Having had a 20+ years career in banking & now starting my own business as a finance broker I think it’s fair to say I know a thing or two about bankers & finance. I also love statistics & can figure out just about anything with the use of a handy spreadsheet!
It is truly amazing what numbers & trends tell us. For example, the Sydney housing market through all it’s booms, bumps & dips over the past 40 years has remained at a consistent average growth rate of just over 7%. This means you double the value of your asset every decade!
What’s even more interesting is that if you had bought a house in 2008 for $450,000 (median price) it would now, even 18 months into a dip, be valued at ~$820,000. Your debt will have decreased (using 5% average interest rate) from $360k to $293k but the big story is that your equity (focus on the equity . . . the uplift far out-ways the cost of debt) will have grown from $90k (20%) to $527k (64%)!! That’s like saving $3,500 every month on top of your salary! This facilitates either upgrading to a new home or drawing on the equity to reinvest in an additional property.
The ability to build & secure wealth & a passive income (that is income you don’t have to work for . . happy days!) through property investment is a tool that most Australians don’t leverage. We are obsessed with paying off our mortgage where we should be utilising our biggest illiquid asset (our home) & turning it into a liquidity tool to invest. But you need to be smart about this. Don’t over-leverage your home & don’t stretch your budget to breaking point. Here’s where you need to talk to a smart & honest broker who has partnerships with property strategists & financial planners who can show you how this is done.
If you thought this last boom was grand, then you should have seen the one from the mid 90’s to 2004. Or go back a bit further to the late 80’s. We have them all the time, actually every decade has booms & busts. The property market is absolutely consistent in this regard, driven by good old fashioned human nature. We buy as the market rises for FOMO pushing prices higher & higher. Then we start to get nervous, with economists & journalists over-use of the term ”bubble”. After 2-3 years of double digit growth the central bankers &/or regulators step in using levers like interest rates or more recently regulatory intervention to slow things down, forcing everyone to take a breather (this is a good thing). When that works, talk of the bubble bursting, impending recession & the end of the world as we know it kicks in. We say that’s it, there will never be another boom like this, but guess what, good old human nature kicks in again & off we go for another cycle around the property market.
Australia is in a very unique position for continued prosperity. We have plenty of resources that the world needs & we have one of the highest immigration rates in the world to generate growth & innovation. So as long as we export stuff & import people, there will always be a new boom with the occasional bumps & busts to keep us on our toes.
So don’t worry if you think that you missed the property boom, you’re just in time for the next one.