Any Last Words

Posted by Dominic Cavagnino

‘Hold your property long term’, those would be my last words. You’re probably wondering what I’m talking about but keep reading, you’ll see.

If you’ve been to any of our famed educational events, there’s no doubt you’ve heard that phrase before. At Blue Wealth, it’s the number one principle of property investment.

Why is that?

Property markets are cyclical, each cycle consisting of periods where prices boom, correct and stagnate. To reap the benefits of property investment your role is to hold on to your property long enough to experience as many market ‘booms’ as possible. Knowledge and education are key to achieving this and understanding the Australian property market is the first step.

Australia’s property market is segmented by capital city, and we often find each capital city in a different stage of the property cycle. Typically, a full cycle occurs within a 10-15-year period. We’ve extracted median house price growth data from the last 40 years through the ABS. In each 10-year interval it is evident that certain capital cities have outperformed their counterparts.

Decade	Top Performers	Worst Performers
1975 – 1984	Canberra 150.74% Sydney 150.44%	Hobart 73.11% Perth 96.63%
1985 – 1994	Perth 136.55% Brisbane 132.33%	Adelaide 57.20% Melbourne 72.87%
1995 – 2004	Sydney 161.75% Melbourne 148.84%	Darwin 56.61% Brisbane 110.88%
2005 – 2014	Darwin 81.88% Melbourne 71.69%	Hobart 44.55% Canberra 47.29%

Source: ABS Median House Price Data. Percentage represents median house price growth.

In the table above, a trend emerges where a city that recorded the worst performance experiences a resurgence over the next decade and becomes one of the top performers. For example, Melbourne in 1985 – 1994 was the country’s second worst performer with a growth rate of 72.8% and in the following decade recorded the second highest growth rate of 148.84%.

In the last four decades, seven of Australia’s eight capital cities have held a place as one of our top performers over a ten-year period. If that doesn’t crush the assumption that Sydney is consistently Australia’s strongest performer, this sure will: data between 2005 and 2014 indicates that Sydney wasn’t even in the top two in that period. It is vital to avoid being short-sighted and maintain a long-term view.

Your role is simple: get educated and make research-driven decisions. This will help you achieve your goals through a strategy most suited to you. Property investment can be an emotional rollercoaster, highlighting the importance of setting long-term goals and sticking to them. We encourage you to remain calm through euphoric periods where strong growth is achieved and market sentiment is positive, but also remain calm where growth is subdued by short-term external factors.

Posted by Dominic Cavagnino, on 12th Sep 2017