Understanding Capital Growth as an Investment Strategy
Property Investment is underpinned by Capital Growth
Property investment is not a quick fix. For this, you'd be better off playing the pokies and hoping that your symbols all line up ......
Property investment is all about 'capital growth' and understanding that in order to build wealth, a long term financial investment is required.
How much capital growth can you expect on a property investment?
Investment properties are a long-term financial solution to building wealth. There are several strategies which can be implemented when building a property portfolio, but there is no denying that focusing on capital growth is paramount to ensure long-term success. Capital growth refers to the increase in value of a property portfolio over a period of time.
Historically, particularly in Melbourne and Sydney, we have seen periods whereby property owners in Australia have seen their capital growth double in a short amount of time.
In years preceding that, capital growth was negative due to the larger economic climate. So, how much capital growth can you expect on an investment property?
Know the property cycle
It’s important to acknowledge that the property market is cyclical, and as a property owner you will experience the market go through various highs and lows. Understanding the property cycle and how it can affect property value, yields and demand is key for an investor. Capital growth will largely depend on the location of your purchase.
The Australian market is made up of many submarkets. The capital growth of your property will depend on where the market in question sits in the property cycle.
Supply and Demand
There are two factors which will contribute to the short and long-term growth of a property: supply and demand.
If demand is high relative to supply, property prices will rise, meaning capital growth will therefore also increase. When demand soars buyers begin to compete against one another to secure a purchase - which is reflected in the higher average selling price.
As a property investor, finding a location that has the right supply and demand ratio is key to determine the potential for strong capital growth. Being able to decipher these market factors will make the difference between a good investment purchase, and a great one.
Investing in property is an important financial decision, which is why at Sandcastle Finance we recommend seeking the right advice before committing to a purchase. This will allow you to set out your goals and put strategies in place to meet these goals.
Contact Sally Prowse today on (02) 9401 0274 to discuss your potential investing opportunities.
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