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Active Retirees : Active Retirees April-May 2012
Active RetireesTM | 41 Paint the town rent With a weak housing market showing no signs of picking up in the short term, property investors – residential and even more so commercial – can still benefit from relatively strong rental yields. By Ben Power F ollowing significant falls in Australia’s residential property market last year, two interest rate cuts late in 2011 saw the cash rate drop to the lowest it had been since April 2010 and sparked hopes of a turnaround. Nonetheless, strong growth in the value of housing in the short and medium term is unlikely, with homes still significantly overvalued. While that may be bad news for those retirees whose wealth is mostly tied up in homes, there is still hope for investors. Pockets of strength and falling values provide retirees with opportunities to generate income streams through higher -yielding investment properties. There are also opportunities in commercial property, particularly office space. “Over the next 12 to 18 months we expect prices to still be pretty flat because the economic environment is still quite weak,” says Angie Zigomanis, Senior Manager of Residential Property at BIS Shrapnel. “But in terms of rental yields we’re seeing the market shift from an excess supply to a tightening situation that will drive rental growth to outpace price growth.” Property is the major source of retirees’ wealth. Australia’s over -65s hold some $349 billion of home equity wealth. More than 72 per cent of over - 65s own their own homes, and those homes represent more than 75 per cent of their total personal wealth. But the past 18 months have been dismal for Australian property as population expansion slowed, interest rates rose (up until recently) and weak income growth led to a lack of confidence from purchasers who were no longer willing to pay as much for their properties. Preliminary estimates show that the price index for established houses for the weighted average of the eight capital cities decreased 2.2 per cent in the year -to-September quarter 2011. Role reversal A recent report by ANZ, ‘Asset Returns: Past, Present and Future’, found the average annual residential property return for the next decade » FINANCE Thinkstock
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