What if you were offered an investment returning 10-14 per cent a year for 20 years? Would you take it?
We’d suggest such a strong consistent return would be difficult to resist. That’s why it may come as a surprise that so many Australians have actually achieved it.
Investing is all about keeping perspective and dealing with the facts.
In this era of information overload, it’s easy to get swept up in the daily torrent of data and headlines and forget to step back for some perspective and a reality check. That’s what is happening in the property market at the moment.
Those with perspective are not surprised at the current downturn because so many lead indicators had been predicting it for two years. Those who didn’t have perspective are shocked by the current steep falls in values in Sydney and Melbourne.
Media coverage doesn’t help ease the panic setting in. A year and a half ago everyone was bemoaning the terrible home affordability ratios as property values reached their zenith. Today everyone is bemoaning the fall in their home’s value, but at least affordability is better.
Over the past 12 months, residential property prices have fallen nationally by 5.6 per cent, led by Sydney’s 9.7 per cent drop and 8.3 per cent in Melbourne.
To keep that in perspective, according to research group CoreLogic, over the past five years property values have grown 19.4 per cent nationally and by 29 per cent in both Sydney and Melbourne. Over the last 20 years national values are up 197 per cent, 274 per cent in Melbourne and 202 per cent in Sydney.
Over that same 20 years other capital cities produced solid gains as well: Hobart 237 per cent, Canberra 231 per cent, Adelaide 194 per cent, Brisbane 183 per cent, Perth 148 per cent and Darwin 38 per cent. Combined regional property markets were also up an impressive 150 per cent.
That means Melbourne property has achieved an annual average return of 14 per cent a year over the past 20 years. For Hobart and Canberra it’s been 12 per cent a year while Sydney property prices have risen 10 per cent a year over the period.
Residential property has produced a stunning return over two decades.
While it’s important to note past performance is no guide to the future, these figures tell an interesting tale of perspective.
WINNERS AND LOSERS
The biggest losers are those new to the property market who bought in Sydney or Melbourne near the peak in October 2017 and have experienced the full brunt of the downturn. Their pain would be accentuated if they borrowed heavily on a small deposit.
Winners are those who have been on the property merry-go-round over the long term and kept their borrowing levels at a manageable level.
The CoreLogic study shows the investment benefit of long-term property ownership and an ability to ride out the cycles without being forced to sell at the wrong time. Yes, property can go down in value but over time has proved to be a great performer for Australian investors, as long as you get the timing right.
Even if there is another 10-15 per cent fall in Sydney and Melbourne property values over the next two years, the 20 year average will still be in good shape but it’s important to get the surge periods right and be part of them.
For example, in the five years to January 2019 Melbourne and Sydney rose 29 per cent each, even taking into account the awful 2018. But in the five years to January 2014 Sydney and Melbourne prices rose 32 and 36 per cent respectively. In the five years to January 2009, Melbourne values rose 23 per cent while Sydney fell 5 per cent.
The analysis shows that property markets move in a different cycles depending on the regions.
Understanding and closely following these lead property indicators will help show where the cycle is going:
• Unemployment and jobs growth: The more people in work, the more likely they have the cash to buy. So a strong economy with good jobs growth underpins a strong property market.
• Immigration levels: A key driver of the last boom as migrant numbers rose significantly. They need a roof over their head.
• Housing finance figures: Indicate how many people are applying for loans with the intention of buying. This is also linked to how easy it is to borrow from the banks. Over the last 18 months it has become harder with lenders implementing stricter credit requirements.
• Building approvals: The more approvals local councils are making, the more stock that will come on to the market. But remember there is always a lag of up to a couple of years for big developments between getting approval and having it on the market.
• Investor sentiment: Both local and overseas investors create demand as we saw during the last boom when Chinese investors were buying up big. But then the regulators and Governments tightened requirements and imposed higher taxes on foreign purchasers.
Tough times tempt landlords to do their own property management
Landlords are battling financial headwinds including weaker house prices and tougher tax rules, prompting some to try to save money by doing their own property management.
An estimated one third of the Australia’s two million-plus real estate investors manage their own properties rather than rely on professionals.
And while technology is making DIY property management easier, there are key questions you should ask yourself when choosing your path.
Real estate author, investor and university lecturer Peter Koulizos said these included:
• Do you have the time?
• Can you afford to do without 10 per cent of the rental income?
• How familiar are you with residential tenancy laws?
“Life is getting busier, and the laws are changing, making it trickier if you are managing it yourself,” Mr Koulizos said.
He said there was also a rising number of “accidental landlords” offering short-term rentals through platforms such as Airbnb. “People need to understand that for short-term rentals the residential tenancies acts do not apply — it’s easier to manage an Airbnb than a long-term rental.”
Landlord insurance company Terri Scheer’s executive manager, Carolyn Parrella, said her firm recommended that investors use professional managers.
“We often find that tenants may target a self-managing landlord because they might not do inspections are regularly as a property manager,” she said.
“Maintenance can get away from you if you are not keeping on top of it.”
Ms Parrella said understanding legal obligations was vital. “Every state has their own tenancies act and they’re all going through periods of change around hardship and other things.”
Linda 姬琳达珍 and Carlos Debello (LREA)
琳达姬琳达珍Debello LREA – LJ Gilland Real Estate Pty Ltd
PO BOX 19
电话：07 3263 6085
0409 995 578 (L)
Wonderful service and excellent outcomes across the board – 25 Feb 2018
Linda and Carlos have been a pleasure to work with during the 10 years they managed our investment property, including the eventual sale. Engaging and personable, Linda and Carlos are always professional and consistently provide excellent, attentive service. I love the way they keep everyone informed in a timely manner and always seek the best outcomes for all parties involved. It’s been a wonderful association and I couldn’t be more enthusiastic about recommending their services.
Very helpful – 25 Feb 2018
Carlos was very helpful along the way. Thank you!
(Amount Undisclosed) Sold on 17 Oct 2017
3 2 1
The #personal #touch #AGENT
#Vendor #Review – #Recommended by JohnLindaRyan
18 October 2017
It truly saddens my wife and I that our relationship with L J Gilland (Linda and Carlos) is coming to an end after a 12 year #wonderful #relationship.
We had #hassle #free #investment for the entire time while our home was in their most #capable hands.
Any #repairs would be handled by Carlos very quick and #efficiently.
During the sale, Linda worked relentlessly with only one aim in #mind, to sell our home for the #best #possible #price and as soon as possible.
We are so #proud to have been associated with Linda and Carlos especially through our recent events that have led to the sale of our home. With nothing but our best interests at heart they managed to alleviate a huge burden on us in record time (within a week).
Thank you for being in our life and all the fond memories associated with it.
Linda and John Ryan.
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