The Power of Patience

Posted by Dominic Cavagnino

Last Tuesday we held our Settlement Evening for all clients with properties that are now approaching completion and settlement.

We asked the crowd how they were feeling about their purchase now that it was almost ready for settlement. The feeling of mixed-emotions was felt throughout and understandably so, given the current discerning media coverage and overall market sentiment.

All of our clients come in to our office confident that they’re buying with a 10 – 15-year holding period in mind. Anyone without this mindset is quickly reminded that this is what we’re trying to achieve. We don’t promote a ‘get rich quick’ scheme. Essentially our model is in place to ensure our clients buy good property in good locations that they can hold onto for the long term.

On the night however, the emotional rollercoaster that is property investment was ever-present. This makes it easy for investors to lose sight of the plan which was originally in place. Our message is one of patience and perspective, the two most important traits to successfully navigate your way through property investment.

Theoretically, it’s very simple for people to block out the noise and maintain perspective. For some, that all changes once their investment has been made. We understand that different phases within the property cycle can bring out people’s emotions. We adopt a counter-cyclical approach so almost all the time our clients are buying when the media is telling them they shouldn’t.

Buying when no one else will, allows you to buy well. When a market peaks, in hindsight buying when no one else is generally labelled the point of ‘maximum financial opportunity’.

I guess you’re now thinking, it’s all good and well to remain patient but are still wanting some confidence around the potential reward. Here is a table which shows the current equity position of an investor based on the year the property was purchased. Evidently, the longer the property has been held, the larger your return.

	Sydney	Melbourne	Brisbane
2010	$322,000 ($583,000)	$254,000 ($468,000)	$59,000 ($460,000)
2005	$419,000 ($486,000)	$412,000 ($310,000)	$207,000 ($312,000)
2000	$618,000 ($287,000)	$531,000 ($191,000)	$349,000 ($170,000)
1995	$708,000 ($196,000)	$593,000 ($129,000)	$372,000 ($147,000)
1990	$711,000 ($194,000)	$591,000 ($131,000)	$406,000 ($113,000)
1985	$816,000 ($88,000)	$647,000 ($75,000)	$457,000 ($61,000)
1980	$836,000 ($69,000)	$682,000 ($39,000)	$483,000 ($35,000)

Source: ABS median house price data and Blue Wealth Property Research

Note:
The larger number indicates the current equity position. It has been calculated by subtracting the median house price in the respective year from the current median house price in each city.
The number in the brackets indicates the median house price at each point in time.

Between 1980 and now, we could find hundreds of articles which are very similar to those we are currently finding in the media. The reality is that the property market has been extremely resilient.

We’re only human, fear, panic and anxiety are normal emotions to feel, particularly in relation to your financial position. The key is to keep it simple and be patient. In time, property has served us well and will continue to do so.

Posted by Dominic Cavagnino, on 23rd Oct 2018