to hold onto their first investment property for around 12 years.
New year resolutionBuying an investment property in the new year is obviously top of mind for many. Nearly one third of respondents were planning on purchasing an investment property within the next year, and 34 per cent will be buying their first investment property. These findings are clearly visible in the current property market, which is in a state of rapid growth in some areas, with investors in particular looking to increase their portfolios while interest rates are at record lows. “A combination of low rates, the housing market showing signs of life in various cities, and the stockmarket’s volatility means people are being attracted to buying residential property as an investment,” Keall says. There is also growth in older investors using the income from property to fund their retirement, with a generation of people lacking enough super funds coming through looking for alternative ways to secure a comfortable retirement. Other mature investors are entering the property market with the view that the investment can then be passed onto their children. Despite this, younger generations are still making their mark, with a quarter of respondents of the Homeloans survey buying their first investment property between the ages of 18 and 29. Those who have invested in property have an average of 1.6 properties – and when it comes to managing the property, the majority (almost 63 per cent) have a property manager to, whilst over a third prefer to self manage. And in line with the recent keen interest in investing via a self managed super fund, the survey found that just under half of the almost one in five respondents who have an SMSF have invested in property as part of their fund. If you have an investment property or are planning to purchase one soon, it might be of interest to know what other investors prioritise in terms of the type of property they look for:
- When it comes to location, 61 percent prefer a capital city, and 37 percent will invest in a regional city, with the remainder choosing a rural area
- Properties with high rental demand; they are usually close to local transport and amenities
- Most prefer an older existing property to a brand new development, and detached houses for a first investment property are more popular
- One sixth prefer a property close to where they live, so they can drive past it