Why Invest In Property Now?

The old saying that there is nothing safer than bricks and mortar still rings true. This maxim sounded clear and strong during the events of the recent turmoil in the global stock markets, which have endured a period it would rather forget, and still reeling. Meanwhile, we have seen a number of investors lose hundreds of millions through the liquidation of shares across the globe in a very short span of time.


It is largely understood that in any investment’s lifecycle there will always be peaks and troughs. As market fundamentals change certain investments will look more favorable than others. This is particularly true with both real estate and the equity markets, where at certain point, any change in market direction will make shares look more favorable than property, and vice versa. It is therefore important that people understand the risks and limitations of the property market as well. Illiquidity, low occupancy rate, rent defaults and cost of borrowing are some of the concerns investors usually ponder before making their investment decision.


Provided an investor has the capacity for a long-term view and is careful in their choice of property investment, then bricks and mortar will always have an underlying value. It all boils down to spotting end-user demand and making money at buying time away from emotional or irrational attachment, regardless of what property type is being invested. There are many properties in need of TLC providing investors the opportunity to add value through alterations and renovations.


Financial advisors, brokers and real estate experts always suggest that investors should have property as a part of their diversified portfolio which might also include shares and cash. However, some investors believe that portfolio diversification is a protection against investor ignorance. In my view, people who are comfortable with certain asset class, because they understand its dynamics and economical characteristics, usually adopt a strategy of portfolio concentration in that asset class being property, stocks or cash. They largely deviate from following conventional investors‘ diversification dogma due to the intensity of their knowledge of and feelings towards their preferred investment scheme.



Many successful investors affirm the viability of their property ventures and reveal unwavering satisfaction from its rewards. To many, real estate has been an attractive and good performing asset class even during down cycles, mainly due to its tangible nature. Therefore, they always consider bricks and mortar as a strategic investment that can withstand economic cycles. It offers them great potential for high capital appreciation, tax benefits and attractive returns. These returns can be extremely rewarding if investors have the ability to leverage easily, buy value- add properties and rely on future earnings to repay debt.



For instance, if you invest $500,000 into a stock portfolio and it doubles in value, you make a profit of $500,000. If you buy a property worth $500,000 and borrow $400,000 to facilitate the purchase, and the property doubles in value, you make a profit of $500,000 from only a $100,000 outlay.



Needless to say that property has been an attractive and good performing investment option over the years in particular during a down markets, However, It is typically an asset that an investor should be prepared to hold on for five to seven years if necessary.



There is currently a cautious optimism in the Australian real estate market building up towards 2011, which might prompt investors to start the buying frenzy, with the overall consensus in the market that a price spike is now overdue.