Australia’s pole position at the very top of global median wealth (per adult) is underpinned, in part, by strong property ownership and the seemingly unstoppable growth in their value. Property investment is undoubtedly considered the safer route toward growing your wealth down under and growth has been strong over the past ten plus years. Consider our beloved Surry Hills, where the median price for a stand alone home has more than doubled from $900,000 in 2012 to roughly $1,800,000 today – with the story in Redfern, Darlinghurst, Potts Point and other surrounding, inner city suburbs being almost identical. In fact, Sydney’s property value growth has been so strong over the past twenty-five years, if the same numbers played out over the next, the extrapolated median house value by 2043 would be an eye watering (and fingers crossed, impossible) $6,349,885. It seems impossible, no doubt, but so does the fact in 1977 you could buy a house in Darlinghurst for $35,000.
Of course, property investment is not all double-digit growth and while the tangibility of your investment may provide some peace of mind – it definitely comes at a cost. The upfront capital required for a deposit and ongoing costs accrued in maintenance and agency/bank fees can amount to significant sums. Further, Australian rental yields are notoriously low, meaning you’re unlikely to cover the costs of your investment with the money collected from tenants – if you can find them! As of now, I would estimate that around thirty per cent of the (brand new) apartments in my Waterloo block are sitting empty. And while our current situation is definitely not the norm, vacancy rates have been growing in the inner city since 2017 – with a massive apartment surplus on the way. As the competition for tenants heats up, some landlords may find themselves in financial strife.
All in all, property has delivered strong returns for investors over the last fifty or so years – with projected population growth lending weight to predictions of a continuing trend. If you have or can save the capital to get started, don’t mind overheads and prefer your assets tangible – property might just be the investment for you!
Head to Fox and Hare for more information, and stay tuned for Part 3 of Glen’s column in our next edition.