The World is Too Uncertain:
“I will wait for a "Better Time” to Invest"
Consistently throughout the past 60 years, people have been saying that it's not a good time to invest in property in Australia.
In the early 1950's when a home loan was as rare as hen's teeth, they said - it's not a good time to buy; there is no money available; prices can not rise.
In the late 50's they said the economy was heading for disaster: Don't buy property, interest rates were going up, import quotas were being cut and world prices for wool and wheat had dropped.
The Menzies credit squeeze of 1961 was a good reason not to buy property.
The doomsayers said property as an investment was finished and would never return to its old glory.
In the late 1960s, Great Britain, Australia’s biggest export customer was negotiating to join the EEC. Menzies raced to London to point out the error of their ways. He was unsuccessful and proclaimed that Great Britain's entry to the EEC would make previous recessions look like a boom. Don't invest in property now, they said.
The early 70s saw low inflation. Property would not increase in value, they said.
Then in the mid 70s, there was high inflation, high unemployment and then recession. The OPEC oil crisis of the late 70s caused people to say the property prices would drop. Property was out of fashion once again.
The abolition of negative gearing in the mid 80s had people saying - don't buy property now, there's no tax advantages.
In the early 90s we had another recession and low inflation with a flood of headlines such as "values cannot rise when inflation is low".
In the mid nineties Australian real estate could not go up as it was “unaffordable.”
Then we had 9/11, the Asian Financial Crisis and the Dow Jones crash.
Australian property was in trouble they said.
The in the early to mid 2000’s the market was in a bubble they said, and an Australian house price crash was inevitable and could not be avoided. The over supply would mean no tenants, and prices would collapse.
There was war in Iraq and SARS in Asia.
Consistently for the past 60 years, "experts" have been saying that the time is not right to invest in property.
There is so much to be learned from people who have been investing in property for a long time.
One thing they all tell you is:
“If you wait for the right time to buy, you'll never buy anything at all. And if you sell when everyone says sell,you'll never have anything at all. The trick is to buy whenever you can afford to. In other words, buy when it suits you financially, not when it's “economically” correct, or when you think the “timing” is right.
Imagine is it 2003 again- and you had an opportunity to invest THEN and decided NOT too because of the uncertainty in 2003:
-In Haifa, 17 Israeli civilians are killed by a Hamas suicide bomb in the Haifa bus 37 massacre.
-The largest coordinated worldwide vigil takes place, as part of the global protests against Iraq war.
-A US-led coalition launches an invasion of Iraq, beginning the Iraq War
-In Nasiriyah, Iraq, 11 soldiers of the 507th Maintenance Company as well as 18 U.S. Marines are killed during the first major conflict of Operation Iraqi Freedom
-The Arab League votes 21-1 in favor of a resolution demanding the immediate and unconditional removal of U.S. and British soldiers from Iraq.
-Baghdad falls to U.S. forces ending the invasion of Iraqi but resulting in widespread looting
-The Riyadh compound bombings, carried out by Al Qaeda, kill 26
-In Casablanca, Morocco, 33 civilians are killed and more than 100 people are injured in terrorist attacks
-Beijing closes all schools because of the SARS virus.
-SARS is declared "contained" by the WHO
-Members of 101st Airborne of the United States, aided by Special Forces, attack a compound in Iraq, killing Saddam Hussein's sons Uday and Qusay, along with Mustapha Hussein, Qusay's 14-year old son, and a bodyguard
-A car bomb explodes in the Indonesian capital of Jakarta outside the Marriott Hotel killing 12 and injuring 150.
-NATO takes over command of the peacekeeping force in Afghanistan, marking its first major operation outside Europe in its 54-year-history.
-Sweden rejects adopting the Euro in a referendum
-Mahathir bin Mohamad resigns as Prime Minister of Malaysia and is replaced by Deputy Prime Minister Abdullah Ahmad Badawi, marking an end to Mahathir's 22 years in power. (Until May 2018 that is!)
-Iraq war: In Nasiriya, Iraq, at least 23 people, among them the first Italian casualties of the 2003 Iraq war are killed. base.
-First day of the Istanbul Bombings takes place.
-After the November 15 bombings, a second day of the 2003 Istanbul Bombings occurs in Istanbul, Turkey, destroying the Turkish head office of HSBC Bank AS and the British consulate.
These events are just SOME of the 2003 events, and have ignored much of the terrorist attacks of that year, the hurricanes, earthquakes, volcanoes etc
The point being there is ALWAYS uncertainty.
So BACK TO 2003....Imagine is it 2003 again- and you took an an opportunity to invest:
According to the official Residex Corelogic Brisbane apartment index Jan 2003 to Jan 2018 (15 years) the average Brisbane apartment is up 95%.
Therefore a $300,000 apartment secured on 30% deposit in 2003, is now worth say $585,000.
Return is $585,000
less 70% loan: $210,000
on $90,000 initial investment.
Your ROI (Return on Investment) is therefore 316%.
Over 15 years <$90,000 investment turns into $375,000>**
4. THE DOWNSIDE
After you do secure an apartment for some reason the market only performs half as well over the next 15 YEARS as it has done in the past 15 years, you’ll still make over 158% return on your own capital in 15 years! Still not too shabby!
Compared to perhaps 3% per year in cash deposits left in the bank.
But STILL want to leave your cash in the BANK?
** Simplified for ease of calculations, excluding rental, costs on purchase etc