Time in the market VS Timing the market

The property market has been a topic of frequent discussion lately, particularly regarding fluctuating prices and the anticipation of interest rate increases. With another rate rise recently announced and further increases expected, it becomes crucial to look beyond the current scenario and consider the broader perspective.

A thought-provoking article published by CoreLogic last week shed light on the changes in house and unit prices over the past three decades, spanning six distinct cycles of growth and decline. Despite the various factors influencing each cycle, such as the global financial crisis (GFC) or interest rate fluctuations, the long-term trend reveals a significant overall increase in dwelling prices. Over the 30-year period analyzed, the average rise amounted to an impressive 382%. In terms of annual compounding, this equates to an average growth rate of 5.4%.

This historical analysis underscores the resilience and long-term value of real estate as an investment asset. Despite the challenges posed by economic downturns or policy changes, the property market has demonstrated its ability to rebound and appreciate over time. While short-term fluctuations and concerns may dominate discussions, it is important to remember that a broader perspective reveals a consistent upward trajectory for property values.

Investors, homeowners, and those interested in the property market can find solace in this long-term perspective. By focusing on the bigger picture and considering the historical context, individuals can gain insight into the potential benefits of property ownership as a wealth-building strategy. It is important to note that localized factors, market conditions, and individual circumstances should always be considered when making real estate decisions, but understanding the historical trends can provide valuable context for informed decision-making.

Time in the market

Thinking big picture and long term reminds us that time in the market is much more important than timing the market.

A couple of other relevant points to add:

• Australians tend to hold their homes a lot longer than a typical market cycle, with the median hold period being 9 years for homes sold over the last 12 months.
• Most regions have seen house values rise much more substantially than unit values over the past 30 years, likely a reflection of the scarcity value of land and faster rate of appreciation.
• The unit sector tends to show higher yields, relative to houses.

While we all wish we had a crystal ball to predict the future, the long term cycles of the past are still useful in informing us that:

• The decline trend will eventually level out, typically followed by a period of stability, then further growth.
• Analysing each downturn across combined capitals from the early 80’s shows the longest period of falling values has been 21 months.
• Each housing cycle has a catalyst, both at the outset of the upswing and the onset of the downturn (eg. interest rates, economic factors, etc). These can also be the cues for housing price stabilisation (eg when interest rates find a ceiling, and then as interest rates fall, then we could see housing markets enter a new growth phase).

On the Sunshine Coast:

• Noosa, not surprisingly, was among the top 10 Australian regional areas for growth in housing values over the last 30 years, rising by an average of 473%, followed closely by Noosa Hinterland (472%)
• Maroochy region was also featured in the top 20 Australian regional areas for growth over the last 30 years, at an average of 443% for growth.

The long-game approach to property investment always pays off when buying property, irrespective of the micro-market dynamics.

To discuss this topic further, or to investigate Sunshine Coast property investment opportunities, please contact us. Our team have a wealth of experience in the local Noosa property market and are actively assisting local and interstate home buyers with investments and research.