Investment Strategy

The concept of the boom-bust cycle has a long history. In fact, it goes all the way back to a major stock market crash known as the Panic of 1825, when large investments failed in several South America countries (including a fake country!). The crisis led to the collapse of 12 banks in Britain alone and was felt across Europe and both American continents. Until this point, economists had generally believed that economic downturns were the result of purely external factors, like war – but the situation in 1825 didn’t seem to fit this rule. Swiss economist De Sismondi was first to point this out and thus give rise to concept of the “boom-bust”, or economic cycle. The idea being that capitalist economies are subject to continual cycles of economic expansion and contraction.

You’ve probably heard that over a 7-10 year period, the value of Australian real estate will always double like clockwork. It’s a common rule of thumb. But just how true is this? Does the pattern of history prove this to be false? Or is it indeed an accurate, high-level precis of the market’s intricacies? To begin with, it’s important to understand what is required for a house to double in value. It sounds extraordinary, but thanks to the power of compounding, a house price doubling over 7 years requires an annual growth rate of just over 10.2%, while a 10-year period needs only 7.2% growth each year.

According to the most recent PropTrack Market Insight Report, an intriguing trend has emerged within the Queensland property market: a notable 53.3% of all residential properties are now cheaper to purchase than rent. This figure stands in marked contrast to the national average of only 36%. In February this year, the national figure was just 9.1%. The differences among these figures prompt a couple of important questions: What factors underlie this trend and what ramifications might it create for markets moving forward?

With the homeownership dream increasingly out of reach for many Australians, the Queensland government has announced a ‘cost of living boost for first home buyers’—with the first home buyers’ grant being doubled from $15,000 to $30,000. The increase came into effect on the 20th of November and will remain until mid-2025, available for those buying or building a new home worth less than $750,000.