Factors driving growth in land values
The greatest returns come from compound capital growth
rather than property rentals. Land is in short supply,
and looks set to remain that way, which means that
its value will continue to increase over time.
Factors driving growth in land value include;
- a shortage of land in sought-after areas
- steady population growth
- changes in social living trends
- high government fees and texes
- increasing demand amidst limited supply
- "sea change" trends.
While buildings depreciate in value, land appreciates,
so the secret to sustained increases in property values
over time lies in ownership of the land. This principle
applies equally to residential and commercial property.
There is a vast difference between owning a property
directly and owning a share in one via a managed fund.
McCarthy Group advocates the full ownership of investment
property rather than investing in the shares of a company
that invests in property. This way all the upside (and
any potential downside) belongs to
the investor. Why own part of a building when you can
own the whole of it?
There is a strong argument that the greatest returns
come from property that has a high land content i.e.
a typical suburban house on a quarter-acre block. Having
said that, strata units or townhouses in prime locations
can be an exception to this rule.
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