Real Estate and Property Development, the Primary Investment Opportunities
There are many investment opportunities available in Australia; however, real estate and property development are the primary ones. Investing in Australian property is a low-risk, profitable option—which makes it attractive to many investors.
Australia is an outstanding country concerning lifestyle and climate, and it offers many economic and political advantages for international property investors. There are profitable opportunities for city investment as well as in other current hotspots. The numerous benefits of investing in Australia’s real estate and property development sectors include:
Above Average Return on Investments
Australian property has enjoyed consistent growth with an average annual rate of 7% per annum over the last 40 years. The doubling in value of properties every 7 to 10 years, compounded with their gearing leverage, means a phenomenal return on investment (ROI). Australia has a high capital return of around 30% or more in key investment areas such as Melbourne, Sydney and the west coast.
Consistent Investment Performance
Australia’s GDP growth is expected to continue at a steady 2.5% to 3% due to its being one of the most diverse, advanced economies in the world. In addition, Australia has regulated investment markets that are transparent and low risk. These factors make Australia an excellent investment location.
Melbourne’s population is averaging growth of 1.1% p.a. and is growing faster than Sydney (41,200 compared to 29,800). The number of households is forecast to increase by 20,975 in 2021. In the next decade, the average household size in Melbourne will fall from 2.6 to 2.25 persons.
Strong Economic Growth
Australia’s GDP is on a par with most European countries. However, its economic growth rates are higher than most member countries of the Organisation of Economic Co-operation and Development (OECD), including the United States and the United Kingdom. Australia also has a favourable sterling exchange rate (typically 1 GBP = 2.3 AU$), which allows you to buy more with your money in Australia.
Strong Future Demand
The increasing population and declining household size will generate demand for an additional 620,000 households in Melbourne before 2030. This expanding demand will continue to push property prices higher. The preference for the majority of the population is to move closer to the central infrastructure of significant population centres or to be nearer to the beach. Demand for rental properties is high, with vacancies currently spiralling down to 1%.
Australian Tax Law Offers Generous Tax Benefits to Property Investors
Generous tax benefits are available for investors via negative gearing in Australia. Negative gearing is a form of financial leverage whereby an investor borrows money to acquire an income-producing asset. The gross income generated by the investment is less than the cost of owning and managing it, including depreciation and the interest charged on loan. This loss is deductible against the investor’s other taxable income.
An investor typically enters into a negatively geared investment expecting the tax benefits or the capital gain (when the investment is ultimately sold) to exceed the accumulated losses of holding it. The sale of investment properties is subject to capital gains tax (CGT); however, local investors are eligible to reduce their gain by 50% if they have held the property for more than 12 months.
Ability to Leverage
Leveraging to invest creates higher potential rates of return. Lenders provide finance for up to 100% of a property’s value, which is more than they are generally prepared to provide for other asset classes. Many Australian properties are viewed as low-risk investments with promising capital growth potential.
Properties Won’t Vanish
The most significant difference between property and shares over the last 78 years is that many of the properties upon which capital gain is calculated still exist today. On the other hand, many of the companies upon which the share-based returns were calculated on have vanished. Unlike shares, a property is a tangible asset that will not disappear due to poor management or obsolescence.
Australia is stable both economically and politically, making it a peaceful and secure lifestyle option.
Easy to Recruit Talented Professionals
Australia’s lifestyle is an easy sell when recruiting and retaining talented professionals. Over half of Victoria’s population ages 15–64 has completed a post-secondary qualification, while over one quarter has a university degree. Australia is ranked highly by expats as a destination for working abroad and as having talented, motivated and skilled professionals.
Australia truly has earned a world-class ranking in healthcare, receiving perfect scores in the EIU Index every year. Public and private hospital systems, community health services, ambulance, and dental services all provide high-quality healthcare.
Clean, Green Parks and Fresh Air
Australia is known for its enormous land size, amazing fresh air, beaches, waterfalls, magnificent trees, manicured lawns and abundant wildlife in calm and tranquil green parks.
Quality Schools and University Education
Australia is home to some of the best schools and universities in the world. It has a first-class educational system that provides both academic and practical experiences. The majority of cities in Australia have the luxury of an extensive range of affordable educational institutions within walking distance.