Did you know that there are thousands of suburbs in Australia as well as nearly 10 million dwellings?
This essentially means that you have less than a one in 1,000 chance of your suburb being the best suburb to invest in – and a one in 10 million chance of a particular property being the best property to invest in.
Yet, it still surprises me how many people will invest in many hundreds of thousands of dollars of property, if not millions, without good advice and research.
All property markets have a cycle that is typically about seven years of high growth often called a boom, where it typically gets about 100% growth?
Then there is usually a five to 15% drop in values, then about seven years of very poor growth, which we call a plateau, of around zero to 10%.
At the start of the boom, rental returns and affordability are normally quite high, with many properties usually positive cash flow.
However, at the end of the boom, rental returns and affordability are very low, with most properties are usually negative cash flow.
One major property market, such as a city, can be booming, while another can be going through a period of very poor growth at the same time.
So, the difference in growth over a seven-year period can be either zero per cent to sometimes more than 100 per cent, which for a $500,000 property can be a difference in growth of around $500,000 or more, plus the rental returns are usually much higher as well.
Of course, these cycles can be longer or shorter depending on what else is happening in the market and where all the other fundamental market forces are also at.
So, you must try not to fall into the trap of thinking that your suburb is great, it always has good demand, so it will always do well, because it is simply not the case, even the amazing Northern Beaches!
From 2017 to 2019, almost all Northern Beaches suburbs dropped in value by about 15%, while also having very low rental returns.
However, many other markets grew by 20% or more in the same period, while having net rental returns at 50 to 100 percent higher, because they were simply at a different point in their respective market cycles.
Likewise, from 2003 to 2009, most Northern Beaches property had no growth, while rental returns were so low that it cost you money to own it if you started with less than a 40% deposit!
However, most Brisbane properties over the same period had around 80 percent growth while the rental returns were much better, plus the rent and tax benefits typically were more than the total costs.
That means most Northern Beaches properties made a loss over a six-year period, while a $500,000 property in Brisbane, which grew by about 80 percent, had capital growth of $400,000, which is clearly an enormous difference.
These differences were actually quite predictable with good research and experience.
Plus, there are great strategies available to invest more effectively and more safely, so look for a good adviser that has some great research and experience to help you.