Property Investment A ‘Super’ Idea

First National Real Estate has some super investment advice for those nervous about their superannuation in the current unstable share market conditions – purchase an investment property.

Changes to legislation in September 2007 freed up self-managed superannuation funds so they can invest in the property market.

According to Paul Taylor, Principal from Taylor’s First National Real Estate property has always represented a strong investment opportunity, but never more so than in tough economic conditions.

“Property is increasingly being seen as a much more reliable safety net than shares,” Paul said.

“In uncertain economic times, this is even more the case as investors realise that the returns from properties are above most other types of investment assets.

“In Australia we enjoy a growing population, our families are getting smaller in size and our incomes are increasing. These factors all add up to ensure demand for dwellings will continue to outpace supply and prices will continue to rise, making property a very attractive investment alternative.”

The gap between supply and demand is expected to support the market during the current economic downturn.  Experts predict the shortage for 2009 to be in the vicinity of 200,000 homes nationally.

“In future years, this gap is expected to widen as pent up demand grows and the population continues to expand,” Paul said.

“It is not expected that the fall in Australian property prices in some areas will be sustained – once they have dropped, the next phase, with official interest rates falling, will be an upswing.”

Rental yields are also increasing, making property investments an even more lucrative option for superannuation fund investors.

“Most experts expect a 6 to 8 per cent return, but with the recent economic slow down, the return on investments in rental properties is more in the vicinity of around 8 to 10 per cent for many areas,” Paul said.

There are many other advantages of self-managed funds investing in the property market including:

• Contributions to super are taxed at only 15%, leaving 85% to put towards your investment
• Property can be leased back to a business being operated by the buyer
• Has the potential to receive a tax deduction, through salary sacrificing, for loan repayments on the principal sum.

“But the best advice I can give is to seek the services of a financial advisor to find the best investment option to suit individual circumstances,” Paul said.

The real trick in property investment is to be in it for the long haul – it is a long term investment where the dividends will far surpass that of the initial financial outlay.”

Based on historical trends in the property market and key economic indicators, the Australian property market is considered to be a sound investment opportunity.