Capital growth: understand how it can work for you
Capital growth, or ‘capital gains’, is a key benefit of property ownership. And whether you own one apartment or a portfolio of investment properties, the concept of capital growth is important to understand. Here we explain capital growth, and explain why it can work for you.
Inflation hates cash
The first idea to understand is that – in a world of steady inflation – cash money is constantly losing value. Holding onto your money might seem like a good idea, but imagine if it was 1975 and you saved the average annual wage, put it in a tin and buried it in the garden. Your time capsule doesn’t change, and if you dug it up today, there’s still be the original amount you put in: $7618.
Earnings have gone up tenfold, property prices in Sydney have increased by over 3000%. But the cash is only worth its face value.
Invest in future growth
That’s a key reason why people invest, whether it be in shares, property, or even their own education and training. Investments of this type typically increase in value over time.
Property has been particularly attractive for a couple of reasons:
Firstly, as we’ve seen, the actual value of the initial capital investment increases. The $7618 median house price in Sydney is now hovers somewhere around $1 million. Pretty impressive growth.
And secondly, capital growth – while certainly riding the peaks and troughs of the market over the decades – increases steadily all by itself. And we all love gaining wealth while we do nothing!
How to take advantage
Capital growth is great in theory, but it only makes a tangible difference if you tap into the extra value that’s been created.
Typically, there are two ways people do this. One way is to sit tight on their property, and realise the value when they finally sell or pass the property on to their children. The other way is to borrow against the equity that capital gains produces to fund further investment.
The right advice
The team here at Mortgage Broker Sydney can help you explore the options open to you if your property has experienced capital growth; from surveying the home loan market to determine if there are other loans that suit your circumstances better to helping you understand the implications of taking out an investment loan.
Contact Mortgage Broker Sydney today for help and advice. Best of all, our service is FREE for you.
Phone: 1300 983 670
Michael began his career in the finance industry over 35 years ago. He progressed through the ranks at the CBA in both retail and corporate lending, culminating in a senior position as a Corporate Relationship Executive. His decision to leave the bank in 2003 to become an independent mortgage broker was driven by his desire to assist everyday customers break through the jargon of the banking world and access the best loan products in the market. His experience is wide-ranging from helping first time buyers to large commercial enterprises. What Michael doesn’t know about home loans, simply isn’t worth knowing!