Why are Australians so passionate about property?
On the surface, the Australian love affair with investment property is puzzling.
Two thirds of investors are negatively geared, shelling out thousands more in related expenses than they receive in rent.
Sure, investors can share the loss with the taxman, but they still end up paying at least half of it themselves.
Property is also expensive to buy, courtesy of stamp duty, and to sell – and requires active management and maintenance.
So, what’s driving our love of investment property?
- Hope of profit via capital gains
Australians have seen big rises in property prices over the past few decades, albeit with some pauses and reverses here and there.
- Fund retirement
Once the loan has been paid off, rental income can help fund retirement – regardless of capital gains or losses.
- For our children
Some parents buy an investment property so each child can, in time, inherit a home – and the peace of mind that comes with a secure roof over your head.
- Renovation and/or development potential
The plethora of renovation television shows demonstrate the appeal of using “sweat equity” to improve a property’s value.
- Fear of alternatives
Many people who would be too fearful to invest in the share market feel comfortable investing in bricks and mortar. Unlike shares, property can be insured – and quality landlord insurance can help with peace of mind by ensuring the rent comes in even if a tenant defaults or damages a home.