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A long History of Capital Growth
April 2009
Houses
have been fantastic investments throughout Australia's
history.
All
Australian cities have a long and successful track record of steady
capital
growth,
with low risk.
And
best of all, the Australian property system is easy to understand, easy
to
follow,
and accurate records are kept.
The
capital growth charts below for houses and apartments in all the major
cities,
clearly show one thing: Australian property, through all the economic
cycles,
through recessions and downturns, through high interest rates and
high
unemployment periods, has consistently returned excellent growth to
investors,
putting Australian property on the top shelf of good return, low risk
investments.
So,
what are house prices going to do? The short answer is that nobody knows
for
sure. It's the future. Anything can happen.
However,
some things are more likely to happen than others and with a lot of
data
and a little analysis we can provide some insight into the probable
future
of
the housing market.
The
Charts providid in this website provide all the information
you need to see where to invest
and
when...and whether it should be apartments or houses you move into.
Compare
the long term trends, with the short term results, to see if there is a
“catch
up” due.
“The
historical capital growth figures in your Chart above are different
from
those provided by other sources. Why is this?”
We
have used the Residex figures, as we believe them to be the most
accurate
on
the market today. In addition they are updated monthly.
Residex
uses the strategy of examining pairs of sales on the same property
and
calculating the rate of growth between the two sales. The rate of growth
isn't
then influenced by factors such as new building activity or renovations.
Here
is how Residex themselves answer the above question:
“Firstly,
it is very important in statistics to make sure you are comparing the
same
things.
Residex
uses ‘the repeat sales method' to calculate capital
growth. Normally,
people
will quote ‘the change in median sale price' as the
capital growth for
an
area.
However,
the change in median sale price is not reflecting the change in the
value
of property, but really the changing in buying patterns.
So
if in one quarter, there were many property sales at the lower end of
the
market
and in the next quarter, there were more sales at the high end, this
would
show a large increase in capital growth.
Calculating
capital growth in this way can mean that some sources come up
with
capital growth figures of 100%! This is not necessarily an incorrect
figure,
but
it cannot be applied to calculate the current value of properties in an
area!”
A word
on “median prices”
There
is a statistic used in Australia called the “median
price,” which is
published
regularly by several different sources.
The
median price is an excellent way of seeing the different price levels
between
cities, but should never be used by overseas investors as to a guide
as
to the actual price in that city.
Here's
why. The median price takes into account all the properties for a city,
both
those in prime locations, and way out in the suburbs, and also includes
many
very old properties.
Therefore
the median prices will be a very low figure relative to new
properties,
and also relative to those properties in prime locations preferred by
(and
recommended to) overseas investors.
As
a simple example that should clearly indicate what we mean, in November
2008,
Sydney's “median house price” was
A$565,000.
But
individual suburb median house prices as quoted in selected Sydney
suburbs
shows Campbelltown (a long way from the city centre) was just
$255,000,
but other areas such as Double Bay (a prestige Harbour suburb)
had
a median price of $2,300,000.
(Source:
RP Data)
In
all the Australian cities that are spread over a large land area, there
are far
lesser
areas with lower priced properties than there are prime areas, hence the
“low”
overall median price for that city.
This extract taken
from the E-Book "The
Foreign
Investor's complete guide to Buying and Profiting from Australian Real
Estate" published
in 2009, by Michael Bentley
www.foreigninvestorsguide.com)
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