I have been told a bit like a catch phrase that Property prices will double every 10 years. People I have talked to about this are just going that property prices have done this for the last couple of decades, so they assume that it will continue to do this. It would be great if it kept doing this, but I do not see how. One of the main influences on buy and hold that I can see is inflation, although it basically never seems to be mentioned. I heard one person say this boom is better then the last property boom cause there is no inflation going wild. The low inflation might not make the interest rates rise like they did before .. but with them being so long I can not see prices will go high.
If you said that inflation was 2.5% which compared to the rest of the world is high, but about what we have in Australia. Now property keeps increasing on average at twice the inflation rate (highly unlikely) and we now had on average a growth rate of 5%. If this value is compounded then it will still take about 15 years to double in price. If prices settle down and increase at 3% or even below inflation then it could take easily 20 or 30 years for prices to increase. With inflation being over 10% I can see property as a great asset to buy and hold. But just to buy and hold now, everything tells me it is a mugs game. I can understand running as a business in that you find where you can get a deduction, or renovate and make your profit then and there. But waiting for capital gain to appear just does not seem like it is going to happen. I am more then happy for some one to find flaws in my arguments cause I would like to buy more property. But buying for the expected capital gains I can not see how it is going to happen.
This might be wrong, but I remember someone saying that inflation really was not really around much before World War II. Maybe we are heading for a low inflation period where I see a great time for business and income streams, but not that good a time for capital gains.
If you said that inflation was 2.5% which compared to the rest of the world is high, but about what we have in Australia. Now property keeps increasing on average at twice the inflation rate (highly unlikely) and we now had on average a growth rate of 5%. If this value is compounded then it will still take about 15 years to double in price. If prices settle down and increase at 3% or even below inflation then it could take easily 20 or 30 years for prices to increase. With inflation being over 10% I can see property as a great asset to buy and hold. But just to buy and hold now, everything tells me it is a mugs game. I can understand running as a business in that you find where you can get a deduction, or renovate and make your profit then and there. But waiting for capital gain to appear just does not seem like it is going to happen. I am more then happy for some one to find flaws in my arguments cause I would like to buy more property. But buying for the expected capital gains I can not see how it is going to happen.
This might be wrong, but I remember someone saying that inflation really was not really around much before World War II. Maybe we are heading for a low inflation period where I see a great time for business and income streams, but not that good a time for capital gains.