With property assets at an all time high… where else can young people invest their money?
In a time where the property market is in a boom and leaving young investors behind we must ask, is there other areas young investors should be looking to invest their money? Many run down houses in property booming areas are going for millions… when the market is like this only those who are wealthy or are assisted by wealthy parents even have a chance at entering the market.
It was only last week that NSW Planning Minister Rob Stokes blamed negative gearing for Sydney’s sky-high prices and warned that the current building boom would have very little impact on prices. For those who are unaware of negative gearing and how it works, simply it can be described as the ability to offset the cost of owning the property – including the interest paid on a loan – against assessable income that makes it particularly attractive. As long as the loan costs are greater than the rental income, then the Australian Taxation Office allows investors to offset the loss against their income. Often negative gearing is considered more of a taxation strategy than an investment one for the simple fact it is frequently used to reduce the level of tax paid by investors.
“Why should you get a tax deduction on the ownership of a multi-million dollar holiday home that does nothing to improve supply where it’s needed?” – Mr Stokes stated during his speech.
Young people may not even think highly about home-ownership in these current market conditions as the costs are a barrier to entry into the market. In Sydney, Melbourne and Brisbane to a certain extent to name just three of the main cities in this country that property prices have risen dramatically in past years. CoreLogic’s head of research Cameron Kusher stated, “The challenge is what else to invest in”. So where and what should younger investors be shifting their investment focus towards?
Investing into and purchasing a property and holding a mortgage over that property is one method of gaining access to the property market. However, there are other methods of allowing investors access to physical property investments if that is their need and want. You can invest monies into a property fund which pools investors funds to invest into commercial, residential and shopping centre premises which will give you exposure to property for as little as $2,000 (minimum $2,000 initial investment balance available with some funds). You then have access to distributions paid out by these fund managers which can be a distribution of roughly 7 to 9 percent on your investment annually, depending on the type and risk exposure of the fund. Investing via a property fund provides you as the investor with ownership of tangible property assets and you don’t need a lot of money to get started.
Corporate bonds and shares may also fit the appetite for investors as a means of investment outside of property. Younger investors can afford to be more aggressive in earlier years as they have a longer investment timeframe than those who are older. One option available to investors may be to utilise shares as a chosen asset class. You can open and start investing in a share portfolio for as little as $500 in most cases these days. As an alternative a number of professional investment fund managers deal specifically with shares in a range of markets both domestic and international. These professional fund managers have varying degrees of investment strategies and philosophies to accompany their funds’ investment approach for their stockholders.
On the more conservative end of the scale you may wish to utilise corporate bonds, term deposits or other low risk volatile investments to build your investment portfolio. There are countless varying types of funds available to investors which can be discussed with your financial planner to get an investment(s) which suits your tolerance towards risk and meets the goals and objectives you’re wanting to achieve.
Seeking advice in the area of investments or wanting to discuss what options you have available for now and the future?? Contact Total Advice Partners on (07) 3284 7875 and speak to one of our financial adviser who can provide you with the best way to move forward.
(P) (07) 3284 7875 | (F) (07) 3284 4790 | (E) info@totaladvice.com.au
