On the surface, it seems to defy logic that the Sydney property market is remaining so strong during one of the major global crises in living memory. However, you don’t have to go digging too deeply to see why property still stacks up as being your best bet, whether this involves investing in or owning your own property.
With money in the bank earning negligible interest, and the share markets being unpredictable and usually only beneficial in the long term, property is becoming the place that so many of us are choosing to park our cash. In Sydney, property has been steadily going up in value for well over a decade now, and the capital gains to be had in property have far exceeded those to be found in any bank. Placing our dollars in hard assets not only fights inflation, it also gives us the reassurance of something tangible during these changing times and most importantly, provides us with a place to live. And when purchased as an investment, return on investment through rent is generally far more attractive than other forms.
Another major driver of the hot property market, also involving interest rates, is the historically low cost of borrowing money. We are able to borrow more now than ever, largely due to the fact that our interest rate will vary somewhere between 1% and 3%, which was previously unheard of. The fact that interest rates have remained low or even further decreased over the last decade stems from the global financial crisis of 2008. And the RBA and banks all indicate rates will remain low in the foreseeable future. All this gives us confidence that rates will remain at all-time lows for the foreseeable future, increasing our buying power which in turn generates property market activity.
One of the chief reasons the RBA are reluctant to raise interest rates is because owning your own property gives us a sense of wealth, which generates spending both elsewhere in the economy and within our own home. We tend to purchase more things when we own our own place compared to when we rent, and we are prone to want to upgrade our property with far more regularity than in previous generations, and spending more the next time round as we move up the property ladder. The flow on effects of all this include increases in property values, a decline in unemployment, a steadier rate of inflation and more discretionary spending - all good for the economy.
Now 18 months into this pandemic, our homes have increasingly become our places of work as well. This change of use has a number of ramifications. We are becoming more insular in our way of life, and home is often now where we work, exercise and periodically home-school our children. These extra purposes ideally require extra space, and many of our homes just aren’t user friendly enough. This has created incredible demand and is fuelling the property market as we seek more multi-purpose properties.
With so many of us now working remotely from home, it is imperative that we have a work-dedicated area. This change of use repercussion is that we are now able to write off a percentage of expenses associated with our home as work-related. When paying off a mortgage, every little saving counts, and every dollar saved in income tax when working from home contributes to greater mortgage serviceability potential and can allow us to upgrade to a more suitable home.
There has also been a big drive towards off-the-plan property that is brand new, intelligently designed and move in ready. Not having to contend with a fixer-upper and having a beautifully designed new property that is move-in ready is proving highly attractive. And off-the-plan has the added benefit of allowing us to plan, prepare and save more while only requiring a 10% deposit. So if you are looking to either purchase your first home, move up the property ladder or invest in a rental property, here are some of the great properties Cramer currently has available.