A lot can happen in 10 years.
Last week I wrote the first in a series of three articles on the biggest changes in property over the last decade and explained how the economy, market forces and our property markets can be hard to forecast.
The reason for my reflective mood is that the 10 anniversary edition my first book How to Grow a Multi-Million Dollar Portfolio in your spare time has just been published so it seems appropriate to look back as well as looking forward (next week) in this series of three articles.
Today I’m going to consider ten big changes that have affected our property over the last decade.
The way that property is bought and sold is much different today than it was just 10 years ago when property portals were still in their infancy and most people found out about real estate through print advertisements or in listings in agency windows.
Today the vast majority of real estate is marketed online with good quality photos, videos and sometimes 3D walkthroughs.
There is also a plethora of property-related information available online including sales statistics, general real estate research and market commentary.
This has created a generation of better-informed home buyers and property investors, and while that’s good the many mixed messages and clutter has led to some investors getting stick in analysis paralysis, while others have made disastrous investment decisions based on mis-information.
Over the past decade there have been a large number of “property educators” who have come and gone, unfortunately sometimes leaving burned investors in their “uneducated” wake.
Today property “education” is unfortunately still unregulated and a new round of fast talking gurus are luring inexperienced investors into their web. Another change in the last decade is how striking looking websites can make these amateurs look like professionals.
All the above influences seem to have enticed more people into property investment. According to Corelogic there are over 2 million property investors in Australia, yet many can’t last the distance, with about 20% of investors selling up their properties in the first year and about 50% doing so in the first five years.
And of those who remain in the game, about 90% never get past their second investment property.
No one saw the GFC coming 10 years ago, despite the fact that the seeds of the US subprime crisis had already been sewn.
While the world’s economic crisis put a short term halt to our property markets, these were soon stimulated again by falling interest rates and our resources boom.
Source: Corelogic
The resources boom lead to a mining town property boom, fueled by “hot spotting” property researchers.
This created droves of short-term property in the multimillionaires, who soon learned that investing in locations that lack multiple growth drivers is fraught with danger.
Many are still holding on to their unsaleable properties and have significant negative equity as values have fallen 20, 30 and sometimes 40% and rents are half what they used to be.
Over the second half of the last decade our property markets have been a two horse race, without our two big “international” capital cities cities, Melbourne and Sydney, attracting significant economic, population and jobs growth causing property prices to serge.
At the same time most of our regional property markets have languished. And this gap is only likely to widen.
Source: Corelogic
With rising property prices, the last decade has seen a surge of renting investors who choose to rent where they want to live (but can’t afford to purchase) and buy an investment property before they buy their first home.
At the same time, more one or two people households of all generations means many people are considering units and townhouses as their preferred style of accommodation and for reasons other than just affordability.
They are trading their backyards for balconies and living in the areas which provide superior lifestyle, amenities and proximity to the CBD and entertainment precincts.
And of course more people are shifting to our big cities, which is creating an even larger economic gap between the “big smoke” and regional areas.
Significant population growth has been one of the driving factors of our property markets over the last decade, and this together with our increasing household wealth has underpinned our property markets.
A decade ago, in 2006 we were happy to have a home loan rate under 10%. Now rates are half that.
Also finance has become more difficult to get. A decade ago there were Low Doc and No Doc loans as banks lent money to almost anyone who was willing to take it.
Today getting finance for an investment property has been made more difficult by changes to lending criteria by APRA, which was reacting to a temporary set of circumstances with a rather blunt instrument.
As I said at the beginning – a lot can happen over a decade, and as you can see a lot has.
Now that we’ve considered the market in 2006 and the changes from then to now, where do I see the market heading in the next 10 years and how can you make the most from what may be ahead?
Well I’ll outline all of my thoughts about this in the last blog in this special series so keep an eye out for it next week.
Michael Yardney is a director of Metropole Property Strategists, which creates wealth for its clients through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Update blog.
Michael Yardney is a director of Metropole Property Strategists, which creates wealth for its clients through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Update blog.
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