Would you like to know how often I get asked this question?
Answer: All the time!
Understandably, people want to know specific locations, the silver bullet, where they can maximise their investment gains. But this is where time-frame becomes important. Trying to pick the market to make overnight gains in property is nigh impossible but in the longer term, if you stick to some general principles, there is actually more scope and locations to choose from.
Picking the right city is more important than the right suburb if you want to make good money from property investment. That’s a key lesson learned from a fresh study of the past decade of house price performance. Property Investment Professionals of Australia chairman Peter Koulizos examined 10-year home price movements across thousands of suburbs and towns and discovered key trends that can help investors make decisions. For example, don’t always follow the old saying that prices double every 10 years. Home prices in once-booming mining towns including Port Hedland, West Gladstone, Roxby Downs and Newman are still more than 40 per cent below their levels of a decade ago, the research found. “Successful property investment is about long-term economic fundamentals, not supposed short-term financial gains,” Mr Koulizos said. “And that usually means investing in locations with diverse, multifaceted economies, not areas that financially ebb and flow depending on the strength — or weakness — of a single industry.”
Mr Koulizos also found that:
• Homes close to city centres did better than those near the beach or in outer suburb.
• House prices rose stronger than unit prices in most capital city suburbs.
• Choosing the right city was vital to tap into that city’s stage in the property cycle.
Other key lessons known to professional investors are:
• Neither booms nor busts last forever.
• Beware of doomsayers, who for decades have been claiming that prices will plummet.
• The crowd was usually wrong. Crowd psychology influences people’s investment decisions, often to their detriment.
• Investors tend to be most optimistic near the peak of the cycle, at a time when they should be the most cautious. And they were most pessimistic near the bottom of the cycle when there was the least downside.
“The markets will humble you if you don’t check your ego at the door. Always continue learning.”