July 12, 2023 by Dymphna

The myth that gets investors into trouble

If you listen to the myth, you could get into trouble.

Somewhere, a long time ago, some pecker-head said that property prices double every seven years.

Since then, it’s become Australian folklore, alongside Bunyips and Dropbears.

And it has just as much basis in reality.

Like I don’t imagine there are many, if any periods in Australian history where property prices have doubled in seven years.

I mean take the Covid boom, which gave us 25% in 18 months, and we’re still not even coming close to doubling in seven years.

PropTrack crunched the numbers on this last week. Taking May 2023 as your end point, it took the typical Australian house 15.4 years to double in value.

It took even longer for units, almost 17.8 years nationally.

Sydney houses (9.6 years) and Hobart houses (6.8 years) were the big exceptions, and those kinds of results are certainly not the rule.

And as I said, that was all with the benefit of one of the biggest booms in living memory.

Proptrack note that it’s just harder to achieve a doubling, the higher house prices go. Going from $100K to $200K is one thing. Going from $1m to $2m is another thing altogether.

“While property prices have risen significantly since the beginning of the pandemic, it has taken many years for median prices to double to their current values across most parts of the country”, PropTrack notes.

“This highlights that as the cost of housing has increased, the percentage gains in prices have reduced”.

So the whole ‘doubles in seven years’ is just nonsense.

That doesn’t mean that there isn’t great money to be made in property still. There is. But it’s not as simple as just hitching your wagon to the market and waiting for your money to double.

And I can guarantee it that there’s a student in every enrolment who’s devastated to hear this.

“What, I can just double my money by buying any old property?!?”

No. No you can’t.

I mean, you might get lucky, but that’s not how we do things at I Love Real Estate.

Unfortunately, you have to put in the work.

You have to buy well – you have to know the value of the market you’re in, and be able to recognise a good deal when you see one.

You have to have a plan – you have to know what you’re going to do to make money from your property. Is it a subdivision? Is it a town-house build? Is it short-term holiday letting?

Buy and hold is a strategy and a strategy that works, but it’s not where the good money tends to be.

And you also have to know how to structure your deal so you can keep your head above water cash-flow wise. It’s not rocket science, but most people who get in to trouble skip this step.

I could go on. But to make good money in property you need to know at least a little about what you’re doing.

But this whole 7-years nonsense just fills people with false-confidence, and gets them to jump into deeper water than they can handle.

It’s time for the myth to die.