G’day. My name’s Ben Everingham and I’m the director here at Pumped On Property. In today’s video I’m going to do another book review, a great book by John Lindaman called Mastering the Australian Housing Market.
G’day. My name’s Ben Everingham and in today’s video I’m going to look at a book that I recently finished, literally a couple of nights ago by one of Australia’s leading data collectors and analysts, John Lindaman. John Lindaman’s book is called Mastering the Australian Housing Market. There’s a few things that I really took away from it personally as someone that’s obviously bought and sold quite a bit of property for myself in the last couple of years, bought over 100 million dollars worth of property for our clients. I run a buyer’s agency that helps people buy investment properties in New South Wales and Queensland. Some of the things that I learned from the book, and I suppose I’d just like to share these and jot these down with you is this concept around changing demographics.
The fact that Australia has very distinct generational groups within the country and that some of those groups are looking for different things than they were looking for in the past. Some of those groups are growing like Generation Y, Generation X, and then some of those groups are exiting the marketplace like generation, or the baby boomer generation and some of the generations that proceeded them. What was interesting is that these different groups of people aren’t all the same and that different groups of people have different interests and are looking to buy different types of properties at different stages of their investment journey.
One of the big, big, big takeaways for me personally as an investor is that you constantly hear this stuff in the media about this generation or this group of people doing this or that or first time owners will never be able to buy again for example or investors are coming into the market and there’s too many investors in the market. It’s just when you actually break it down to the demographics and the effect that a certain group of people have on the market at any one point in time, a lot of it’s just hogwash and a lot of it’s created to write and sell stories in newspapers and get on TV and prick up people’s ears when they hear them in the ads.
It’s an easy book to read, it’s small, it’s got big font size. It’s got a lot of value in there, particularly around this concept of changing demographics and who you should be listening to for your advice and who you should be avoiding and putting those little silencers on your head. There’s so many different opinions and so much noise in this industry it can be very confusing at times to just have the confidence to move forward and make a decision and to have the right strategy in place to do that.
One of the big things I took away from this book was why the Australian market has continued to grow in value and that growth has proceeded almost every single developed country in the world in the last 20 years and why Australia didn’t have a correction during the global financial crisis and why property prices continue to be buoyant. In John’s interpretation of the Australian marketplace he thought one of the reasons could be the consistent population growth occurring in Australia. We, by far, have the strongest population growth according to his statistics of any westernised or developed country in the entire world with an annual growth rate of 2% per annum.
That’s a result of us opening the floodgates and allowing lots of migrants into the country, which come and produce jobs, which come and buy houses, and which continue to help our society build into the great nation that we’ve become. This population growth has been, in John’s eyes, one of the major reasons for that continued upward growth when other countries in Europe and America for example whose growth rates have stabilised or even started to go backwards has resulted in over supplies of certain types of properties and some of the major issues that we’ve had.
One of the other reasons why John mentioned that Australia’s market has continued to grow in this book, Mastering the Australian Housing Market, is because there’s been an almost under supply of property in many of Australia’s capital cities. For example, Sydney and Melbourne in the last 12 months had 100,000, or their population’s grew by over 100,000 people. In some of those marketplaces there was units got created but there wasn’t a lot of housing stock and so that shortage of supply versus of demand has meant that that demand has continued to put pressure on supply and it’s continued to push prices up.
That’s not a great thing for Australians. At some point in the future there probably will need to be some sort of correction whether it’s now or whether it’s during the next land lead price reception globally. At some point in the future there needs to be some sort of correction or we’re going to need some sort of wage growth in Australia or some sort of stagnation to make sure that we can continue to afford to buy property in certain markets in Australia. When we talk about affordability and when John talks about affordability in this book it’s very specific to certain marketplaces. It isn’t everywhere in Australia. There’s so many amazing examples of great properties at great prices in markets like Brisbane at the moment, but there’s a generalisation in the media also at the moment around some of this stuff.
One of the cool things that I picked up from the book as well is where to buy for capital growth. It just kind of reaffirmed what I was already thinking. If you really want to chase small capital growth over the long term and good rental returns at least for some of the time then you’ve really got to be chasing Australia’s capital cities of Sydney, Melbourne, and Brisbane that have constantly outperformed all others over the last 100 years in Australia. He makes note of, from a risk perspective, chasing those high quality marketplaces and those products with some sort of scarcity factor, whether it be water views or whether it be very close to the CBD, and close to infrastructure, and close to transport or close to the beaches, the major things that locationally drive up growth. He also mentions in the book that you can chase or follow infrastructure around, which has a direct and strong effect on property price in certain areas so follow inner city train stations around and those sorts of announcements are huge.
I was literally reading the budget for Queensland a couple of nights ago and on this 4.5 billion dollar underground railway project in Brisbane I can guarantee you that that’s going to have a big effect on property price in very specific parts of the city. Yeah, it was kind of interesting that he was reaffirming my thought process. Some of those guys at the Property Couch also think very similar around high quality product in high quality areas. He also mentioned and reaffirmed my concept around timing. One of the big things that I got out of this book was that you do not have to buy and hold property for a lifetime. You can buy, make money, sell out, reinvest that money in another market, make money, sell out, reinvest, and sell out again. He doesn’t think or from the book, from my interpretation of the book … Sorry, I can’t say anything about what John personally thinks but from my interpretation of the book it was kind of like let’s pretend it was 2012 right now and you could buy anywhere in Australia. Well, the timing pointed towards the city market having a strong potential for future capital growth and ResiDex and those RP Data guys were saying those things at those times around some very strong performance of suburbs down there. Had you followed that advice and bought that property at that time you might be 80% better than you were then and maybe that market’s peaked a little bit now, who knows, but you could be exiting out of there and then redeploying the money in a market like Brisbane for example where it really hasn’t started its growth cycle yet and probably has a fair bit to go before we reach the top of the next cycle.
That was a good thing for me because we hear so many people in the industry and so many people in our lives say you buy property and you hold it forever and you pay it down. 80% of the time that you hold properties in Australia they do nothing or they go backwards. Whereas if you’re trading markets and you’re identifying the right market at the right time and riding the wave up you can put yourself in a very strong and much better position. I’m not advocating that everybody go sell that to go buy that but it was interesting as part of a holistic strategy to think about well maybe you buy and hold some really high quality assets with great cash flow. You also buy some really good assets with capital growth potential and you wait for those assets to grow in value and then you sell them at the appropriate time to pay off the other stuff outright. That’s kind of a way that the average Aussie like me could achieve financial independence in the future.
The last thing that I wanted to talk about that I really like from this book is some of his concepts around how to actually monitor the market and what types of information you should be considering following tracking, not just for the properties that you are in but when considering to buy a property in a different suburb. Some of these things that he follows religiously or told people to follow religiously in the book was time on market, average vendor discount, the total number of listing, and then following the trends of that data for an area over time so that you know when there’s a buying opportunity and you also know when there’s a selling opportunity.
I think it’s really important to understand that because we get emotionally invested in property, we think that the boom’s never going to end but the boom does end. 250 years of data in America and Europe would show you that property is cycular and it moves in waves. There’s good times to buy and there’s good times to sell. Really beginning to educate yourself on some of this stuff is super, super important and this is one of the few books that I recommend in the industry that I’ve read that I actually got some value out of. Most of the crap out there is just people sprucing their own product and making property a lot harder than it really needs to be. This is a good book based on data, I highly recommend reading it. I hope you got a little bit from today’s review so thank you so much for your time and until next time, see you again