If you’re seeking the best property investment advice around, disappointingly, the simplest advice is often the best. In this article we will explore two key traits of the wise property investor – backed by historical data.
The Virtue Of Patience
You’ve likely heard stories from your parents about how cheap houses were “back in the old day”. While prices are relative to the time, there is much to be said (and benefit from!) with asset price inflation for longer term investors.
If we go back in time to 1989 (when the Proclaimers were top of the charts) the median house price in Brisbane was $96,000. Fast forward to 2019 and it’s now $535,000. Hard to fathom and if you do the maths – that is an annual rise year-on-year of 5.9% per annum.
Let’s stay on the calculator and look forward another 30 years to 2049. If prices rise at the same rate, then Brisbane’s median house price will be just under $3,000,000 in 2049. At that time a case of beer might cost around $300 – so once again it is all relative.
The chart below shows the relative median house price growth in Australia’s capital cities. Brisbane house prices are the light blue line.
Source: ABS, Queensland Productivity Commission.
You can see that it’s a bumpy road with some long flat spots. There have been a couple of significant price surges, the first between 1987 and 1992 (just before the “recession we had to have”) and then from 2001 to 2009.
You could argue that the 90s were a ‘lost decade’ – with 10 years of no significant growth. In a similar vein, the 2010s have been another soft decade, with Brisbane median house prices having recovered from the dips after the 2011 flood – but with little further progress beyond those price levels.
What factors might deliver the next surge? Will the tightening of building approvals over the last couple of years do the job? Will Brisbane’s big infrastructure projects like the second airport runway or Cross River Rail finally pay dividends? Will we win the right to host the 2032 Olympic Games and be catapulted onto the world stage as a genuine global city – with ‘global’ property prices?
The patient investor knows that these questions – and more – will eventually be answered and that the key is to just ‘hang in there’ for the long-term benefits.
Quality As A Non-Negotiable
The population in Australia’s capital cities are growing faster compared to regional areas, with trends in employment and lifestyle factors primarily driving interstate and international migration.
The chart below shows that over the last 20 years South East Queensland’s median price growth has significantly outpaced that of Queensland’s regional areas.
The data makes it hard to refute the old real estate mantra of ‘location, location, location’.
You may also have heard the saying before that there are ‘markets within markets’. The following chart reveals that within South East Queensland the rate of growth in median house prices had generally been stronger the closer you get to major employment and infrastructure hubs (the CBD).
Source: Brisbane Buyers Agency.
With the river city getting bigger every day, we can probably expect a continuation of the big divide between the ‘prime’ suburbs and the rest. Over the next 30 years Brisbane is on track to effectively double in size, placing even more of a premium on the best locations.
The Best Property Investment Advice For You
When it comes down to the best advice it might be as simple as remembering just two words – ‘patience’ and ‘quality’. Remember that the data shows that it is possible to hold a great asset for a decade and have no significant growth, making it hard to ‘keep the faith’. The trick is to just persist with your strategy. Chopping and changing – especially with real estate having such high entry and exit costs – is not the way to go.
The legendary investor Warren Buffet famously said that the share market was a mechanism for “the transfer of wealth from the impatient to the patient”. I think this truism is just as relevant for property. That’s why the tortoise always win the race. Slow and steady.
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