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Here's the truth about where property prices are headed

Sydney Harbour lower north Shore against city CBD waterfront around Circular quay and the Sydney Harbour bridge over red roofs of low-rise residential houses in aerial view. Source: Getty Images

It’s common knowledge that the value of property grows overtime.

It doesn’t grow consistently or uniformly, but overall, property prices generally increase.

But how are investors to act in the current market if they wish to grow their wealth in the safest possible way?

So let's look back at property prices to help you look forward.

It’s common knowledge that the value of well-located property increases over time.

It’s also fair to say that the sooner you start investing in property, the better you’ll end up financially.

“That’s not fair,” I can hear new investors say. “Despite the fact that the value of some properties have fallen, prices are still so high, I’ll never get my foot on the ladder — let alone be able to build a property portfolio that allows me to retire.”

I can understand your frustration.

And in fact, to compound it somewhat, I’ll share with you this titbit of information one of my mentors shared with me many years ago.

The best time to get into real estate was 20 years ago.

I would add — the second best time is today.

But that's not particularly useful information, is it?

Who wouldn't like to buy their parent's house for the price they paid for it years ago?

Until we master the scientific breakthrough of time travel, it’s not possible to go back in time and buy property while it’s still “cheap”.

And let’s not sugar coat it — if that were possible, we could snag some absolute bargains.

If we take a look back at what real estate prices were like a few decades ago, the facts and figures are eye-wateringly appealing.

I started investing in the early 1970's.

In 1973, the median house price in Sydney was just $27,400.

Renting would cost you an average $26 per week, and according to the Australian Bureau of Statistics (ABS), the average weekly wage was $111.80.

Buying a house at this time in in Brisbane cost $17,500 and in Melbourne it would set you back $19,800.

The first property I bought in Melbourne cost me $18,000.

I went halves with my parents and we got $12 a week in rent and we were excited!

And if you were to purchase the average house in Canberra back then, it would cost you around $26,850, whereas a house in Hobart would have seemed a steal at the low median of $15,200.

As for Perth and Adelaide, the housing market was affordable with a median of $26,850 and $16,250, respectively.

Pricing of houses these days is a vastly different story

According to the latest data from CoreLogic, median house values at the end of June 2019 were:

  • Sydney — $866,524

  • Melbourne — $709,092

  • Canberra — $656,943

  • Brisbane — $533,133

  • Perth — $458,137

  • Adelaide — $465,266

  • Hobart — $484,716

  • Darwin — $461,033

Time, not timing

In the space of 46 years, all capital cities have recorded massive price growth.

Some have performed better than others, clearly.

But the fact remains that anyone who bought property in 1973 and still owns it now, has profited very handsomely from their investment.

Also, time in the market, not timing the market, is a surefire strategy for success when you’re building wealth for your future.

There are a number of factors that influence property prices, but in particular our population growth and the increasing wealth of our nations have driven up values.

When all is said and done, however, the irrefutable truth of the matter is this…

If you follow a proven investment strategy, do the right research, choose an investment grade property, in the long-term outlook will be favourable.

This is true regardless of how volatile value movement is over the short-term and no matter how high property prices are in the current market, and

So, rather than fretting about "where property prices are heading’"over the next year or two, focus on the bigger picture.

If you buy well, buy smart, and have a strategy in place, your prospects for wealth creation are strong.

After all, if Sydney property prices increased from around $27,000 in 1973 to $878,000 in 2018 — can you imagine where they will be a few decades from now?

Now could be the best countercyclical opportunity in decades

We're at the tail end of this property slump.

Sure the value of some properties may slip a bit more, but the downside is minimal and the long term upside for well located capital city properties is solid.

Factors that led to the change in the market momentum include:

And this will only get better in the next few months as APRA's changes haven't really worked their way through the banking system yet, and many home owners and investors have not yet benefited from the lower mortgage rates and the tax cuts are yet to hit our hip pockets.

Now don't expect a property boom any time soon, but think about it?

How often in your lifetime will you get a chance to buy Sydney property 15% or so cheaper than you could a few years earlier?

How often in your lifetime will you get a chance to buy Melbourne property 10% or so cheaper than you could a few years earlier?

A few times in your lifetime!

Michael Yardney is a director of Metropole Property Strategists, which creates wealth for its clients through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Update blog.

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