For most Australian’s, the vast majority of their wealth is tied up in their PPOR. Real estate as an asset class is the largest in Australia and it’s for that very reason that it is so secure. We can see that very clearly when we look at how the Government has responded in the last few months.
While the stock market has fallen sharply and the Government didn’t bat an eyelid – they have thrown the kitchen sink at protecting the Australian property market.
This is something that all would-be property investors and home owners really need to take notice of – because it’s not happening in any other asset class.
When it comes to Australian property, the Government is basically saying, ‘we’ve got your back.’
There are a couple of key things both the Government and the major banks have done to help prop up the property market – both for renters and landlords.
Firstly, from an investor’s point of view, we have seen that banks and lenders have implemented a mortgage holiday. What this means is that banks will let borrowers effectively freeze their mortgages from anywhere between 3-6 months.
After which, the interest and other fees will be added to the loan and investors (or homeowners), can carry on as usual when things turn around. Albeit with slightly higher repayments.
At the same time, we are also seeing a lot of different measures handed out to renters. In many states, you can get something in the order of a $2,000 subsidy to help pay your rent, while there is also a moratorium on evictions and even rent increases. While that might not be the best for investors, they of course, have access to a mortgage holiday as an offset. And of course, renters are still required to pay any outstanding rent.
Clearly the Government has a vested interest in keeping the entire property market ticking along and they are prepared to do anything they can to keep people both in their homes as well as making sure the industry holds firm.
Everyone needs a place to live and it’s no secret that the property sector contributes a huge amount of money to the economy, not just in terms of its value, but through all the associated jobs it brings along with it.
Some might even suggest this makes real estate the holy grail.
Compare that to the stock market where we’ve seen the ASX 200 tumble, as much as -39% and the Government didn’t one bat an eyelid.
The Government also didn’t seem to care when big businesses started to fail and weren’t too worried when Virgin went into administration.
If you own shares with debt and your portfolio is now worth even 30% less than what it was you could very well have more debt than the value of your portfolio. And that’s not something the bank will likely accept, and the Government won’t be there to help you out either.
That’s not to say one investment is better than the other, as it’s important to have a mix of asset classes across your entire portfolio.
For me, this really does highlight just how safe and secure Australian real estate really is and why I consider it to be such a great asset class to invest in to build long-term wealth.