Why Do People Invest In Property?

Property has long been Australian’s preferred asset class for investment. Investing in property has helped build wealth for Australians and helped investors achieve their desired lifestyle. Here we examine some common reasons to invest in property as an asset class and answer some crucial questions that come up when making a property investment decision.

Here are 8 reasons people invest in property as an asset class:

  1. People need somewhere to live; residential property satisfies this need.  An individual’s demand, requiring somewhere to live, creates a market.
  2. Property provides a level of “bricks and mortar” security.
  3. Assuming appropriate population demographics, the demand for housing grows and therefore property values should appreciate.  This, in the past, has provided some protection against the eroding effects of inflation.
  4. Financial institutions have traditionally been comfortable lending money with residential property as security; this enables you to leverage your investment.
  5. Tax benefits from offsetting income against expenses to create a deductible loss.  Generally, new property and any improvements can be depreciated which in turn creates higher tax deductions.
  6. The ability to use equity in an existing property to finance the purchase of an investment property and have the tenant assist with the repayment of the mortgage.
  7. You maintain direct control over your investment.  For example, if you were unsatisfied with your property manager you would give them the appropriate notice and appoint a new manager.
  8. Lending institutions have traditionally been comfortable with property that enables them to lend significant amounts using the property as security.  This can be useful to raise capital for other types of investments or other interests such as starting your own small business or helping your children buy their first property and diversification into other asset mediums (shares).