What Bitcoin teaches us about the Sydney property market

Posted by Luke Graham

I know very little about Bitcoin and other cryptocurrencies. What I do know is it has experienced massive growth in 2017, and as a result most friends who mistake me for a currency analyst are asking for advice on how to get in on the action.

Some experts suggest cryptocurrencies are in a bubble reminiscent of the dot com saga at the turn of the millennium. My argument is that nobody knows for sure.

What is interesting, however, is the amount of interest in Bitcoin after its exceptional 2017 performance. If you had invested just $100 in Bitcoin in 2010, you’d probably be retired today with a cool $17 million USD. But you didn’t invest in 2010. Admittedly, neither did I.

The increased level of interest is much like the recent Sydney property boom. Take Parramatta, for instance.

In 2006, 400 units were sold in the suburb at a median sale price of $306,000. In 2014, there were 1,300 sales in the suburb, more than three times the 2006 total.

Those 1,300 purchasers from 2014 paid a median price of $585,500 for their unit of choice, which grew by about $75,000 within twelve months and has since tapered off. The 400 purchasers from 2006 doubled their investment in less than ten years.

Why were there so many purchasers in 2014 and so few in 2006? Because in 2006, the Sydney property market wasn’t making headlines for any good reasons.

Progressively from 2006 to 2014, more and more people came into the market as a reaction to what they were hearing about the market. This was happening across much of Sydney.

As a result, for the 2014 purchasers to achieve the same goal the 2023 median unit price in Parramatta would have to reach $1.26 million.

This discovery echoes the most overused investment quote of all time, from Warren Buffett:

‘Be fearful when others are greedy, and be greedy when others are fearful.’

Posted by Luke Graham, on 28th Nov 2017