Understanding Property

Why Property?

Property has demonstrated to be a reliable financial performer for centuries.

 

While it fluctuates in value, the trend over time is always up.

 

Historically, the average price of property, in Australia, has doubled in value every 10 years. The decades where this has not occurred, were followed by decades that more than made up for it and there are reasons for this that will continue well into the future.

 

WARNING – not all property has and will double in value. However, the right properties should continue this trend. Knowing where to buy, what to buy and when to buy is critical ingredient that needs expert attention.

 

As a general guiding policy, Oz Property Investment Centre, asks first before anything else, does this property we are buying have a realistic opportunity to double in value in the next 10 years!? If not, we will not buy it. *

*No one has a crystal ball and no one can promise you capital growth. However, the fundamentals of capital growth are ingrained in the monetary system itself and a systematic fallout of rapid population growth as experienced in Australia, in the past and well into the future.

 

 

What is Capital Growth?

When properties increase in value over time, it is called Capital Growth. Capital Growth is the main factor to consider when researching where and when to invest. The aim is to have a property that doubles in value over 10 years, rather than one that makes $200 profit per week but fails to grow or devalues.

 

 

What Causes Capital Growth?

It is all about SUPPLY, DEMAND AND SCARCITY!!

 

If it is not scarce, we are not interested. Properties should only be bought in areas where land supply is nearly out or out already. Where an area is land locked (no more supply is available) and demand is increasing now, and well into the future due to population growth, then competition for the location will drive prices up.

 

The three key drivers for capital growth are:

          #1 Economic Growth

          #2 Population Growth

          #3 Supply & Demand

 

Property has a proven track record of providing individuals and families with higher returns than other riskier investments, due to a few factors:

  1. Continued demand for the product
  2. Strong population growth
  3. 40 million people in Australia by 2050
  4. Massive shortage of homes

However, it comes with challenges. Choosing the correct property, market, location, time and price. The difference we offer is that education is a key component to working with our clients on their property investments.

 

 

Should Capital Growth Continue to Continue in The Future? Or have I already missed it?

The current estimated population in Australia is 23M. 
The expected population in Australia by 2050 is 40M.

 

Where are they going to live?

 

Most of the population coming to Australia will centre around our capital cities and no less around our major regional centres – which are the powerhouse economies and job creators for this great country of ours. 

 

The current average income is $75K/year.
The projected future household income in 2050 is $360K/year!

 

What does this do for affordability and compatible property prices?

 

In 2015, the average new house and land package is approx. $450K (this is significantly higher in the major cities). 
In 2050, the average new house and land package in your new emerging outlaying suburbs could be in the vicinity of $1.9M.

 

Yes, that correct! Young families could be investing $1.9M+ to get into a new home in 2050 and it is likely that these homes will be smaller than homes being bought today.  

 

*Note: the above example relates only to the more affordable, outer most emerging suburbs. It is important to note that the properties you buy today may be on the outer limits of the city, but in the future, may be exclusive infill suburbs as population swells and keeps moving further out, surrounding your property.

SUPPLY AND DEMAND IS ESSENTIAL.

Where demand outstrips supply, capital growth occurs. Be warned to ensure that the shortage is sustained and not just a temporary event. Many places have major problems with water, sewage, schools etc not able to keep up with population growth so this slows down development! Bad for residents, great for investors! Scarcity is Key.

Economic Growth

Always check to see what developments and projects are contributing to population growth in an area. What industries exist and are they prospering? The most stable investments are in larger populations with over 100,000 people and with diverse range of industries supporting it. We must consider what is happening right now, but more importantly where will it be in 10, 20 & 30 years from now. Is the economic growth in the area sustainable? While mining centres are attractive with their rental returns and sometimes astonishing short term growth, they are only as stable as mining.

Population growth

Australia is going to nearly double its population in the next 40 years! Which requires more dwellings to be built over this time. We are looking for the places that are experiencing sustainable high population growth. Infrastructure is the key to jobs or lifestyle attraction that will bring population to the area.

Affordability

What are the incomes in the area like right now AND where will they be in 10 years, 20 years? Interest rates at the bank also effect affordability. What are the current land prices like against those incomes? If the incomes in the area are high and could support property prices doubling right now, then you could see it being realistic, that future growth predictions are sustainable.

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