Not long ago, regulators’ forced banks to cut back on investment loans. That period has passed, and this presents a new opportunity for investors.
If you are 30 and buying for the first time, if you are 40 and shifting house, if you are 50 and know you need to invest – there are two typical responses in these times that I shall call a “property boom”.
- “I need to buy now, or I’ll miss out” – FOMO
- “The market is crazy; I’ll wait until it crashes” – It never does.
Hidden in current headlines is “Feb 2021 – largest rise in house price in 20 years.”
In other words, this has happened before and will happen again.
You would have been 10, 20 or 30 back then – so possibly not aware of the property boom that followed the introduction of the GST (in 2000) that added 10% to the price of most things – including houses and underpinned that boom.
This current 2020 boom was caused by the government response to Covid.
There have been small surges in between.
Since 2000 Sydney house price has risen by x 4 – it has doubled TWICE (from $300,000 to $1,200,000).
Since 2000 Brisbane house price has risen by x 3 (from $200,000 to $600,000).
That is not an opinion – this is a fact.
The ASX 200 has risen from 3000 to 7000 in that same period.
In the overall market indices – Property outperforms the Stock Market. This is not an opinion; it is a simple fact.
Now for an interesting idea.
During Covid lockdowns, and given the regulators dampening of investor loans – many people have been dabbling in the stock market. Day trading (not the same as investing).
Take one of the current stock market “darlings” BNPL; Buy Now Pay Later.
What is the difference between 6 BNPL stocks, say;
- Afterpay
- Zippay
- Sezzle
- Splitit
- Klarna
- Payright
And 6 houses all in the same street and suburb, say; “1,3,5,7,9 and 11 Seventh Avenue?
It is highly likely that one of the stocks mentioned previously will disappear and your investment will be worth $0. What is certain is that they will NOT all rise together.
Property offers less risk. What I mean by this, is that it is likely these neighbouring houses will rise in value together. And you won’t find one house disappearing (unless a great sinkhole opens and swallows one).
Nothing above is guaranteed, but the general point I make is sound.
To me the biggest story from the current boom is that if you enter the property market either for your owner occupied or investment property and hold for the long term – that is one of the most secure assets you will ever own.
If you have the ability to invest (and to have the retirement you wish for that is essential), and you do not consider property then you should ask yourself why not?
The hidden story of this current property boom is the small number of investor loans being taken out.
To enter the market as an investor and hold for the long term is the relatively silent lesson to learn from this boom.
If you have overlooked property investment for the last decade or so, then you should talk to me again about how to create a property portfolio.
You might also like to start by reading my Investment Property series here: Investment 1: Start with the end in mind.
As a footnote – at yesterday’s Reserve Bank meeting the Governor REAFFIRMED his commitment to low rates until at least 2024.
Do not miss this property boom – waiting will only cause regret.
As always if you would like advice specific to your own personal circumstances, please call or email anytime, it’s what I’m here for.