Many Investors looking at Australia are not aware of another critical, but often overlooked, fact that helps protect against a downturn as was seen in the USA.
And that is that investors make up approx. 25% -30% of the property market in big cities like Melbourne and Sydney. Foreign buyers account for around 10%.
So, around 60%-70% of all properties are therefore in fact purchased by “owners.” That is, people intending to live in them. NOT buying for investment, and who require at least a 10%, if not as is usual a 20% deposit.
That is, in a downturn, they do not rush to sell, as this is their own home, not an investment. This provides a natural “buffer” against panic selling, such as occurs in the stock market. And as the Banks have only lent around 80% of the price, they do not rush to recall the loans, and this has been one of the secrets as to why the Australian housing market did not collapse during the financial crisis.
This 70% home ownership rate has hardly varied for the past 50 years. However, around 1/3 of all these people actually have no mortgage at all. They do not care what happens to interest rates or the market as they have no outstanding loan. For them, to panic and sell or have the banks repossess them is unheard of. The opposite again of what happened in the USA.
Property taxes favour investment
Always buy new to maximise tax deductions. The Australian tax office allows the full construction cost of a new property, plus all the fitting and furniture to be claimed as a tax deduction against rent, plus allow mortgage interest and all other running costs. The bottom line in all this is, if investors buy new, plus take a mortgage, they can greatly reduce any potential Capital Gains or tax or rental. Cost on purchase seldom exceeds 5% of the price.
Australia welcomes foreign investors.
Like many countries, Australia has rules relating to foreign buyers. There are no extra Stamp Duties or taxes on property for foreign buyers, they simply need to buy new, not yet completed or off the plan property.
They may also purchase raw land and build a home. Therefore, resale must be to Australia residents, which is seldom an impediment if property has been well selected as Australian make up around 90% of the market.
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