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Melbourne house prices 1970 to 2020

One of the reasons I made this chart is because I see people pointing to inflation and higher mortgage rates as a reason property prices are going to go one direction or another.

But as the chart suggests, housing is way more complicated than pointing at a single factor and saying a 12 trillion dollar residential property market is going to do something or other.

We literally just went through this in 2022, rates went up 14 times and house prices largely increased significantly across the nation over the last 4 years.

Serious investors look through all these turbulent moment’s and just continue on with the plan. In fact, serious investors are gathering finance to buy now while sentiment is lower than it otherwise would be. Most people are pointing to the latest event of the day as the latest excuse as to why they aren’t investing (and they likely never will).

The chat above shows both real and nominal average house prices growth for each decade from 1970.

It also shows average mortgage rates, average inflation and average cash rate.

The short term money market rate was used before 1990 to make calculations in my chart as the RBA cash rate in its current form only came in then.

Property prices in the chart are based on house prices only and sourced from a range of different sources to try make it as accurate as possible.

Chart was created by AI by all figures were input and checked by myself to ensure accuracy or as close to accurate as I could possibly make it given complicated calculations like the short term rates pre 1990.

#melbourne #melbournerealestate #brisbanerealestate #brisbaneproperty #brisbanebuyersagents

High risk does not equal high return.

We have often heard some version of the phrase high risk equals high reward.

But if simply taking on more risk ment getting a higher reward, then it wouldn’t be higher risk.

This is best examplified in the commonly shared chart at the top of the image below.

This chart is very misleading, it implies there is a direct correlation between the amount of risk you take on and the amount of reward you will recieve in return.

The second chart at the bottom of the photo is a far better representation of the actual risk return dynamic.

The bell shaped curves on this chart represent the distribution of likely probabilities as you work your way out the risk curve.

Simply put, as you take on more risk, sure the precieved probability of gain should increase, but the probability of loss also increases significantly along with it.

If you look at the first curved bell on the left side, low on the risk reward axis. We can think about that as a 10 year government bond which Warren Buffet said is about the closest thing you can get to the highest risk free return. Probablily of loss is low, upside capped and not very high.

If we look at the largest curved bell on the right side of the chart, we could think about that as a speculative stock or crypto coin. Probability of a pecieved outsized return should be present, but the probability of investment going to effectively 0 is also high.

When it comes to property, we like to think about this in a variety of different ways using this framing.

Single industry town versus diverse economies in major capitals.

Brand new versus established

High rise tower versus single family home

Perceived long term reward needs to be balanced with perceived risk and we try manage this as effectively as possible in our business and tailored to clients own risk profiles.

All posts on here are written entirely by myself.

#risk #investment #brisbanebuyersagent #brisbanerealestate #melbournerealestate