Property investors can achieve an average 233% return on investment property in Sydney if they buy in 1993 and hold the property to 2010.
Sydney’s median house price rose 233 per cent between the June quarter of 1993 and the June quarter of 2010, from $188,050 to $626,444, according to the latest housing price figures from the Australian Property Monitors.
Houses in the inner western suburbs saw the biggest percentage price rise of the nine Sydney regions, up 318 per cent from $208,000 to $870,000. The smallest increase was in Canterbury-Bankstown, where the median house price still rose 201 per cent from $166,000 to $500,000.
The housing prices suggest that the regions that are closer to a certain lifestyle (the city or the beach) experienced higher return on investment and that’s where all the demand has been and still is. Ultimately the level of demand decides the house prices so you should know where to buy if you want to invest in properties.
There is one important factor that cannot be ignored – the interest rate. If you want to buy a home or investment property today, you should be budgeting to pay interest rates of about 9 per cent or higher.
Let’s hope that people do some sums around these figures and break the obsession with property. If you put $206k in the bank at 6% over 17 years you end up with $530k. That is simply chucking it in the bank. The $206k turning into $870k also doesn’t take into account your mortgage interest payments and upkeep of the home. Wake up people property is a poor way to build wealth.
@Frank, you will have to pay income tax on interest earned. You haven’t taken into account the tax offset of the interest on investment property and the rent as well. You need to add back 17 years worth of rent. 206K growing to 870k is just the capital growth. There is also a rent yield.
When you deposit $206K into bank, you need to have $206K. To buy property at $206K you need to pay 5% normally out of your pocket plus stamp, plus conveyancing, plus LMI if applicable. So to buy $206K property you need $11K roughly initial cash investment.
If you buy it as investment you get rent – and when you put money in the bank you don’t. Another myth is that you do not get enough rent to cover mortgage repayments – you know this is negative gearing. I would not go far for examples. I have bought $210K house near Penrith back in 2008. Now it is rented out to TAFE students $390 per week. Mortgage repayments are about $270 a week.
After a 21% growth last year the house risen in value by 44K. Plus there was about $6K of rent exceeding outgoings. Roughly 50K in total. Given initial investment of $11K that was 455% return. Of course, I have to pay tax.
Interesting thoughts.
It could be a really great time to buy given that the market looks to be dipping more and more each week. Who knows, the $206k you spend on a property with the right Home Loan to boot could be worth double that in 10 years time. Now that’s more than a bank is going to be able to offer in interest 😉
The percentage increase does not include the cost of renovation/upgrades.
Sometimes these cost are in excess of 100-300K