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Healthy returns on property for medical professionals

Supplier: Finlease (Australia)
05 May, 2009

Professional premises now more affordable than ever.

If you're currently renting your medical suite or surgery, recent property market indicators suggest that now is an ideal time to consider purchasing your own premises.

Interest rates are at their lowest levels in almost 50 years making repayments easier, while there are some bargains around for good quality commercial offices or retail sites that can serve as medical rooms.

Recent comments by Bill Evans, Chief Economist of Westpac also suggest that the Reserve Bank is likely to continue to drop rates throughout 2009. That means affordability is likely to improve for the foreseeable future.

According to Mathew Tiller, Research Analyst at Colliers International, "Yields on commercial property have increased whilst interest rates have fallen. This means that the spread between the cost of purchasing a property and the return on investment has increased." In the Sydney CBD Office Market Indicators Report Autumn 2009 published by Colliers International, it was estimated that yields have risen by 125 - 200 basis points over the past 12 months for prime Sydney CBD commercial property. That means if you're currently paying rent, your landlord is reaping bigger dividends at your expense

At the same time, with reduced buying activity by the major institutional property investment companies, private investors are taking advantage of the buying opportunities that are available in the market right now.

How good an investment is commercial property? The Property Council/IPD Property Index for the office sector recorded a total return of 17.5 % in the year ending June 2008, while returns were 9.5% for retail sites. While this growth will have slowed due to financial challenges we're facing, many believe that the long term trend is strong. In addition, it is estimated that those who buy their premises will end up paying around 50% less than those who rented over the same period.

We spoke with Steve Daley, a medical property investment specialist with finance broker 'Finlease', who said, "Financiers are looking favourably at lending money to medical professionals." This is in contrast to the tightening of lending activity to the wider business community.

So as other businesses are finding it harder to source the funds to purchase commercial property, GPs, dentists, veterinarians and other medical professionals are in a strong negotiating position to pick up some bargains.

Once you own your professional premises, you're more in control of your business destiny and won't be at the mercy of your landlord. The rent you're currently paying could be better spent paying off an appreciating asset and building a nice secure nest egg for you when you eventually retire.

So it's worth having a chat with your accountant, or talking with Steve Daley of finance broker 'Finlease', a leading provider of finance to the medical community.