In The Australian Financial Review a few days ago, it was reported that RENTS could rise between 6% – 12% this year! Nationally our vacancy rates are sitting at 1.66%. All capital cities experienced rental growth averages of 8% in 2007. There is still a critical shortage of housing.
Senior economist at UBS, Adam Carr said building approvals and new house commencements were at about 140,000 and we needed 200,000 to meet underlying requirements. Construction activity had been slow to pick up because of interest rate increases, cost of land, cost of development and slow approval processes.
10% to 20% increases in property prices over the next few years are expected, especially in capital cities. Investors with properties in the city fringe areas of Melbourne that we have recommended will be enjoying increasing equity and minimal vacancy rates. Generation Ys are also tending to rent rather than buy which helps landlords.
According to the Westpac Bank, the inflation adjusted growth for Melbourne was around 4.2% in the last quarter of 2007. Overall Melbourne rental yields are sitting at 3.8%. Construction costs are expected to go up over the next year by about 4.6%.
As we’ve all heard, continued rising prices and falling affordability is making it hard for first home buyers to enter the market. Generation Ys could consider staying at home with parents to keep overheads low and invest in a property instead of buying a home.
Alternatively try not to spend too much on rents so that you can afford to invest or save up for a deposit. Not buying your own home and investing instead is a much cheaper option and you’ll get a nice cheque back from TAX Office too!
I’ve had an increasing number of young investors in their early 20′s successfully investing in Prime Melbourne locations for as little as $250 per week. Compared to some of their friends, slaving away to pay of a $600 a week mortgage, these foreward thinking young investors are finding property ownership easy. They also have the added bonus of using their tax dollars to own appreciating assets, Property!
This is one way to curb spending on toys (Hot up Cars, Xboxes etc.) . Initiating this from young creates the habit of having a forced savings plan, giving them greater financial control and freedom in the future… Wouldn’t you like that for your kids?
Real estate where there is convenience of commute and access to leisure pursuits will always experience growth so long as wealth does, and the growth of wealth in recent years is a real and substantial trend. Our team of experts can help you target top performing investment grade properties and ensure they are suitable for your financial position.
Quick Calculation for homeowners concerned about the rate rises:
If you have a $300,000 mortgage at 8% today, and your rates go up to 8.5%, your weekly payments will increase by approximately $29. Careful management of bills around the home (foxtel, groceries, ph bills etc) can help you find this extra money. If you’re really concerned, you can opt for an interest only loan (if you haven’t already) or even fix your loans for a short period of time for some certainty.
There are loan products in the market that allow you to pay a reduced interest rate for a few years if things are too tight. These products require you to have a certain level of equity in the home to begin with. One can opt to pay, for example, 3.99% interest and the remaining interest normally payable gets capitalised. One should however not be buying a home if fluctuations of a couple of hundreds of dollars a month is going to be a struggle. To find out more about this unique product (Time Out product) give us a call. 1300 788 971.
One final note….if you’re thinking about helping your children get a head start in life, without having the stress of a home loan, speak with one of our friendly Investment Coaches. Your child may be in a position to secure his or her 1st property using the Tax Man & Tenants to pay for over 50% of the property’s cost! Don’t you wish you had this opportunity when you were young?
If your child has been working for 2 years and you’re considering using some of the equity in your home to give them a start, this may be the best future you could give your child. Call 1300 788 971 for a free assessment.
Successful Property Investing
Klear Picture Pty Ltd
Treasha Lim
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