Jack and Jill are a likeable average Australian couple living in Brisbane. Like most young couples they share the dream of a comfortable retirement together in the future.
Jack is an employed plumber while Jill looks after 3 young children.
They manage to cope as Jack is earning good money. Jill contributes to their income through doing ironing for local residents.
Jack has superannuation estimated to accrue to around $600,000 at retirement in 30 years. They recently consulted us to consider property investment. It was agreed by all that $600,000 in 30 years would not be enough to finance a comfortable retirement and that even if they sold their home they will still be around $1,000,0000 of today’s dollars short of what is required 30 years from now.
We advised them to approach lenders to determine what they could borrow. The answer was around $400,000 which would probably buy them a house and land in a fairly good location.
Then buyer’s remorse set in. Jill commented on the news on TV (60 Minutes) etc. and suggested that they should wait. Jack agreed.
And thereby hangs the tale.
They were buying an investment which, if looked after properly, would remain one of the best in the area, of the type, best in the market at the time of sale or bank valuation.
They were depending upon the price in 30 years, not now, but their fears related to the current situation and therefore they did not proceed.
So, price fluctuations have been on for the past 50 years, but always, demand has exceeded supply.
Have a look at this chart of Australian house prices over the past 50 years.
If Jack and Jill had been 20 years older and had bought the investment property in 1998 for $135000, it would be worth $ 500,000 plus today.
Who knows what it would be worth 20 years from now.
My advice to Jack and Jill was “Hey guys – you need to do something now regardless of today or tomorrow’s market conditions. Buy a property that is one of the best of its type in the area, look after the gardens and be sure that you have tenants who can share your pride in the property and time will do the rest.”
Jack has called me to resume the discussion.
The Australian property market moves in cycles which are influenced by a wide range of factors including interest rates, consumer confidence, unemployment and of course previous rates of growth that impact on rental yields and levels of affordability.
“While Australia’s current annual population growth of 1.4 percent may seem modest, this also adds 340,000 to our population each year, which is one new Darwin resident every 20 weeks or a new Tasmanian every 18 months.
Each state has its own property cycle and there are cycles within each cycle. Different areas, different price points and different types of property have their own cycle.
You’ll find that in each 10-year period there seems to be 3-4 years when the market is flat, 3-4 years of low capital growth, and a few years of strong price growth during the boom stage of the cycle.
When you look at the property prices that prevailed 10 and 20 years ago, and look at property prices today, it’s clear that property investment is a long-term play. You need to be patient as, over the long term, values in our major capital cities have doubled every 7 to 10 years.”
From Successful Ways
Don Duncan F.A.I.M.
Don is the Principal Consultant at Meredon Consulting, with over forty years experience in developing successful residential property investment strategies, and extensive experience in the financial sector, Don is uniquely qualified to provide you with the best property investment advice available. He is supported by experienced property investment consultants in both Brisbane and Sydney. Don is a Fellow of the Australian Institute of Management, and a qualified Trainer of Trainers. In addition to this Don has also been an active member in the community, he was a member of Rotary International and Past President Toastmasters Territorial Council of Australia.