31 December 2019

Property is Still Australia’s Leading Investment Class

Pat Carbone
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The S&P 500 index has clocked an average return of over 10% since its inception in 1928. The fund is such an excellent performer that Warren Buffet famously declared that when he dies, he’ll leave 90% of his estate in indexed funds just like it.

As impressive as the S&P 500 may be, there is one Australian investment class that has consistently outperformed it over the last five years. We’re talking about property.

Australian Property’s Stellar Ten Year Returns

There are countless ways to invest in property but Australian Real Estate Investment Trusts (REITs) might just be the most lucrative and accessible. These REITs are portfolios of property listed on the Australian Stock Exchange that include both commercial and residential assets.

Over the last decade they’ve returned an average of 14% per annum. This shows that property is still the best performing investment class in the country by a decent margin. While REITs are a fantastic means of gaining access to the property market, they can’t match the returns of a savvy real estate investor who does it themselves.

Growing Your Wealth With Property

Despite the potential for massive returns, property investment is by no means a get-rich quick scheme. You need a clear goal, a smart strategy, expert help and a strong work ethic if you want to succeed as an investor.

Here’s some advice from Homes.com.au experts on how you can start a thriving property portfolio:

  • Get expert advice – It’s always best to approach a registered financial advisor who specialises in property before making any investment deisions. This will help you set goals, fill the gaps in your knowledge and develop a strategy.
  • Do your homework – Always research the market in the area you’re considering and evaluate trends and previous results in the neighbourhood. Key growth indicators to look for include strong capital growth and/or a strong rental return depending on your strategy.
  • Buy carefully, buy well – Before you purchase you need to be sure that you can comfortably service your mortgage, and that the numbers add up in terms of putting you ahead – not burying you in costs. Make sure you know what you’re getting into and that the property you purchase fits into the strategy you have defined.
  • Trust your head over your heart – Property tends to be an emotional transaction, and it’s easy to be overwhelmed by the desire to own an ostensibly high quality property. Instead, it’s always best to keep a level head, look at properties from a logical standpoint, and consider their potential as an investment only. Do not look at every property as the key to unlocking the lifestyle you dream of. Instead, adopt an investors mindset and employ a more aggressive attitude when assessing properties.
  • Secure a well-structured home loan – Locking in a low interest rate with the help of a mortgage broker across terms that suit you – not cripple you – will go a long way to ensuring you achieve the best returns possible.
  • Plan, plan, plan and then plan some more – Don’t just structure strategy around a single property purchase or a short time frame. If you are looking to develop a portfolio, you must adopt a steppingstone approach to growing the value in your property investments. Ideally, formulate a plan that extends to your retirement then assess it every year with the help of an expert advisor.

Despite the rollercoaster of Australian property conditions, real estate is still a red hot investment and if you know what you’re doing it’s a great way to build your wealth. When you’re ready to start property hunting and creating a formidable portfolio, check out the opportunities on Homes.com.au.

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