Building Wealth with a Residential Property Portfolio – The Facts
Building wealth with a residential property portfolio? Let’s look at the facts. Of course, you may already know that I am biased towards quality residential property in a solid growth area of a city with at least one million people.
The Facts
Let’s take a look at findings by researchers at the Swiss-based Bank for International Settlements. They found that the long-term rise in Australian house prices since the early 1960’s has been the most sustained property market upswing in the world in recent decades. The cumulative gain in Australian property prices since 1961 being 6,556 percent!
The team looked at 47 countries and they found:
- Upswings vastly outnumber downswings
- For 80% of the time, studied property sectors were in upswing mode
- Upswings on average last about 13 years
- Downswings last about 5 years
Answer: Our data suggest that the answer is an unqualified yes!
In twenty advanced economies each with approximately 45 years of data, the real house prices increased on average by close to 7 percent per annum.
How does that compare with Brisbane, my preferred area for residential property investment? At 7 percent per annum, the value doubles every 10 years. The average price of a house in Brisbane in 1972 was $15K. If values doubled every 10 years (that is 7%) the average today would be $337K, where in reality it is $655K. In my 40 years in business, the value of my client’s properties has, on average, doubled every 8 years.
In a recent article I state that women are falling behind with superannuation and suggest that all girls should study mathematics at school. This has prompted a mother of three teenagers, a girl and two boys to ask how to teach her children to create and understand building wealth.
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So what should this mother say to her children?
Start with a real-life family meeting with the children – set budgets and saving targets. Tell them getting wealthy is not an instant gratification game. An old friend once said to me that there is nothing wrong with getting rich slowly. You need time to get smarter and wiser.
Question what you read in the paper or see on TV. Read books like “The Richest Man in Babylon” by George Samuel Classon and “Rich Dad Poor Dad” by Robert Kiyosaki.
Rene Descartes, the famous 17th-century French philosopher and Mathematician said: “I think therefore I am.” She could encourage her children to envision what they would like to achieve in life. There is then a good chance they will reach their goal.
Until next week …
Steve Taylor
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DISCLAIMER
Steve Taylor & Partners blog is opinion and not advice. Readers should seek their own professional advice on the above subject. The figures stated in this article were accurate at the time of publication. For up to date figures, please contact our office.
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