Investors often focus on market cycles, interest rates and hotspots. But history suggests the most powerful driver of property wealth is far simpler — and far more patient.

Real estate investing is often seen as a timing game. Investors debate whether rates have peaked, whether prices are about to fall, or which neighborhood is “next.” These discussions are understandable, but they distract from the variable that has historically been most important: time.

For long periods, real estate wealth in Australia has been driven less by precise entry points and more by the ability to hold quality assets through multiple cycles.

The power of compounding is most evident outside of real estate. The well-known example of “double-investing” shows how growth that seems insignificant at first becomes dominant later on. Real estate doesn’t grow at exponential rates, but the underlying principle remains: returns accelerate over time, not uniformly or early on.

What the long-term numbers actually show

According to data from CoreLogic and ABS, the value of Australian residential properties has grown at an average compound annual growth rate (CAGR) of around 6.7% over the past 30 years. Housing in capital cities has generally outperformed other units, with long-term compound annual growth rates (CAGRs) approaching 7–8% in Sydney and Melbourne, despite extended periods of stagnant or negative growth.

Let’s take a $500,000 property with 7% annual growth as an example:

• After 10 years: ~$983,000
• After 20 years: ~$1.93 million
• After 30 years: ~$3.81 million

It’s worth noting that more than half of the total capital growth occurs after year 20. This is when many investors no longer hold the asset.

Even with a more conservative CAGR of 5%, the same property reaches ~$2.16 million in 30 years. The result may not be spectacular in a single year, but it is transformative over decades.

Why the early years can be disappointing

One reason investors lose faith is that property growth isn’t linear. Stagnant periods are common and often prolonged.

Prices in Sydney, for example, remained virtually stagnant between 2003 and 2012, but then rose by more than 70% between 2012 and 2017. Melbourne experienced similar patterns, with long pauses followed by sharp price adjustments.

I was recently reminded of this by a long-time client, Sarah, who owns several investment properties in Victoria and Queensland. Two of her Brisbane properties, acquired in Chermside and Carindale, showed minimal price growth for almost five years. In contrast, her Melbourne asset in Bentleigh East had appreciated rapidly.

She wondered if the Brisbane properties had been a mistake.

Upon reviewing the figures, a different picture emerged. Both Brisbane properties had been generating positive cash flow since their second year, rents had increased by more than 25% since purchase, and loan balances had decreased significantly. They were doing exactly what they should be doing: generating income and quietly reducing risk.

Short-term price charts had masked the long-term progress.

Interest rates, cycles, and outlook

Interest rate concerns are often cited as a reason to delay or sell. Since the early 1990s, Australian variable mortgage rates have averaged between 6% and 7%, despite falling below 3% during the pandemic. The ultra-low rates of 2020–2021 were an anomaly, not the norm.

Investors who base their decisions on the assumption that rates should remain low often find themselves overexposed. Those who build reserves and plan for average conditions tend to last longer.

History shows that investors who bought well-located properties during periods of higher interest rates, such as the late 1990s and mid-2000s, and held them through subsequent cycles, were rewarded not for perfectly timing the market, but for simply sticking with the investment.

The cost of selling prematurely

Property is an expensive asset to trade. Stamp duty alone can easily exceed 4–5% of the purchase price. Selling costs, legal fees, and capital gains tax further erode profitability. These costs compound the impact of selling before the most productive years of ownership.

I once spoke to Michael, an investor from Melbourne, who sold a wooden house in Northcote in 2009, having doubled his investment in less than a decade. At the time, it seemed prudent to him. Today, comparable properties on the same street are selling for more than three times their asking price. The opportunity cost far exceeded the tax