Is property still a worthwhile investment?

Is property still a worthwhile investment?

Is property still a worthwhile investment?

With the triple challenge of a pandemic, recession and social and political unrest around the world, people are wondering whether property is the way to go.

The economic slowdown caused by our government to control the coronavirus pandemic plus rising unemployment and falling consumer confidence is creating significant headwinds for our property markets.

Despite this they have remained remarkably resilient.

And it’s true… property values are likely to fall a bit further in certain segments of our property markets (I’m looking at you high rise apartment towers and other secondary properties) before they bottom out.

Of course I can understand why some 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?

So let’s look at how our property markets have performed over the last 40 years…

Have property values really doubled every 10 years as many pundits would suggest?

I remember last year when there were similar concerns and at that time a MoneysaverHQ analysis of 40 years of Real Estate Institute of Australia data has found that a majority of state capitals have indeed doubled every decade.

Around the same time leading finance journalist Anthony Keane @keanemoney  reported 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.

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  • 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.

And with all the bad news currently circulating, it’s sometimes easy to forget that property values in most of our capital cities, and in particular in Melbourne and Sydney which seem to have suffered the most from the current pandemic, are still significantly higher than they were 12 months ago when the above statistics were reported.

Capital City Value

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.

 

40 Year House Price Growth

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. Sites For Property Investment

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?

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on

Project Team Avatars

If you’re wondering what will happen to property in 2020–2021 you are not alone.

You can trust the team at Metropole to provide you with direction, guidance and results.

In challenging times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s what you exactly what you get from the multi award winning team at Metropole.

If you’re looking at buying your next home or investment property here’s 4 ways we can help you:

  1. Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family.  Planning is bringing the future into the present so you can do something about it now!  This will give you direction, results and more certainty. Click here to learn more
  2. Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $3Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment grade property.  Click here to learn how we can help you.
  3. Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
  4. Property Management – Our stress free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years and our properties lease 10 days faster than the market average.

 

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