How To Predict Capital Growth

G’day. My name’s Ben Everingham, and today we’re going to talk about how to predict capital growth.

G’day. My name’s Ben Everingham. I’m the director here at Pumped on Property, and we’re a buyer’s agent with offices based in Queensland and New South Wales. Today we’re going to talk about how to predict capital growth. I know I’ve probably sucked you in with this title of today’s video. What I want to start by saying is, unfortunately there’s no way to actually accurately predict capital growth in the Australian or any other marketplace in the world. What I am going to share with you today is some awesome free and some really cool paid tools that we use to begin to paint a picture and to begin to understand the capital growth story.

Persevere with me. It’s going to be a bit of an interesting video. I’m going to share some of the insider tools and tricks that we use to predict capital growth in our business, or at least get a really good understanding of the marketplace and where it’s potentially heading.

To kick it off, as I said, no one can predict capital growth in this country. There’s people that spend a lifetime analysing, understanding the marketplace, speculating on the marketplace, spruiking about the Australian property market, but at the end of the day, these people just constantly get it wrong. If you look at the success rates of the average person, they’re right until they’re completely wrong. When they’re wrong, they go silent for a while, then they come back and it’s either, “It’s going to boom again,” or “It’s going to bust again.” Anything to get in the media, most of these people.

There are some fantastic companies in Australia who all they do is focus on the research, the numbers, looking at the indicators and setting businesses, banks and full time investors up with quality information that you’ve got to take with a grain of salt, but can be used as part of a bigger picture to understand how to predict capital growth into the future.

The first source of information I wanted to talk to you about today is Residex. Residex has been in the Australian property market for over 15 years. If you haven’t heard of Residex, you’ve probably heard of their sister company which they own called On the House. Residex is really cool and it’s basically a business that produces these reports. They’ve got a number of different reports. The report that I normally buy is either the Best Renovator report, or the Top Suburbs report. Basically these reports are Residex’s pick for whichever state or marketplace you decide to buy the report in. They might do a report for New South Wales. They might also do a report for Sydney, for example. It’s Residex’s best predictions for which suburbs in those particular marketplaces or in that state are going to perform, generally according to them, over the next five to eight years.

I was looking at all of the disclaimers written in the back, because obviously Residex is smart enough to not pretend they have a crystal ball and that it’s always going to be perfect. I think they say that roughly around 80% of the time over the last 15 years, their predictions have either achieved the level that they said they were going to achieve or slightly above that. From my personal experience of buying three properties in suburbs in these reports, I’m a very happy investor. I think the first property I bought doubled in seven years and the second property that I bought has actually doubled in six years. Happy times for me. These properties are in Sydney and also on the Central Coast, and anybody that’s bought in those suburbs, properties have almost doubled over that period of time. It might be Residex, it might just be because of the growth that’s occurred in those markets over that time, but fantastic starting points.

Again, they’re not a silver bullet. You can’t just buy these reports and go, “Okay, this is the suburb I’m going to buy in because Residex says it’s good. I’m going to follow their thoughts and opinions and research and just blindly follow it forward.” You’ve still got to do your own research. You’ve still got to compare it against other sources. You’ve still got to look at the fundamentals and the key performance indicators in that market. You’ve got to look at the timing of the global cycle, the Australian cycle, the state cycle, and begin to piece together a picture.

From what I find, out of every 60 suburbs that Residex might put in a report, there’s probably two or three which I have real value and they’re the ones that I focus on, so Residex is a great resource. You have to pay a couple hundred bucks for these reports, but as a novice or first time investor looking to reduce all of this craziness which is the Australian market down to a few distinct suburbs, it can be a really good starting point.

There’s another company in Australia called BIS Shrapnel, and these guys basically produce fantastic industry research, market research, data analytics, and reports for all types of people. They produce them for the government, for the banks, for private investors, and they produce a great report. The last report that I had bought from those guys was the Australian Property Market 2016-2019 Property Forecast Report, and some of the information in these reports is absolutely fantastic.

I suppose if you look at the stock market you’ve got your bullish investors which are all gung ho, everything’s always going to be good speculating, and then you’ve got your bearish investors which make the most of slower quieter markets or on the way down. These guys are super conservative in their approach, and that’s what I like because I personally only think that the Australian property market in the next ten years is going to do four, maybe five percent capital growth in Sydney and Melbourne, potentially Brisbane over the next ten years. I’m very bearish in my approach to property prices and price growth over the long term.

The cool thing is, because property prices are so high now in Australia, and so many times your average annual salary, 50% growth today is like getting 100% growth ten years in, in real terms, when you actually look at your cash on cash return. Because property prices are so high, you don’t need them to do as much as they used to do in terms of gross returns because the dollar for dollar amount of money that actually ends up in your pocket is equal or comparable to what it used to be anyway. Not many people are talking about that, but really cool place to start, BIS Shrapnel. If you can’t afford their reports, because they are expensive, you can definitely just Google them and look at their summaries. They’re constantly in the media, these guys, talking about and sharing little snippets of their reports. Really cool info.

There’s another partner of ours called Real Estate Investor. They’ve got a software tool which does all sorts of different things and tracks all sorts of different info. They’ve also got their version of the Residex Top Predictions reports, which is based on them running an algorithm, pulling out a range of suburbs, and then whacking it into a report. I think some of that stuff you’ve got to pay for, some of it you can just jump over there and subscribe to their email list and they’ll shoot out a couple of those free reports for you.

Again, none of these are silver bullets. They’re just different opportunities in the marketplace where you can get access to different information to begin starting your research.

There’s another awesome little report. It doesn’t predict capital growth, but it definitely points you in the direction of where it’s going to perform next, and that’s the Herron Todd White, or HTW, Month in Review report. Amazing free report. They look at the residential, commercial, and rural property markets in Australia on a month to month basis, and have done for a long time, and produce these great reports which look at the Australian property market as basically a clock with 12 on the clock being the top of the market and 6 being the bottom of the marketplace. Obviously there’s the declining side and then there’s the rising side. I try and fly between 8 and 9 on that clock each month in terms of the areas we focus.

As of the time of recording this video, I think Sydney and Brisbane are both in the rising stage of the market, Melbourne’s at the top of the market, Perth’s in the declining stage, as is Darwin. I think the ACT’s in the almost peak of market stage. It gives you a really cool idea.

I don’t think reading one of the reports is enough. You’ve really got to look at their data over time. It’s not perfect, because for the last 18 months, Sydney’s been sitting at top of market, where all of a sudden in the last month it was downgraded to rising market again because an analyst has got it wrong, as they all do, all the time. All of us do, because we’re just human and we don’t have a crystal ball. The best indicators in the world still don’t factor into account speculation and sentiment and those sorts of things. Obviously in that time, when these guys are saying that it was sitting at top of market, there’s people in Sydney that have made 20% in that 18 month period.

Again, you’ve got to take all this stuff with a grain of salt, but a really, really good report to help you identify the state you’re going to buy in and then the marketplace within that state, whether that be metro or regional, and it’s a cool way to keep your finger on the pulse and figure out what’s going on in those marketplaces, what the sentiment’s like, what the demand and supply’s like, what’s actually happening there infrastructure wise, job growth wise, etc.

The last thing I wanted to talk about in terms of how to predict capital growth was a really cool book I recently picked up by Phil Anderson called The Secret Life of Real Estate and Banking. Probably hands down the best book in the Australian property market. I actually did an exercise about 12 months ago, where I looked at every single one of the hundred top wealthiest share traders of all time, companies and individuals and hundred top wealthiest property investors of all time alive and dead. Anything that they had written in a book, I went and bought their product. This is one of the books. Not that Phil’s one of the wealthiest people of all time, but he’s definitely been recommended by some of the wealthiest people of all time.

This book looks at things completely different. It talks about an 18 year property cycle. It’s 100% worth a read. Having read through this list of great people and great companies and their investment strategies, hands down the best book that I’ve read – Thinks about things completely different. Looks at data that no one else has really looked at properly. Has identified an 18 year property cycle pattern. Like any analyst, it works until it doesn’t work. You only have to be wrong once, and then the whole theory’s out the window, but I gravitate toward this because it’s a bigger picture. It helps me identify where we’re at in terms of the timing of the global cycle. When I should be buying, when I should be selling, when I should be holding, when I should have liquid cash and when I should have strong assets for growth.

I hope this video’s been useful. Obviously there’s no silver bullet when it comes to how to predict capital growth, but these are some of the great tools and resources, free and paid, that I’ve used. Anybody who’s seriously considering investing in property and really looking to get started or take that next step, but doesn’t know where they want to buy or what they want to buy or have a concrete strategy, I’d love the opportunity to offer you a one on one strategy session with me. I’m the director here. My name’s Ben Everingham, and in the last 12 months, I’ve bought roughly $50 million worth of property for our clients.

If you jump over to www.pumpedonproperty.com and at the top of the website you’ll see Strategy Session. If you just click on that, you can find out a bit more about what that strategy session can do for you. I’d love to spend half an hour or an hour getting to know you, where you are right now, what it is you’re trying to do, and help you develop a concrete action plan and some next steps, and spend some time educating you on the marketplace.

Until next time, thanks for watching and stay hungry.

Ben Everingham

About

Ben founded Pumped On Property after building a multi-million dollar property portfolio over a 5 year period. His mission is to show you how to replace your income through property investing so you can do what you love…full time.

6 thoughts on “How To Predict Capital Growth

  1. Great video and an honest one at that. Whilst there are no guarantees when it comes to the subject doing adequate research will give you the best chance of ensuring your investment benefits from capital gains.

    1. Thanks for your feedback Charlie. I 100% agree. While no one has a crystal ball there are markers which can help Australian investors get better long term outcomes.

  2. Thank you Ben for great post. I agree no one has crystal ball because it’s hard to predict 100% accuracy, But according to me, at-least we can do –
    – investigate the area
    – look at the statistics of an area
    – look at the trends of statistics
    – look at vacancy rates.
    – You can look at vendor discounts of an area.
    – You can look at days on market
    – Demand for properties in the area.
    – The future development in the area, and
    – Infrastructure

    I hope it’s helpful for prediction. 🙂
    Thank you.

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