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January 25

Leveraged Housing Will Generate Large Returns in 2021

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Setting aside bitcoin, what was the best-performing asset class for Aussie investors in 2020? As it turned out, residential real estate trumped the alternatives.

Aussie home values appreciated 3 per cent in 2020. If you then add in the national gross rental yield, you get an impressive total return of 6.60 per cent for the year.


The good news for property punters is that the returns will be even better in 2021 – in fact, more than double the 2020 results. You are going to get more than a 100 per cent return on your equity in 10 times levered, well-located Aussie housing. That forecast is playing out and should be comfortably realised within 12 months.

What is not widely understood is just how little net aggregate house price growth there has been since 2017. Home values in Sydney and Melbourne are actually 3.88 per cent and 1.76 per cent lower today than they were three years ago.

This is also generally true across the eight capital cities, which are 1.87 per cent lower. The flip side is property in Adelaide and Brisbane, which has net increased by 7.79 per cent and 4.91 per cent in value over this period.

The next phase of the housing cycle should see the return of investors seeking to capitalise on the unprecedented emergence of “positive gearing” whereby gross rental yields are way above the cost of servicing residential mortgage debt. Combined with strong prospective capital gains, investment property will look like a good bet relative to the alternatives.

For advice on residential investment lending structures which best suit your needs and financial goals, talk to us at FINPRO.

 


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