What is capital growth? Capital growth also known as capital, capital appreciation and growth equity is the increase in market price of an asset. Capital growth is the increasing value of your property investments portfolio over time.
Do you have a question regarding capital growth? In particular, Melbourne and Sydney have had strong periods where many home owners with investment properties in some cases, doubled in value over a very short period of time.
You can within capital cities and specific suburbs manufacture capital growth through renovation, subdivision and development or a combination of all three.
Basically, if you’re waiting for capital growth to happen or using a passive buy and hold strategy, there’s no guarantee your investment property will gain in value.
Capital growth over any given period largely depends on where and what property you buy because real estate experiences steady growth over the long term…
Where to find great capital growth property investments? Is there magical suburbs or cities to suit every property investor? The only magic in the property game is to develop your investment process while doing your research with due diligence…
Capital growth, this is where both your personal financial criteria and investment strategy with risk options are clearly defined. Do you want low risk or long term?
You need to ensure the numbers clearly stack up. If in doubt, you should reach out to your team of property investment experts for help and professional advice.
Capital growth, that’s what you’re here to find out, right? You know through your research there are plenty of incredibly good investment properties out there.
There are over 15,000 suburbs across Australia, which ones point to and confirm the best capital growth? Which suburbs stand out as higher-return capital growth?
Can you determine future demand or other critical driving forces for capital growth from such a long list of investment properties and best streets within each suburb?
Perhaps cash flow is more important to you? You could buy positive cash flow property in mining towns across Australia at the moment. What if you want to buy in a capital city?
Traditional property investments in capital cities have long been considered the safest place for investing in property, which delivers capital growth over time.
The capital growth rule of thumb was to stay close to the inner city and go out the country for positive cash flow. Have you put this capital growth rule to the test?
What if you want to invest for capital growth in today’s market? Firstly, it’s a fast changing environment, so it’s critical to understand why the rules have changed?
Does capital growth mean buying close to CBD? What if capital city houses are too expensive? Is your strategy based on the past capital growth rules…make sense?
The fact is there are much less home buyers, property investors and home owners that can actually afford capital growth houses. As a result, demand is shrinking.
What if supply remains the same? Capital growth slows and can even decrease the value of properties. This means rental returns via capital city are reasonable…
Let’s take a closer look at rent statistics according to RP Data…across all capital cities combined, the figure grew by 7.1% for houses and 4.2% for units in 2011.
Property values in these cities fell by 4.3% (houses) and 1.5% (units) for the same period. If you crunch the numbers and factor in inflation of 3.1% in 2011, what position are you in terms of investing in property located in the capital city?
Does it mean you need to avoid capital cities altogether? It depends what you focus on, right? What if capital growth properties are priced within the affordably bracket for both investors and renters alike?
This is a great strategy because if you need to sell any property quickly, you have a wide pool of buyers ready to buy. Generally, affordable rent means a larger group of people can afford to rent your property.
Regardless of your strategy, I’m sure you’ll find if a tenant vacates one property and you own two $450,000 properties, you still earning rental income from one property while you fill the tenant gap for the other (usually within two weeks).
On the other hand, finding tenants wanting to rent higher-end $750,000 property, may take four weeks or more all the while you’re still making mortgage repayments without any rental income.
That’s why a location with strong, developing infrastructure, growing population and good council that encourages development and expansion is a good suburb.
You may want to check out options in Brisbane, while the market is still depressed, or in Melbourne where there are suburbs meeting the criteria with infrastructure.
Obviously, you need to do your research to know which suburbs have good future capital growth with population growth, avoiding over saturated rental suburbs.
What if your property portfolio is set-up with the goal of capital growth, which is mainly equity? What’s the formula you’d use to calculate capital growth?
Short list: The proportion of equity to total portfolio must fit according to your investment goals, financial constraints and risk tolerance.
In general, does your capital growth portfolio contain 65% -70% equity, 20%-25% fixed-income securities and remainder in cash flow or money market securities?
P.S. What if you want high returns on capital growth? What strategy do you use to protect assets against any severe loss in value if the higher-risk equity portion of the portfolio takes a plunge?