The property investment world is full of sage advice in. Tried-and-true adages abound to help reset your compass during times of indecision.
One of my favorites is, “Time in the market is more important than timing the market.”
Every property pundit with even a smidge of good sense will wheel this phrase out at some stage. The funny thing though is that there are plenty of “advisors” out there who’ve barely seen an entire property price cycle in action… so how would they know? Worst of all are the ones who made decent equity gains in the last fool-proof property boom (i.e., 2020 to 2021) and are convinced they’re now the fount of all knowledge when it comes to successful investing.
Fortunately, I have personally seen the exceptional results that come from multi-year ownership. Now the good people at CoreLogic have produced the stats which prove those with long-term ambitions come out well ahead.
The 30-year trend
CoreLogic recently published a compelling study looking back at property price trends over the past 30 years. That’s three decades of market moves to help paint the picture… and the figures were striking.
First up they discovered that the average period of property ownership (based on 12-months’ worth of sales data) was nine years. What’s most interesting about this to me is it’s just about a full price cycle in some areas (but only just). While these owners have obviously enjoyed the recent boom, they haven’t benefited from the huge value upticks that can occur over multiple spins of the property clock.
Another interesting revelation is that it’s a fallacy to think softening markets will cause mass panic and sell off hysteria among property owners. The CoreLogic numbers show that through the peak of the latest growth cycle, approximately 617,300 homes were sold across Australia. While that was the largest number of sales since 2003, it equates to just 6.3 per cent of Australian dwellings turning over in a year. The point being that most homeowners aren’t directly impacted by short-term changing values.
The CoreLogic graph is crammed with compelling information.
From 1992 to 2022 there have been six distinct growth cycles and six district decline cycles. These have each been stimulated by a variety of drivers present at a given time.
The graph shows that while prices do grow and retract, the overall direction for values is absolutely positive. Nationally, dwelling values have increased 382 per cent since 1992 which equates to an annual compounding growth rate of 5.4 per cent over thirty years.
That’s a stellar annual figure for such a low-risk asset class.
Of course, looking at Australia overall doesn’t account for local market performances. For example, the mining boom and bust in Western Australia saw Perth values increase by 104 per cent between 2002 and 2012, but a look back at the past 10 years reveals they’re up just 14 per cent between 2012 and 2022.
A few more truths about the market have been exposed by the analysis too.
Houses have, over time, outperformed units for price growth as an investment class in most markets. Conversely, units have consistently shown higher rental yields. This would indicate the importance of selecting the right asset for your investment budget and cashflow situation. While a house might be appealing, using a unit to get your foot on the investment ladder can be a smart move as well.
Also, national property prices do not tend to double every 10 years, which is a period quoted by some. That said, using smart analysis to select the right locations and property types will see you outpace much of the market.
Capital cities also tend to outperform regionals, despite the rising popularity of decentralisation in 2020 and 2021. A 20-year gain of 453 per cent in capital city housing was more impressive than the 314 per cent increase across the regional centres. This is why you must ensure there’s a weight of population within reasonable proximity of your investment property.
All in all, the numbers show that while Australians are enamoured with discussing the property market, few are dramatically affected by short term bumps and shifts. This should bolster the spirits of anyone concerned by the current downturn in prices. History shows that a turnaround will come, and for those who hold on, the benefits are enormous.
You just need to watch for the indicators that demonstrate positivity is returning to the field, such as stabilised interest rates, lower building costs and reduced inflation. As these come to the fore, expect our residential property markets to begin their steady upward march once more.
Always review any property location research and investment analysis data, with a professional, QPIA (PIPA Member) qualified & accredited ASPIRE Property Advisor Network Advisor. Never rely on glossy sales brochures or property marketing information, ensuring a property is right for your strategy. Property Investing is about BUYING a property that matches your goals and aligns with your investment strategy. Never be SOLD an investment, know your numbers!
Visit www.aspirenetwork.com.au or call our office to be connected with an accredited and independent Property Investment Advisor on 1300 710 933
