Be careful not to get priced out

Discussion in 'Investment Strategy' started by Kepler5b, 5th Jun, 2018.

Join Australia's most dynamic and respected property investment community
  1. Kepler5b

    Kepler5b Member

    Joined:
    23rd Mar, 2016
    Posts:
    6
    Location:
    Sydney
    Bought my PPOR in late 2012 for 1.1million in lower north shore, Sydney. This was not an easy transaction for our household, just barely qualified for the mortgage.

    Five years and 2 months later, an identical property in my street sold for 2.2million

    So, the property increased around 100% in 5 years, a gross increase of 1.1 million. Pure random luck in the market. I can honestly say, I did not see this coming.

    My household is on a relatively high income, but there is no way that our household, let alone one person, has earned 1.1 million in 5 years.

    Ironically, now we would not be able to afford our home, if we hadn’t bought 5 years ago.

    While I don’t expect the same increase in the next 5 years – in fact I expect the property to lose some value - I wasn’t expecting a doubling in the last five years either.

    Real estate agents constantly proposition us to sell the property. While tempting, I know that would be a trap. How could I know that I could afford to buy back in the same location, at a later date? Short answer, I can’t know that.

    I’ve heard of other people, like retirees, selling up and moving location, regretting it, and then being unable to return.

    Warning for young-úns – and not so young-uns – be careful not to get priced out of an area, consider whether it would be better to leverage an existing asset than sell and be unable to buy back in.
     
    2 people like this.
  2. Simon Hampel

    Simon Hampel Founder Staff Member

    Joined:
    3rd Jun, 2015
    Posts:
    12,394
    Location:
    Sydney
    This is what a lot of people new to the real estate market don't tend to appreciate. They hear adages such as "property doubles in value every 7-10 years" ... which is generally true over the long term - but doesn't reflect the reality that property prices will generally be stagnant or fairly slow growth for an extended period (or even slightly negative), and then the boom when all the price rises occur can be as little as a couple of years.

    It doesn't always happen this way - but it is a generally observed pattern.

    But yes, it can be an issue that if you sell out (eg to take a position interstate/overseas for a few years) you may find it difficult to buy back in if your period of absence from the market happens to coincide with a boom period.
     
    2 people like this.

Build Passive Income WITHOUT Dropping $15K On Buyers Agents Each Time! Helping People Achieve PASSIVE INCOME Using Our Unique Data-Driven System, So You Can Confidently Buy Top 5% Growth & Cashflow Property, Anywhere In Australia