Property Investing: Should I stay, or should I go?

Are you concerned about the current state of the property market and where it’s heading? You’re not the only one…

Over the coming weeks we will shed some light on where the best value is (in the current market) and serve a good reminder of the benefits of what fundamentally sound property investing can do for you.

With increasingly negative media coverage surrounding the Australian property market, now might be a good time to step back and gain some perspective on things before you throw in the towel on the whole notion of investing.

Property investing is not a get rich quick strategy, it’s a long-term game designed to build a nest egg for the future. Done correctly, it can lead to genuine wealth creation giving investors more options in life such as early retirement, funding their children’s education, or providing additional cash flow to enjoy more of the good things in life like travelling or living in your dream location.

Property markets, like all other markets, are susceptible to temporary slumps and stagnation, but for many investors the key to their success has been TIME in the market more than TIMING of the market. 40 years ago, the median house price across Australian capital cities was just $37,337. Today, the median house price across the whole of Australia is $809,201 which is almost a 20x increase in value. Let’s just say the market slows down over the next 40 years and only performs at 50% of the previous 40-year growth, that would still be a 10x increase, which would mean that by 2058 median house prices would be a little over $8 million. Not too shabby!

In this game, it generally pays to be patient and remember that in many cases short-term volatility is being underpinned by long-term growth – you just have to hold on. There are still some good signs for our future property markets which are, in some ways, a protected species:

  • Australians have established a long love affair with property (which is probably why when it misbehaves we start getting all emotional about it in the media)
  • The property sector is Australia’s #1 employer
  • It is deeply embedded into our economy and financial sectors
  • Property provides a massive revenue stream to all tiers of government

Also, relative to other overseas countries Australia has:

  • A healthy economy
  • A rapidly growing population
  • Stable government (despite our compulsion to bring in a new prime minister every 5 minutes), and
  • Enjoys a high quality of life and desirability to live here

It must be said that much of the negative press towards Sydney real estate is justified, due to its sheer unaffordability. However, there are many more affordable markets that are backed by solid fundamentals for both capital growth and rental yields that should be getting more coverage.

Stay tuned for our next blog post to find out where these locations are and find out how you can pick up a great property for under $500,000….

Let us know your thoughts by commenting on our blog and feel free to give us a call on 0430 227 328 if you have any questions.

by Simon Salotti, Business Development Manager at Divitis Finance

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