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More than one in five first time buyers are buying an investment property
Topic Started: 21 Aug 2014, 02:52 PM (2,640 Views)
peter fraser
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Investment properties popular with first-time buyers
August 19 2014
By Jessica Darnbrough
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Property investment is proving increasingly popular with Australians, with new research showing a jump in the number of people opting to buy an investment property before an owner-occupied dwelling.

According to Mortgage Choice's latest First Time Investor Survey, more than one in every five Australians (21.1 per cent) said their first property purchase was an investment property.

By comparison, in 2009, just 12.9 per cent of first-time investors said their investment property was their first dwelling purchase.

So what is the lure - why are we seeing more first-time buyers purchasing investment properties?

Looking at the survey data, it seems the majority of buyers (29.4 per cent) who purchased an investment property first made this decision because it allows them to "look out for their financial future".

A further 26.7 per cent said they had purchased an investment property in a bid to "get their foot onto the property ladder", while 19 per cent said purchasing an investment property enabled them to "buy where they could afford and still live where they want to".

These statistics show Australians are taking a mature and sensible attitude towards property investment.

First-time buyers understand the value and benefits associated with investing in property and, as such, aren't prepared to let surging property values stop them from jumping onto the property ladder.

According to recent research conducted by RP Data, the residential property market is Australia's single largest and most valuable asset class, with a total estimated value of $5.2 trillion.

Because of this, it's fair to assume that investing in property is a fairly safe bet - investors can rest assured they're investing in the country's single biggest asset class.

Of course, this isn't the only reason why an increasing number of Australians are putting their money into the property market.

The fact is, interest rates are sitting at historic lows, making it easier for buyers to jump onto the property ladder. Furthermore, Australia's property market is enjoying significant growth at the moment - making it a very lucrative asset class.

The June RP Data Rismark Hedonic Home Value Index finished the financial year into double-digit growth, with capital city dwelling values climbing 10.1 per cent over the 12 months to July 2014.

This is sensational growth - especially when you consider the compounding annual growth rate of dwelling values across the combined capital cities was 4.8 per cent over the past 10 years.

On top of that, rents are climbing and vacancy rates are falling, making the property market very attractive to investors.

Annually, house and unit rents have increased by 2.4 per cent, while data from the Real Estate Institute of Australia shows vacancy rates have dropped over the past 12 months.

Today, Sydney has the lowest vacancy rate of any capital city market, with just 1.4 per cent of rental properties vacant, followed by Brisbane, which has a vacancy rate of just 2.3 per cent.

So, with interest rates low, vacancy rates falling, rents and property values climbing, it isn't surprising to see a greater number of first-time buyers purchasing investment properties.

First-time buyers are seeing property investment as a way to build and future-proof their wealth.

Furthermore, if first-time buyers are unable to buy where they want to live - which is usually close to city centres and major working districts - they know they can still benefit from investing in a property they can more easily afford.

At the end of the day, regardless of where your dwelling is located, property is proving a very valuable and lucrative investment.

Edited by peter fraser, 21 Aug 2014, 02:52 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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ThePauk
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Peter
Remind me again of the current FHB's numbers? 12% or something like that is it not?
How many are actually seeing this? I call BS... "First-time buyers are seeing property investment as a way to build and future-proof their wealth."
Sure, kids stay at home longer, buy and IP and then move into it later perhaps. Makes sense to me.
Edited by ThePauk, 21 Aug 2014, 02:59 PM.
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John Frum
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Regardless of whether it appears to be a sound investment or not, the fact that so many FHBs are adopting this strategy is a clear sign that the market is broken and needs to change.

An efficient market would not allow an outcome whereby the tax benefits gifted to an individual for living in a rental and negatively gearing an IP outweigh the imputed rent advantage of a PPOR.
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness.
"Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
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Another mindless spriuk by the vested interests.

Get on the property ladder, more like a game of snakes and ladders now.

And the lies, this clown cliams vacancy rates are falling, they are rising like no tommorow.

And rents are flat to falling
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ThePauk
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Just out of curious ity, how do they know it is 20% of FHB's? What data tells them this?
Considering it is an investor survey by a vested interest, I call BS.
Edited by ThePauk, 21 Aug 2014, 09:01 PM.
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peter fraser
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ThePauk
21 Aug 2014, 09:00 PM
Just out of curious ity, how do they know it is 20% of FHB's? What data tells them this?
Considering it is an investor survey by a vested interest, I call BS.
It's a survey. I notice that you never question a survey by DFA or any bear organisations.
Edited by peter fraser, 21 Aug 2014, 09:09 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Sydneyite
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John Frum
21 Aug 2014, 07:37 PM
Regardless of whether it appears to be a sound investment or not, the fact that so many FHBs are adopting this strategy is a clear sign that the market is broken and needs to change.

An efficient market would not allow an outcome whereby the tax benefits gifted to an individual for living in a rental and negatively gearing an IP outweigh the imputed rent advantage of a PPOR.
Maybe it's not the housing market that is broken, but the tax system that makes people better off financially going down this path? I don't just mean NG, CGT etc, but the whole tax system - high personal marginal income tax rates, not enough GST and so on.
For Aussie property bears, "denial", is not just a long river in North Africa.....
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b_b
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Sydneyite
22 Aug 2014, 11:27 AM
Maybe it's not the housing market that is broken, but the tax system that makes people better off financially going down this path? I don't just mean NG, CGT etc, but the whole tax system - high personal marginal income tax rates, not enough GST and so on.
The most advantageous tax break in housing is for the PPOR. Some of these "first time" buyers are being poorly advised.
Edited by b_b, 22 Aug 2014, 11:31 AM.
(S – I) + (T - G) + (M - X) = 0
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Dr Watson
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John Frum
21 Aug 2014, 07:37 PM
Regardless of whether it appears to be a sound investment or not, the fact that so many FHBs are adopting this strategy is a clear sign that the market is broken and needs to change.

An efficient market would not allow an outcome whereby the tax benefits gifted to an individual for living in a rental and negatively gearing an IP outweigh the imputed rent advantage of a PPOR.
Transmutation.
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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zaph
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b_b
22 Aug 2014, 11:30 AM
The most advantageous tax break in housing is for the PPOR. Some of these "first time" buyers are being poorly advised.
I wonder how many move in for a brief period to make it possibly exempt from CGT?
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