Capital Growth - What will my property be worth in 20 years?

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Capital Growth has been described as the 8th wonder of the world. Over time the value of your property will increase, building your wealth as you go. So how do you answer that question, what will my property be worth in 20 years?



Very interesting meeting recently where a group of people sitting around discussing what they believe properties would be worth down the track 10, 15, 20 years from now. We came up with some pretty interesting outcomes. Now, the basis of our conversation was about, what would a $350k investment property be worth 20 years from now? I think you're gonna be really shocked to see some of the outcomes we came up with.

Now, I think most people would expect me to hang around with very optimistic property investors. On this day, however, there was a very mixed group of people in the room, some people believing that we would achieve very similar to what we've achieved over the last 20 years, about a 7% capital growth amount on properties, giving us around about a value of $1.35 million for that $350k property 20 years from now. Others believed it would be below what the last 20 years has been, believing that we'd get about 6% average capital growth, leaving us with a value of that $350k property being now worth $1.12 million- still a very nice outcome. It was interesting when a couple of people in the room said, "You know what? We only believe we're gonna get 5%," well below the historical evidence of capital growth. And at 5% capital growth, when we did the figures, we still had achieved a growth on the $350k property to be worth $928k, very nice result, and I was very surprised when we worked these numbers out. One person was very pessimistic. They believed we'd only achieve an average of 4% capital growth. At 4% capital growth, he was very surprised to learn the property would still double in value over that time, it would be worth $766k, still had doubled in price even with just 4% average capital growth over that period of time, well below the historical evidence of property performance here in Australia. And then, we went on and went, just for a joke, let's work it out at just CPI 3% capital growth. What would we get at 3% growth? That property would be worth $632k, leaving everyone in the room pretty amazed, particularly when it comes to most property educators that use 8%, well above any of these numbers, as their forecast figures.

Now, I like to let people play devil's advocate. I like to let people work out where they believe their gut feeling tells them they would like to be as far as a forecast figure on capital growth. My job is to help people buy well. My job is to help them secure these properties with $1 deposits, enjoy very low holding costs, maybe $5 or $10 a week for the first 6 months of that 20 years, and then cashflow positive thereafter. Everyone that was in the room that day, whether they're optimistic or pessimistic, we all agreed we'd be sitting back 20 years from now wishing we'd bought more properties, as much as we could, so long as we control the numbers here- we didn't leave ourselves exposed with high holding costs and so many of the other common mistakes that most property investors make.

Look, guys. I don't know where your thoughts are. Hopefully you've found that as fascinating as we did to work these numbers out. The only thing I would say- please, if you are gonna buy a property, if you're gonna secure one of these properties, any property, if you can't do it with your lunch money, don't do it, guys.

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