Ah ha! Five years ago information has come to light that claims that so many of our ordinary white picket fence suburban homes - valued at $1 million.
The fascinating thing about this is that I wrote exactly this on 27 July 2010 – ten years ago and here is the link.Now, 2020, 10 years later, ha, the $1m price tag is old news.
That article from News.com stated that one in seven Melbourne residences is now worth 1 million dollars or more, according to statistics provided by a real estate research organisation, Residex, which valued every house in 32,592 streets. As reported in news.com recently, this means that a surge in property prices has created thousands of new Millionaire Rows in the space of a year.
Now, late last year News.com published an article stating: “Property prices are tipped to soar over the next decade as median house prices in most capital cities come with a $1 million plus price tag. National house prices have skyrocketed at a rate of 8.43 per cent per annum in the 30 years until 2010 and given recent soaring growth rates it’s predicted Australians will need to stump up much larger deposits to afford properties that have risen beyond six digits.”
But having refelcted on both those articles, four and a half years apart, I wonder whether a million dollars is really 'worth' a million dollars, or if it is just 'paper talk'.
I read a story of a gentleman in his early sixties whose wife had died some time before, his children were well and truly off his hands, and by selling up his home, and adding his life savings and superannuation, he put into place a scenario that many have considered.
He invested with his $2 million in long-term profitable and secure shares and bonds and rented a residence with a six month lease. At the end of six months he travelled, and upon his return, he leased again for six months, near one of his children's families; and then at another time, near another of his children, and so on. There was more than enough interest from the $2 million to live where he wished and travel where his fancy took him, or stay longer in any one place.
This gentleman was obviously wise in his strategy, but there are dangers in this process. If the Global Financial Crisis had hit him just as he had made his investments, he would not have been able to carry out his plan. His initial $2 million would not have been worth anywhere near $2 million.
Similarly, for the average Australian family, if they sell their home they will have to spend all that and more, and fees and stamp duty, and moving costs, to buy another to find another house to purchase to live in. The $1 million may hold its value, but it is not worth anything because it is just swapped for something else, plus costs.
Possibilities
If a family is in the position to ‘downsize’, they could sell a reasonably luxurious home and move to a cheaper house, pay off their debts and for the first time live a more relaxed life with liquid assets (money) in the bank. However, both News.com articles were not talking about luxurious houses, but those considered rather ‘ordinary suburban homes’, which have inflated in value. This strategy would not work for those families.
Of course, there are others who seek to make money when they see prices escalating out of control. For example, the Gold Coast beach side suburbs have seen prices go up and down in almost reliable cyclical scenarios. Sharp investors have bought up $3-4 million properties when at the bottom in these cycles, holding them for a few hours (or days), and selling them on for much more than their purchase price.
The Scriptures are replete with references to buying and selling real estate. For example, we're told that in the days of Noah people were buying and selling. Jesus tells a parable about those invited to a wedding feast and one of them had to attend to real estate.
Like any investment, real estate needs careful evaluation. $1 million might sound a great deal of money in liquid assets, however if that value is in your family home, it is only realistic if someone will pay you that amount of money and you have somewhere else to 'rest your head'.
This might be a realistic comment for 2020. Proverbs 15 verse 22 says “Without counsel, plans go awry, But in the multitude of counsellors they are established.”