Residential Real Estate – investing now More Attractive
Investing in residential real estate has become more attractive due to APRA’s attempts to make housing more affordable for first home buyers. A listener to our radio segment on 4HI heard on the TV that APRA has not really been effective in making housing more affordable for first home buyers and his question is: “Can you explain what APRA stands for and do you agree they have not achieved their goal of making housing more affordable for first home buyers?”
APRA is short for Australian Prudential Regulation Authority and it is the Prudential Regulator of Banks, Insurance Companies, Superannuation Funds, Credit Unions, Building Societies and Friendly Societies.
APRA reasoned that if they put pressure on lending institutions to either not lend to residential real estate investors or make such lending less attractive by higher loan value ratios and higher interest rates than owner-occupiers it would deter investors, leaving more housing available for first home buyers.
Did it work? It worked in part, but it did not get the result APRA wanted. They were successful in reducing demand from investors, but all that happened was with less housing being provided by investors, there was a shortage of rental housing, which then pushed up the price of rents.
And, of course, if rents increased, that brought investors back into the market. Almost every time the Government interferes with the marketplace, (excuse the expression) it bites them on the bum.
The bottom line is that it did not make housing more affordable. I have never seen a situation where investing in residential real estate was more attractive with interest rates so low and rental returns so high.
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Super Contributions, Shares or Invest in Property?
Many of our local people in Emerald have lost equity in their homes and are not able to use equity to buy my executive homes in Brisbane, however, I am still quite busy. Whilst we still have many clients buying with 10% deposit, we are now doing a lot of business setting up Self Managed Super Funds.
How much do you need in Super to do this?
You need about $220k in Super and a minimum income of $70k per annum. A person in this position needs to contribute nothing to pay off a $500k home in Brisbane as their Employer Super contribution covers everything.
As mentioned last week retirees are now pulling their savings out of the bank and paying cash for my investment properties. They are getting 3.5% return with tax deductions plus an average capital gain of 7.5%. It is a lot better than a 2% return on which they have to pay tax.
If you are interested in investing in residential real estate or setting up a Self Managed Super Fund in order to build a residential property portfolio contact us to make a cost free, no obligation appointment.
Steve Taylor
If you prefer to listen here is my radio interview on Emerald 4HI:
At the helm of Steve Taylor & Partners, Steve Taylor has been delivering expert advice and product knowledge to clients for over 30 years. Steve Taylor & Partners provide individuals, couples and families with the right strategies to create wealth and change their lives with solid bricks and mortar.
DISCLAIMER
Steve Taylor & Partners blog is opinion and not advice. Readers should seek their own professional advice on the subject being discussed.
