Property investment is often seen as a pathway to wealth, and with the right skills and mindset, it can be. But success isn’t about quick wins – it’s about playing the long game.
CoreLogic’s latest Pain & Gain report confirms this, with properties held for longer periods consistently selling for greater profits than those sold after a short tenure.
This shows that successful property investment isn’t about speculation; rather, it’s a marathon requiring patience, strategy and a long-term perspective.
Property values grow over time
Historically, property values have grown over time, despite occasional dips. In 2022, CoreLogic assembled a report that included the median house and unit values over the 30 years prior. As the graph below illustrates, the overall trend has been upward, despite some periods of slower or no growth.
Since that report, property prices have continued to rise. By the end of 2024, the median house value in the combined capitals was $1,008,719, a further 8.6% increase from May 2022 when the CoreLogic report ended. For units, growth over the last two and a half years was 8.0% to a median value of $687,670.
The long-term growth in property has been driven by several factors, including:
- Population growth, which increases demand for housing
- Slower housing supply, which tightens the market
This imbalance between high demand and low supply puts upward pressure on prices.
Managing market cycles
The cyclical nature of the market means that periods of growth are invariably followed by periods of stagnation or correction and vice versa.
For example, in the graph above you can see that during the global financial crisis, Australian housing values fell 7.5% over the 2008 calendar year. But, this was followed by a period of sharp increases in values. Similarly, prices fell during the pandemic, only to rebound with low interest rates and government stimulus driving sharp growth.
For investors with a long-term perspective, these fluctuations are less worrying. Holding a property for longer allows it to recover from downturns and benefit from sustained growth.
These cycles are influenced by various things including macroeconomic factors like interest rates, economic growth and consumer confidence. Take, for example, the data from the September 2024 quarter in CoreLogic’s Pain & Gain report. As the table below illustrates, the median profit made on resales increases consistently the longer a property is held.
Some outliers, like the four-to-six-year hold period where profits increased, can be linked to cycles in the economy. For instance, buyers who secured low fixed interest rates in 2021 faced higher repayments when rates rose after May 2022, prompting sales. This also coincided with soaring property prices, resulting in higher profits.
But, this is an isolated example. Trying to “time” the market by buying at the bottom and selling at the peak is notoriously difficult, even for seasoned investors. A long-term strategy helps you ride out these ups and downs, allowing natural growth over years and decades to build wealth.
Planning for long-term success
So, the data shows that a long-term strategy is likely to yield good results for property investors. Here’s what you can do to achieve this:
1. Research
Thorough research is key. Identifying high-growth areas with strong infrastructure potential is important. Factors to consider include employment opportunities, desirable amenities and transport links. These factors drive demand and support long-term capital growth.
2. Financial planning
Property investment is a financial commitment that requires a solid foundation. Choosing the right loan product and structuring your finances for stability can help you weather potential economic changes.
Consider factors like your interest rate type, loan terms and repayment options. For example, a loan with an offset account can help you build up savings to renovate your investment property down the line or use as a deposit for your next property.
Most important is that you get professional advice to ensure your strategy aligns with your overall financial circumstances and goals.
3. Commitment
In property investment, short-term market movements can often create noise that distracts from the bigger picture. It’s important to resist the temptation to react impulsively to temporary dips or spikes in the market. Instead, stay focused on your long-term strategy, guided by clear goals.
The right mindset
Why you choose to invest in property is personal, and will differ from investor to investor. You could be looking to build equity, achieve a passive income from rent or secure a comfortable retirement. Whatever the reason, the key is to keep your mindset focused on the long-term benefits.
Are you looking to purchase an investment property? Whether it is your first investment property or your tenth, Clever Finance Solutions can help you with the process. Book a call with us to discuss your home loan needs.