Property Prices
What matters the most is WHAT you buy, not WHEN you buy it
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Antony Cohen
Co-Founder – LongView |
We have on prior occasions called out to let you know when we had a view about the direction and size of likely short-term changes in market prices which was wildly at odds with views being expressed by market commentators.
Today, we think many commentators are obsessed (as they often are) with what we call the “short view”. Right now, they are speculating that there will be reductions in prices of property of anywhere up to 25% over the next one to two years.
Most often they attribute this to expected further interest rate rises. However, there are many factors at play beyond interest rates which influence property prices in the short term. And different segments of the property market have wildly different exposure to interest rates as a factor. The rate at which migration recovers from the hiatus caused by pandemic being one amongst many other factors that will have at least as much impact. A third will be the impact of war and inflationary pressures on the global economy and potentially the Australian economy through wages, unemployment etc.
What stands out to us in all this noise is the degree to which the discussion about the “short view” projections is drowning out the fact that the residential property market in Australia has, for a very long time, been a good investment.
As illustrated above, equities markets have exhibited much larger price declines – with crashes every 10-20 years of up to 50% – whereas residential property price declines have never exceeded 10% and such declines can be “seen coming” as they ease off over a few years whereas equities markets can “crash” overnight. The combination of the relative volatilities of these markets combined with the much higher cost of switching between properties than between equities makes it even more the case that time in the property market is more important than timing the property market.
Consequently, buying the right property continues to be far and away the single most important factor in determining the success of a residential property investment, not the time that you bought it. In essence, what matters most is what you buy, not when you buy it.
The above shows the sale prices in 2021 of four properties which were all acquired for approximately $400,000 in 2011. The outcomes ranging from a loss of $86,000 to a gain of $775,000 starkly illustrate how important buying well is to the financial outcome from a property investment. That is why we have and continue to invest in our field team and our data analytics capabilities so that we can source the best properties and provide advice about which properties are most likely to give returns like those achieved by the Heathmont property, not like the Docklands one.
It is our strong view that not getting buying advice is false economy.
As the chart shows, the cost of advice pales into insignificance compared to the cost of switching properties to fix a mistake, let alone the opportunity cost of holding the wrong property for a decade.
If you wish to book a free strategy meeting with our Buyer Advisors, click here.
Watch our recorded webinar: How big are the risks of buying property now?
