Hi my name is Ben Everingham and in today’s video we’re gonna talk about some of the property investment options I really like in the Brisbane market.
Hi my name is Ben Everingham and I am the director here at Pumped on Property. In today’s video, I am gonna share some of the options that I love right now in the Brisbane property market. This is a little bit of an insiders guide into the Brisbane marketplace. For anyone that’s been following my videos for a while, I own a buyer’s agency who used to buy quite a bit of property in the Sydney marketplace but has recently in the last couple of years moved heavily into the Brisbane market. So over that couple of year period I think we would have picked up at least $60M or $70M worth of property up here. So we’ve got great local experience into the Brisbane marketplace. Now today’s video is really a bit of a peak behind the curtains to look at some of the different options currently available that I have personally put my own money into. And then our clients have decided to put their money into and these are some of my favourite options. So before we kick off in regards to the property investment options I love in the Brisbane marketplace right now, I just wanted to explain the Brisbane marketplace a little bit.
So Brisbane is obviously the third largest city in Australia in terms of population and at the time of shooting this video which is 2017, it remains the third largest. What I do like about Brisbane is that Brisbane has basically been the third most expensive capital city in Australia for a long long period of time. Right now as of the time of shooting this video, Sydney and Melbourne, which will always be more expensive than Brisbane unless Brisbane’s population growth out competes theirs, sometime in the future. But at the moment Darwin, Perth, and Canberra are also more expensive than Brisbane. So there’s different reasons why that might be the case. And everybody’s got their own philosophy and I am not gonna talk about those things in today’s video but it’s interesting that historically the third largest city in Australia is now the sixth most expensive city in Australia. So another thing I like about Brisbane as I am filming this video is that when Sydney and Melbourne begun to recover from 2011, 2012 onwards, Brisbane had the 2011, 2012 floods. And that kind of rocked the city, put a lot of things back and put Brisbane on the back burner for a lot of investors Australia wide.
So because Sydney and Melbourne’s growth have been so incredible over the last four years, not too many people looked at Brisbane as an opportunity. Now, when you look at the statistical averages of the last four years in the Brisbane marketplace, you can see that as a whole, Brisbane performed extremely average in terms of average capital annual growth rates when compared to Sydney and Melbourne over that time. In an ideal world, we would all continue to buy Sydney and Melbourne as the two major hot spots in terms of capital growth in Australia long term. But at the time of filming this video, unfortunately, I just don’t see a huge amount of value in that marketplace anymore. Not because I think it’s going to pop or the bubble is going to burst but because who wants to pay 40-80% more than someone else who paid for the same product only four years ago? Well some … Brisbane is a wider area, it has a wider market, it has only really grown by around about 4% per annum over the last four years, or just under 5% per annum over the last ten years. Certain suburbs in Brisbane have gone incredibly well and received great capital growth, anywhere between 20 and 45% in the last four years.
There’s always suburbs in each market that you might look at averages and go the growth in Brisbane isn’t what I am looking for. Certain pockets have performed extremely well and in line with places in Sydney and Melbourne over that time. So I do like Brisbane and now let’s suck in these different options. So there’s two types of investors I envision would be watching this video today. The first is the passive style investor which is looking to buy a really high quality property and hold that property for the longer term. And then the more active investor and they’re the people looking at the renovators, adding granny flats, looking at new builds and maybe looking at new townhouse or sub-divisions.
So I am going to break today’s video into those two distinct categories so for those of you who are more of the passive investor looking to get great long term capital growth and you know, just buy a high quality low maintenance property and sort of set and forget it for a period of time, until you come back to it in the future and re-evaluate it to move forward with another property or clean it up to sell it or clean it up to just revalue the property and reduce the overall risk on your portfolio. They are the people I am speaking to when I am talking passive. And the passive opportunities that I really like as of right now 2017 in Brisbane are the suburbs between seven and twelve kilometres from the CBD. So in the last four to five years since the last GFC a lot of the areas between the CBD and five kilometres from the CBD in Brisbane have performed very well. But a lot of the suburbs between seven and twelve kilometres have been kind of forgotten about. And so there’s examples of some suburbs between seven and nine kilometres for example that have gone up by 40% in the last four years. And then there’s other suburbs between seven and nine kilometres that have literally gone up by 6%. And so those suburbs that have performed average over the same period of time for no real apparent reason, except they might not have been the flavour of the month. There the ones I am really talking about and I love that opportunity between seven and twelve kilometres from the city in high quality suburbs with train stations, good school districts, good infrastructure, strong family cultures, low numbers of renters, high number of owner occupies, and more premium quality properties.
So some of these areas I am referring to have great average incomes in terms of the family household between $1700-$2000 a week. Property prices are very affordable from my perspective. What I am seeing at the moment is this domino effect slowly spreading out from the CBD or slowly spreading out five to ten kilometres from the city where one by one these suburbs are falling and dramatically spiking in prices. People kind of get onto them. An example of a suburb that I watched this happen to, in the last couple of years that we had bought a lot of property in, a couple of years ago was Keperra. Keperra is nine kilometres from the city to the northwestern side. And I watched Keperra go from being able to buy properties two years ago for $400k to the same properties now selling for $530K over a very short period of time, as it became more and more popular. If you were to drive around that suburb now, you can see the gentrification taking place and people beginning to clean out those properties because all of a sudden, nine kilometres isn’t so far away from the city.
The second side if you’re a passive investor of Brisbane that I really like, which is the same strategy that you would apply in Sydney or Melbourne if you’re looking for long term capital growth, are the quality beach side suburbs. So there’s beaches all the way along Brisbane and while they might not be the beautiful surf beaches that people from Sydney are used to, they are still water front suburbs. And they’re still desirable to a lot of the people who live in Brisbane. You know there’s suburbs to the south, there’s suburbs to the east, there’s suburbs to the north that are all beach side that represent different value propositions based on how much you can expand. There’s beautiful water side suburbs, like the Manly in the Wynnum’s that are very very premium. You know the further north or south you go obviously the cheaper the product becomes. But just stick to your fundamentals, make sure you are doing the right research. Long term I really really like these beach side suburbs. I am personally getting exposure to them at the moment. We manage a lot of the properties in these areas for our clients and I really like the long term potential. So they are the passive investor options. The seven to twelve kilometres from the city or the beach side suburbs that I really like.
If you’re a more active investor, the first thing I kind of wanted to talk about is the renovation option. So in my mind, there’s two types of renovations. There’s the simple cosmetic stuff or the simple changing from a three bed one bathroom to a four bed two bathroom style renovation. And there’s the much more advanced kind of structural renovation or extension above the existing roof line style renovation. So in terms of these renovations I have seen properties, for example in suburbs seven kilometres from Brisbane CBD. At the moment we can buy like a nice 500-600 square metre piece of land well located in the suburb in a premium pocket of a suburb in a premium street, selling un-renovated for $600k and then selling the same properties literally next door right now, fully renovated beautiful for anywhere between $850K-$900K. So there are these discrepancies in Brisbane that existed in Sydney and Melbourne years ago. Unfortunately, those discrepancies in Sydney and Melbourne for anybody that’s been buying down there, you would know the difference between a renovated and an un-renovated product has been reduced. And that’s the same in lots of pockets of Brisbane.
So I don’t think there’s an opportunity like buy and flip in Brisbane right now. There’s just not enough margin left in it. But if you’re looking to buy something that as an active investor you can add value to longer term. Something that represents great value if you’ve got a little bit more money to spend. If you don’t have that sort of money to spend, there’s great options between $400k-$500k where you can be very close to the city or on the beach. But buy that liveable with renovation potential style property or ugly duckling, and maybe clean it up when you’re looking to re-finance it in the future or sell the property. Alternatively, you can find something with a big floor plan and add a bedroom or bathroom under that same existing roof line by just modifying that floor plan slightly. Even in suburbs in Brisbane where properties are selling for $400k, I have noticed that the difference between three and four bedroom homes can be quite significant so I think there’s a short term opportunity to make the most of that in the current market.
After this sort of cosmetic renovation in the bedroom and bathroom renovation, there’s that more structural style renovation where you buy, you know the smaller two or three bedroom home and extend it and put a nice big deck and create like the lifestyle style home. Alternatively, you could buy a three bedroom, one bathroom home that’s raised and further raise it to legal height and fill in underneath. So I think there’s an opportunity there in this. Some of the things that I have liked to have done and clients have done with us. Then there’s the granny flat option which isn’t available in Brisbane city council but is available in the number of surrounding local councils, like southwest and northern Brisbane. So for those of you looking for cash flow, there’s some opportunities to buy houses in a nice position in the suburb that would get good capital growth. Again focusing on the beaches that are close to the city. And then maybe if you’re hunting for cash flow now and you’re at that stage of your journey. Or you just want to land bank a secondary dwelling or a granny flat in the future, you can find a site that looks like that and add a nice granny flat in.
I am seeing heaps of these little options around in the marketplace at the moment. I talked to a client this morning. We bought a property for her for $350K which was rented for $300 a week for the first six months. During that first six months, she built a granny flat. That granny flat is just being rented out in the first weekend with my management company for $310 a week giving her over 14% return on that money from a cash flow perspective as a gross yield. And she also has now listed in the last month, cleaned up the house, and fully renovated it. And aims to get for the $30k she spent on that, about $400 a week in rent. But an extra valuation on the home for the $30k she put on it, it should value the house without the granny flat for about $420K. So she probably now would have manufactured an easy $50k by just buying the right product at the right time. And doing a simple renovation to increase that. After she completes this renovation and gets the driveway in place, she’s going to revalue that property and move forward again. So that granny flat option is interesting as well.
Another option that I like in Brisbane in the right areas and I am not talking about huge greenfield sites with infinite amounts of land around you & new built properties. I am talking about vacant pieces of land in great established suburbs close to the city. And buying a piece of land and building a home that’s appropriate for the suburb that you select. So I have seen options at the moment where you can buy land and then build a product and the combination of that activity results in a higher price than the combination of the land plus the home. So I think there’s an option or an opportunity for some people that are more active investors to pick up a decent piece of land, build a high quality product in the right market at the right time. Or dual income product and actually move forward from that perspective as well. That’s something I have done a number of times myself. I like that strategy for a number of reasons and I think that still represents value, only in the right suburbs and those suburbs being the infield suburbs right on the beach or close to the city.
The last option that I really like is the townhouse sites that are in development in Brisbane right now. For those very active investors with a little bit more cash to play with. And some of those people that we have been helping acquire these sites are more looking to land bank for the future and come back in five, ten, fifteen years to do that project. Others are looking to move into them now and hopefully create the product and then sell some of them to keep some outright or sell all of them to make a short term profit. But there’s been a number of council zoning changes around Brisbane, South Brisbane, Western Brisbane, and North Brisbane in recent years which means some of these sites, the old subdivision sites have all been picked up or selling for a premium now. But some of these townhouse sites represent great value and you know, still have those types of percentage profits that you need in those deals, above 15% to make them financially viable from an investment or a development perspective.
I now have talked about a heap of stuff in today’s video but I wanted to sort of explain some of the options that I like in Brisbane. As I said if you’re a passive investor, I really like the seven to twelve kilometres from the CBD option for an existing house. Or the beach side suburbs within one and a half kilometres walking distance to the water. If you’re more an active investor there’s options for renovating cosmetically or adding bedrooms and bathrooms at the moment. There’s also the granny flat opportunity in certain areas. Just make sure you looking at vacancy rates and making sure that the suburb warrants that type of product in the future. There is also the new build options for certain people, again close to the water or close to the city. And then there’s amazing townhouse sites if you know where to look, that can represent interesting buying at the moment as well.
So I really appreciate your time today and thank you so much for listening in on my video which was all around property investment options available in the Brisbane market right now that I really like. I hope you got some value out of today’s video. And until next time, stay hungry