Australia has one of the most impressive track records for long-term property yield in the world, but often, the biggest mistake property investors make is not being patient enough to truly reap the rewards.
Just how well has Australia’s property market performed?
Well, according to a recent report from the Switzerland-based Bank for International Settlements, the long-term rise in Australian house prices since the early 1960s has been the most sustained property market upswing in the world.
But that doesn’t mean the country is immune to stagnation and slumps. In fact, these are a normal part of the property cycle – that is, the habitual rise, fall, stabilising (and then rising once again) of property prices.
Like many other types of long-term investments, it pays to be patient and remember that in many cases short-term volatility is being underpinned by long-term growth – you just have to hold on!
Take some of our clients as an example:
In 2008, we negotiated the sale of a block of 91 two-bedroom, two-bathroom, one car apartments in Sydney’s southwest. The sale price was $405,000 per apartment.
We sold all 91 apartments and a couple of years on, some clients mentioned that the apartments had only grown slightly in value and that rental yields were low. We reminded these clients to be patient, mentioning that they purchased in a good suburb and at a good price and that they will see the greatest results if they hold onto their properties.
Nevertheless, a few became restless and sold in 2010/2011. After costs, they made little profit, most just breaking even.
Nine years on the apartments were recently valued conservatively by a bank at $875,000 – and they’re expected to continue growing in value. Over this period, we have seen rents wax and wane, some years increasing by as much as 5%, others decreasing by a few percent as more property came onto the market, followed by years on flat growth before increasing again.
The takeaway here is to be patient and to consider the long-term growth in value of your investment – though that’s not to say there won’t be a time when selling is the best option. This could be because of unexpected life events requiring you to free up your money, or to take advantage of a suburb/city boom that may be short-lived (e.g. holiday towns). You may consider selling a property to finance the acquisition of an investment with greater potential.
In any of these cases, the team at Providence can support you with advice and services to help you make an informed decision about buying your next home or investment property, or deciding which agent to use and which approach to take when the time comes to sell.
But remember, be patient!
Ultimately, the message here is to be patient with property. In many cases, the longer you hold on, the greater your returns. Fluctuations in market, including stagnation and slumps are normal in all property markets, though in almost every case, and certainly in Australia’s big cities over the past half-century, the overall property price trend is pointing one way… up.
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Providence Property Group is a specialist property advisory firm providing unparalleled research-driven insight into the Australian residential, industrial and commercial property markets. Providence is a strong advocate for responsible and informed investing and supports clients to find and secure successful investment opportunities across Australia.