Delve into insider insights on purchasing properties in Australia's prime locations. Explore rentvesting, market sentiment assessment, and strategies to avoid FOMO. Gain valuable knowledge through real-life examples and case studies for informed decision-making.
You've probably come across headlines screaming: “This is the last chance to buy!”
You’ll also see some of my own videos suggesting that: “This is the last time”
If you go across any Facebook group, they're all saying: “Just buy anything!”
But let's pause and delve deeper into what this frenzy actually entails. In this article, I want to discuss:
The common sentiment right now is that:
Now, you are starting to see journalists come out and suggest that: “This could be your last chance at buying property, otherwise you will probably rent forever," and “if you're renting you're probably poor.”
Because THAT’S WHAT SOCIETY HAS TOLD US!
Rentvesting ultimately gives you the best of both worlds and you should definitely consider it especially if:
So you say: “Hey, at least I can rent here and I can still get my money to work for me.”
There are a couple of things we really need to consider before we jump into some statistics. I’ll give you some real life examples with suburbs in Sydney. Now, I'm going to discuss suburbs that are actually growing and those that are not.
I'm going to explain this as we go through the examples.
Yes, you could go out there and say: “Ravi, I want to buy 10 properties in the next 6 months. But in effect I have no savings and if something goes wrong then I'm absolutely screwed.”
As you see, practising good risk management is key to building a sustainable portfolio. What you're trying to do is get as many assets as possible for as long as possible. However, the truth is that most people get shaken out because they didn't have good risk management.
Right now, lending conditions are very different to where they were:
So chances are they're going to be significantly different in the next:
It’s often why I say road maps are just a guide you can't just go: I'm going to buy and then continue buying and doing the same thing in 10 years time.
Why? Because, the reality is things will change and you need to adapt. I've seen really successful investors that have had no plans, and poor investors who stuck to a plan and absolutely got decimated.
How? Simple! They never changed and adapted. That's why it's key that:
Now, when you hear people say:
“You need to get in.”
“Prices are crazy, you can't find anything!”
“Supply is low, you just have to buy.”
With that comes “FOMO” and then you start buying with emotions. Truth is…when you buy with that “emotion of missing out” and then match that with the fact that you, as a person, want to go and buy your own place…
It is a recipe for disaster! Why is it a recipe for disaster?
Mainly because you're buying and investing with emotions! Unfortunately, as humans, we have a lot of emotions.
Some more than others…
When you are treating property as a business, you need to remain as logical as possible. Yes, some people will have more emotions and can't stay rational. But that's just the reality of it. That’s why some people will do really well compared to others who are still investing, but may be more risk averse and that's just normal.
Now, let's cover off a couple of key examples with some suburbs… I also want you to make the decision for yourself.
Let’s talk about: New South Wales and Sydney specifically. In the first example what I want to do is: Look at an area that's in Sydney that has been primed for growth.
Everyone was saying it and in fact it actually did grow over the last 5 years. But then, I want to compare it to an area that:
In addition to that we also had a lot of issues when it came to lockdowns. Yes, I'm referring to Victoria. So, if I had gone and simply invested in one of these areas VERSUS something that had really positive sentiment,
What would that actually look like? Let's look at the numbers:
GRANVILLE
The suburb I've got here is Granville. It is a suburb near Parramatta, which has been basically tipped to be the second CBD of Sydney.
If you are outside of Sydney, You are probably like: “Where is Parramatta?”
But anyone in Sydney knows that Parramatta is supposed to have been the next best thing. That's why we've seen such good growth. So, if you look at the photo above, the median value right now is about $1.024 million. Just over a million bucks and you can see how it's tracked over the last couple of years.
Now, if you go all the way back to about 2018, and 2019, the actual medium price was sitting at 725,000.
It sort of stagnated and went sideways.
Until we have seen this massive boom during the lockdowns.
Suggested Alt Text: 5 year median price trend graph showing Mar 2020 to Feb 2021 price
That’s when we saw prices go from $710,000.
All the way up to about a million since that has plateaued mainly due to the fact that interest rates are so high.
If you had gone and bought exactly 5 years ago, you could have bought a property for about $725,000. Now it would be worth just over a million and would equate to about 41% growth.
On the other hand, Granville 5 years ago was tipped to be the area to be in. I agree that:
But there’s a lot of metrics that suggest that you would get a lot of growth. We’ve seen a lot of growth but what I want to do is compare that to an area that:
I want to see how it's performed.
WODONGA
So about 5 years ago you could have invested in Wodonga, a major regional Hub in Victoria. What you can see here is the prices are significantly different.
For a house here, right now, you could pick up one for about $549,000.
But if you go back to looking at what prices were in 5 years ago, you would see prices at about $349,000.
And this goes to my first point which is: Percentage gains are not the same as dollar value gains
Why? If you looked at this and said:
“Okay, well in Granville, I've actually made almost $300 to $400,000.”
“In Wodonga, if I had bought— I'm only really making about $200k.”
So clearly Granville was the better option, right? Well…not exactly. Why not? Because, if you bought in Wodonga 5 years ago, the growth that you would have experienced was 57% versus the 41% you would have got in Granville.
This is why percentage gains are very important to consider when you're actually going to accelerate your portfolio. Yes, you can go out there and say: “I made all this money.”
But it would be like buying a place in Vaucluse in Sydney for about:
And saying: “Well, hey, I made a million! What did you do?”
But as a percentage gain, you would still be outperforming it in some areas like this. This is why historically, if you look at properties priced:
That is the sweet spot!
That is where the majority of the gains can be experienced.
That is the key for when you're building out a foundational portfolio.
If you're someone interested in going: “Hey! I want to go and build a portfolio with 10 plus. How am I going to do it?”
Well, you want the fastest horse, right? The fastest horse will often not be in an area that's highly priced. So, that's something to consider as you go through this. Now, you could go on to argue, playing devil’s advocate that Ravi just picked these suburbs to prove his point. The reality is, I just picked two suburbs out of the blue.
But, what I'm going to do is: I'm going to repeat this process and say: “Hey, these are the two areas—let me just look at the numbers there.”
I'm sure there's a few that are going to go and buck that trend and based on this article, it's looking like my theory is correct now. Fortunately, I run the full surface buyers agency and I've been doing it for a few years! So, I'm familiar with the majority, if not all, of the suburbs priced at this point in the areas we focus on. They've consistently outperformed even Blue Chip areas across Sydney, Melbourne, and Brisbane.
FIVE DOCK
The next example I have is Five Dock. It is located west of Sydney—it is probably about 15 to 20 minutes from the city.
Five Dock is a really nice area to live in as there's a lot of good eateries as well. I'm sure if you've known about Five Dock, you love the cafes and you love the vibe there. It’s also very close to water and again: prime real estate.
If you said “blue chip in Sydney” you would say: “Five Dock.” So, looking at the median price here, it's just over 2.4 million.
It is more than twice as expensive as Granville despite being probably 25 to 30 minutes away.
It is Blue Chip.
Now, you look at this and you go:
“Okay, well it's worth about 2.4 and if I got in 5 years ago it would be worth 1.7 million.
So yes! I would have made $700,000!”
But what does that actually look like from a percentage perspective that would be a growth of 42%?
Well, if you divide that by 5 years, it’s growing at about 8%.
Yes you could go on to say:
“Well, that was due to the lockdowns.”
“This is not reliable.”
But, trust me! I've gone back 30 years ago and so I've seen the data. In addition to that, you could also argue the opposite which is: “Hey, it could have actually been much higher. But given that interest rates have gone up significantly, that's why it's tapered off, but it would be much higher otherwise.”
So, you can see how there are arguments for and against. Now, what I did was I said: “Okay, I've looked at a regional Hub in Victoria. Let me think of a regional Hub in New South Wales.”
You are probably thinking of the same one I am, which is Dubbo.
DUBBO
If you go and say: “Okay, I’ll go to Dubbo, the price point there is about $560,000.”
Okay great…and it's been pretty much stagnant for the last couple of years. Why? The reasons are:
So there's not as much pressure on that market. Now, if you look at this and you say:
But you would be wrong…
Did you know that this area has grown by 49% in the same 5 years? If you listen to the people around you saying: “No, you've just got to buy one really expensive property in a blue chip area in Sydney.”
(Which is probably going to be the most expensive area in all of Australia.)
Then, you would have done well! But you would have significantly been outperformed by other areas. This is why it's so key to be looking outside of your backyard because: There are areas out there that are performing so much better than the numbers I've just shown you.
To put simply? These aren't even the areas that we've been pushing our clients towards when purchasing property. So you can only imagine what the numbers look like on that end. That’s why I haven't skewed this at all. I've literally just picked random areas.
Now, I want to show you one more example because you could go on to say:
“Well, price points matter now my thesis has changed.”
“It’s not about Blue Chip properties, it's about price point.”
“Ravi showed me the price points and how they're different.”
Well, what I did was I said: Okay, the reality is right now,
You’re probably faced with one decision: “Do I buy my own property?” or “Do I go out there and with the same amount that I can afford, I go and invest somewhere else?”
Most likely you've been told:
“Buy in the Blue Chip area!”
“Get the first homeowner grants, you'll outperform anything else and you'll make money.”
Well, let's look at that: Again, we go to Parramatta and we look at apartments. If we can only afford $600,000, that's what we're buying in this market. So, if you look at this and you look at the unit market right now you could probably purchase one for about:
But it doesn't take a genius to look back 5 years ago and it's actually gone down.
So during the biggest Australian property boom that we've seen over the last 50 years, you would have purchased property and actually lost money.
Think about this...when you consider:
We can take this even a step further.
ROUSE HILL
Now, Rouse Hill has been a really popular area for a lot of immigrants coming into Australia. They’ve got so much infrastructure being built around there.
Well, it's already been built but the Metro was a really big factor. You could get to the city within an hour and still have enough money to buy a house. Right now, you could purchase a house for $1.5 million
If you look back 5 years ago:
If you said:
“Okay, so I can't afford to buy a house, but I know it's going to go up because this area is prime for growth.”
“I've seen everywhere, people buying everything, and it's going up…it’s bonkers!”
What will I do? Well, if I can't buy a house, I'll buy a unit instead! That’s my lower barrier to entry. I'm going to go and do that. So in an area that houses have grown by 50%---what have the units done? If you look at this: The units can now be bought for about:
But 5 years ago were worth about:
So you've gone ahead and lost money. Again, during one of the best times to be in Australian real estate.
This is just taking a median value of the suburb…There’s going to be:
If you go ahead and:
You’ll go out there and make money! It’s just a matter of if actually wanting to make money or do you actually just want to leave home and have a good excuse to do it.
If you're interested in getting help to actually build this out properly then definitely contact me and my team.
You can book a FREE discovery call with the Search Property team so we can go and help you supercharge your portfolio.
Thanks guys!
Disclaimer: Search Property Pty Ltd (SP) does not provide financial or investment advice and does not hold a financial services license as defined in the Corporations Act 2001 (Cth). Any advice given by SP is general in nature and does not take into account your personal circumstances or objectives, financial situation or needs.
.png){kind=icon}
.jpg)
.jpg)
%20(1).jpg)
%20(1).jpg)
%20(2).jpg)
.jpg)
