3/03/03

Property Investment Outlook

Australia's housing has always been cyclical but investors for the long term always do well. Buyers still welcome the low interest rates. Housing affordability is still high and whilst interest rates remain on hold as announced by the Reserve Bank recently, there is every chance that they will ease further.

Recent geopolitical events, the talk of war with Iraq, the declining American economy and surging oil prices are all factors that will add to the impetus of further cuts in interest rates, particularly with US official interest rates at 1.25% and Australia at 4.75%. Interest rates undoubtedly are on hold for now but any shift in the next few months is more likely to be down than up. (Source: The Australian Financial Review 11/02/03)

Three main factors continue to propel the housing market. Historic low interest rates, the lack of alternative investments and the Government's home owner grants are the prime reasons fuelling the housing market buoyancy. The perceived safety of property investment means that the appeal of investing in property will continue. With demographic changes, inner city housing will continue to perform well. Annual growth will slow in the short term but the market will remain strong for well positioned, well designed residential investments at a fair price.

The Federal and Victorian Governments continue to encourage investments in real estate via tax incentives.

The Federal Government's incentives include the halving of capital gains tax (implemented since July 2000), maintaining negative gearing which allows accumulated tax losses to be offset against future income or capital profits, allowance for additional tax deductions and the abolition of estate taxes.