We all have one of these stories.
I’m referring, of course, to the ‘one that got away’ in property.
If we haven’t personally looked back on a property that, in retrospect, we could have bought for next to nix, then we know someone who does.
This was the case with a Sydney investor I met recently, who lamented the fact that his grandma sold her prime piece of real estate for a song in 1985.
The family was given the opportunity to buy the apartment, perched on Sydney’s harbour – quite literally on the waterfront, overlooking the Harbour Bridge and Opera House – for around $180,000, but no one was interested.
So some lucky buyer picked up the two-bedroom apartment, which would currently be worth well over $1.8 million.
In these situations, investors can often become annoyed or frustrated over their ‘lost opportunities’, but not much can be gained from that mindset.
After all, it’s not exactly news that property prices increase significantly over time.
Most people are fairly clued up to the fact that the price and value of real estate generally grows as each decade ticks over.
That’s why it’s often said that time in the market, rather than timing the market, is the safest way to invest in property.
That’s one of the reasons I’ve always encouraged younger home buyers and investors to get into the property market, because I believe that the earlier you start, the better off you’ll be in the long run as compounding (of property price growth) and time work their magic.
The proof of this philosophy is pretty much in the pudding, as property values have grown exponentially over the years.
Let’s assume that you bought your first home or investment property just over 40 years ago, in 1976.
Across Australia’s capital cities in 1976, median house prices looked like this:
- Sydney – $36,800
- Canberra – $35,100
- Melbourne – $32,900
- Adelaide – $29,800
- Hobart – $31,575
- Perth – $33,000
- Brisbane – $26,275
There’s a few interesting things that come out of these figures.
- How cheap property prices seem when you look back today (not that they seemed inexpensive at the time)
- Brisbane was the cheapest capital city then, well behind Hobart and Adelaide.
It’s important to keep things in perspective, though.
The average wage in the mid 1970s was around $6,000, according to the Australian Bureau of Statistics, so the median Sydney house price was almost six times’ the value of the average annual income.
Forty years on, both wage and house prices are considering higher, although they haven’t grown at a consistent pace.
Sydney’s median is now 27 times higher than it was in 1975; if wages had matched that pace, the average wage would now be $162,000.
Of course two of the big reasons behind this are:
- There are more 2 income families (both partners working) today than there were 40 years ago increasing disposable household income.
- Interest rates have virtually halved substantially increasing affordability. The standard variable interest rate in 1976 was 9.88%, meaning you needed to pay twice as much interest to service the same dollar value of loan
House prices today:
According to CoreLogic , median capital city property values at the end of October 2018 were as follows:
- Sydney – $833,876
- Melbourne – $665,044
- Perth – $451,148
- Canberra – $589,415
- Brisbane – $491,925
- Darwin – $433,818
- Adelaide – $431,554
- Hobart – $445,655
Sure there is lots of negative press about property at the moment, but…
Knowing what you know now, who wouldn’t have liked to buy their parent’s house for what your parents paid years ago?
Wouldn’t it be great to have a crystal ball and take a peak into property markets of the future and see where real estate prices will be in another 40 years
In its absence, I think it’s a pretty safe bet to assume that in the long-term, property values will continue to grow, underpinned by our growing population and the general wealth of our nation.
It’s important to keep this in mind when you’re negotiating your next property deal, as squabbling over $2,000, $5,000 or even $10,000 in today’s dollars is unlikely to have a huge impact on your eventual wealth.
That doesn’t mean you should buy any old property
Just like over the last 40 year, in the next 40 years some properties are going to out perform others – you need to buy investment grade properties.
Buying smart, investing in strong growth locations and negotiating the best price for the current market conditions: these are the most important tenants of property investing.
Follow these steps and you’ll be less likely to lament ‘the one that got away’ in years to come!
WHAT CAN YOU DO TO STAY AHEAD?
As signs point to softer growth conditions for Australian property over the coming months, independent professional advice and careful consideration will be as important as ever in navigating Australia’s varied market conditions.
If you’re looking for independent advice, no one can help you quite like the independent property investment strategists at Metropole.
Remember the multi award winning team of property investment strategists at Metropole have no properties to sell, so their advice is unbiased.Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level.
Please click here to organise a time for a chat. Or call us on 1300 20 30 30.
When you attend our offices in Melbourne, Sydney or Brisbane you will receive a free copy of one of my books – you choose!
Subscribe & don’t miss a single episode of Michael Yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to Michael Yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.