Why Markets Matter And How To Select The Right One

Hi, there. My name is Ben Everingham, and I’m the Director here at Pumped on Property, and in today’s video we’re going to talk about how to select the property market to invest in. For those of you who’s the first time at my channel, welcome. Really excited to have you here. Please subscribe to the YouTube channel. If you’ve got any questions or comments, please put them at the bottom of this video, and if you’d like me to shoot anything else similar, please comment in the bottom of the box there, but today’s video we’re going to talk about why market matters, which markets have performed best in Australia in the past and which ones are predicted to do well into the future. I’m going to talk about the power of timing, and then I’m going to talk about some of the major resources that I use as a buyer’s agent who buys over 50 million dollars’ worth of property per year for my clients that I use to help identify the right market for me to invest in. Stay tuned.

It’s going to be a nice, quick, simple video today with some really, really useful tips and tools for you to access and get stuck in yourself if you’re looking to identify which part of the Australian property market to invest in right now. The first thing I’m going to talk about in today’s video is really about why markets matter. Market identification is a bit of a science, and it’s also a bit of an art, because at the end of the day, investing in property is speculative, and we hope that prices in the future will be worth more than they are today. Based on the history of Europe, based on the history of America, based on the history of Australia and many of the countries in Asia, it looks like most of the time the future is going to look better than the past, but in terms of identifying markets, not all markets are equal, and you can’t compare apples with apples when looking at, for example, Sydney versus some regional town at the back of the Northern Territory.

When we look at the history of marketplaces, some marketplaces perform significantly better than others, and for those of you that have watched my videos before, you know that I’m very much a, focus on good long-term marketplaces with strong potential for capital growth as well as great potential for cash flow, but that means, for me, really looking at the fundamental markets of Sydney, Melbourne, and Brisbane and then within or around those markets. I do like Wollongong and Newcastle as a long-term option. The Sunshine Coast, North Brisbane, and the Gold Coast as long-term options, but outside of that I personally wouldn’t invest anywhere else in Australia, and that’s just based on job growth. That’s also based on population growth, and that’s just focusing on the areas that I’ve seen historically perform much better than other areas in Australia.

If we look at the last 46 years’ worth of data, Sydney, Melbourne, and the Brisbane markets have all gone up by over 9% per annum with Brisbane actually performing better than anywhere else in Australia in the last 46 years at 9.7% per annum. Then if we look at the data in the last 20 years, Melbourne, Sydney, and Brisbane have again all performed at over 8.5% per annum. It’s just in the last 10 years that Sydney and Melbourne have sort of bolted away compared to everywhere else in Australia, with Sydney and Melbourne both growing by just over 7.9% per annum, so Brisbane hasn’t had to catch up yet, and it may or may not have that catch-up in the future again. That’s part of this game and part of the speculation.

Again, when I’m looking at investing, I’m looking at which markets have performed best in the past, because I only have a limited number of dollars to spend, and most other investors are the same. Not many of us inherit hundreds of millions of dollars or millions of dollars to be able to go out there and put whatever money into anything, and if you’re getting it from someone else it’s all probably going to work out anyway if you just hold it for long enough, but for me it’s really about identifying the best use of that dollar and chasing the best capital gain with the best rental return possible on a property that puts me in a position of the least long-term and short-term risk and exposure.

The third thing I wanted to talk through is around timing. Timing is extremely, extremely important. There’s a great book which looks at timing of the real estate cycle in America and Australia, and there’s another great book that looks at the timing of the cycle in London and Europe. The book about London and Europe is Fred Harrison’s The Power in the Land, and the book about the American slash Australian cycle, because Australia has followed America within one year for the last 200 years in terms of its cycles, is really called The Secret Life of Real Estate and Banking by Phillip Anderson. I highly recommend you pick up those books, because they’re both incredible resources, but that looks at the bigger picture timing, which seems to be about a 14 to 18-year cycle. Then within that, there’s smaller sub-cycles, so there’s the first half and second half of the 14-year cycles. As we’ve just seen in 2017, sort of Sydney has gone through an incredible six-year run where it has performed extremely, extremely well, and now it’s starting to settle down.

It may have another great, great run just before the next global financial crisis, so timing at the higher level is important to understand and then reducing it down to Sydney and Melbourne have been doing extremely well, but Sydney is obviously starting to slow down as of 2018 at the time of recording this video, where other marketplaces are starting to improve in value. You can see that Canberra has been doing well in the last 12 months. You can see that Hobart has started to pick up. You can see that parts of Brisbane have really started to pick up recently as well, so not all markets are the same. You can see that Perth is still losing value. You can see that Darwin is still losing value, so within the Australian marketplace, there’s markets doing very well and markets doing very averages at most times, and then there’s a bigger picture where at certain times in the cycle almost everywhere does pretty well, and at other times of the cycle almost everywhere does very, very badly, and you can actually lose a lot of money.

Some of the resources, which is the last thing I wanted to finish on with today’s video, that I follow and look at relating to how to identify the right market to invest in is the first and easiest one, which is free. You can just Google HTW Month in Review Report. That’s a report that’s produced each month. You can have a look at where the different property markets, metro and regional, are at in Australia as of January 2018. Cities at the start of a decline. Melbourne’s approaching the peak of market. Brisbane’s at the rising market stage. Some of the North Queensland marketplaces and places like Adelaide are at the bottom of the market, and you can still see places like Perth and Darwin are in the decline phase. Again, it can be a really nice resource as a property clock for houses and a property clock for units, and then there’s a much deeper description of each of those things as well.

Your investment property magazines and some of the Australian property magazines provide a bit of a write-up on what’s happening in each of the different states in Australia on a monthly basis. Again, take all of this information with a grain of salt. Your job as the investor is to pick up different pieces of information and make the best decision you possibly can based on the information that you’ve got. I also look at the real estate institute of whichever state, so it could be Queensland, New South Wales, Victoria, WA, South Australia’s reports, and I look at what they’re talking about in terms of where the market is right now and where it’s going into the future, because they collect a lot of data and have a lot of access to people within the industry. They generally have some different thoughts compared to someone like HTW and the magazines.

Then if you want to go to the next level, there’s some amazing reports produced by people like BIS Shrapnel, QBE, the Reserve Bank of Australia, and some of the big banks which really look at where the Australian economy is right now, where the global economy is, where monetary policy is, and how that’s affecting supply and demand related to the property market in different places in Australia. You can really go as deep or as high level as you want in with this sort of stuff, but there’s some of the better resources that I’ve been able to access. Again, most of those are free or relatively cheap. Some of them are a little bit more expensive, but I hope you’ve got some value around this video today how to select a property market to invest in.

For those of you seriously considering buying an investment property in the next 12 months, I’d love you to jump over to my website, www.pumpedonproperty.com, and book in a complimentary strategy session with me or my brother Simon, where we’ll look at where you are right now and where you’re looking to go long-term, and then we’ll look at some of the challenges that you’ve got to overcome at the moment and help you identify your next action step. We’ll also share with you as much information as we can about the Australian marketplace. It’s not a sales call. It’s a call to really add value to where you’re at in your life right now, and then if you see value in, or you’ve got the tools to go do it on your own, go and do that, or if you’d like the help of someone like myself that buys quite a lot of property for myself and clients, then I’d love to talk to you about that, but thanks for your time and attention and happy market shopping. See you later.

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.

2 thoughts on “Why Markets Matter And How To Select The Right One

  1. Good Blog.
    Your blog mentions the declines in Perth , but I was hoping to understand if there is any
    future investment potential given that Perth’s property is affordable , has good public transport and amazing beaches .

    Also the demand for essential services is still good there .
    Perth Suburb Profile

    1. Hi Martin,
      Perth’s historic performance has been quite positive. I would recommend doing more research into this.
      If you are definitely considering Perth then keep a close eye on when HTW’s monthly review indicates the residential housing market to be at the start of recovery. Try to focus close to the CBD <20kms or <1km to the ocean and large pieces of land >400msq.
      We hope this has helped.

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