February 20, 2023

#193: Listener questions - will property continue growing at 7% pa on average? Analysing rate cycles, population growth, increases in wealth

41 minutes

Got a question for the trio? - https://zfrmz.com/uLtjhyBskV96PY6eJfaI In this week’s episode, Dave, Cate and Pete answer two great listener questions; one is as the title describes, and the trio address growth drivers, assumptions and some of the things that don't always correlate with property price growth in the way that people expect them to. 1. A great question from Phil about historical average capital appreciation in capital cities. Hello gang! When you quote property appreciation estimates, you usually say something like 7%, based upon the historical average appreciation of the capital cities. That 7% has been made up of a number of factors: -population growth
-increases in general wealth
-increase in dual income
-foreign investment
-government positive incentives (first homebuyer schemes)
-government mismanagement (not building enough housing, or a mismatch between where the housing is built and where people want to live)
-falling interest rates, (since ~ 1990: 17% to 0%, then bouncing back up recently) So my question is: How much of the 7% return we have seen would be due to falling interest rates, and how should we alter our expectations of returns going forward? Dave answers this compelling question with the aid of some charts. Looking at what happened prior to 1990 is a telling example of interest rate rises not necessarily correlating with price declines. From foreign investment to government mismanagement, Pete and Dave touch on some of Phil's points, and they maintain that "government not building enough" is not the root cause of heightened property price growth at all. As Pete states, it's generally the private sector that builds most of the housing because government (or community housing) is represented by only about 10% of housing. Pete also notes that property price growth is not directly related to interest rate movements, and he cites some specific periods that prove that more elements influence property price growth than just interest rates. 2. And a fabulous question from an anonymous listener who asks the trio about open home etiquette. To leave your name and number? Or to seek a different approach? Tune in to hear some valuable insights... A neighbour attends an Open House but complains to your assistant at the door that they do not wish to give their details to be logged on to the Register as they do not wish the vendors to be told of their interest. You need to address their concerns and advise them of their rights and your obligations. How would you address their concern, whilst trying to build rapport with the potential buyer? The trio have fun with this question and Cate sheds light on some exciting undercover jobs she's had in her career when it comes to working with clients who wish to remain anonymous. 8. And ..... our gold nuggets! Cate Bakos, the 'Property Buyer's Gold Nugget: If a buyer has a decent relationship with the agent, they should be prepared to politely ask the agent not to call them about a particular property. Aside from saving the agent time, it will demonstrate to the agent why it's not the right property for them. David Johnson, the 'Property Planner's Gold Nugget: Dave talks about long term capital growth and the need for investors to be invested in an asset class that outperforms inflation. Regardless of short reduced overall yields, Dave firmly believes that investors are better off to invest long-term, than to risk inflation eroding their future wealth by waiting it out. Show notes - https://propertyplanning.com.au/listener-questions-will-property-continue-growing-at-7-pa-on-average/

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