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Capital Growth. A thing of the past?

Discussion in 'Property Market Economics' started by Sonamic, 27th Jun, 2015.

  1. Sonamic

    Sonamic Well-Known Member

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    I was speaking to my Broker the other day. As you do. And I expressed to him my lack of faith in the "Property Clock" and my all time favourite phrase "property doubles every 7 to 10 years". To which he replied "these days that's looking more like 30 years".

    Now maybe I'm just a naysayer. But my question is, who here still believes in property prices doubling every 7 to 10 years?

    Take your average mum and dad 1st time Investors. Late 30's - early 40's, couple of kids in school. All their friends at Bbq's on weekends are talking property. They think "we can do this too". They're 15 years into a 30 year stretch on the family home mortgage. Take out 125k Equity to do 20% down plus Costs on a 500k house and land package in a shiny new estate 10 minutes from home so they can keep an eye on it and new houses don't need maintenance right. Be worth a million bucks in 10 years tops!

    How long till this actually doubles in Value in today's Market? And the scary part, how many of these hypotheticals are out there getting themselves into potential Financial difficulty because they don't have propertychat to help them lessen mistakes hard learned by others, and help them buy right, better equiped with the knowledge?

    Thanks for reading my rant.
     
  2. Gingin

    Gingin Well-Known Member

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    Property values double every 10-14 yrs, but so do wages,keeping everything relative.

    At the moment there is a large disconnect,ie 9 yrs wages for an entry level home when traditionally its been 6 yrs.

    Will property go up in value?... Sure. In real terms?. Maybe not.Will there be opportunity cost elsewhere? You bet.
     
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  3. Leo2413

    Leo2413 Well-Known Member Premium Member

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    All of my properties have more than doubled in 10 years, that's not to say I believe all residential property will perform the same.

    It comes down to education, commitment, mindset and action.

    Those who are hardcore and take the time to learn what gives your property the best chance for quickest CG and ALSO how to manufacture growth - its those people who will do well and see quickest CG (small %age of investors and this will never change because human nature never changes)

    Its really simple.

    Education, mindset, relentless commitment and massive action.

    Now most investors have varying levels of the above, hence they will see varied results. The fact of the matter is, most ppl who invest in property approach it 'wrong' in order to build a large portfolio fast and build massive wealth. Now that may not be their goal which is fine too. Over the years I have been so sick and tired of hearing how people say there is no 'wrong ' way to invest in property. IMO its absolute BS, of course there is, if there isn't then more investors would be able to build wealth though it. And the more 'wrong' decisions you make, the slower it will take to build wealth. Simple answer is to educate yourself and approach it differently to most investors.
     
    Last edited: 27th Jun, 2015
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  4. MTR

    MTR Well-Known Member Premium Member

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    What can I say... Some properties double in 3 years. Surprised..?

    MTR:)
     
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  5. Sonamic

    Sonamic Well-Known Member

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    No. I've had properties do this in the past.

    But for Joe Average just starting out there is a very real chance of getting burnt thinking they are doing right by betting big on the "sure thing" that is property. Hence the changes to Lending of late I suppose to scare off all but the most committed.
     
  6. Azazel

    Azazel Well-Known Member

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    Get a new broker, maybe someone from here that knows what they're talking about. Or a new favourite phrase.
     
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  7. MTR

    MTR Well-Known Member Premium Member

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    ...and many will get burnt believing property doubles every 10 years.

    Timing is an important factor, buy at peak and your screwed.

    Newbies will all make mistakes, that's how you learn, persistence is key, fall over, pick yourself up, dust yourself and won't be doing that again

    MTR:)
     
    Last edited: 27th Jun, 2015
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  8. roberto

    roberto Member

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    I don't know if property will double in the next 10 years, but I think property will grow at the GDP + CPI rate over the long term.

    By definition, the GDP measures the real increase in income (and expense) of the country and the CPI measures the nominal increase, so property (and other assets) should growth at similar rate over the long term. Obviously, it is not a lineal trend, sometime assets will grow at a faster rate and sometime at a slower rate (even negative). However, as long as we have positive GDP and Inflation, we should have asset growth.

    For example, If we stay in a low inflationary environment with low GDP growth, lets say 2% + 1%, then property should growth close to 3% per year and double in 23-24 years. With GDP + CPI around 6% property would double in 12 years, and with GDP + CPI around 10% property would double in 7 years.

    I don;t have formal sources, this is only my opinion based on empirical evidence and common sense???
     
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  9. MTR

    MTR Well-Known Member Premium Member

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    Dont get caught up with what may, could, would, should happen... No one knows, even the top wossa economists get it wrong, and they all have conflicting views WTF.."..gotta love them.

    watch markets today and follow those that are rising because it means there is greater demand therefore you will make money, ignore the noise, I do:)

    MTR
     
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  10. Sonamic

    Sonamic Well-Known Member

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    Yes Azazel. I'm onto it. He's a nice bloke, but with quotes like that, past his use by date.
     
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  11. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Agree with MTR. 95% of everything you hear is just noise.
     
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  12. Kael

    Kael Well-Known Member

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    Agreed with Azazel. Wouldn't a broker want you to be happy about spending money on property and using his services? Haha
     
  13. Jingo

    Jingo Well-Known Member

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    I agree, no one really knows what will happen.

    All the talk around BBQ's about property is usually an indication that the market is peaking, and probably best to sit tight.
     
  14. keithj

    keithj Moderator Staff Member

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    Ask him where the extra 10 million people that the ABS expects to be here in Oz by 2035 are going live. If he's not expecting them to create massive demand for a well located houses, then maybe suggest that he invests in tents ?
     
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  15. HUGH72

    HUGH72 Well-Known Member

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    No one knows the future, if you divide 72 by your estimated rate of CG it will approximately give the time to double in value. Eg CG of 7% is required for a place to double in value in 10 years.
    I've had one which doubled in 5 years and has just doubled again, this took a further 15 years.
    A low rate of wage growth, low inflation and low economic growth means that the time frame is likely go be greater in the future but thats okay and probably preferable for things not to get overheated.
     
  16. Bayview

    Bayview Well-Known Member

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    True.

    I've been buying and selling property since 1985 - not that many; only 10 properties.

    5 were IP's and 5 were PPoR's - 2 of the PPoR's were builds on blocks I bought previously.

    Over that stretch, I have had some properties that did nothing at all in 3 years, and one that doubled in value (PPoR) in 3 years.

    I didn't time any of these purchases - I didn't have the awareness and/or knowledge of property to really embrace that and capitalise.

    But, what I have noticed over that 30 years is that folks were always saying how expensive property is, how it couldn't keep going up and so forth.

    But it still keeps on doing that.

    While there is such a thing as inflation, wage growth and population growth it will always happen. The rate of growth will vary.

    Right now, there are lots of folks looking through a very very small window of time.
     
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  17. Bayview

    Bayview Well-Known Member

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    YUCK!!

    The last thing any Country needs is another 10 million people.

    After 3 years in the USA, I can guarantee everyone here that more people does not equal better lifestyle or economy, and certainly degeneration of the environment..

    We already have one of the best lifestyles of any Country in the world - with a tiny population and an immense tract of land...yet we are hell-bent on travelling down a path to the destruction of it.
     
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  18. LibGS

    LibGS Well-Known Member

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    Except the many experts that post on here.
     
  19. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Even the experts here don't know. What they do know is
    A) if it does happen you won't capitalize on it by not being in the market.
    B) how to manage their risk while they are in the market.
    C) how to buy the best property possible in the best location possible to ensure they are well placed to take advantage of any potential price movement.
    D) how to manufacture growth when the market doesn't give them any for free.
     
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  20. Sonamic

    Sonamic Well-Known Member

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    Valid points all. Depends on when and where you buy, how much you spend etc and a deal of luck? Educating yourself from those in the know increases that luck. I take everything I hear with a grain of salt, including what is said on this Forum. But you have to listen to the noise from many sources and then formulate your own direction of action that works best for your circumstances, timeframe, finances etc. Taking that action and backing yourself is the hardest part in the beginning. Then it gets a little easier each time thereafter. So a Broker saying it may take 30 years for property to double was dismissed. He gets my deals through to buy what I want for now.
     
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