Melbourne’s median price has now passed the $600,000 mark, and Sydney’s median price has now passed the $800,000 mark.
More gains are expected. Particularly over the next fifty years.
Fifty years is a long time. But it’s how long property should be held for. Property is an intergenerational asset and over the decades and generations will produce excellent rates of return. Obviously precise predictions of future prices are not possible. There are too many variables in the equation.
Let’s stick to the basics, and look at what is expected to happen to Australia’s population over the next fifty years, and try to make an educated guess about home prices from that.
The Australian Bureau of Statistics provides the following data:
|State||Population 2012||Population 2062||Increase %|
Income levels will rise too. Inflation runs at roughly 3% a year, so a $1,000,000 home in 2014 will be worth at least $4,384,000 in 2062 if it just goes up with inflation.
Much of Australia’s population growth is driven by immigration. More than 220,000 arrive each year, and most are well educated, reasonably well off, and very aspirational: they want to get ahead and they work very hard to do so. Of this 220,000, nearly half arrive just in Melbourne, keeping demand for Melbourne property, particularly the fashionable inner, eastern and bayside suburbs rising and rising each decade.
These aspirations are shared by older Australians too: just listen to talk back radio for a day to witness the energy and effort put in to buying and keeping a home. It’s an intrinsic part of the Australian culture and psyche, and there is a stigma attached to not owning a home.
Obviously the more fashionable suburbs will be in more demand. They are privileged locations and people will fight to get there.
This is why should buy residential property now. Just don’t buy:
- an apartment;
- anything from a spruiker;
- any property in an unfashionable suburb;
- anything from a developer;
- other than at auction or by private sale from an owner (not off the plan);
- using a SMSF unless you are sure of what you are doing and you understand that property prices can fall and if they do the value of your super retirement funds will fall too; or
- using (significant) debt, unless again you are sure of what you are doing and you understand that property prices sometimes fall and, when they do, negative gearing works in reverse.
The key to getting the most from our relationship is regular meetings. Come in, or phone up, and spend time with us telling us about what you are doing and what you want to be doing. It’s a rare meeting that does not kick at least one goal. Most meetings kick a few.
Meetings are the key to getting a sound and sensible financial plan in place. Please do not hesitate to contact Bez on firstname.lastname@example.org or Sean on email@example.com or 03 9583 6533 to arrange your next meeting.