Every day, property investors and buyers are obsessed with doom and gloom news about the movement of the market. While the headline news like price fall or rise, clearance rates, and rental yield receive a lot of attention from the audience, it is also likely to create a combination of both nervousness and excitement for home buyers and sellers.
The average duration of a cycle lasts about 3-5 years, during this short time frame, even the most accurately-timed buyers who purchase at the trough and sell at the peak may still lose money due to high transaction costs such as stamp duty and agent fees.
Overall, the property market plays an integral component of the wider economy. The property market also shares many characteristics of financial markets: buyers and sellers tend to overreact to both good and bad news, which leads to above or below fundamental/true market prices, or peaks and troughs in the short-run.
Economically, the property market is one of the main pillars of the economy; generating jobs, tax revenue and stimulating the economy through consumption. Therefore, politically, the government tends to closely monitor the movements of the market: deploying stabilization policies when required.
Interestingly, over the long term, the price growth rates tend to converge with the long-term average growth, which is about 5-7% depending on the capital cities/or regions: prices tend to fall after a period of higher than average growth, and vice versa.
The sustained price growth over the very long-run is mainly backed by Australia’s persistent population growth at 1.6-2%/year, 3 times higher than other OECD countries, partly due to income growth.
Therefore, it usually takes over 2-3 cycles/10-15 years or more to realise the fruits of property investment. Unless there are better opportunities that ensure better returns/or due to tax minimization strategies/forced sales/or exiting the market, it may not be optimal to sell existing property to purchase new ones, again partly due to transaction costs, including capital gain tax and agent fees.
The transaction cost-minimization strategy can be implemented by utilising the existing equity for a deposit for upcoming purchases. The ultimate aim is to build a sizable portfolio that can pay for itself, and generate sufficient passive income and equity for investors.
At Milk Chocolate property concierge, we have developed a cutting-edge data collection and analysis system to identify high-performing/high capital growth properties based on the long-term fundamentals with high levels of accuracy at any stage of the market cycle.
Calculated by MC using ABS Data
Long-term Price Movements (Houses, $000, Sydney)
Long-term Price Movements (Houses, $000, Melbourne)
Long-term Price Movements (Houses, $000, Brisbane)
Long-term Price Movements (Houses, $000, Adelaide)
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