Once you understand the need to
make your money
work for you,
you need to decide how to do that.
This lesson examines the advantages of direct property investment as an asset class.
Property is something most Australians understand. It is a tangible asset; you can see, touch and feel bricks and mortar!
There are several reasons why property makes a dependable investment choice, and we look at each of these in turn.
In a free enterprise economy like Australia market forces largely determine what will be produced and at what price. It’s essential to understand what influences the demand for housing and also what constraints exist on the supply side of the equation.
How responsive or ‘elastic’ the market is also has a significant impact on prices.
“What goes up, must come down” is a truism that applies to the housing market, as depicted in ‘ The Property Cycle ‘ and is true of the broader economy, as modelled in the ‘Business Cycle’. The cycles are inextricably linked to one another, dependent on and responsive to the same influences and metrics: consumption, investment, government spending and incentivisation and the level of confidence in the business and household sectors.
Having the right investor mindset involves being armed with this knowledge and investing in a sustainable way that allows you to ride out the movements around the trend.
One of the biggest mistakes investors make is to come in and out of the market and to follow the ‘herd mentality’. Sometimes it pays to hold your ground and stand out from the crowd.
Finally, we look at why buying a new property is an advantage not only to the individual investor but to the economy as a whole.