Profitability of Property

Corelogic RP data is at it again releasing the latest ‘pain and gain report’ for Australia, and you might be able to tell by the name the report outlines total loses and profits of property in the last quarter of trade.

It is a very interesting report which reiterates that what a solid investment property is. The results show that the overwhelming majority of owners that sold made a profit. I would like to compare these details of those that invested in shares and see how many people made a profit vs how many made a loss. I’ll bet a 1000 to 1 that the results are not even close.

The results showed that “one third (31.9%) of homes resold for more than double their previous purchase price. Across those homes which resold at a profit, the total value of this profit was recorded at $12.9 billion with the average gross profit recorded at $239,855. The data also highlights the fact that ownership of property, whether for investment or owner occupier purposes, should be seen as a long-term investment. Across the country, those homes that resold at a loss had an average length of ownership of 6.2 years. Across all sales recording a gross profit the average length of ownership was recorded at 10.2 years, while homes which sold for more than double their previous purchase price were owned for an average of 17.5 years”

In regards to South East QLD: Just over the last quarter of march 2016, 95.7% of houses across the great Brisbane area have been sold at a profit of purchase price, units have seen 85.9% sold at a profit to original price. The Gold Coast has a lossmaking resale percent of just 13% meaning out of 100 houses sold in the March quarter 87 were sold at a profit to original purchase price. The median profit on the Gold Coast was $97,000 over this time with the median profit in the Brisbane area reaching $152,000.

There are a couple of take homes from these findings:

  1. Property is a long term investment
  2. You should on average double your money at least every 17 years
  3. Focus on growth but try an bring the cost of ownership down (cash outflows) so that you are able to hold multiple properties for the long term

First Home Buyer but no deposit? We can help!

If you are a First Home Buyer looking to get into the market but do not have a deposit then we may be able help you.

Did you know that the government has just increased the “First Home Builders Grant” from $15,000 to $20,000 from the 1st of July 2016? Although that may not be enough for you to enter the market, if you combine that with a cash builders rebate, it may just be enough to get you into your new home.

So, if you are tired of paying rent, have a job and want to live in your very own brand new home, then please contact us on 1300 148 178 or and we may be able to help you.

Investment lending requirements eases

The investment lending landscape appears to be softening. Not long ago APRA starting clamping down on banks and insisting that they reduce the growth in their lending to investors. Westpac was the first to reduce their LVRs to 80% allowed to investors to the detriment of many borrowers.

After losing market share and bringing their investment lending loan book within acceptable parameters, Westpac have now eased the policy on LVRs. They are now allowing lending up to 90% for investors. This is good news for property investors that have assets tied up with either Westpac or St. George which they own.

Brisbane continues to impress investors

Brisbane continues to lead the country for strong capital growth rates according to the latest findings from the quarterly PPA update.

Brisbane’s constant population growth and low unemployment rate are factors that continue to make the city Australia’s number one place to invest. Residential population growth in Brisbane over the past decade or so has grown by around 27%. That’s approximately 400,000 new residents in the CBD with this number expected to double over the next 20 years. That will take the city’s population from 1.7m up to almost 3m people by 2035.

The strong population growth coupled with great affordability makes it excellent value for investors. House prices rose by a little as 15% from 2008 to 2015 while income over the same period grew 31%. Couple this with falling interest rates and Brisbane’s residential stock remains extremely inexpensive. Its affordability index is currently sitting at a very strong 27%.

If you are thinking about getting into this market, it would be advisable to get in before the market rises too much as per Sydney and Melbourne.

Is your equity working for you?

One of the simplest, safest and best strategies to build a property portfolio over the longer term is to buy new and hold. But many people buy and hold and don’t grow their portfolio because they are unaware that they are able to. Many are not utilizing the equity growth in the current properties because they are not up to date with current values.

This is a regular occurrence and many investors are missing out on achieving their goals early because they have not accessed this unused equity.

If you are serious about property investment and intend to build a portfolio that you can live off then there are some simple rules you need to follow:

  1. Keep up to date with values.
  2. If you think there is equity available then check! Get the property revalued.
  3.  If you have equity, then use it. Always be trying to expand if possible.
  4. Make sure you are on the most efficient loan structure so that you are optimizing your LVRs

Remember, it is only through owning multiple properties that you will ever be financially free. It is the compound growth and rents off these multiples that eventually allows you to live off your assets.