Property investment, despite global financial crises and credit crunches, remains one of the all-time best forms of investment, better than shares and super. The average rate of increase in property value averages out markedly better. Some markets, particularly the US market, have been hit hard, but they will recover, and people have been picking up bargains as a result.
The economics of property investment
It’s interesting to note that the economics of property investment have been evolving a lot since the 20th century, creating excellent sources of wealth that historically didn’t really exist before except for the very rich. Basic home ownership, let alone property investment, was a prerogative of the rich, because only they had anything like the money needed to invest in properties.
During the 20th century, the rise of the middle class created new sources of capital for the property market, setting off the global chain reaction of exploding property development and new markets for properties. These two new economic factors were major drivers of the mid and late 20th century property booms. They literally made the modern property market.
This is a demand-driven market. It’s also a major capital market. Billions of dollars pass through the property market every month. Large amounts of bank credit are directly involved in this market, and it’s asset-creating credit, underpinning general wealth creation in the society.
The good news for you- A market for your money
The good news for property investors is that this is also a working 24/7 money machine, provided you invest wisely, learn the methods of successful investment and get the right professional property investment advice. Properties are what are called “hard assets”- They have an intrinsic value both as commodities and as capital creators. This is the mechanism that creates opportunities for investors.
The property market is to some extent a self-fulfilling prophecy- It creates values. Successful property investors buy investment property on the basis of these values. There are many ways of making money in this environment - Investment properties have multiple values as income streams, capital gains and asset bases for further investment.
Better news- The future property market
What’s clear from current trends is that redevelopment, more than expansive development, will be a major stream for investment capital. The old cities are truly out of date. The buildings are antiques, not designed for modern “smart” housing or commercial spaces for the New Economy. Redevelopment has to happen.
In Australia, redevelopment in major cities has created a stampede of profitable property investment. These new, high quality investment properties are selling faster than they can get on the drawing boards. In Melbourne, old industrial land which was rotting away for decades has been turned into a whole range of high capital investment assets.
It’s been a goldmine for the redevelopers, but also for the investors. The future property market will include different types of property and probably also different types of title, sooner or later. Whatever it does, it won’t be dull, and will be profitable.
