A major bank and industry experts, buoyed by the current housing recovery, are even holding strong hopes of a new high in prices in the New Year. Houses will need to gain $38,700 or 6.9 per cent on top of their current $561,000 median to reach a new peak value of $599,700. Land values, Australia wide, have seen phenomenal growth over the last decade with an average 251% increase across all major cities. I don't know any other asset class that has seen nearly that kind of average growth in the last decade. Land is the truest commodity in real estate. Check out the growth for each major city, it’s truly amazing. Imagine if you could hold land that grew in value like this, and with no holding costs? This is why many of the wealthiest people around the world see land banking as such a powerful asset class to have in their portfolio. Per square meter Perth is now the most expensive city in Australia, closely followed by Sydney then Adelaide with Melbourne close behind. Brisbane comes in as the fifth most expense while Hobart remains by far the cheapest land market in the country. Adelaide has the smallest land lots in Australia, which makes the land price more affordable. I believe this is a trend we will see flow through the country over the next decade as affordability becomes a major focus for developers and purchasers. Now imagine if the land market grew like this over the next decade, and you were able to secure land lots with about $50,000 in total costs. What kind of return on your money would that represent? Let’s look at the last decade in Melbourne for example. Say your costs were $50,000 and you could negotiate a 10 year settlement (which, by the way, is what I have been doing for clients over the last two years). If values went from $88,000 to $226,00, that's an increase in value of $138,000 and with a $50,000 holding costs your return on investment would be 276%. Not bad when you consider this could be done with no bank debt and very little on going costs, if any.Australia Property Market
Land value increases in major capital cities, per square meter, 2002 – 2012: