Do Property Values Really Double Every 7 to 10 years?

But let’s dig deeper…

There’s been a lot of fuss recently about the Sydney property market which has lost a little ground over the last few months, yet in reality it’s just experiencing a soft landing after a number of years of unsustainable capital growth.

Property markets move in cycles

This means that each state has its own property cycle and there are cycles within each cycle.

So what’s ahead?

While past performance isn’t always the best predictor of the future, and housing trends are likely to change with a shift to smaller housing since more of us will be trading back yards for balconies and courtyards; if property prices were to rise in the future at the same rate as over the past twenty five years, here’s what Aussie’s report forecasts:

How do you outperform the market averages?

The system that we use at Metropole which has helped many clients build substantial property portfolios uses what I call a top down approach (going from the macro to the micro):

  1. I start by looking at the big picture — the macro-economic environment.
  2. Then I look for the right state in which to invest. One that will outperform the Australian market averages because of its economic growth and population growth.
  3. Then within that state, I look for the suburbs that will outperform with regards to capital growth.
    We’ve found some suburbs have 50 to 100 per cent more capital growth than others over a 10-year period.
  1. Obviously those are the suburbs we target.And it’s all about demographics.These will be areas where more owner occupiers will want to live because of lifestyle choices and one where the locals will be prepared to, and can afford to, pay a premium price to live because they have higher disposable incomes.In general these are the more affluent inner and middle ring suburbs of our big capital citiesThese suburbs tend to be areas where more owner-occupiers want to live because of lifestyle choices and where the locals can afford to and will be prepared to pay a premium to live because they have higher disposable incomes.
  2. Then I look for the right location within that suburb. Some liveable streets will always outperform others and in those streets, some properties will always be more desirable than others.
  3. Then within that location I look for the right property. And finally, I only buy at…
  4. The right price, but I’m not suggesting a “cheap” property — there will always be cheap properties around in secondary locations. I mean the right property at a good price.

So how do they know which is the right property to buy?

I follow my 6 Stranded Strategic Approach and only buy a property:

  1. That would appeal to owner occupiers.
  1. Not that I plan to sell the property, but because owner occupiers will buy similar properties pushing up local real estate values.
    This will be particularly important in the future as the percentage of investors in the market is likely to diminish
  2. Below intrinsic value — that’s why I’d avoid new and off-the-plan properties which come at a premium price.
  3. With a high land to asset ratio — that doesn’t necessarily mean a large block of land, but one where the land component makes up a significant part of the asset value.
  4. In an area that has a long history of strong capital growth and that will continue to outperform the averages because of the demographics in the area as mentioned above.
  5. With a twist — something unique, or special, different or scarce about the property, and finally…
  6. Where they can manufacture capital growth through refurbishment, renovations or redevelopment rather than waiting for the market to do the heavy lifting as we’re heading into a period of lower capital growth.

Remember:

During a boom everyone is an optimist and expects the good times to last forever, just as we lose our confidence during a downturn.

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Michael Yardney

Michael Yardney

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Michael Yardney is a #1 bestselling author & a leading expert in the psychology of success and wealth creation Sharing stories on Success, Property & Money