If You Want to Build Long Term Wealth…

Where have you invested your wage growth from the past decade?

Well, if you are the average Joe or Jane, perhaps you’ve used those funds to buy a couple of mini quick picks on the lotto.

And if you did that, you wouldn’t have a lot of spare change left over.

Bloomberg reports the average weekly household income has grown by $27, over the last decade.

About $3 a year.

Contrast that with the growth in house prices.

Check out the table below. It comes from an Australian Financial Review article, from a week ago.

Property price growth vs salaries growth 01-05-2018


Source: Australian Financial Review
[Click to enlarge]

For me this table is personal, because I live in one of the areas listed.

Where I own, it’s old style blocks with a large backyard.

Everywhere I look it’s all getting developed.

This is a way land price can and will go higher. Larger houses on smaller blocks.

Though I’m late to the party, I’m doing my own development. Replacing an old run-down house and building three new houses.

It’s a positive thing to do. It beautifies the neighbourhood and provides additional housing for the area. As well as providing employment for surveyors, architects, builders and a long list of others.

Plus, I get a new house for free, without any debt

The property market waits for no one

Last year I was fortunate to buy another property in my area. It was open for inspection on the weekend and sold in less than a day. That’s how quickly things can move in the property market.

I can only speak from personal experience. If there is a property slow down, I’ve seen no evidence of it in my area.

Every week I receive advertising in my letterbox, from real estate agents who say they have dozens of interested buyers.

They list the selling price of their recently sold properties. The figures always surprise to the upside. I shake my head sometimes, at what properties are selling for.

You just have to find a way to get on the property ladder. Because if you are a wage earner renting a place to live, you’re falling behind.

Some stayed out of the property market. Mostly on what they read about a housing bubble. That hasn’t worked out to well for them.

Year after year experts have been calling a property collapse, yet house prices find a way to go higher.

Remember all the media attention Jonathan Tepper got back in 2016? He forecasted a 50% drop in Australian housing prices, and warned a collapse was ‘imminent’.

That all looks silly now. Stop listening to all the market ‘experts’. They don’t know the land cycle.

And it wasn’t only Tepper’s view that an Aussie housing collapse was coming in 2016. That view was shared by many private investment companies.

Your takeaway from all this? If you want to build long term wealth, you have to buy as much capital gain (land), as you can comfortably afford.

Because at the end of the day, everything is captured by land price.

The value is in the land

Whenever you read the headlines, it’s always about ‘house’ prices rising, but the actual house can never rise in value. A house needs constant upkeep, items need servicing, replacing, repainting and so forth. A house is a cost and can only fall in value.

Ahh…but the land. Fixed in supply, around all the amenities we enjoy, must rise in value with progress and increasing population. Land is the real asset.

And local improvements in amenities and infrastructure such as new schools, better transport links, recreational facilities, and the like, all cause land price to rise.

If you are the average wage earner, renting a place to live, the economic gains are not flowing to you.

All the gains feed into land price. To those that own.

So buy as much capital gain (land), as you can afford. First a place to live and take it from there.

But buying property in this market, I’ve found, is not easy.

You might find a property your keen to live in or invest in, but there’s always someone else who gazumps you with a better offer. Or at auction there’s always someone who tops your bid.

Most of us are complete novices when it comes to buying property. That’s why I suggest if your considering buying property, employ the services of a buyer’s advocate. These are people who buy houses for clients almost every week of the year. They know the property market, how it works and how to get those contracts exchanged and signed. It just puts the odds more in your favour.

Find a way to get a foot on the ladder. Because if history is to repeat, we ain’t seen nothing yet. The really big gains in property come in the second half of the real estate cycle.

Find a seat, sit back and watch it all unfold, it will be exciting to watch.

If you want to find out more about how to profit from the property cycle, and to time it all to your advantage, then go here.

Terence Duffy,
Lead Researcher, Cycles, Trends and Forecasts


Terence Duffy is an analyst and chartist, specialising in researching economic trends and cycles.  His primary focus is housing and land affordability. But you can also depend on him to offer his unique analysis of stock market charts. As Terence will show you, the charts often forecast, well in advance, the good or bad news to come — which he details in Cycles, Trends and Forecasts.


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