Prompt
Above Average Long-Term Growth
There are more opinions on the drivers of long-term growth than there is data. There are 3 things I have found with solid historical evidence that are also very easy to research
- Do not buy anything new
- Buy a house not a unit
- Buy in a built-up area
The problem with a data-driven approach to long-term drivers is that the information age is relatively new. There’s very little historical property data dating back many decades. Auction clearance rates, vacancy rates, yields, selling times and stock on market don’t go back more than 15 years.
But I have been able to research the 3 things mentioned above over decent timeframes. Here’s what I found…
Don't Buy New
Claiming the depreciation loss against your taxable income helps lessen the impact of a bad thing, but it’s still a bad thing. For more detail on this topic and the historical evidence backing it up, check out this article: “New properties under-perform”.
Buy a House
Houses have outperformed units over the long-term.
Buy in Built-up Area
Why Long Term?
Time Even Things Out
You can see the growth rates narrowing. Here it is for 16 years…
Everything Changes
If you wait long enough, whatever worked in the past will not work in the future. The longer your plan is, the more chance there is of it coming undone before it’s fruitful.
Short Learning Cycles
How many lessons can you learn if you don’t know you’ve made a mistake until 30 years have passed? Contrast that with a 3-year plan, in which you might have time to recover before retirement age.
Technology
If we can only make predictions a few years in advance, then it makes sense to use what we know rather than guess what we don’t know. It’s extremely difficult to make forecasts decades into the future. Going with what I know makes more sense to me, even if the timeframe is somewhat limited.
Best of Both
If we can only make predictions a few years in advance, then it makes sense to use what we know rather than guess what we don’t know. It’s extremely difficult to make forecasts decades into the future. Going with what I know makes more sense to me, even if the timeframe is somewhat limited.
