Where to from here with the high cost of building?

This is a question I often pose myself when contemplating my navel.

Will costs keep spiraling out of control, or will market pressures force things to come to some sort of equilibrium. The truth is, no one knows for sure.

But what we do know is this, the design and construction industry is cyclical. There are ebbs and flows with each market fluctuation. The historical data shows that on average, houses across Australia generally rise between 3 and 5% every year. This means, on average across Australia, a house will double in price every 20 years.

Historical data going back to the 1980s show for Melbourne (where I reside) that house prices have doubled 5 times over 40 years. This doesn't bode well for the generations to come as property ownership becomes less and less affordable for your average income earners. Is it possible that Australias main centres will become havens for renters, like is normal practise in places like Paris, New York and Hong Kong? Possible, though unlikely as we don't have the same density provisions as those cities.

There are solutions. Buying apartments and townhouse units offers an opportunity for first home buyers to get on the ladder. The current government has eliminated stamp duty on "off the plan" apartments and townhouses with no current indication as to when this will scheme will end.

That's positive, but has a degree of risk as it is not uncommon for unscrupulous developers to put clauses in these contracts which allow them to take peoples deposits without recourse. That's a whole other issue we can address later.

For now, the answer is, if you have the deposit, get in the market. Do your due diligence, follow consistent growth markets and buy in the down-cycle.

Signing off,

Revell