This is the strangest downturn I’ve seen during my long career, but it’s definitely not the first.
I’ve lived through the 1982 recession, the 1991 recession, the 1997 Asian Financial Crisis, the 2000 dotcom crash, the 2003 SARS outbreak, the 2008 GFC and now COVID-19.
If there’s one thing I’ve learned during all these crises it’s that at times of uncertainty, people search for safe havens to put their money.
Property vs gold, bonds and equities
So where will people park their money this time?
I don’t think people will rush for gold, because it doesn’t offer strong long-term returns.
I don’t think people will be attracted to term deposits and bonds, because interest rates are at record-low levels.
I don’t think people will be keen on equities, because stock markets have been decimated recently. That leaves property.
Values and rents have kept increasing
Even though times are gloomy right now, you can continue to build your wealth over the long-term by investing in quality real estate.
Property – unlike shares – tends to record gradual price movements, rather than the sharp ups and downs of the stock market.
During my years as a finance broker and property investor, I’ve seen times when values have gone up and down, and I’ve seen times when rents have gone up and down, but the long-term trend has been clear: steady increases in both values and rents.
House prices have gone up, up and up
If we compare median house prices in 1973 (based on data from a Department of Parliamentary Services report) with median house prices from the end of 2019 (based on data from the ABS), here’s what we get:
● Melbourne grew from $19,800 to $740,000 (up 3,637%)
● Sydney grew from $27,400 to $960,000 (up 3,403%)
● Hobart grew from $15,200 to $500,000 (up 3,189%)
● Brisbane grew from $17,500 to $550,000 (up 3,043%)
● Adelaide grew from $16,250 to $487,500 (up 2,900%)
● Canberra grew from $26,850 to $737,500 (up 2,647%)
● Perth grew from $18,850 to $500,000 (up 2,553%)
Yes, that’s despite the many downturns and crises we’ve endured since 1973.
That’s why I think property is a great bet when times are tough. And it’s why many people right now will be looking for an investment that’s ‘safe as houses’.