Is property still a worthwhile investment?
After a prolonged period of strong price growth, particularly in the Sydney and Melbourne property markets, Australia’s housing markets are in a slump phase led by falling values in our 2 big capital cities.
And property values are likely to fall a bit further in these cities before they bottom out.
Of course I can understand how it can understand why property buyers have “gone on strike” while waiting for the picture to become clearer
Many must be finding it hard to foresee strong house price growth at a time when the media is full of negative headlines about property.
But it’s important to keep a big picture view and remember what’s happened over the long term?
Have property values really doubled every 10 years as many pundits would suggest?
Leading finance journalist Anthony Keane @keanemoney reports that since the REIA data series began in 1980:
- Sydney median house prices have doubled four times, up from $64,800 to $1.06 million — a 1536 per cent gain.
- Melbourne real estate values also doubled four times over, up from $40,800 to $796,500.
- The value of Brisbane properties also doubled four times, from $34,500 to $530,000.
- Adelaide didn’t quite get there, doubling at least three times from $36,300 to $475,000, and it was a similar story for Perth — up from $41,500 to $500,000.
- Canberra has performed the best of all capitals, doubling almost five times from $39,700 to $665,000.
- Smaller cities Hobart and Darwin don’t have REIA records dating back to 1980, but have both doubled at least twice since the late 1980s. Hobart’s median house price has climbed from $88,000 to $502,800 since 1991, and Darwin is up from $87,500 to $493,800 since 1987.
Of course it hasn’t been a smooth ride
I started my property investment journey in the early 1970’s and I’ve lived through 8 property cycles, I’ve seen property booms and periods when their was little growth for a number of years.
I’ve invested during periods when negative gearing was allowed and a number of years when it wasn’t.
I’ve borrowed during times of high interest rates – very high interest rates – and now when I’m paying the lowest interest rates in the last 40 years.
And I’ve come to realise that neither booms or busts last forever.
So remember… property slumps (like the one we’re experiencing) are temporary.
However the long term appreciation of well located properties is permanent.
Let’s put this into perspective:
Back in 1973 around the time I bought my first investment property, the average weekly wage was $111.80 (including full- and part-time workers), according to the Australian Bureau of Statistics (ABS).
Today, a full-time worker makes on average $1,604.90 weekly (before tax).
Back then, just like today, there was a concern about how hard it was for first home buyers to get into the property market.
I paid $18,000 for a house – I went halves with my parents and we received $12 a week rent (and boy were we excited!)
And we took out a 30 year loan because we had no idea how we’d ever pay that $18,000 off.
It was hard for first home buyers as well as property investors then. Just as it is today
Having said that today many first home buyers are choosing to rentvest – rent in areas they want to live, but can’t afford to buy and instead they become renting investors and buy an investment property where they can afford to helping them get a foot up the property ladder.
So don’t be too worried about all the negative property news in the media.
Of course I can understand how it could be difficult to imagine strong house price growth at a time when real estate values are falling in some parts of Australia.
But if you’re considering getting into the property market remember this: Who would not like to buy the property their parents bought 10 or 20 years ago at the price they paid back then?
Here’s what you can do about it
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 home buyer or a beginning 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.
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