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Hindsight is a wonderful thing, isn’t it?
Let me ask you a question…
With the benefit of hindsight and knowing what you know now if you had the opportunity to use a time machine and could go back to 1973, would you buy an investment property?
By the way…I’d already bought my first investment property by then.
Back in 1973 median house prices and rents across Australia’s capital cities looked like this:
- Sydney – $27,400, rent $26 per week
- Melbourne – $19,800, rent $19 per week
- Brisbane – $17,500, rent $17 per week
- Adelaide – $16,250, rent $15 per week
- Perth – $18,850, rent $18 per week
- Canberra – $26,850, rent $26 per week
- Hobart – $15,200, rent $14 per week
So, if you used that time machine, at those prices you could probably buy any house in the capital city of your choice on your credit card.
Firstly, credit cards weren’t around in Australia in those days – the BankCard was only introduced in 1974 and…
For those looking to buy a home back then, houses prices were very, very expensive.
According to the Australian Bureau of Statistics, the average weekly wage in 1973 was $111.80.
By the way…to purchase my first investment in Melbourne 50 years ago I went halves with my parents, we paid $18,000 and took on a 30-year mortgage of $16,000 and had no idea how we were going to pay it off.
Things are very different these days.
CoreLogic’s Hedonic price index for October 2021 shows the following median house values:
- Sydney – $1,311,641
- Melbourne – $962,250
- Brisbane – $709,136
- Adelaide – $575,949
- Perth – $548,351
- Canberra – $956,119
- Hobart – $704,321
A few other things have changed.
Back in 1973, the standard variable interest rate on your loan was around 7.5%, so your repayments on a median price Sydney home would be have been around $40 a week or around 35% of your weekly wage if you could borrow 100% of the property value and paid interest only.
Of course, back then you couldn’t.
The banks required you to pay a minimum 25% deposit, you had to pay back principal and interest and the banks did not accept your wife’s income in calculating your serviceability.
Today, the average wage is $1,737.10 according to the ABS and you’re likely to have an interest rate with a 2 in front of it.
This means servicing a mortgage is not the problem, even for many first home buyers – saving a deposit is.
On the other hand, many established homeowners have significant equity in their homes and today’s low-interest rates make it easy to upgrade to better accommodation.
Sure APRA is trying to slow our markets down, but there’s still plenty of momentum left in this property cycle.
As a property investor, you need to take a long-term outlook and it will be interesting to see what property values will be in 50 years’ time.
Here are 2 lessons I wish I knew
However, if I could go back in time there are 2 lessons I would tell my younger self…
1. There are always risks associated with investing.
Don’t be afraid of failing, because the biggest risk is not doing anything to protect your financial future.
Sometimes negative experiences, mistakes, and failures can be even better than success because they teach you something new which another win could never teach you.
However, we are often so driven to get things right that we fail to see the value in the things we get wrong.
Instead, we spend our time wishing we had done it differently.
Or not doing anything at all because of the fear of making mistakes paralysing us.
If you get it wrong, learn from your mistake and make it count by doing it differently next time.
One “failure” can – with time – help you create many successes.
2. Don’t waste your time worrying.
Most things you fear will happen, never do.
They’re just monstering your mind.
And if they do happen, they’ll most likely be not as bad as you expected.
Time spent worrying is time that you could spend identifying opportunities and taking action.