subject: Property Trends Over The Last 80 Years In Australia [print this page] In Australia, property prices over the last 80 years have doubled every 7-10 years. If a property is in a well located area, it may double in 7 years or even earlier. In a 7-10 year property cycle, the price doesn't go up 10% every year. The price goes up, it stabilises, it may fall a little, then it goes up again, and in 7-10 years it doubles. On average it increases by about 10% a year. People have a tendency to buy when the market rises, in which case they may have to pay more than when the market is low. Would you prefer to pay more after the price has increased or less when it's low?
When property prices stabilise or decrease a little, some people freak out and sell their investment property and get out of the market. In a rising market, some wait for the market to go down to buy. Then, when the market goes down, they wait for it to start rising again to buy, but in doing so they never actually get in and they miss the boat.
My best advice is that property prices double every 7-10 years. Buy a property when you can financially afford it and wait for 7-10 years for it to double - don't speculate. The earlier you buy your first one, the earlier you can invest in the second one. Some people ask me when is the best time to buy. The best time to buy was
yesterday, five years ago, or ten years ago. The future may never come, so the only time you have is now.
When you invest, stick to the fundamentals of property investment. It's these fundamental principles that drive property prices up.
Fundamentals of property investment
1. Population
Does the population increase or decrease in the city you live in?
The population in Melbourne continues to increase, so this puts pressure on demand and therefore drives property prices up.
2. Land
Is land readily available?
Shortage of land + strong demand = increase in land prices
3. Material costs
Do you think that buying the materials to build a house in 2 years' time will be cheaper or more expensive than today?
In time, it's going to cost more to build using the same materials.
4. Labour costs
Do you get paid less than last year?
The restaurant charges you more every year doesn't it?
In the same way, labour costs increase every year, usually in line with CPI.
So if the population increases, there is a shortage of land, costs of materials go up and labour costs go up, property prices have to go up in the long term.
Stick to these fundamentals. It's the law of supply and demand. And remember - invest for the long term.
