Why is now a good time to buy a Sydney investment property?

by Chris White, Prosper Group

Many property investors have always regarded buying a Sydney Investment Property as one of the best and quickest methods to build personal wealth. Let's take a look at why.

1. There is good potential for capital growth, generating equity and allowing for further investment. Many investors have seen their Sydney investment property double in value every 7 to 10 years.

2. Property is a tangible asset which is widely accepted by the finance industry as security for a loan.

3. A positively geared investment property can provide a regular income stream.

4. A negatively geared investment property has a number of tax advantages.

Whilst there has been limited growth over the last few years, there are now many positive signs for those who own a Sydney investment property or are thinking about buying one that suggest that we are at the beginning of an upswing cycle, with some areas showing returns of over 10% from January to September 2009.

The following factors assist in understanding the renewed interest in Sydney property:

1. At around 5%, interest rates are currently at their lowest level since 1964. Whilst they are expected to rise over the next 12 months, it is unlikely that they will achieve the highs of 2007 to 2008 levels for some time to come.

2. At also around 4% to 5%, rental yields for a typical Sydney investment property are at the highest levels since the 1990s.

3. Unlike the United States and some other countries, demand for housing exceeds supply and many anticipate that this will worsen. The Sydney Metropolitan Strategy indicates that Sydney needs to house an extra 1.12 million people in the next 25 years and that it remains the most preferred destination for 146,000 migrants every year.

4. With the reduction to the Governments first Home Owners Boost on 1 October 2009, ($14,000 cash incentive provided to first home buyers), the buying frenzy in the sub $600,000 market is widely expected to ease, making buying conditions for those looking to buy a Sydney investment property more favourable.

5. The latest official figures suggest that there has been a rebound in consumer and business confidence which is evident from recent business and consumer surveys. Property investors are making a comeback to the market with many looking to buy their first or add another Sydney investment property to their portfolio.

Remember that property investment is a long term strategy and there are many factors to consider. It is important to make careful decisions regarding location, type and characteristics of property, the amount you want to spend and the returns you can expect.

For those considering purchasing a Sydney investment property the signals are positive that the next upswing phase of the cycle has started and we can all enjoy higher returns in the near future.