If you are about to make your first investment, start with doubling. A $700,000 property that doubles has made $700,000. A $1.2 million property that doubles has made $1.2 million. The only thing nobody can tell you is when. So how long does it take for property to double in value? No one can say for certain, but history is clear on the pattern.
What history shows
Between December 1991 and December 2021, Australian dwelling values rose about 381 per cent by CoreLogic’s figures. They more than doubled, then doubled again, in thirty years: about thirteen years for each doubling, on average. Sometimes it happens sooner, when inflation runs high, and sometimes later, when it runs low. If that history is any guide, and I think it is, I expect real estate to double again sooner or later. That is my reading of the past, not a promise for any property.
Two investors, twenty years apart
Take two people who each invest in a $1 million property of the same type and hold it until 65. One starts at 25. The other starts at 45. In round numbers, take a doubling every ten years, and a slower case of every fifteen. These are assumptions to show the arithmetic, not a forecast for any property.
| Doubling every | Starts at 25: value at 65 | Starts at 45: value at 65 |
|---|---|---|
| 10 years | $16 million (four doublings) | $4 million (two doublings) |
| 15 years | about $6.3 million | about $2.5 million |
Look at the gap, not the totals. In the ten-year case, the person who started twenty years earlier ends four times larger; in the fifteen-year case, about two and a half times, because time does the work.
Where the deposit comes from
The other half of the story is what each doubling was bought with. A deposit of 20 per cent controls the whole property, and the whole property is what doubles. Often the deposit itself is borrowed against equity in a home or another property, so the investor carries interest, not cash, while the value does its work. That cuts both ways: the loan stays whatever the market does, and the rent and the investor’s income have to carry it. Using the equity you hold explains how that works.
Why the 45-year-old is not too late
The person who starts at 45 still sees two doublings by 65, and two doublings of the right property can change a retirement. What they cannot get back is the first twenty years. Every year, people get in touch with me at about 55 and say they really need to do something now. They have fewer doublings ahead of them, so the plan has to fit the years they have.
Doubling only works for the investor who can hold through the years in between, including the ones when values fall. That is why the weekly cost of holding weighs as much as the price.
The plan that lets you hold is different for every income. To build yours, one step at a time, book a first conversation. It costs nothing.
Nicholas Lockhart
Using the equity you hold to add the next property →
If the market falls or rates rise after your first investment →
Source: CoreLogic Home Value Index, December 1991 to December 2021, published 21 March 2022.