Property investors could be in for a strong 12 to 24 months, despite recent data confirming a decline in property investment returns.
Data released last week by CommSec revealed that returns on ASX shares increased 11.4% in the 2018/19 financial year, a figure the research group said is “a smidgen below record highs”. Further, government bonds saw a 10.4% increase in returns.
Meanwhile, the ROI on property investment over the same period declined 3.4%.
On the one hand, it’s the latest blow for the property investors, who according to CoreLogic figures now account for 26% of total property market activity down from a 43% high.
On the other hand, the industry’s outlook remains upbeat due to favourable market conditions and prices.
“The reality is, people will always be attracted to investing in property, as they feel they are putting their money into a tangible asset. The outlook for property investment is bright,” said Mortgage Choice CEO, Susan Mitchell.
According to Mitchell, a “number of headwinds” placed downward pressure on the property market ahead of the federal election, which in turn contributed to the CommSec figures. However, the outlook is stronger than the numbers suggest.
“It’s a good time to consider investing in property. Investors now have the confidence that tax reforms, negative gearing and CGT are no longer a threat and national dwelling values appear to be bottoming out, which means there are good deals to be had for buyers,” Mitchell added.
The most recent monthly banking statistics from APRA show the trickle-down impact of the Coalition’s election win has yet to begin and investor loans have fallen again.
Mint Equity director Zac Peteh, agreed that curent market conditions mean the outlook for the next 12 to 24 months is strong.
“A lot of investors see shares as part of a diversification strategy, not a replacement for property,” said Peteh.
“Performance of the property market in the next 12 to 24 months is likely to be positive for investors if buying or holding, given we are at a low point in values. Those investors who can secure finance now while buyer demand is relatively low, stand to benefit from property values improving in the coming years.
“The capital growth is the driving factor for investors choosing property over shares. We are already seeing an uplift in investor activity since the election and given mortgage brokers support almost 60% of all loans being sourced, the trend is positive for our industry,” he added.