Real Estate In Australia

By: Parag Sheth

About Australia

Australia is a country of so many extremes, being the sixth largest country in the world (50% larger than Europe) but having the lowest population density in the world, some 2 people per square kilometre. The country has historically strong links to Britain, with the Queen still the official monarchy of the country, although the history of Australia is very colourful. Initially populated by the aborigines, the country was used as a place to ship prisoners many years ago. Slowly but surely the aborigine influence in the country was reduced, and western style values introduced.

The country was originally made up of six separate states, although they formed a union in 1901 to create Australia. It was not until Captain James Cook arrived in 1770, that the country was actually discovered by the Europeans. A place of immense beauty, stifling hot weather conditions and one of the most laid back social attitudes in the western world. Australia really is a special place.

Many of the worlds main mineral companies have originated from Australia, as the land of "Oz" continues to supply a large majority of the worlds precious metals, etc. The economy has been fairly strong for some time, although historically there have been large peaks and troughs in line with the swing in commodity prices. This dependence has since been diluted with the country now offering a broader more diverse business scene.

While the mass media portray Australia as a vast and varied land, it is difficult to actually appreciate the size and beauty of the land. Golden white beaches give way to golden white desert land, with many towns and settlements hundreds of miles away from the hustle and bustle of main stream Australia. The famous flying doctor is still in existence, and many of the families rely on the internet and other modern day technology to actually educate their children. A vast and prosperous land, with many investment opportunities.

Property Market

As the business base of Australia has moved away from the dominance of natural resources, the economy has become much more balanced. Still growing and adjusting to the changes, the economy has been one of the better performing worldwide, since 1990. Relatively stronger than most of their European counterparts in the worldwide down turn in early 2000, the economy has thrown up a number of interesting opportunities for foreign capital.

Due to the sheer size of the country, and the extreme difference in population per kilometre, the market for property in Australia is very diverse. Historically it is the main inland cities of Melbourne and Sydney which have pushed the Australian property market ahead, although the coastal areas with strong popular tourist attractions also performing well. Quality Australian property will always hold an attraction to the foreign investor as the infrastructure in many parts of the country is weak, and sometimes nearly non-existent.

While the vast majority of Australians own their own homes, there is a strong rental market which now represents 29% of all dwellings in the country. There are very many similarities with the UK and Australian economies and style of government, although the fundamental difference is that Australia will never run out of land to develop, although the quality of local services may well diminish the further away you move from the main cities and coastal towns.

The Australian property market has been relatively strong for some time, but due to the high concentration of attractive properties in a limited number of areas, the market can show large short term fluctuations. These tend to flatten out as the slow but sure expansion of the larger cities continues, and investors also look for cheaper alternative areas in the less populated parts of the country. To spot Australia's next growth city could throw up a very lucrative investment.

Why Invest in Australia

Australia offers a unique investment opportunity for those looking at the longer term picture, due in the main to the strong economy, increase in gross domestic product, buoyant labour market and a western style attitude to attracting outside investment.

As the business and employment markets continue to develop with opportunities in all areas of the country, we are seeing a slow shift from owner buyers to long term rental agreements. This market is expected to grow further in the coming years, and offers would be investors a quality long term income stream, together with the potential for long term capital growth.

While air travel from Britain and other parts of Europe is lengthy, there are a number of commercial routes from Europe to Australia as the country continues to retain strong ties with European counter-parts. The free market culture is proving very successful, producing a number of larger Australian corporations who have diversified all over the world - media being one of the main exports.

Add in the ease with which finance is available - often on a short term agreements, allowing maximum tax relief on loans (usually 5 - 10 years, rather than in excess of 20 years in the UK) - not to mention the attractive landscapes and scorching hot weather, it is easy to see why tourism is playing a larger and larger part in the economy of Australia.

Outlook

Historically the Australian economy has seen a number of volatile phases, although over recent years there are signs of a more gradual increase which looks set to continue. The forecast is underpinned by a stable interest rate outlook, proactive government policies to resist the threat of over heating, a thriving employment sector and stable inflation. These all add up to a great scenario for long term property value appreciation, although there will always be "hot spots" in the country, due to the vast difference in population density.

The buy to let market has been showing particular strength, and is currently offering rental returns in the region of 8% - 9%, while properties in Australia a showing capital appreciation averaging approximately 10% per annum. The government are also increasing expenditure outside of the major cities and tourist areas, which is encouraging property investors to consider looking further afield than just the high population density areas. The country has a lot to offer both the tourism industry and the overseas investor, with the Australian property market particularly attractive.

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