Why now the time to Invest in Australian Residential Property ?

1. Supply versus demand - there is an estimated 1 million new homes needed in the next 5 years (Housing Industry Australia). The research considers Australia’s permanent and short term immigration intake, natural household formation trends and demolition statistics. Recent figures released from the bureau of Statistics show a national population growth rate of 1.6 % for a total of 21,181,000 people, while Queensland’s Growth Rate is very strong at 2.3 %.

2. Rental Crisis – as the shortage of New Housing slowed over the past 12 months (to October 2008), mainly due to a series of increasing interest rates, pressure has been applied to the rental market which is currently at a vacancy factor of less than 1.25%, an all time low.

3. Interest rates - average standard Variable Home Loan Interest Rates have come off a high of 9 % in August 2008 and have dropped 1.25% in the subsequent 60 days, with a further expectation of 2-3% by April 2009.

4. Currency - the Australian Dollar has lost 28% to the US Dollar over the recent credit crunch, giving foreign buyers a 28% discount in purchases.

5. Resilience - South East Queensland Houses on average have held value during the 2008 credit crunch and in some areas actually shown growth.

6. Capital Growth - average capital growth in South East Queensland the last 20 years is 11.2 %.

Summary

Residential housing prices are set to increase in South East Queensland with interest rates tipped to drop some 40-50% by April 2009. Housing shortages, in South East Queensland, are forecasted to reach an all time high by the end of 2009 and Rental vacancies to drop below the 1% level.

With these factors in mind, now is the time to invest in new residential housing which should yield 4-5 % per annum together with government tax advantage schemes on capital gains, depreciation etc.

Example

Purchase Land $200,000

House $220,000

Investment $420,000

Deposit @40% $168,000

Costs $7,500

Construction interest $7,600

Rent pw $380

Interest pw $378