Looming inflationary pressures and the RBAs willingness to control inflation will push property prices higher over a ten year period. Labour and materials under an inflationary period, will drive construction of new dwellings higher, lets not forget that. All services and anything related to property will be more expensive. We are also vulnerable to the Asian influence, which comes into the equation, creating a cyclical buying frenzy into the Aussie property market; therefore IMO, average property prices by 2020 will be around 1million dollar mark.
The smart way to use property is to leverage and use the equity that exists when most of the mortgage has paid off to invest and diversify wisely. If we look at a company, which has a debt to equity ratio of less than 50%, we would consider it as a sound company to invest into. Your property investment or your place of residence, which has a DOE of less than 50%, would be viewed positively by a bank that is willing to offer more leverage to purchase more property, shares, bullion, or whatever other smart investment you feel will take off, over the next few years.
The bottom line is, when holding property, never think of the negative aspects of it-think equity and leverage, think like a company or bank and make the most of the situation at hand. These are my views to creating true wealth.
