Don’t wait to buy land; buy land and wait…
I saw one of those interesting posts on the Property Talk Australia Facebook group yesterday, showing land for sale up in Collaroy in Sydney.
The auctions were scheduled for April 1922, 102 years ago next month, with a £2 deposit required for purchase.
Source: Property Talk Australia
Today these blocks would have land values of around $2 million, if not more up on the beaches.
Of course, we've been through periods of high inflation, low inflation, high interest rates, low interest rates...and even a shift from pounds to Aussie dollars in 1966.
Some of the blocks are also better than others, granted, but by my calculations that comes to a compound annual growth rate of more than 11 per cent (but less than 12 per cent).
Call it 11½ per cent.
As Cameron Murray pointed out on last week's podcast, as we get wealthier as a nation, we simply spend more of our wealth on housing.
It’s a much simpler and better model for thinking about the user cost of housing.
Inflation hedge
Come to think of it, 11½ per cent is not too different from total returns from stock markets over the same timeline.
The difference with real estate is that you can typically leverage the results 5x or more.
Of course, every so often articles surface about whether real estate is a "good" investment or a "sub-par" investment.
But I normally pretty much ignore them because they rarely take account of how leverage is used in the real world, how in imperfect markets you can add value to properties through renovation or extension, or how you can redraw equity to buy more investments.
It’s why I know considerably more people with $5m to 10m property portfolios than I do stock portfolios.
I think at the very least this graphic shows why people like to own land and real estate in the landlocked city suburbs of Australia.
At a time when currency debasement is of concern, property tends to work pretty well over time as a decent inflation hedge.
I read this week that construction unions are pushing for 26 per cent pay rises - whether that comes about is another matter, but I doubt the cost of new housing is going to fall any time soon.
Inflation expectations
In that context, it was a relief to see consumer inflation expectations dropping back to 4.9 per cent, the lowest level since February 2022, according to ANZ-Roy Morgan's survey.
Consumer inflation expectations are now much closer to where they were in 2018 and 2019 - when the official rate of inflation was actually below the 2 to 3 percent target range - so are likely commensurate with the Reserve Bank hitting its inflation target.
Consumer sentiment generally remains low, with higher interest rates slowing consumption, and with wages growth also now rolling over.
---
P.S. Whenever you’re ready…here are 5 ways I can help you manage your own money and go next level wealth:
- Boom or Bust – 20 minute online workshop for investors
Register for my next free online training - Boom or Bust? How to change your investment plan - book in here
You also download a free copy of my e-book The Only 6 Ways to Become Wealthy here.
2. Download our property buying guide
Download our free property buying guide here.
You can also check out a few of our recent property investment purchases here.
Get in contact with us today if strategic property investment is your thing.
3. Subscribe to our Top 10 Podcasts for Investors
Listen in to our podcasts
The Australian Property Podcast is one of Australia's biggest business podcasts, with over 30,000 unique listeners per month.
And our enormously popular Low Rates High Returns Show also remains available on Spotify.
4. Subscribe for my free daily blog
Subscribe for my free daily blog with well over 3.5 million hits here.
You can also catch up with me daily on Twitter here, where I'm active daily and have over 13,900 followers.
By the way, I'm a 7-times published author on finance and investing, so you can check out some of my books here.
5. Work with me privately
For a limited time you can book in a free diagnosis call with me here, so book in a call today.