Real Estate Investor Magazine South Africa May/June 2015 | Page 61

AUSTRALIA

Australian

Rental Property
Pros And Cons Of
Cash Flow On Property
BY BILL RAWSON

I

n the Australian property media, the pros and cons
of capital growth versus cash flow on property is
still being debated at length.
Rawson said that to his surprise he thought that the
last word on this subject had been said some time ago
because there is usually a high connection between
good rentals and capital appreciation.
“If you achieve good rentals you will usually
get significant capital appreciation and vice versa.
However, those interviewed in the Australian property
press made many points that are as relevant in South
Africa as they are in Australia,” he says.

“Genuine wealth is achieved
when the value of your assets
double in every growth cycle.”
Those backing capital growth, argue (to quote
an article in the Australian Property Investor) that
genuine wealth is achieved when the value of your
assets double in every growth cycle.
These, as in South Africa, usually cover time periods
of seven to ten years, but in some cases they can be
as short as five years. To achieve this very valuable
doubling, the rental income has to be supplemented by
significant capital appreciation.
Most people agree that new property appreciates
faster than old property. This outlook in both countries
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is encouraged by certain tax allowances