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Property Investment Store




Are you looking to build a reliable income stream to replace your job (and perhaps get your kids’ financial game rolling on a good start)? Rental properties can be a suitable investment.

But what about the falling property prices and rising interest rates? This question leaves property investors with a bundle of nerves.

Presently, some new rental property investors are jittering while potential investors are asking: is owning rental property a viable investment at this point?

We acknowledge the rising global inflation and its effect on practically all sectors of the Australian economy. Yet, if you ask me when to buy an investment property, I think it’s best NOW.

To clear your doubts, let’s run over five reasons why I think now is your best time to invest in a rental property in Australia.

  1. Property Rates are falling. 

The Australian property market has dropped consistently for the fourth month now. The price drop in rental properties is linked to the decreasing demand for homes; primarily occasioned by the rising interest rates.

In August, property rates hit an all-time low since 1983, with homes value falling as low as 1.6 per cent in August; according to Core logic’s Home Value Index Report.

Properties in key cities like Sydney had always seen high rates. But the decades-long narrative changed in August. The city’s property rate dropped by three per cent, and unit prices dived by 2.1%.

While a few doomsday analyses have predicted a gloomy outcome from this drop, from the long-term view, we have always advised, a simple-but-smart investment logic, to buy properties on dips – that is when the price is momentarily weak.

Thinking of owning rental property? It’s smart to exploit the fall, as the prices may skyrocket soon.

  1. Interest Rates Will Normalise Soon 

In response to the rising inflation – which isn’t an Australian thing; but a global concern – the Reserve Bank of Australia (RBA) has increased the nation’s interest rates for the fifth time. Even, October may witness the sixth.

This looks like one of those rare cases where inflation can be a perk to property investors. For instance, while inflation triggers high rental rates, your interest and principal mortgage payments stay the same. This way, the effect of high-interest rates, including rental property expenses, is offset by equally-rising rental income.

Remember that interest rate increases usually come with some complimentary positives, including an increase in wages, reduced unemployment rate, a flourishing labour market, job creation, and an increase in rents.

As we always remind our clients – don’t let the rising investment property expenses scare you; the rents will go up too.

Besides, sceptical investors’ tension eased a bit with RBA’s Lowe Philips’ recent announcement about the interest rates returning to normal after a successive five-time hike.

So, either way – interest rates up or down – property investors may have no better time to buy rental properties.

  1. Immigrants are returning – Post-COVID border restrictions

As the COVID border restrictions ease globally, Australia has again opened its doors to foreigners looking to settle for education, tourism, investment, and whatnot.

The lessons and after-effects of the COVID pandemic will see migrants from Asia, Africa and other third-world destinations seeking (or returning) to more stable economies like the UK and Australia.

Then, here comes the big 2032 Olympic Games billed to hold in Brisbane.

In retrospect, The Sydney 2000 Olympic Games doubled the median house prices in Sydney between the years 1998 and 2003. As Brisbane plans to host the world in 2032, you can bet the massive infrastructure investment about to hit Brisbane in the lead-up to and much after the 2032 games.

With these indices and a professional guide, property investors will be grateful they keyed right in time.

  1. Increasing Supply Shortage

The 1% residential vacancy in big cities has shot up prices by 5 to 10 per cent annually. This all-time-low vacancy rate reassures investors of more regular rental revenue than in past years.

Persistent shortage in the supply of houses has left prices of standalone homes skyrocketing, reaching about twice apartment rates. With this sky-high rate, many buyers opt for units and unit rent lifts in significant regions like Melbourne and Sydney, particularly among immigrants.

While Sydney and Melbourne have given property investors the most significant gains, homeowners in smaller regions like Adelaide, Brisbane and Perth have benefited from interstate migration also. As with any commodity, increasing demand matches with limited supply ALWAYS results in increasing property rates and rents.

With the current demand-up-supply-down situation, these rental prices may not decline anytime soon. From current indices, rental rates for traditional homes may hit as high as $10,000 before 2022 wraps.

SQM Research reported national residential vacancy stands at 3.1% in August, a significant drop from the 7.8% recorded a year ago.

So while rental property supply is at a disturbing low, only a few investors are filling up the gap, leaving excellent investment opportunities for potential investors.

  1. Steady Income Flow

Investment in positive gearing properties has led many homeowners to financial stability. A positively geared property is one whose recurring revenue exceeds matching investment property expenses, generating recurring profit. Such predictable and consistent income leaves property investors at relatively low risk.

With income surpassing rental property expenses, part of the surplus revenue offsets home loan repayment increase, hike in interest rates, and other unexpected costs – and still leaves excess.

If you wish, you could use the additional income from your positively geared property to settle your loan faster or spread it out to other sustainable investments – that could also mean acquiring more properties.

With a sound investment plan, owning rental property can be the best financial decision to get ahead financially and have your kids started on a healthy financial note. You may soon question your need for a regular 9-5 and retire into a viable, steady, and long-term income stream.

When to Buy Investment Property – Any Crash in Sight? 

While some speculations about a market crash have left new investors with bated breath, seasoned, experienced investors are not losing sleep about owning rental property. 

A couple of years back, in 2020, the COVID pandemic inspired several such predictions, one of which was the forecasted 3% to 32% fall in house prices. Funnily, it turned out the reverse—two years into the virus, property rates spiked by over 30%.

For the inflation stories, they didn’t start today. Between 1982 and 1987, Australia experienced hard-biting inflation, with property prices shooting up by 150% in Melbourne and Sydney, while rents reached 130%. 

Besides, inflation, interest rates, and whatnot are irregular shifts which have but slight short-term effects. Property investors should better focus on the fundamental variables that collectively determine the long-term viability of property – including location, type of property, etc.

The likelihood of the 2009-like house prices crash is almost unrealistic. Servicing of montages is pretty stable as the country boasts rising incomes and all-time low unemployment.

Mortgage lending in Australia is well serviced with a 3 per cent boost in serviceability assessment.

Experts think the barely 2% fall of the real estate growth isn’t a big worry to home buyers compared to the over 25% growth it had gained. The recession, and the government land use act, among other related policies, are mainly responsible for the slight growth shift, which is tipped to stabilise soon.

But even with the rising interest rates –which is on their way down – potential investors will most likely find a good home at a relatively lower price, making the mortgage repayments more favourable.

What’s more?

Invest In A Co-Living Property Solution 

With income-producing Strategies like the Property Investment Store’s Co-Living, Property Solution offers investors a way around handling interest rate increases in the short term without going backwards. 

Co-living properties are an innovative housing solution that offers like-minds tenants secured, well-furnished and affordable rooms. These houses are tastefully designed with tenants’ comfort and privacy in mind, featuring air-conditioned rooms, suitable parking spaces, and each tenant to their private lockable space with bathrooms, linen cupboard and pantry.

These homes are thoughtfully built, designed and located – all these with investors in mind. Besides, as deemed fit, you can easily convert the properties into conventional homes in the future.

These properties promise over double the standard returns from conventional investment properties. We employ strategies to ensure your returns hit a gross minimum of 6.5% to 8% per annum.

That said; now let’s roll back to the key points on why there may be no better time than now to owning rental property investment in Australia.

Key Points 

To refresh your minds, here are key reasons why owning rental property may never feel as profitable as it is now:

  • The falling rates buy the dip.
  • RBA Governor Lowe says interest rates will normalise soon
  • COVID 19 restrictions have eased; immigrants are trooping in; they’ll need homes
  • General supply shortages and a resultant higher prices for rent and buy prices
  • Positive geared property that puts cash in your pocket each week. Viable dependable long-term investments that can help you retire into financial freedom.

Looking for a more strategic income-generating property investment idea?

Consider our unique CO-Living Property Solution. This concept allows you to take care of any additional interest rates in the short term without going backwards.

Contact our customer-friendly experts to discuss this and other tailored solutions for your property investment needs.