Property investors could be in for a promising 12 to 24 months, despite recent data confirming a decline in returns on investment.
Last week’s data, released by CommSec, revealed that returns on ASX shares increased 11.4% in the 2018/19 financial year, a number the group said is “a smidgen below record highs”. Additionally, government bonds saw a 10.4% increase in investment returns.
Meanwhile, the returns on property investment over the same period declined 3.4%.
On the other hand, it’s a most recent blow for property investors, who CoreLogic now says account for 26% of total property market activity. This is down from a 43% high.
Regardless, the industry’s outlook remains positive due to favourable market prices and conditions.
“The reality is, people will always be attracted to investing in property, as they feel they are putting their money into a tangible asset. The outlook for property investment is bright,” said Susan Mitchell, Mortgage Choice CEO.
According to Mitchell, a “number of headwinds” placed downward pressure on the property market before the federal election. This, in turn, contributed to the CommSec figures. However, the outlook is more positive than the numbers suggest.
“It’s a good time to consider investing in property. Investors now have the confidence that tax reforms, negative gearing and CGT are no longer a threat and national dwelling values appear to be bottoming out, which means there are good deals to be had for buyers,” Mitchell added.
The most recent monthly banking statistics from APRA indicate the trickle-down impact of the Government’s election win has yet to commence and investor loans have fallen again.
Director of Mint Equity, Zac Peteh, agreed that current market conditions make for a positive outlook over the next 12 to 24 months.
“A lot of investors see shares as part of a diversification strategy, not a replacement for property,” said Peteh.
“Performance of the property market in the next 12 to 24 months is likely to be positive for investors if buying or holding, given we are at a low point in values. Those investors who can secure finance now while buyer demand is relatively low, stand to benefit from property values improving in the coming years.
“The capital growth is the driving factor for investors choosing property over shares. We are already seeing an uplift in investor activity since the election and given mortgage brokers support almost 60% of all loans being sourced, the trend is positive for our industry,” he added.
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