Australians love property and our high level of (expensive) property ownership is one of the reasons we are ranked as one of the wealthiest countries in the world. Not only do we desire our own block of paradise, we also love to invest in property with 1.9 million individuals declaring rental income (or more likely a rental loss) in their annual tax returns.
But do we every stop and ask why? Why do we love property so much, and why is a large chunk of the population obsessed with becoming property millionaires?
In this article I will delve into some of the psychology that drives bricks and mortar investment. My goal is not to change behaviour or even judge whether the desire to invest in property is right or wrong. I simply want to hold up a mirror so we can better understand our own decisions and biases.
Property is a physical asset
Property is a physical thing.
Utilising a unit trust structure to provide multiple investors with ‘shares’ in an underlying property is not new. Listed and unlisted unit trust structures have been around for many years and we’ve also recently seen a fractional property investment solution launched by DomaCom.
The real point of difference that BrickX provides investors is that they are effectively creating a market where the shares (or ‘bricks’) in the individual properties can be bought and sold openly with very little cost (2% purchase cost, $0 sale cost). The transparency and liquidity this can provide is something residential property investors can’t currently access.
But would SMSF investors be better off buying an entire property via a limited recourse borrowing arrangement, or should you buy a number of bricks across a number of properties?