Capital Growth as an Investment Strategy

Successful investors understand the concept of capital growth. Compound growth in the value of investments has generated wealthy Australians over time. Income is important, however; capital growth is key to your wealth building journey. Without Capital growth, a portfolio will remain stagnant over time.

Our wealth strategies incorporate purchasing property in high-demand areas that are projected to increase in value over time.

Capital growth is ideal for those who have a long term investment horizon as property values can fluctuate the same way stock markets do, however, it is proven that over the long term, property has great capacity for capital growth.

While it involves minimal work for the investor, you need to ensure you understand the cyclical nature of property markets to ensure investment success.

Types of Capital Growth Investments

Real estate is just one vehicle for capital growth. Other common investments include:

  • Funds (ETFs and mutual funds)
  • Equities (shares and stocks)
  • Bonds (government and private bonds) 

If you are interested in real estate but do not want to buy a property, there are alternatives such as Real Estate Investment Trusts (REITs) or Unlisted Real Estate Funds that can be used.

Capital Growth Property Case Study

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Get Started with Capital Growth Properties

Like any other investment, there is always a risk in investing in real estate for capital growth. Here are some steps you can do to minimise the risks:

  • Look for properties in areas with proven track record of capital growth 
  • Do your due diligence - research about the local property market and real estate projections over the next five years
  • Look for favourable financing
  • Work with property investment advisors

Investing in real estate for growth is by no means an easy process. To increase your chance of success, it is best to work with professionals who have the expertise and experience in finding capital growth properties in Australia.

Frequently Asked Questions

What is capital growth in a property?

Capital growth in property refers to an the increased  of market value over the cost price or invested amount in real estate. This is also known as capital appreciation. 

For example, you can say that you have capital growth if you purchased a Sydney property for $480,000 in 2015 and you have sold it for $560,000 in 2020. 

What is a good capital growth rate?

What is considered as a good capital growth rate is a hot topic among Australian property investors. 

Some say, 10% is good enough, while some would argue that 20% should be the minimal benchmark. 

To figure out your suitable capital growth rate, you must consider different factors including your investment goals and personal circumstances. 

You may use online free calculators so you can get an estimate of the capital growth over time, or you can consult a licenced property investment advisor in Australia.

What is long term capital growth?

Long-term capital growth is a real estate investment strategy, which aims to increase the market value of a property over a period of several years. 

While long-term is subjective to your time horizons and individual circumstances, long-term growth, in general, is designed to yield above-market returns over a period of five years or more.

Who determines the value of a property in Australia?

Practically, the value of a property refers to the amount that someone is willing to pay. But in the real estate market, buyers and sellers need a ballpark figure as a basis for negotiations. 

In selling a real estate property, you need a proper valuation report that is in accordance with the estimated sale price defined by the International Valuation Standards Council. 

You will need formal property valuation before you can buy any property financed through Australian banks. 

Talk to a Property Investment Advisor Today 

TENX Wealth has a team of property investment advisors who can help you develop a successful strategy for real estate capital growth.