Due to COVID-19, Australia experienced its first recession in over 30 years. While much of the globe has faced substantial losses in overall property value, the real estate markets in major Australian cities have bounced back. And Australian property has once again proven its strength. As people now seek to find a safe place to invest, few opportunities can compete with Australian real estate market. So, why investors favor Australian property?
Low Interest Rates
Back in November, the Reserve Bank has further cut the interest rates from historic low of 0.25 percent to record-low of 0.1 percent to stimulate Australian economic growth. Thanks to the recession, mortgage rates are also lowered and for the first time in Australian history, investors can pay off the loans with such incredibly low costs.
We saw a drop in property prices in 2020, yet prices have been bouncing back quickly. Other than the record-low interest rates, government also published several incentives to help eligible buyers to get their first property.
First home buyers can take advantage of those incentives to significantly lower the amount of funds required to obtain their dream home. However, there are some eligibility requirements, such as you must be an individual, over 18, and an Australian citizen or permanent resident. Here, we provide a brief overview of some benefits provided in NSW.
First Home Buyers Assistance Scheme
As a first home buyer in NSW, you may be eligible for a full or partial exemption on transfer duty depending on the value and type of the property.
First Home Owner Grant (New Home)
In addition to the First Home Buyers Assistance Scheme, if you are buying a new home that no-one has lived in before and it worth no more than $750,000, you may be eligible for a $10,000 grant.
First Home Loan Deposit Scheme
Normally, borrowing a home loan requires 20% deposit of the value of the purchased property or you will need to purchase lenders mortgage insurance if your deposit is less than 20%. The First Home Loan Deposit Scheme allows first home buyers to purchase their properties with deposit as low as 5% without additional cost. However, this scheme is usually limited to 10,000 borrowers in a financial year and has several eligibility requirements, such as applicants must be current Australian citizens, prospective owner-occupier and earn less than $125,000 annually if single, or less than $200,000 a year for couples.
Potential Growth & Returns
Australian property, especially in major cities such as Sydney and Melbourne, has always been extremely enticing for international investors. Over the last ten years, the average property value in Australia has doubled and many buyers have benefited a lot from the capital gain.
Other than the capital gain from selling the property, you may also get constant returns through rental if you do not live inside. If these returns are high enough, they can be used to cover the repayments for the home loan and the property may potentially pay off the mortgage itself. Investors can benefit significantly from this, especially interest rates are record-low for now.
The security of Australian property is well-noticed around the world and it is one of the key reasons why investors jump into Australian real estate market. Unlike the high risk and volatility of stock markets, investment in property is more secured with a relatively fixed return and actual property asset. Back in 2009, most other modernized market experienced a significant drop, yet the pricing for Australian properties did not fluctuate much. Last year’s volatile market due to COVID-19 once again proved that investing in property is a sage decision. Australian property has shown its ability to continue growing in value and maintaining a stable market. Once the border is open, it is quite clear that both the real estate and rental market will pick up and demands will increase.
When it comes to making the decision to invest in property, the key, like any large financial decision, is to do your research thoroughly, consider your unique circumstances, and find the best property that is right for you.