Missed The Sydney Property Boom?
When your hard-earned home deposit isn’t enough to enter Sydney’s property market it’s normal to feel disillusioned, but those willing to think outside the square have a profitable alternative. It’s probably taken some time to get your funds together and your sacrifices won’t have been easy. It’s a bitter pill to realise that Sydney’s property prices have doubled since you’ve been saving, pricing you out of the market before you’ve had a chance to begin. But before disappointment takes over, let’s look at the nature of the property cycle across four Australian capital cities. Even better? You’ll discover an alternative home ownership strategy that allows you to live where you want and put your money to work elsewhere.
Forget the million dollar mortgage
Imagine entering the property market with a million dollar mortgage - or even higher? If you were to buy your first home in the Sydney suburb of Gladesville, a three bedroom home currently costs around $1.6m. Without a significant injection of capital, it’s unlikely a first home buyer could purchase there, however renting would be another story. Where your mortgage repayments could be as high as $1650 per week, to rent a three-bedroom house in Gladesville would only cost around $850 per week. That deposit you’ve been saving could then be invested in a more affordable market to provide you with:
- A lower purchase price
- Higher rental yield and therefore higher return on investment
- Higher potential for capital growth
- The means to capitalise on low-interest rates by getting into the market now
- A foothold in the property market
- A growth asset set to achieve your financial goals
- Tax-deductible outgoings and expenses
The nature of Australia’s property cycle
When you look at how property prices have performed across Australia for the past 20 years, there is a clear pattern that emerges. There are 4-5 years of strong growth, 3-4 years of no or low growth and then the cycle swings back to strong growth again. I’ve researched the median property prices from 1996-2016 across four capital cities - Sydney, Melbourne, Brisbane and Perth - to demonstrate how this cycle works.
During the 10 year period from 1996-2006, there were approximately 7 years of strong growth across each of these cities, but not all at the same time. Post-2006 Perth’s prices leapt ahead as it experienced strong growth courtesy of the resources boom, whilst the following decade saw prices continue to rise but at a slower rate.
As for Sydney, Melbourne and Brisbane, each of these property markets saw growth patterns but some at a faster rate than others. What stands out, however, is that even the slower markets experienced solid growth.
Sydney and Melbourne are not your only options
Brisbane and Perth still remain affordable investment options and provide high rental yields, despite their slower growth to date. As history shows over the past 20 years, it’s only a matter of time before these markets grow. For those who’ve saved a home deposit and missed Sydney or Melbourne’s markets, make sure you capitalise on the next growth phase in those affordable Brisbane or Perth markets. When you see growth occurring across each of these four capital cities, it shows that no one property market is better than another. If you buy in a capital city and hold for at least 20 years, you will achieve capital growth.
Select your growth area and make it count
Property selection in these markets is extremely important to ensure you achieve capital growth and a buyers agent will take the guesswork out of where you buy. They know the ins and outs of the various markets so the fees are money well spent. While nobody can say exactly when a property cycle will turn - or when it will peak - a professional is aware of the market indicators that signal an area is primed for growth. They can also find a property market matched to your financial means.
Don’t despair - the right time is always now
Just because you’ve missed the boat in Sydney, it’s not the time to go out and blow your home deposit on a trip overseas. You’re better to be in the market rather than out, so put your funds to work elsewhere. Rent where you want to live in Sydney and invest elsewhere. All markets increase in value over time, so get in there and be patient while capital growth works its magic on your investment.