Purchasing a home to live in is almost a rite of passage in Australasia. However, that course has become more difficult as years have passed, meaning in order to dip their toes into the market, first time buyers have had to look at other alternatives to buying a family home, like property investment.
In fact, research from Digital Finance Analytics (DFA) shows that throughout Australia, more than 35 per cent of first time buyers are actually using their home loans for property investment. This number becomes even more significant when you look at the number of first time property investors just five years ago, which was almost none.
In light of these figures, what are the main reasons for a growing number of first time buyers purchasing rental properties?
Statistics from CoreLogic RP Data reveal that the first rung of the property ladder has been getting increasingly harder to reach.
It was only two decades ago that more than 95 per cent of the real estate in Australia’s capital cities sold for less than $400,000. However, fast forward to the 12 months to July 2015 and this figure has dramatically changed. Over 60 per cent of homes sold between $400,000 and $1million.
The DFA report stated that more first time buyers were either living at home with their folks or renting in the area that they couldn’t afford to purchase in. Meanwhile, to get into the market they’re investing in other locations that are more accessible.
There are a number of tax deductions that you can claim on the expenses of owning your investment property, which could certainly add to the appeal for first time buyers. According to the Australian Taxation Office, these can include:
Essentially, you can claim a tax deduction on any cost that is related to your rental property. However, it is important that you check with your local authority, as rules can vary depending on your location.
Provided you make an informed decision when it comes to looking at property for sale, the income you receive from your tenant’s rent will be sufficient for a profitable investment. This will allow you to put your feet up while your property builds in value!
According to CoreLogic RP Data, the year to July 2015 saw combined capital city home prices climb more than 11 per cent. To put that in perspective, had you purchased a $500,000 home in July 2014, it would now likely be worth more than $555,000.
With this increased equity, you will be better equipped in the property market, whether you intend to add a second rental property to your portfolio or finally purchase your dream home to live in.