Residential real estate investment is one of the safest and the most secure investments one can make. Residential property investment has reached $7 ¬†trillion of an overall 12 trillion of the total investment portfolio. 52.2% of household¬†wealth is held in housing reflects the confidence Australians have in the residential housing¬†market. Let’s look at the pros and cons of Property Investment.

 

Advantages of Property Investment:

  • Good Hedge against inflation
  • Leverage through bank loan
  • Tangible
  • Provides capital appreciation and rental income
  • Not impacted (immediate) economic data

The Disadvantages of Property Investments:

  • No known valuation method
  • Capital Gains Tax
  • Liability Risk
  • No Liquidity, difficult to turn into cash

 

Property as an investment has the highest potential return with minimum risk and low liquidity as compared to some of the other asset classes which are shown in the graph below. The beauty of such as asset is that it is not affected by macro and micro economic issues to the same degree as compared to other asset classes.

Investing Options
Property Shares Bonds Fixed Deposit
Potential Return H H M L
Risk on Capital M H M L
Liquidity L L M H

Situations and goals of each investor can be different therefore it is always advisable to get professional advice prior to making a financial commitment.