In order to answer this question we should take a look at the different investment alternatives which exist.
Let us assume that we have an investor who is seeking the best investment opportunity for her AUD 1 000 000. Probably the easiest possible investment is opening a term deposit with a local bank. Term deposits in reputable large banks are also deemed one of the safest possible investment opportunities.
Deposit rates at any given time among banks are usually in accord. So let’s take an example with the Bank of Melbourne. Currently the offer rates of the bank on fixed term deposits ranging from 0.05% for monthly deposits to 0.30% p.a. for 60 month deposits. Interest rates for the past couple of years have fallen to record low levels, and it seems that this trend will persist in the coming years. We may shop around and find slightly higher rates – the highest currently offered is by Rabobank and reaches 1.25% p.a. for a 60 month term deposit.
Anyway, this provides a good starting point for our Turkish Citizenship by Investment.
Another investment option, which our investor has is to participate in the stock market. Successful investments there will be higher than term deposits. Provided that our example investor is not a connoisseur of stocks around the world an investment in an exchange traded fund (ETF) is a reasonable option. The top performing ETFs in Australia currently have annual returns ranging from 3.57% of UBS Diversified Fixed Income Fund to 4.09% of IOOF Multimix Diversified Fixed Interest ATR in AU.
Although the stock market offers greater returns, it is characterized with high volatility and considerable greater risk. Just imagine having invested in airline shares prior to the global pandemic.
When we are considering investment opportunities we always need to take into account the annual inflation rate. For Australia this has ranged from 4.46% in the year 2000, through 2.92% in 2010 to the current lows of 1.16% in 2019. We are deliberately excluding the pandemic 2020 form the calculation, as the economy was strongly affected by the pandemic. Currently inflation pressure is mounting globally, and we may experience rising inflation in the coming years.
What inflation does is erode the income which our investments have generated. With the above examples and current quotes this will spell out negative return had our investor chosen a fixed term account and a higher risk return in the range of 2.5% from investments in ETFs. We can easily imagine what will be the return on investment should inflation reach the levels of 2010, let alone those of the year 2000.
In the current volatile global state of economies and the possible investment opportunities investing in real estate offers a much safer option. At the same time the safety of the investment does not compromise the return on the investment. This is especially true for investments in rental properties. Actually the Australian Government outlines property investments as both having a lower risk and providing a reasonable return.
Let’s analyze the pros and cons of rental property investments in Australia:
- Easy to comprehend – While some of the investment opportunities will require at least some specialized knowledge (the stock market, ETFs, etc.) and continuous monitoring of markets, investments in property does not require much specialized knowledge and are easier to understand;
- Insignificant volatility – Although return on investments in property may vary some from year to year, the fluctuations are relatively insignificant. The small amount of volatility provides for a much safer and more predictable investment;
- Rental income – Investments in real estate (if not for living purposes) provide a great opportunity for generating a monthly income from rent;
- Tax benefits – Here it is possible to offset expenses for the management of the investment property, including any interest paid for the purchase of the property against the rental income. This would leave any appreciation of the property as a net return for the investor;
- Appreciation of the property – The Reserve Bank of Australia published statistics show that over the past 35 years Australian property prices have increased by an average of 7.25% p.a.;
- Inflation protection – The above average increase of housing prices fluctuates over time. However in the years of high inflation, housing prices also appreciate more quickly. This offers an additional stability for property investors.
- High entry price – Undoubtedly investment in properties will necessitate a significant amount of money. However, this con is mitigated to some extent by banks, who are eager to lend to property investors (we can’t imagine why);
- Inflexibility – When investing in real estate we should know that we are investing long term. Partial exit will be difficult if not impossible;
- Prolonged vacancies – As investors in rental properties are relying on rent as an income, prolonged vacancies without rent will be a problem.
Obviously the pros strongly outweigh the cons, with one very important note – choosing the right property.
Investment In Brighton Properties
Investments in properties situated in one of the best suburbs of Melbourne provides a wonderful opportunity to benefit from all of the pros of property investment. At the same time the cons are strongly minimalized. Here are the figures: Brighton unit prices have enjoyed an annual average appreciation for the past 10 years of 4.18% with a 2.86% gross rental yield. House prices are doing even better – the 10 year average appreciation stands at 7.22% with a slightly smaller gross rental yield of 1.73% per year. The median price change for the suburb is standing at 14.05% for the past year! Brighton is clearly on the rise. Just compare these returns with the alternatives as quoted above
How can an investor find such properties?
Investing With The Support Of High End Real Estate Agents In Brighton
This is exactly where investors should seek the support of a high end real estate agency in Brighton. Using their support every investor will be able to maximize the return on the lucrative Bayside suburb.
It seems that we have answered our question: Brighton really offers a perfect investment opportunity in rental housing.