What 20 years in property can do!
- By Peter Gordon
- •
- 26 Mar, 2019
There’s a recurring question in real estate…
‘When is the best time to buy property?’ Answer: Twenty years ago.
‘When is the next best time to buy property?’ Answer: Today.
Some new data from CoreLogic crystallises this message.
Over the past 20 years, national property values have increased by 197.4%. That means a house worth $500,000 back in 1999 is now worth close to $1.5 million today.
Just think about that for a minute. Where were you 20 years ago? How cheap does $500,000 look today compared to back then?
Over my 35 years in real estate, so many people have told me about the golden buying opportunity they missed 20 years ago because they got scared.
It’s sad to listen to these stories and see the looks on people’s faces as they lament what that one investment 20 years ago could have done for them today. The wealth, security and lifestyle options that such significant capital growth would have given them at this point in their lives.
These stories are all about fear and the herd mentality. Here’s what Warren Buffett, one of the world’s most successful investors, has to say about fear: ‘Be fearful when others are greedy. Be greedy when others are fearful’.
Let’s apply that logic to today’s market conditions in Sydney and Melbourne.
Are people greedy right now, or fearful? Yes, they’re fearful. The scary headlines are getting to them. They can see that property prices have fallen 10-15% and the buying opportunities are there but they’re hesitating.
Why are they hesitating? Because ‘the herd’ is talking about how bad it is out there; and no one wants to be the little black sheep who buys amongst all this doom and gloom.
Here’s the reality – let’s take Sydney. We had 75% growth over five years, followed by a 10-15% price drop to date. This is not even remotely catastrophic – nor unexpected. Even for buyers who purchased at the top, all they need to do is remain in their new homes or hold their investments for the medium to long term, which should always be the plan when you buy real estate anyway.
While there are definitely cycles in the property market, well-located and in-demand property rarely declines in value.
Let’s go back to the CoreLogic stats. Over the past 20 years, combined capital city values have increased by 212.4%. Combined regional markets have jumped 150.3%. Let’s dig deeper and survey the performance of our East Coast capital city and regional markets…
Capital growth over 20 years
1. Melbourne takes the cake with 274.6% growth in home values over 20 years
2. Canberra 230.7%
3. Sydney 201.9%
4. Regional NSW 185.6%
5. Brisbane 182.8%
6. Regional VIC 179.5%
7. Regional QLD 123.6%
Now, not every property in Australia will have amazing growth over 20 years. Local factors in different states, like the impact of mining and short-term commodity booms on the regional Western Australia market can have a big impact on long term capital gains.
The data shows that at this point in time, regional WA home values have grown by 77.5% over the past 20 years. Had the data been taken during the peak of the mining boom, it would have been a far more impressive number because this market has declined significantly since then.
However, on the East Coast where we have strong concentrated population growth and housing undersupply, reliable long term capital gains are relatively easy to achieve if you buy well.
People who make the most money out of property have a very long term view with this asset class. They buy when the market is low and either hold, or sell when the market is high. They buy quality property in desirable locations close to major job centres and lifestyle amenities. Then, they pretty much sit and wait.
It’s a simple recipe to follow and we have plenty of historical evidence proving that good Australian real estate delivers wealth.
In Sydney and Melbourne today, now is the time to buy for future wealth. As Buffett says, it’s time to be greedy. Pull away from the herd, ignore the chatter and focus on the fundamentals of what property can deliver for you.
Don’t be the person that says to me in 2039, “I should have bought back then.”.
Published: Thursday, February 28, 2019 John McGrath
Don't sit back and miss the boat ! Join us to find out why now is the right time to invest and for exclusive previews of investment opportunities.
9th April 2019
| Quiet simply, the Palms is the place to buy! |
Sydneysiders and Melburnians, put aside your equally outstanding flat whites for a moment. Stop bickering about whether great beaches beat cool laneways (they do) and desist from debating whether all baristas require waxed moustaches (ideally).
Because Brisbane is closing in on the title of Australia’s best city, and we must join forces to keep this subtropical upstart in its place.
Time magazine recently named Brisvegas on its “World’s Greatest Places” list, and omitted our cities. It’s a huge shock (and who knew they still published Time magazine?). But they might be onto something.
Time points to the 2032 Olympic and Paralympic Games, which will be hosted in the maroon metropolis. Brisbane will do a fine job, even though it’ll baffle the world when rugby league is added to the schedule and Queensland is allowed to field its own team.
Time’s most radical claim is that Brisbane is worth visiting now, but tourism is surging. Not only did Lin-Manuel Miranda recently drop in to catch Hamilton , but hundreds of Hamilfans flew up to watch his interview with Leigh Sales (presumably unaware that it would subsequently arrive on iView for free).
A leading local agent has appraised each side of these duplex's to be worth $665k on completion and rent for $495 per week. So that is massive potentail instant equity of up to $390K on completion, which is incredibly hard to find.