re: property- examples of winners...taxing
My own typical suburban Melbourne home went nowehere in price for about 9 years. In the next 5 years to now it rose 115%. In the last year and a half it rose 26%, but over the full 14 years it averaged 8.8%.
Of course everywhere is different, but these heated discussions often quite amuse me, as although, it is true that in some areas the prices of housing has skyrocketed in recent times, in other places it has not. Additionally you have to calculate an average over a greater period than just the time of boom. So it is obvious that regardless of the interest rates, and state of economies, there are other mitigating factors that lead to the price of a property.
I personally believe that property is a very safe bet in Australia. Generally, whilst the population is expanding, there is more interest for properties in the inner city. This as a flow on effect, as eventually people are priced out of the inner city and move further out. I really believe it's at the fringe where one can make the most money out of property, the areas which are on the verge of the next wave of seekers, where properties have not yet been renovated and knocked down for bigger and better places.
The beauty of property in an expanding population, is that whilst housing is affordable, everyone is looking for that home. This increases market interest and fuels increased house prices. It also means people are leaving the rental market, and this creates higher rental vacancies, which is what I believe is happening now.
Now let's just say the economy does bust, sure there will be some who are over-committed and will be forced to sell. But just as all smart investors do, the savvy well off ones will step in to pick up the slack. Because these investors do not buy at the peak of the market, they know when the time comes (and yes it sometimes takes years), there will be some good buying opportunities. This does not mean property prices will fall substantially, history has shown that indeed it does not. But the thing is, when the time does come, the rental market again picks up, and good returns are once again achieved, usually by those that have the money (money makes money as they say).
There is nothing right now to suggest the Australian economy is in trouble either. In fact the way I see it, economy strength would be more likely to cause some owners trouble, if it were to fuel interest rate rises and inflation. Currently the interest rates are low, inflation is low, Australia has already shown it can shrug off economy woes elsewhere around the world, unemployment is low, alot lower than 6 percent in real terms (many out there who simply dont want to work, dole pays too well).
Australia is aging. What this means for the foreseeable future, is that people on an average count are alot wealthier. To put it into perspective, 14 or so years ago, when I had about the same amount as I have borrowed at the moment, my repayments hit over triple what I am paying per month now. Take inflation into account and increased salary, and you can see that there is alot of money around and is why many people have invested in additional properties. Even if the interest rates rise, it is not going to be disastrous for most.
Finally, there are many other factors that could be considered, there is no easy formula for anticipating the next movement of property, but you have to use some sort of yardstick, and that yardstick is history. Anyone who suggests that you can't rely on yesterday to predict what will happen in the future is probably right, but it's really all about playing the percentages, what is most likely to happen. Property prices will continue rising over time, sharemarkets will rise over time, and if it doesn't, it probably means something very bad has happened to this world, and in that case your money will probably be worthless anyway.
