A few mornings a week I walk down to my local café, order a coffee, and catch up with some local regulars.
There is something about knowing the people you share your neighbourhood with. Their story, how long have they’ve lived here, why they like to live here? It’s good for the soul.
One of my locals is a guy named Dan.
Dan is 83 years old and has lived in the area for 64 years! In fact, he lives just two streets over from my wife and I.
Dan and I got talking and he told me he bought his land in 1957 and built his house two years later in 1959.
I asked him what the area was like when he first moved here.
“Well, for starters your whole street didn’t exist – the land your house sits on was a dairy farm until the end of the 60’s” he replied.
“The main road was a dirt one and there were army barracks and dairy farms on the western side, and barns for everyone’s horses on the eastern side” he continued.
Times have obviously changed. The western side of the road has since been replaced by houses, and the eastern side now houses a shopping centre, Bunnings, Aldi and a homemaker centre.
“The stables got turned into a drive-in theatre before they became that shopping centre.” Dan added.
The suburb I live in is just 7km from the Brisbane CBD. It’s hard to fathom only 60 years ago my suburb housed a dairy farm. It’s even more difficult to believe, it’s been less than 50 years since the roads were built.
Naturally, I had to ask Dan how much he paid for his house in 1959?
He bought his block of land and built his house, costing him a grand total of £3,350.
In 1966 pounds were converted to dollars at a rate of 2:1, so let’s call it $6,700.
The house is worth $1.4 million today.
Dan has experienced a compound annual growth rate of 8.7 per cent per annum. In other words, his house value has doubled roughly every 8 years over the 64 years he has owned it.
Dan’s story is a reminder of the value of land and time.
Compound growth is the secret sauce of investing and time is the most valuable ingredient when it comes to compound growth. A lot can happen in one decade. Even more can happen in two, let alone the six Dan has owned his home.
Most property investors own and hold their property for less than 10 years., not allowing enough time for compound growth to really kick in.
For property, the formula is simple. Land is a finite resource (not making any more of it) and population growth drives demand for land. As a population grows, so too does demand and the value of land.
The Brisbane population is about 2.6 million people today, up from 2.2 million ten years ago and 1.7 million twenty years ago.
When Dan bought his home, Brisbane had a population of just 600,000 people.
It might not be sexy, but it definitely works.
