Buying for long term growth

An astute investor knows that buying property is not about market timing, but time in the market. The more years spent in the market, the more likely you are to achieve substantial growth. Property should never be overlooked as a long-term investment and it can usually weather any economic storm – even a global recession.

An investment should be something on which you can confidently build your future. The serious investor takes a long-term view of the investment portfolio. In so doing, over time, the effects of any short-term instability are generally smoothed out.

Investment in property is a lower risk option than, for instance, placing money in 10-year government bonds. It is also a continual strong performer in the long-term. Property is extraordinarily durable, better able to absorb shocks and deal with economic challenges than many other investments.

Of course, the property market, like any other market, experiences cyclical fluctuations. Downturns can be unexpected, disconcertingly rapid, and of variable duration. So at these times of movement towards more defensive stocks, it’s quite understandable that we have already seen money taken out of the sharemarket and re-invested in the property market as a solid, long-term investment. The property market is not as vulnerable to world events as the sharemarket and other forms of investment.

Real estate that will perform best for investors will be of good quality, well designed and close to city facilities. These attributes in areas where you can’t build new product will be particularly rewarding because of the scarcity factor.

Investors should avoid smaller regional centres and outer suburbs not underpinned by a diverse and strong local economy. But they should take advantage of current conditions to diversify. Scarce architectural styles in firmly established, blue-chip residential precincts in inner-suburban areas 2-7 km from the city centre are usually successful because of limited supply and strong demand.

Coastal property has consistently been a strong performer, but prices in these areas have fallen and flattened. In the long term, the push to seaside and lifestyle property will continue, and values will rise.
If we consider prices for property, particularly premium real estate, over the past 20 years, we note a series of short-term booms and slumps. In the long-term, however, property values have increased consistently, staying well ahead of inflation and surpassing just about any other investment you would care to name. Very few other investments can promise this. Historically, the value of quality real estate has eventually always increased beyond its previous high point.

Below is a table indicating the updated Capital Growth Figures, for all Australian capital cities, for the past 5, 10 and 20 years.

This chart enables you to see what the historical price growth has been for each city, both long term, 20 years, and short term, 5 years. By carefully looking at the figures, it is possible to determine clear trends, and decide which city is likely to "catch-up", and whether it is time to invest in apartments or houses. The figures are updated to the end of each calendar year.

5, 10 AND 20 YEAR RESULTS, TO DECEMBER, 2006:

Source : Citylife Property Group, based on data supplied by the ABS,C.P.G. figures, REIA data.

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