In an interview with Property Tribune, Terry Ryder, Managing Director at Hotspotting, said that Australian property prices will rise moderately in 2023, with regional differences in plan. 

“There is a growing chorus of real estate analysts who are forecasting that residential property prices will rise in 2023 – and I am one of them,” Mr. Ryder said.”In contrast to the predictions of economists working for the big banks and other institutions, specialist real estate researchers see prices growing in the year ahead.”

“No one is forecasting price rises like we saw in 2021, when the national average was an increase above 25 per cent. Rather, most credible analysts are suggesting price growth that could be described as solid or moderate,” Mr. Ryder added. 

Mr. Ryder was referencing the analysis published by SQM Research that stated that in a best case scenario, house prices will rise in all Australian cities, except for Darwin. 

If you are planning to try real estate investing this year, here are more reasons to push through: 

1. Potential for increased rental income

As interest rates rise, the cost of borrowing money may also increase. 

This could lead to more people choosing to rent rather than buy, which could increase demand for rental properties and potentially lead to higher rental income for property investors.

Rental income can be a good source of passive income, meaning that it can provide financial benefits without requiring a significant time investment.

2. Diversification of investment portfolio

Adding real estate to your investment portfolio can help diversify your assets, which can potentially reduce overall risk.

When you diversify your investments, you are spreading your money across different asset classes and industries, rather than putting all of your money into a single investment. 

This can help to protect your portfolio from being negatively affected by the performance of a single investment or market sector. 

For example, if your current investments are in the equities market, you should consider adding real estate so that you’ll have a buffer if that sector doesn’t perform well. 

3. Potential for capital appreciation

Property prices can increase over time, particularly in areas with strong economic growth or limited availability of land. 

This can lead to capital appreciation, or an increase in the value of the property.

In the context of real estate, capital appreciation can be a good thing because it can lead to a higher return on investment when the property is sold. 

For example, if you purchase a property for $100,000 and sell it 10 years later for $200,000, you have realized a capital gain of $100,000. 

This increase in value can be the result of a number of factors, including inflation, improvements made to the property, and changes in market conditions. 

Capital appreciation can be a good source of return on investment for real estate, particularly when it is combined with rental income.

4. Potential for tax benefits

In some cases, owning investment property can provide tax benefits, such as deductions for mortgage interest and property taxes.

There are a number of tax benefits that property owners in Australia may be eligible for, depending on their individual circumstances. 

Some of the potential tax benefits of owning property in Australia include:

Negative gearing: If the expenses associated with owning a rental property (such as mortgage interest, property management fees, and repairs) are greater than the income the property generates, the property is considered to be negatively geared. In this case, the owner may be able to claim a tax deduction for the net loss on their tax return, potentially reducing the amount of tax they owe.

Capital gains tax (CGT) discount: If you sell a rental property that you have owned for at least 12 months, you may be eligible for a CGT discount of 50% on the capital gain.

Depreciation: The value of certain assets, such as appliances and fixtures, within a rental property may be able to be claimed as a tax deduction over time through a process called depreciation.

Landlord insurance: The cost of landlord insurance may be tax deductible.

5. Potential for passive income

Renting out a property can provide a source of passive income, which is income that is earned without actively working for it.

Investing in real estate can be a good way to generate passive income. 

There are a few different strategies you can use to earn passive income through real estate, such as:

Renting out a property: You can set up your rental business and receive regular income from your tenants. 

REITs: Real estate investment trusts (REITs) allow you to invest in a diversified portfolio of real estate assets, such as office buildings, apartments, and shopping centers. REITs are bought and sold on the stock exchange and offer a way to earn passive income through real estate without the need to own physical property.

Crowdfunded real estate: Online platforms now allow you to invest in real estate projects with as little as a few hundred dollars. These platforms allow you to invest in a variety of real estate projects, such as commercial and residential properties, and earn a share of the rental income or profits when the property is sold.

6. Opportunity to leverage

It is possible to purchase investment property using leverage, such as a mortgage, which allows you to control a larger asset with a smaller amount of money.

When you buy a property with a mortgage, you’re using leverage because you’re borrowing money to finance the purchase. 

This can potentially allow you to buy a more expensive property than you could afford to pay for in cash, which could lead to higher returns if the value of the property appreciates. 

However, it’s important to be aware that borrowing to buy a property also increases your risk, as you’ll be responsible for repaying the loan regardless of whether the value of the property goes up or down.

Another form of real estate leverage is a lease option, which allows you to rent a property with the option to buy it at a later date. This can be a way to use leverage to buy a property, as you’ll be able to make small, incremental payments over time rather than paying the full purchase price upfront. 

However, it’s important to carefully consider the terms of the lease option and make sure you’re comfortable with the agreement before signing on.

7. Potential to add value

Improving a property through renovations or other upgrades can potentially increase its value and make it more attractive to renters or buyers. This can also increase the return on your investment.

Keeping the property in good repair and making necessary updates, such as a new roof or updated appliances, can help attract and retain tenants and increase the value of the property.

Installing energy-efficient appliances, windows, and insulation can not only add value to the property, but also lower utility costs for tenants and make the property more attractive to environmentally conscious renters.

Real Estate Investing Has Its Risks 

It’s important to keep in mind that investing in real estate carries some risks such as the following: 

Market risk: The value of a property may decrease due to changes in market conditions, such as a recession or an increase in interest rates.

Tenant risk: The property may be vacant for a period of time if the tenant moves out or is unable to pay rent.

Repair and maintenance costs: The property may require repairs or maintenance, which can be costly.

Leverage risk: If the property is financed with a mortgage, the investor may face the risk of default if they are unable to make the required payments.

Legal and regulatory risk: There may be legal or regulatory issues that arise, such as zoning changes or environmental regulations.

Economic risk: The investor may face economic risks, such as inflation or deflation, that can affect the value of the property.

Natural disasters: The property may be damaged by natural disasters, such as floods, earthquakes, or hurricanes, which can be costly to repair.

It’s a good idea to do your due diligence and carefully consider the risks and potential returns before investing in real estate.