19 Aug Is there a bubble in Australian property? – Simon Cohen
In today’s show together with Simon Cohen, from Cohen Handler Buyer’s Agents, we look at the trend leading buyers to invest outside of the city limits due mainly to the emergence of major transport systems and roads. We also look at why so many investors struggle to get past one investment property.
Kevin: A few weeks ago, I had the pleasure of talking to Simon Cohen from Cohen Handler Buyer’s Agents out of Sydney. Simon Cohen returns once again.
Simon, I want to talk to you about a couple of other things this time – one, about whether or not you see a bubble. Is there a bubble in Australian property?
Simon: I don’t know if “bubble” is the right word. I think definitely the market is exceptionally hot, and it’s a great time for people to buy with historically low interest rates. I do think prices have changed, not for a certain period of time, but I think they’ve changed for good. What may have been $650,000 is now $750,000, and we have certainly seen that median house price move to around $1 million, which is the highest it’s ever been.
I’m not sure there is a bubble. It’s certainly a hot market, it’s a heated market, and there are definitely more buyers than stock. Will it burst? I’m personally not that confident it will.
Kevin: I don’t think you can say that the entire Australian market is one market. If you look at Sydney, it could be argued that maybe that’s slightly over-inflated at this point in time and there might be a correction coming. But if you look at other markets around Australia – like Brisbane – Queensland continues to perform at a steady level. I think it would be hard to argue that there is a bubble.
Simon: Agreed. Really, it depends who you ask, right? Some people think Brisbane is always a little bit behind and will catch up. Some people think it’s had an over-supply of property and won’t. But I absolutely agree with you. Every market is different and most people only talk about Sydney and Melbourne, which are the two hottest markets out there.
Kevin: Another thing I wanted to talk to you about – because I know you’re in touch with a lot of investors – is why most property investors only ever get to one investment property and then find it difficult to get past that.
Simon: I think most people save and save and save for their deposit, buy that investment property, and then really don’t know what to do with it. To me, it’s a huge enigma. The beautiful thing about property is you can buy it and after three months, you can have it revalued, and if you buy well, you don’t need any more cash. You use the equity in the first property to keep growing your portfolio. We see heaps of our clientele, year on year, continue to do that.
I think most people maybe don’t have the right advice, or they don’t know how to structure it, or they think just having one is enough. But the point of having the first one, which is the hardest one, is that you can get many more down the track.
Kevin: I’ve spoken to a lot of commentators in this show, and it seems apparent to me that the reason a lot of people stop is because they probably don’t have a strategy. They know they want to get into property investment. They get their first one and think, “Good, I’ve made it now and I’ll sit,” but they don’t have a strategy to move on.
Simon: Exactly. The hardest one is the first one. It should be smooth sailing from there.
Kevin: Simon, on another topic, just while I’ve got you there, when you’re looking around for your buyer clients, tell me about investment moving out west because of the emergence or the need – I guess – for major transport systems to be developed as populations grow out.
Simon: Absolutely. One of the offices we have is out west. A year ago, we were looking at an area like Parramatta, which is the fastest-growing CBD in Sydney, incredible infrastructure. The smartest thing you can do as an investor is look for areas that even if the market slows down, they have reasons why they’ll continue to grow – as you say, transport, offices moving out there, and things like that. It’s far more affordable. The yields are a lot higher.
Living in the east, in the north, and around the city has become so expensive that areas further out west where there is incredible transport and infrastructure make absolute sense for people to live in, and so they make really great investment opportunities for clients.
Kevin: It’s always great talking to you, mate. Thank you so much again for your time. Simon Cohen from Cohen Handler has been my guest.
Mate, we’ll catch up with you again soon.
Simon: Always a pleasure. Thank you.