What Difference Does 2% Make?

2% 

It doesn’t sound like much, but when it comes to capital growth, over the time period you’ll own  your home or investment it can mean you are missing out on a lot of money.

A common mistake often made that results from looking at the data and statistics, is that all properties in a suburb grow in value at the same rate, but that’s not true. 

House price statistics are based on averages. 

So If you’re not doing your own suburb level research you’re not seeing the big differences in price growth between ideally positioned properties and those that aren’t.

So let’s use Bondi as an example. 

The median apartment price is $1.1m and the median growth rate has been about 7.5% a year for the past ten years. 

But what’s actually happened is the apartments that are:

– more ideally positioned, with views

– North and/or East-facing

– Are low maintenance

– have parking or potential parking 

– had no nearby development, are never to be built out

Appreciated in value at a greater than 7.5% a year. And those properties which were less than ideal, and had only a few, or none of those attributes- appreciated at less than 7.5% a year. 

So assuming these same types of numbers continue if you were to do your research and buy a $1.1m home in Bondi today that achieves 8.5% growth it would sell in fifteen years for $3.7m 

If you didn’t quite get your purchase right and instead achieve 6.5% growth it will sell for $2.8m in fifteen years.

That 2% difference in capital growth equates to $900,000 in hard dollar terms which is a large sum of money – even in 15 years time. 

With property, you make your money when you buy, more so than when you sell. 

When you buy is when you make the biggest effort to do your research thoroughly to make a good decision.  

Research, matters. Buying on the right side of the right street matters. Because 2% can make a big difference. 

Not just in Bondi – everywhere. I hope you found this useful. If you’ve got any questions please get in touch,  I’d love to hear from you.