Monday, January 15, 2007

Property not attractive ... Rents need to rise

Rents are expected to rise as a result of continued Australian Government policies that have affected the property market. Firstly we all know that the housing boom from 2000 was largely a result of the halving of capital gains tax, first home owner grants and the use of negative gearing. From 2006, the new changes to superannuation have prompted property investors to move their funds to super, leading to a large fall in house prices. Property Investors are leaving the market. Rents will have to rise to make property an attractive investment.

A lot of Australian Investors love to own property that is negatively geared and then there are those who look for positively geared properties as well. The problem at the moment is that property has had a very large boom recently and everyone is taking the capital gain while it is on offer and is moving this into their superfund. The reason this happens is becasue a lot of people are negatively geared and are thus losing money each year on the property. A significant capital gain offsets this loss significantly and it might be that interest rate rises have put the pressure on investors which were close to their threshold.

Good Luck Investing.

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