Coronavirus - Silver Lining to the Property Market
The major tailspin in the stock market caused by the Coronavirus scare should give a welcome boost to the Australian property investment market during 2020. Over the last couple of years, many investors have overlooked property in favour of investing in stocks because of the booming stock markets throughout the world. The ASX 200 jumped by around 20 percent last year, while Wall Street's benchmark index, the S&P 500, surged by 29 percent. And stocks continued to soar in price during the early part of this year until the Coronavirus hit with a vengeance.
In the last few weeks alone, the stock market has lost more than $200 billion in value and these losses may increase as the impact of the Coronavirus spreads throughout the world. The immediate impact of the falling stock markets is being felt in the value superannuation account balances as many superannuation funds invest heavily both in the Australian and international stock markets. A similar trend also occurred during the financial crisis of 2008/2009 with superannuation funds being hit hard by the big downturn in the stock markets at the time. As a result of falling stock prices and declining super fund balances, there was an eventual upswing in property investor activity as investors took advantage of low-interest rates back to buy a property.
The reality is that property like gold is viewed as a safe investment option during a time of global financial uncertainty.
With the RBA dropping interest rates at its March 2020 meeting by 0.25% and expected to drop them again in April, these very low-interest rates should again entice more people to invest in property over the coming year.
This is particularly the case in regions of Australia where property values are still relatively affordable and yields are high such as Queensland, Western Australia, and South Australia. The positive returns delivered by investing in property is a key reason why one in five Australian homeowners now own at least two properties.
Overall, figures from the Australian Bureau of Statistics show that 21% or one in five households own a property other than their own home.
This figure is set to increase even further as a result of the Coronavirus as people investing for their retirement decade to move to the safety of property investment away from higher-risk options such as the stock market. The tax benefits associated with property investment will also encourage more people to buy investment properties on the back of the Coronavirus scare.
Property investing still allows people to claim generous tax benefits associated with negative gearing as well as depreciation.
The tax benefits associated with tax depreciation can be very significant with DEPPRO clients achieving tax benefits obtained through depreciation equivalent to 60% of the total purchase price of the property. To qualify for these legitimate tax deductions, an investor must have a fully compliant tax depreciation company undertake an onsite inspection of the property and then compile a depreciation report based on this inspection.
Property investors should, therefore, check that the company undertaking their tax depreciation schedule is a member of The Australian Institute of Quantity Surveyors (AIQS).
Employing a company that is a member of AIQS such as DEPPRO gives protection to consumers that their tax depreciation report complies is completed in a professional manner.