Everything Is Crumbling Down in Australia But Not Property Investment, How?

The past year has seen major shifts in Australia's property markets, but not in our attitudes to property. Buyers may favour different areas or property types over time, and price growth may occasionally stall or even reverse, but surveys show that our faith in bricks and mortar as an investment option remains just as solid as the long-term upward trend in property values. Here are 10 reasons why Australian investors' devotion to property is so unwavering. 1. Property investment is the main game Property is by far the largest asset class in Australia, often making it a key component of any balanced investment portfolio. The nation's combined residential and commercial property market is worth more than $8 trillion, compared to the $2.7 trillion we have saved in superannuation and the $2 trillion invested in the ASX. 2. Property is a real asset Unlike so many of today's intangible investments, property is something we can see, touch and easily understand. No special skills or knowledge are required to appreciate the intrinsic value of property. That's why financial institutions will lend more readily against it than most other investments. 3. Prices are on the rise again after the COVID-19 recession Ahead of definitive data from Australian Bureau of Statistics, the Reserve Bank of Australia (RBA) has predicted that Australian is out of recession after two quarters of negative growth, and probably resumed economic expansion in the September quarter. And property prices are on the rise again for the first time since the start of COVID-19, says CoreLogic, with national home values posting a 0.4% increase in October. Melbourne was the only city where values fell over the month, but it too is expected to rebound strongly in November after coming out of lockdown. 4. It has the government support Federal and state governments keenly appreciate the key role property plays in the Australian economy, so they provide solid support for the market. The $680 million HomeBuilder scheme is the latest example of this, but pro-property policies ranging from high immigration quotas to negative gearing and other tax benefits, first-home buyers grants and the First Home Loan Deposit scheme show governments will always do what is required to ensure a strong property market. 5. The RBA is helping too Interest rates were already at historic lows before COVID-19 hit, and now central banks worldwide will have no choice but to keep interest rates even lower for even longer thanks to the pandemic. By reducing its cash rate to a historic low of 0.1% p.a. in November, the RBA intends to help get people into jobs and reduce the level of problem loans, but this policy will also provide further strong support for property prices. 6. Australians are property-obsessed Australians are the seventh most property-obsessed nation in the world, a global survey by HSBC Bank last year found. This national fixation has historical roots: even as early as 1881, Aussies were world leaders in property investment. HSBC found that we spend an average of 2.5 hours a week focused on property, more than twice the time we spend at the gym (1.08 hours) or speaking to our parents (0.88 hours). 7. Keeping the faith Even in the depths of the pandemic, a survey published by ING Bank in October found one in four Australians believed that now was the right time to make a property investment, and almost half saw property as their strongest investment option. Melbourne was the region that most people hoped to invest in (28%), followed by Sydney (24%), Brisbane (17%), and the rest of New South Wales (16%). 8. Unstable equity markets Equities, the primary investment alternative to property for many investors, have always been far more unpredictable than property prices, with the ASX 200 index regularly moving more in a single day than property values do over a quarter. But 2020 has seen share market volatility reach new heights, and many experts are warning that equities' pandemic-driven rollercoaster ride is far from over. 9. Australia well placed internationally As a stable, prosperous nation with an abundance of natural resources, we are well placed to take advantage of the growth of many nearby emerging economies over the coming years. This has not escaped the attention of foreign investors, who see Australian property as a premium long-term investment, thus providing global support for local prices. 10. So many options There are many different ways to invest in property, each with their own advantages. Direct investment options such as buying a house, unit or vacant land are complemented by more liquid and less management-intensive alternatives such as mortgage or property trusts. Source: Mondaq