Ever heard of Groundhog day?
It was a great movie, made back in 1993 with a young Bill Murray. It depicted Bill waking up and starting his day on an American celebration called Groundhog Day. At some point during the day – after making quite a hash of things, something happened to trigger him being on a perpetual loop.
Every time he woke up, he was beginning the same day, he would see and hear the same things and have another attempt at the day, and at winning the heart of the young Andie MacDowell. Great movie.
I felt like I woke up to Groundhog Day when I found our old mate Harry Dent back to his old tricks. For those of you who don’t know Harry, Harry is an American author who writes books about the impending demise of property. He did this in America, and has expanded his repertoire to England, Europe and of course Australia.
He has done this for a number of decades now, and I often feature some snippets of his television interviews and headlines in my Master Classes. Fortunately for the property market – unfortunately for him, his predictions haven’t culminated in the foreseen property bubbles, and dramatic meltdowns however they did help sell his books to the unwary.
Surprise surprise, there is another impending disaster and you can read all about it in his… you guessed it, NEW book. Naturally there is much in the way of facebook marketing, paid newspaper articles and probably some TV air time to throw the fear of the forthcoming catastrophe into the general population.
The general theme
Housing prices heading off the cliff, the greatest economic and political upheaval since the American revolution, stocks will crash as much as 80%, etc etc. It is followed up with watch my video, read my book, act now to protect and build your wealth blah blah.
Bad news sells, so there is sure to be a trail of media reaction, news stories and television debates about the topic, which in a way is good.
For a start it will help educate the next generation of people contemplating property for the first time, who may be put off their plans or goals by the misinformation, in learning about how the media works.
Over the past 18 years I have been tracking the headlines and the following results of what has actually happened with the property market. When there has been a major attention-grabbing headline or prediction of an impending bubble bursting, property meltdown or a drop in the market of 50% or more, I have found 9 times out of 10, the exact opposite occurs.
To the point where when there is a big brouhaha about an impending catastrophe I get pretty excited as it is usually followed by some outstanding growth in the market.
When you look at the meaning of Brouhaha, I found this on an online dictionary: Brouhaha - Brouhaha is something that people think is really important that's actually not important at all, like the Brouhaha over some new celebrity gossip. (Brouhaha seems like a big deal, but it's a bunch of baloney.) I actually think it is the perfect description of what Harry Dent and those like him create.
Often it is just a stir to assist in book sales that without creating the fuss wouldn’t make it off the shelf or fill their wallets.
I think the 7 important things to remember about the property market are.
- The property market goes up and down during its’ cycle but over time continues to rise
- Property takes 10-15 years to mature and isn’t a get rich quick scheme
- Retirement based on rent gives you an ongoing increasing income for the rest of your life
- Rent and property tend to go up equally over time
- The media predictions are usually behind the actual trend of property growth and retractions – because by the time the results come out it is historical data
- Property has been the backbone of most wealth created in Australia
- Property wealth is accelerated because you can use OPM – other people’s money (bank loans) to buy property, and OPM (rental income) to pay them off
The downside of people like Harry Dent and the other book selling doom-dayers is it adds fear and confusion into a market that the novice investors are already treading gingerly in with fear and trepidation.
I will admit I am a huge property advocate. I have tried other things – shares, share trading, currency trading, even multilevel marketing for income. Bottom line is, property has worked for me where the other things I tried didn’t.
Property is a great wealth creator if you understand it.
Education, research and knowing that investing in a property is a long term investment helps. It also helps to know that in Australia it has always been a supply and demand issue. We are a growing country and have the constant need for more property.
When you look at investment options – property also takes the cake. This is made evident by the fact it gives you an ongoing increasing income, which is much better than relying on cash long term.
The value of money goes down over time, so investing in money can be the worst investment – yet most people think that money equals wealth, often the opposite is true.
Money devalues over time so anyone retiring on money will run out. The cost of living goes up making lifestyle spending unable to be sustained on the return on money invested.
Rent from property investing gives an ongoing increasing income for the rest of your life because rent goes up with the cost of living. The other exciting thing about property – is that if you have property debt, debt is money and it also reduces in value over time!
Looking at a couple of case studies :
- If you had bought a property in Brisbane in 1970 – you would have paid $12k for it. If you still owned it today it would be worth $600k. If you still had the debt (not likely as the mortgage would be paid off by now) however if you did – you would owe $12k on a $600k property.
- Same property, if you had bought the property in 2007 you would have paid $300k for it. Today it would be worth $600k. If you had borrowed 100% and not paid anything off you would have a 50% loan to value ratio now. I know the figures because I bought this one.
Rent does the same thing. It goes up over time with the cost of living.
This property started out renting for $290 per week, and now it earns $570 per week.
At the end of the day, I think property in Australia is a strong and safe investment. I believe it has been for the past 100 years or more and I think it will continue to be… but then again, I’m not trying to sell a book – so what would I know.
Keep smiling and have great week!