Wednesday, October 04, 2017

Australian property expensive compared to shares....or its just compound interest

Great article here comparing the long term returns of shares and property in Australia

When we compare the performance of shares and housing over the history of our nation we can see some interesting similarities, but also some crucial differences. The graph shows how each has performed since 1901 using a common index so that we can easily compare the critical changes that have taken place over the years.

Some of the easily noticeable external events are
•    1929 – The arrival of the Great Depression
•    1952 – The start of the Korean War
•    1960 – The Menzies Government Credit Squeeze
•    1974 – The ‘petrodollar’ crisis and Stagflation
•    1990 – The recession “We had to have”
•    2008 – The onset of the GFC

Proving yet again we don't have super expensive housing......Australians are just shit at calculating compound interest and both housing and shares rise about 7-8% over the long term, yes there will be dips and variance....but at the end of the day you need to be able to calculate 7-8% compound interest in your head.

The only reason our housing is expensive compared to say the USA is we keep insisting that everyone lives 20-40 mins commute from the center of 2 cbd's and until we decide to start populating tier 2 cities.....Australians will be paying over the average for our housing costs.

The older I get the more I fail to understand why Australia doesn't understand the need for more than 2 big cities and 5 country towns.

Until we realize that Canberra, Bathurst, Orange, Port Macquarie, Nowra  etc etc MUST be allowed to expand into fully fledged cities with self sustaining industry and jobs we are stuck in a vicious cycle of trying to squeeze more and more people into an expensive situation in Sydney and Melbourne.

Its time for Australia to grow up.

We need more #Tier2cities and we need them now.

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