PROPERTY INVESTMENT

Why property has never been a ‘get-rich-quick’ scheme

June 8 2016
Get rich quick

If you’ve ever played Monopoly you’d know that the winner of the game is most likely to be the player who has held the most property for the longest.  The key to the game is to get in, ensure you have the cash flow to support your lifestyle and your investments then hold them for the long term.

In real life, the notion of property doubling every 7 – 10 years is very often talked about.  No doubt though if you’ve bought property in WA in this last few years, you’d be finding that a pill hard to swallow right now.  But sit tight.

If you’d bought a property back in 1990 you may have been feeling the same way.  New owners were likely to have been left scratching their heads wondering whether they had made the right decision, particularly after seeing the boom of 1988. The period which ensued up to 1999 saw low inflation rates similar to what we are currently experiencing, and yet despite this, the property market still showed growth.

The median house price moved from $96,000 in 1990 to $145,850 by 1999 reflecting an average annual growth of 4.2% with a 51.9% return on investment*.  Interestingly, the interest rates were hovering on average around 9% for that decade making the cost to hold the property much higher back then.

WAProperty market 1960-2015

Following the decade of the 90’s, the WA market shifted gears and we witnessed double-digit capital growth with many commentators saying this was the bubble of all bubbles. Whilst we saw solid continued growth, the 2006 spike is still dwarfed by the 1988 boom with an unprecedented 58% growth in one year.

So despite the current market factors and commentary suggestive that the likelihood will be we won’t be seeing you double-digit capital growth for a few years, astute buyers will be seeing the opportunities to take advantage of the current buyers’ market with a long term buy-and-hold strategy.

* These returns do not take into consideration costs of holding the property.

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