Should you have already bought a home?
February 26, 2015 / Written by Rich Harvey
When it comes to Australian property investment, it's easy to get cold feet. The sheer price of a home can be daunting, as can the paperwork needed to get into it. Not just that, but you're making a long-term commitment - who's to say what your life will be like in 20 years?
However, that overlooks some of the most important factors about property - the long term gains and the steadiness it brings. All too often, we see investors focused on the gains they can make in the next year, when casting your eye on a longer-term plan can be much more beneficial for your investment. To put this in focus, let's have a look at some property markets over the last 20 years.
Melbourne's market movements
According to data from the Real Estate Institute of Victoria, the median price of a home in the state's capital in 1994 was a cool $146,550. According to the Reserve Bank of Australia's inflation calculator, this works out to $250,226 in 2014 terms. However, the actual median price for 2014 in the REIV data was $630,000: An increase of just above 150 per cent.
So even though there have been ups and downs, the general trend is for large-scale capital gains. Here, they can be in the realm of $400,000. Even though we see some of our current growth as huge and expect a drop, it has been echoed before: For example, in 1998 prices rose by more than 18 per cent. See what we mean about keeping an eye on the long-term?
Sydney surges not uncommon
While Sydney is well ahead of the pack for growth at the moment, for long-term growth it is not far off the rest of the country. According to a 2013 Housing Industry Association report, dwelling prices in the Harbour City rose by 267.5 per cent over the preceding 20 years, with annual growth of 6.7 per cent.
So while there will always be peaks and drops in the market, when you look at the longer-term gains, it seems they will always stay steady for your Sydney property investment.
While watching the finer details of the market (or getting an experienced buyers' agent to do that for you) is important when you choose to buy a property in Australia, it's just as crucial to place your investment into a wider context. Short term gains and positive cashflow are excellent but if you're worried about prices going down, just remember what history tells us: Overall, they don't.
So with this in mind, the question might not be whether you should buy a home, but rather why you haven't bought one already!