It’s often difficult for young people to grasp the effect losing time will have, especially on their financial security.
However it’s imperative for them to know that over time, the value of an investment grows – and this is especially true when it comes to property.
According to realestate.com.au, the median price for a two-bedroom unit in Sydney (postcode 2000) was $1,115,000 based on 104 home sales in 2016. Over five years, this is an increase of 54.9%, or a compound annual growth rate of 9.1%.
What does this mean? It means the earlier you invest in property, the more you are going to receive the benefits.
Why property is a great investment
A residential property investor chooses property for a number of reasons. While it may cost less to start a share portfolio, property has these advantages:
- A proven rate of return – you can see the trends going back decades and predict them.
- Tax advantages – negative gearing and depreciation reduce your taxable income.
- There’s a growing demand – companies come and go, but people always need houses.
- The possibility of a great deal – everyone buys shares at the same set price, but there are so many variables with property that you can make a shrewder investment.
Saving up for a home deposit with an investment portfolio
Young Australians are finding it harder to save up for a home loan, and it’s no wonder given the cost of homes in our most desirable areas. According to a 2016 survey by Demographia, Australia is second only to Hong Kong for world housing prices.
The solution for young people who aspire to live in a popular – and expensive – area is to first develop an investment property portfolio. By buying investment properties in more affordable areas with a reliable supply of tenants, young investors can finance their dream home. After five years or so, the equity from their investment portfolio could fund a deposit on a much more expensive property.
Young people buying investment properties
According to a 2016 NAB survey, first home investors constitute about 12.2% of all new property sales in the third quarter of 2016, up from 11.1% in the second quarter.
What this means is that young people are choosing to buy an investment property and live at home or rent rather than buy in an area they can afford but don’t aspire to.
It’s about thinking ahead and getting an overview of the financial advantages that develop with the passing of the years.
With the right investment property advice in Sydney, young people can start to build a property portfolio at the earliest age possible, avoiding the money worries that affect so many of us in later life.
To get in touch with a Financial Specialist at Gordon Wealth, click here, or call us on 1300 05 05 88.
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