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Sydney slow down tipped + The insurance you pay but get no benefit from + What is in store for Brisbane in the next decade.

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Highlights from this week:

  • Avoiding a big cost of getting into the market.
  • The one thing we know for sure about our Australian banks.
  • What will the Brisbane market look like and perform like in 10 years time?
  • Why, even in a rising market, you still need to look for the good demographics.
  • Where people are losing money with property.
  • How the regional markets are travelling generally.
  • A ‘rentvestor’ tells his story.
  • Why Queensland is set to benefit from a New South Wales exodus.

Transcripts:

Why I waited 20 years to buy a family home - Patrick Bright

Kevin:  I don’t know if you saw it, but there was a comment recently, Channel 7’s Sunrise with Kochie, where he and Natalie (I think Natalie might be his co-host) were having a debate about rent rentvesting. I think she asked him whether or not he knew of anyone who’d done it. That’s my memory of that.

It reminds me of several conversations I’ve had with Patrick Bright, in terms of rentvesting. Patrick joins me. Patrick, of course, from EPS Property Search.

Good day, Patrick. How are you doing?

Patrick:  Hi, Kevin.

Kevin:  We’ve talked about this before, but I believe you were one of the first rentvestors. Is that a fair comment?

Patrick:  I don’t know, mate. I didn’t really know anybody else doing it at the time. I figured this out back in 1998, so almost 20 years ago. I was a sales agent at the time, a young one, and I was pretty green in the industry. I was just looking at financials and looking at numbers and things like that.

We were told that the average person would sell their home and move every seven and a half years back then. Those were the stats at the time. And that’s why you should prospect and speak to everyone, find out when they last purchased their home, so you knew what average timeframe they might be likely to move.

Then that’s how you get listings, obviously: talking to people, keeping a database, and knowing when they’re likely to move.

Kevin:  When did you work out that it was going to be better to rent and buy an investment property? Was it at that time? That’s what drove that?

Patrick:  Yes, around that time. What I did was I looked at the massive amount of money, the buying and selling costs of buying a new home. I worked out that most people’s home really did only suit them for that seven-to-ten-year mark. I looked at the cost of rent, and. I looked at the cost of paying off a mortgage. I looked at the borrowing ability. I’m a young bloke, 20-odd, trying to learn “How am I going to grow my portfolio? How am I going to get into real estate?”

I just worked it out that it was much cheaper to rent – in fact, probably about 50% the cost renting – versus buying and selling and just paying off your own place. You don’t have to come up with a big pile of money for a deposit and all those costs. Now, it doesn’t work if you fall behind eight-ball. The concerning thing is the people who just rent and never invest. Then they fall behind the eight-ball.

But I made the conscious decision then that I would skip doing all these buy-and-sells until I had a family, I knew how big my family was going to be, I knew where I was going to school my kids, I knew where I wanted to live for the next 25+ years, and I was going to rent until then.

Kevin:  That was back in… what did you say: 1997, or was it ’98?

Patrick:  1998.

Kevin:  Okay. Quick arithmetic there, we’re looking at about roughly 20 years. That’s when you started investing. Tell me about the journey from there. At what point did you buy your principle place of residence?

Patrick:  Well, I’ve actually only just bought my principle place of residence at the beginning of this year, in February, because it now suited me. My wife and I have decided where we want to school the kids. We’re just about to have our fourth child, who’s due in a few weeks.

Kevin:  Well done. Congratulations.

Patrick:  Thank you. We thought “Well, that’s enough for us, four.” We know where we’re going to school the kids. They can go all the way to year 12 at the school. We found a place that would be big enough to house the family and one that was very close to the school, that met all our other needs of size of block, view, and all the rest of it that we wanted. We started looking for that by last year, once we found out we were having number four, and we bought.

Kevin:  Over those 20-odd years, how many properties have you actually purchased as investment properties, and how many of those do you still own?

Patrick:  I bought over a dozen, and I still hold most of the properties that I’ve bought. I basically just bought when I could afford to. I would buy another one each time and just add to my portfolio.

I have sold properties over the years because I’ve bought, renovated, sold. I had intentions of doing that. I’ve also sold properties to fund business ventures that I’ve done at different times and expanded my business, and things like that. But generally, I try to just buy and hold and not sell. That set us up pretty well, because I could leverage off those investment properties to buy other investment properties along the way.

One of the things I learned talking to finance brokers was that most people barely made a dent in their mortgage. They might buy a home, in seven or tens years’ time, they’re selling that home, and a lot of the time, the equity they had allowed them to roll into a bigger property, but they never really made much of a dent on that mortgage.

That was when I came up with my 20/25/20 rule, which is 20% deposit, no more than 25% of your income in repayments, and you must be able to pay it off in 20 years. That rule has stood me well, and many of my clients over the years, because you can get on top of the mortgage and you can get into a good position to be able to buy another investment property sooner.

Whereas if you’re doing what the banks will lend you – which is usually a lot more money than you probably should be borrowing, giving you 30-year mortgages, they’ll allow you to pay off 30% or 40% of your income – then you’re stretched, and it’s very hard to get on top of it and get into the next property.

That is just another rule that I have when I’m investing.

Kevin:  Well, given that’s the rule, I guess we’re 20 years down the track now, some of your portfolio, you’ve got to be coming at the other end, if it isn’t already, with nil mortgage.

Patrick:  Yes, effectively. What I’ve done with those properties is tax-effectively… Obviously, I’ve done everything correctly, within the rules. If you’re using an offset account, you pay down the mortgage by using an offset account, and then you can redraw on that offset account to invest further into another property. That’s what I’ve done to expand my portfolio.

Overall, I’m not very [6:24 inaudible] because I wanted to be comfortable. But most of my properties are capital city based, because I’m chasing growth, as well as returns. I’m not just chasing a rental yield wherever. I want to be more certain about my growth, and I’ve been very good at – obviously, it’s my job; I should be good at it – picking where to go and where to invest. That’s come out quite well for us, and that’s put us in a very good position to do what we do.

Kevin:  Okay. Just to close this off then, Patrick, given all that experience you’ve had with rentvesting, what would be your advice to someone to get started? What would be your top three suggestions?

Patrick:  Definitely do the numbers on investing. If you don’t believe me, do it yourself. I can prove it, because I’ve done it many times. I’ve done it, and I’ve got dozens and dozens of clients who have done this over the years. It is the road less traveled. Most people will not do this; they will just buy a place to live in. So, do your numbers.

Have the plan. I had a conscious plan. When I met my wife, just over a decade ago, I told her of my plan and what I wanted to do, and made sure she was on board with it. It wouldn’t have worked if my wife said to me “I can’t rent. It’s not for me.”

The thing is you move around a lot, especially these days. People move a lot more jobs and careers. I think people are moving more often than they used to. So, I would be making sure you have your partner on board with it. That would be critical.

Make sure you invest where it’s smart to invest. That may be where you eventually want to buy, and I think that’s a good thing to do. One of the reasons I personally have invested the majority of my investment properties in Sydney is because I knew I was going to live there long term.

Why I did that was because if the market is doing well in that market and I need to leverage off that property in the future or – which was always a possibility – sell a couple investment properties to fund the purchase of my primary place of residence when the time came, I wouldn’t be priced out of that market.

Sometimes people will buy in another area – a regional capital city – and that market has done poorly while the market they want to live in has done really well, and they are actually being priced out. That’s a risk factor that I wanted to lower by buying the majority of my investment property where I was always going to have my primary place of residence.

Kevin:  Very sound advice. Hey, Patrick, it’s great talking to you. Thank you very much for sharing that bit of wisdom with us. Patrick Bright there from EPS Property Search.

Thanks for your time, mate.

Patrick:  Pleasure, as always, Kevin.

 

What will Brisbane look like in 10 years - Brett Warren

Kevin:  It’s always good to look as far into the future as you possibly can, especially if you’re looking at investing into a market. The question I’ve asked Brett Warren from Metropole Properties in Brisbane is what does he think Brisbane will look like in ten years from now.  He’s written a very interesting article, which is up on our website right now at Real Estate Talk. Just go in and search; it’s under my featured channel. He joins me to talk about this.

Good day, Brett. Thanks for your time.

Brett:  Hey, Kevin. Good to be with you.

Kevin:  And thank you in particular for doing this. I know you spend a lot of time having a look at what you think the Brisbane market is going to be like. Give me a bit of a snapshot.

Brett:  Absolutely. Kevin, when we last spoke, if you remember, we’ve had a pretty ordinary decade in terms of growth and in particular, capital growth. I’ve just read an article by Bernard Salt, and he’s of the same opinion that Brisbane is probably going to play a bit of catchup over the next ten years and try and catch up to those major metropolises like Sydney and Melbourne.

Kevin:  What’s involved in that? Is it a lot more infrastructure, or is there enough infrastructure in the pipeline now for us to be able to achieve that kind of growth?

Brett:  There are some infrastructure things happening and projects happening. The more exciting thing from my point of view – and obviously from a property investment perspective – probably our three major employment hubs are really starting to expand.

You probably will have heard and seen that the Queen’s Wharf project is really going to be a centerpiece for the CBD expansion in Brisbane and create jobs and pump about $1.7 billion worth of tourism into the coffers, which is much needed, as you know.

You may have seen Brisbane Airport looks like a bit of a sandpit at the moment, but we’re actually getting a second runway out there, as well. So, that’s going to increase flights by about 130,000 each year and will rival Singapore eventually, which is a major international city.

And finally, some of our hospitals are starting to transition, as well. We’ve already had Lady Cilento up and running and things like that, but there’s another $1.1 billion expansion of Royal Brisbane Hospital as well to create more jobs and age care facilities and things like that.

Kevin:  Entertainment is going to play a big part, too. The lifestyle or the climate in Queensland – and in Brisbane in particular – leads to that with the river, as well, doesn’t it, Brett?

Brett:  Yes, absolutely. We have some entertainment precincts. That’s going to increase the walkability and the lifestyle. People want those lifestyle projects. So, the old, rundown Howard Smith Wharves is going to get a facelift, and they’re spending about $100 million transforming that to link the city to the New Farm Riverwalk.

As you know, the Brisbane Showgrounds are expanding at the moment. They’re midway through that, with about $3 billion being spent to redevelop that with new retail space, laneway shops, and really going to maintain that green space, which is important.

Probably the last thing from my perspective: Brisbane’s response to Madison Square Garden in New York City is Brisbane Live, which is a 17,000-seat amphitheater and rock concerts and multiplex cinemas and restaurants and bars. That’s all planned to be above the Roma Street train line, so that’s going to be very accessible to everyone in Brisbane by the public transport network.

Kevin:  All of this development that’s happening, Brett, what do you think is going to happen with capital growth over the next decade?

Brett:  I can tell you it’s going to be a lot more exciting than the last decade, Kevin; that’s for sure. I think I mentioned before, we have a number of things that we monitor in terms of immigration, jobs, wage growth. That’s all been trending downwards until recently, when we’re starting to just see a bit of a neutralization and even an upswing.

These types of projects are going to create massive amounts of jobs, high demand in the inner city, and things like that. And as I said before, the tourism spend is going to come up a lot as well, and that’s what Brisbane has been sorely lacking in the past decade.

Kevin:  What areas would you be looking at in South East Queensland, or would you be looking specifically at inner Brisbane?

Brett:  Inner Brisbane, I’d probably be looking within about a 10- or 12-kilometer ring. You still need to look for the good demographics, the rising incomes, the access to employment hubs. We’re planning to get about another million people to Brisbane by 2031, so as you can imagine, Kevin, public transport is going to become more and more important, so train lines and busways and things like that.

We’re also seeing little trends like good school catchments, and walkability is becoming a bit of a buzzword, but some of those lifestyle precincts that we’re developing as well are going to be a huge benefit and create a lot of demand in that inner city area.

Kevin:  Are you concerned about an oversupply of apartments in that inner city 10-kilometer ring?

Brett:  Yes, absolutely. There is a small oversupply at the moment, but you’ll find that most of those areas are areas where the land has been re-zoned. It was old factories and warehouses, and all of a sudden, they could put 200 or 300 apartments on. But as I said, with a million more people to Brisbane, that’s really a short-term concern. That’ll get taken up, and then the land is really going to be a premium. So, that’s where the drivers will come from.

Kevin:  Brett, that’s a great insight there as to what’s going to happen in the next decade in Brisbane. Things are looking pretty rosy. So, you’ll be recommending people continue to invest in Brisbane, South East Queensland?

Brett:  Yes, absolutely, particularly for the next decade. I’ve spoken to a lot of people. Once that Queen’s Wharf project and that expansion starts to happen, the second runway gets built, that’s when you’ll really start to see the lights switch back on again in Brisbane, and I think capital growth will follow.

Kevin:  What about some of the regional areas around Queensland? Will some of them continue to struggle?

Brett:  I think they will. A lot of it has to do with employment. We always hear that Redcliffe is getting a train line or there’s a hospital coming into the Sunshine Coast and things like that. They’re isolated incidents, unfortunately. We really need… And most people are moving to where the jobs are, and unfortunately, that’s the inner city and capital cities in Australia.

Kevin:  Yes. Good talking to you. Brett Warren, of course, from Metropole Properties in Brisbane. A great insight there as to what’s going to be happening in the Brisbane market in the next decade.

Brett, thank you very much for your time.

Brett:  Thanks, Kevin. Good to be with you.

 

The insurance you pay for someone else – Andrew Mirams

Kevin:  You’ve probably heard the term, LMI – lenders mortgage insurance. What is it? What’s behind it? Is it necessary? Is there a way not to have to pay it? Let’s find out. Andrew Mirams from Intuitive Finance is here to explain what it’s all about.

Lenders mortgage insurance: is it a curse or a benefit?

Andrew:  Kevin, it’s not a curse at all; it’s a requirement for many borrowers to just get into the market in the modern day. When we’re talking about housing affordability, it’s probably not a housing affordability crisis that we’ve been in; it’s actually the ability for people to save that deposit to get in.

So, what is LMI or lenders mortgage insurance? It’s basically the difference… In Australia, all our lenders want you to have 20% deposit plus cover your stamp duties and costs and things like that. So, on a standard $500,000 purchase, you should have $100,000 plus your stamp duties and costs. You might have $125,000 to 130,000 to get in.

As it’s becoming dearer to live and everything like that, and we’ve had a pretty low amount of wages growth, it’s getting harder and harder to save that deposit. So, you can then lend up to 90% and 95% to buy your home, and it just requires an insurance there, which actually protects the lender should you ever default down the track.

It’s not an insurance that protects you; I think it’s about the only insurance in the world that you pay and it protects someone else. So, it’s there to cover the buffer, the margin.

Kevin:  On that point, that’s probably one of the biggest gripes. How do they get away with that? Why aren’t the banks having to meet that themselves?

Andrew:  Well, I guess the banks could just say no in reality. The reason they want that 20% margin there is they know that the markets go up and down at different times, and if there’s ever a reason that they might have to force sale a property, they want a margin in there that they know they’re going to be able to recoup their funds.

The one thing we know about our Australian banks is that they don’t lose money. So, that’s why they don’t do it, and the mortgage insurers are a separate arm to the lenders.

Kevin:  Okay. What is the cost of it?

Andrew:  That depends. There’s a whole range of factors there. It will depend on the loan amount and how high. There are certain tiers up: to $300,000, over $750,000. There’s a whole range of different tiers. The more exposed you are just from a dollar perspective, the more expensive it will be.

If you’re only putting in a 5% deposit – so the bank is giving you a 95% loan – and the risk is higher, they’re more at risk because there’s less margin, so you will pay more for LMI on that situation. If you’re putting in 15% deposit and your loan is 85%, then you’ll find that your mortgage insurance will be a lot lower.

So, there’s not an actual cost that I can quote you, Kevin, because there are a whole lot of specifics in terms of your actual loan-to-value ratio, the loan amount, and then there’s some analysis around the client as well that happens.

Kevin:  Of course, if you want to avoid it altogether, you just have to cough up a 20% deposit. Has that 20% barrier ever moved? Was it ever less or more?

Andrew:  No, not in my time, and I’ve been lending for around about 30 years. It’s always been around that 20%. Like I said, it covers the lenders for those margins when property may go up and go down. It would be naïve to think that properties don’t fluctuate like shares and other things in the market; there are cycles. So, it’s just there to give them a comfort or a buffer.

Kevin:  I do know that with some other types of borrowing – for instance, in a super fund – sometimes you’re required to come up with an even bigger deposit. Is that also geared to LMI, or is it also just because it’s a super scheme?

Andrew:  No, in super, you wouldn’t be able to get lenders mortgage insurance because that’s actually governed by the SIS Act and the superannuation. They’re very stringent in their rules on superannuation.

Kevin:  Okay, there it is. LMI all explained for you. A necessary evil but probably a good one. It does protect you in the long run, but it also protects the bank. Andrew Mirams, thank you very much for your time. Andrew Mirams of course from Intuitive Finance.

Thanks, mate.

Andrew:  My pleasure, Kevin. Thank you.

 

The property winners and losers - Cameron Kusher

Kevin:  There’s a good report inside the latest Your Investment Property magazine that deals with the Pain & Gain Report, which is a report that I always love to get from CoreLogic RP Data. Joining me to talk about that report and what we’re feeling in the industry at present – a bit of pain – Cameron Kusher joins me.

Good day, Cameron. Nice to be talking to you again. Thanks for your time.

Cameron:  No worries, Kevin. Thanks.

Kevin:  Always an interesting report, the Pain & Gain Report. Where do you go to first? Are you finding that there’s more and more people in pain, Cameron?

Cameron:  When we look at the resells, we are seeing it’s a bit mixed. In the capital cities, we are seeing a little bit of a climb generally in the percentage of people reselling their properties at a loss. It’s largely being driven by the unit market.

But when we look at the combined regional markets, we’re generally seeing improvement in those markets. That’s, again, largely being driven by the fact that a lot of the coastal markets are stronger. We’re still seeing a lot of weakness, though, in those markets linked to the mining and resources sector.

Kevin:  You mentioned there about units. Are we seeing a bit of evidence there that there might be an oversupply in some areas, Cameron?

Cameron:  We definitely are. I guess what we’re finding, though, is that it’s more so outside of Sydney. In fact, Sydney is actually seeing fewer units reselling for less than what they were purchased for than houses. But in every other capital city and every other regional market across the country, we’re seeing more units reselling at a loss than houses.

To give you some perspective, in Melbourne, you’re talking about less than 2% of houses reselling at a loss compared to about 11% of units. In Brisbane, you’re talking about less than 5% of houses reselling at a loss compared to almost a quarter of all units reselling at a loss. So, you can see that there’s a pretty big disparity between the two property types.

Kevin:  Yes, absolutely. What are the trends that you’re noticing in terms of people who are buying? We’re looking at single-person households. Are they becoming more prevalent?

Cameron:  They’re certainly becoming more prevalent. That’s reflective of what we’re seeing across the country also. We’ve seen a lot of unit construction over recent years, so we have been seeing more sales flowing towards that unit market. But obviously, the data is suggesting that a lot of those people now looking to resell are selling for less than what they purchased those properties for.

Kevin:  We’re seeing some incredible incentives being offered in some of the markets to try and clear some of this stock. Are you hearing anything about that at all? Is that a trend that would concern us?

Cameron:  I think that’s definitely concerning, and I think it’s reflective of the fact that people – particularly developers – are really struggling to clear the end stock. Of course, in the federal Budget, we also got the announcement that developers can only sell 50% of these new off-the-plan projects offshore.

It’s not a case whereby they used to be able to just go and do a roadshow through Asia and find lots of buyers for these properties. They’ve already initially sold a lot property to offshore buyers. They don’t really have the capacity to do that anymore, and I think that’s going to make it a little bit harder for developers to clear that stock at the end of a project.

Kevin:  Cameron, what did the Pain & Gain Report tell us about the Perth and Darwin markets?

Cameron:  It shows us that those markets are continuing to weaken. If we look at Perth, for example, you’re talking about almost a quarter of all properties – that’s houses and units – selling for less than what they were purchased for. In Darwin, you’re talking about more than a third of all properties in Darwin reselling for less than what they were purchased for.

I guess this is really reflective of what’s happened. The market’s fallen by about 10%. A lot of people don’t have a job in these areas anymore, so they need to leave the market, and unfortunately, they’re taking a bit of a hit when they do so.

Kevin:  Capital city versus regional markets, any indicators there for us, Cameron?

Cameron:  The capital cities are generally doing better. If we look at houses, for example, you’re looking at about 6% of houses reselling under the previous purchase price, compared to 11% in the regional markets. For units, it’s about 11.5% or 12% for resells at a loss in the capital cities, compared to about 17% in regional markets.

Capital cities are still stronger, but as I said, there has been a little bit of creeping up in the percentage of loss in the capital cities and a continued fall in the regional markets.

Kevin:  That’s a snapshot for you from the Pain & Gain Report from CoreLogic RP Data. My guest has been Cameron Kusher.

Cameron, thanks for your time.

Cameron:  Thanks, Kevin.

 

Reasons not to buy in Sydney – Simon Pressley

Kevin:  There’s a blog currently on the Real Estate Talk website written by Simon Pressley from Propertyology that prompts me to want to talk to him about it. He makes the comment that an exodus is under way with thousands of people leaving New South Wales for more affordable property locations – and why wouldn’t they?

Propertyology Managing Director Simon Pressley said more than 23,000 people migrated away from New South Wales over the 12-month period and that number is expected to escalate in the months and years ahead. Simon joins me.

Simon, thanks for your time.

Simon:  Always a pleasure chatting, Kevin.

Kevin:  Simon, what impact will this exodus, if it continues, have on the Sydney property market, do you think?

Simon:  It’s a direct reflection of its housing affordability, we feel. There’s a bit of a precedent that was set at the turn of the century – roughly from 2002 to, say, 2007 – where there were very large volumes of people exiting New South Wales for other states. In that era, Queensland was the biggest beneficiary. And it would appear that that sort of trend is continuing.

Certainly, that exodus out of New South Wales is continuing. That doesn’t necessarily mean that it’s going to be repeatable with all of them coming to Queensland.

Kevin:  But, Simon, we are hearing about an undersupply driving the market there. Is that real?

Simon:  No, I don’t think it’s real. It’s a perception that a lot of people have who live in Sydney because it’s so congested and expensive, and they process that to mean undersupply. It’s always going to be congested, it’s always going to be expensive, but the actual data shows that there’s been more new supply in Sydney over the last couple of years – and for the next couple of years, for that matter – than at any time before.

Of course, people then respond and go, “Oh, but our population growth is much higher now than any time before.” That’s actually not true. The population growth in Sydney over the last couple of years is comparable to, say, 2006 and 2007, but in those two years, Sydney built only half the volume of properties that they’re building now, and there was no boom in 2006 and 2007.

So, we don’t think there’s an undersupply or an oversupply. What we’re saying is there’s a lot more supply than what people probably realize is what’s happening, and in the next couple of years, there are going to be record volumes.

Kevin:  We always talk about the property cycle, don’t we? How does this fit into that cycle, or is it throwing it out?

Simon:  I think Sydney has definitely well and truly peaked. It’s in its fifth year of a strong price growth cycle. It’s rare for any property market to be that strong for that long. Typically, three years of good growth is quite a normal cycle. Of course, Sydney has had such a strong economy combined with low interest rates that we’ve all benefited from, and that’s probably why it’s gone into its fifth year. But I think it’s definitely at the end of its cycle now.

Kevin:  When we see that Sydney market adjust, it does actually go into a bit of a crash or a bit of a freefall for a little while. Is that likely to happen, do you think?

Simon:  Anything’s possible. I’m not forecasting that Sydney property values are going to significantly decline. We could see some modest decline, but things decline for a reason, and the common causes for property values to fall are either fast rising interest rates and/or really poor economic conditions.

Now, we’ve already had some out-of-cycle interest rate rises and Australia’s most expensive city also has the largest value mortgages, so that’s going to have some impact, more so on those who have investment properties than owner occupiers. But as far forward as we can analyze, its economy is likely to remain strong.

For that reason, I can’t see Sydney’s market crashing. I don’t expect strong price growth: modest growth or you could have a prolonged period of next to nothing.

Kevin:  Is it likely to mean that Melbourne is going to become our biggest city sooner than is currently projected?

Simon:  Possibly. Melbourne’s population growth rate has become over the last couple of years the fastest in Australia. It hasn’t always been that way. Brisbane and Perth and Darwin, for that matter, have always been the three strongest population growths, but in this current era, it’s Melbourne.

Let’s not forget, though, whilst Melbourne is not as expensive as Sydney is still Australia’s second most expensive city. So, if someone were to leave Sydney, let’s say, because housing affordability is just not there and go to Melbourne, are they going to be comfortable living 50 kilometers out of the Melbourne CBD where you can buy an affordable house? I’m not sure. They might move somewhere else.

Kevin:  From a pure investor perspective, are there better capital growth locations around Australia than Sydney?

Simon:  Almost everywhere, I would say. We wouldn’t have said that over the last five years, but as I said earlier, Kevin, I feel that Sydney is at the very end of its growth cycle. Other than Melbourne, most of Australia hasn’t really done anything over the last five to 10 years, really. So, we could generalize and say everywhere else has its growth cycle ahead of it.

Right here and now today, the hottest market in the country unquestionably is Hobart. We feel it’s still got a few good years ahead of it. Canberra is another one that’s performing well, though Canberra is a little bit on the expensive side as well. Brisbane we think has definitely got better potential than Sydney, although I think it is unlikely at the minute to have spectacular growth.

We’re encouraging investors to have a critical look at all of regional Australia. Region doesn’t always mean risky. It can mean risky if it’s a tiny, small mining town, but if you cast your eye to the really strong regional cities, many of those have some really good capital growth potential and better rental yields.

Kevin:  Always good talking to you. Get more information and read the full blog article on our website RealEstateTalk.com.au. Look for it under my channel. You’ll find it there from Simon Pressley at Propertyology. He’s been my guest.

Simon, thank you very much for your time.

Simon:  Thank you, Kevin. Have a great day.

 

 

1 Comment

  1. Steve Polder Reply

    Hello Kevin & thanks for the very useful information you explore on a range of subjects. Andrew is very kind to the concept of LMI and in theory I acknowledge it’s worthiness – but not today!!! I’m not so kind and I think it’s a rort – if the banks want to insure their borrowing facilities, then let them pay the insurance themselves! If I want to protect my personal income against ill-health or disability then I have to take out an insurance policy and pay for it myself. It’s an insipid tax on consumers that has NO evidence for existence as Australia has the lowest mortgage default ratio in the western world. LMI adds heavily to the “up-front” costs of buying a home – in some cases an even greater impost than the stamp duty liability on a property transaction and bites significantly for people wanting to live in Sydney. In an environment where the regulator APRA has effectively given the freedom for banks to raise interest rates of their own volution (i.e. rates on interest only loans for investors have recently gone through the roof) outside the directive of the Reserve Bank, we are now experiencing a “plutocracy” of the most evil kind and the working class man is picking up the tab yet again. I believe the whole paradigm of loan contracts should be reviewed to exclude retrospectivity (notwithstanding the fixed rate option) – but that’s an argument for another day …. thanks for listening Kevin.

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