14 Aug Property investing is full of myths – Simon Pressley
A 3-month study on the historical performance of each of Australia’s 550 Local Government Authorities has been completed and the outcomes have dispelled many investor myths. In today’s show we talk with Simon Pressley, Propertyology’s managing director.
Kevin: A three-month study of the historical performance of each of Australia’s 550 local government authorities has been compiled by Propertyology. Given that some locations have strong capital growth and others have better rental yields, Propertyology calculated a total return and then ranked each LGA from 1 to 550.
The findings of the study produced some fascinating outcomes, and according to Propertyology’s managing director, Simon Pressley, it has dispelled many investor myths. So far, they have released reports on Queensland, Victoria and Western Australia.
Joining me now to discuss the findings is Propertyology’s Simon Pressley. Simon, thank you very much for your time.
Simon: Thanks for having me, Kevin.
Kevin: I mentioned in the introduction that the outcomes of these reports dispelled many investor myths. What were those?
Simon: Property investing is full of myths, one of which is that population growth rate is the biggest driver property prices, and that was dispelled by this report. There are locations such as Narrabri and Ararat where actually the population has declined – albeit only a little bit – over a ten-year period, and they have been among the best performers in all of Australia.
Another common myth is that capital cities are better than regional locations. While you can certainly have some poor performing regional locations, the best performing locations have been more regional than capital cities.
Kevin: Were any of those regional areas on the back of mining?
Simon: Mining was a common flavor, Kevin, but let’s bear in mind, our study took in a 15-year period, so that’s a long period of time. But right through Australia, the better performing locations, if you narrow it down to a common industry driver, mining and also agriculture were probably the two biggest industries.
Kevin: I guess when people hear of mining, they instantly think of places like Murrumba where there were spectacular increases that were not able to be sustained.
Simon: That’s true but the best three performing out of 550, number one was Newman, number two was Port Hedland – both Western Australia regional locations – and number three was Isaac, which covers Moranbah and Dysart. Those three locations have had some spectacular years in the last 15 years and they’ve had some very poor years, but even factoring in those poor years, they outperformed everything else.
Kevin: I guess it’s great tool if you’re looking to look at property investing over the long term, Simon.
Simon: Absolutely, yes. For industries like that, timing is very important. I think the big losses are those who board at the top of the market without really understanding what they’re doing.
Kevin: Yes. There is so much detail on the reports, and I thank you for sharing them with me. By the way, too, they are reports that are available on the website. I’ll tell you before we finish this conversation how you can get to them.
Simon, there is a lot of detail in those reports. There is far too much for us to cover in the time we have available. What were the standout points for you?
Simon: Standout points? We were surprised with some of the findings ourselves. As I said, locations like Ararat and Narrabri, they don’t have the big profile of capital cities or even some of the big regional cities, but yet they really have had spectacular performance. They just chug along and don’t get any media attention.
There are places like Wyndham, which is outer Melbourne, that has had the highest population growth rate out of any local government authority in Australia. It has performed okay as a property market but has been far from one of the better ones. I think it’s the thing with population growth. Yes, it drives demand for accommodation; however, if supply keeps up with that demand – or in some cases, exceeds it – the overall growth is not going to be as good as what some people may think.
The best performing capital cities? Darwin was ranked number one in the last 15 years followed closely by Perth – and there again, mostly resources influence there. Sydney, in spite of its current boom over the last two and a half to three years, is still officially been the worst performing capital city over that 15-year period.
Kevin: That’s amazing, isn’t it? Sydney, of course, has those huge peaks and troughs, and that has a major influence over a long period like 15 years.
Simon: Yes, that’s right. The number one thing, we think, why Sydney hasn’t done as well as what people think – although it has the biggest population masses of any city in Australia – is the affordability side of things. Affordability is the number one driver of demand for pretty much all commodities, including property.
It’s only had its boom over the last two or three years, Kevin, because we have historically low interest rates. The low interest rate just compensated for the affordability. But it has the potential to go a complete circle if we have several interest rate rises in years to come.
Kevin: I promised that I’d tell you how you can get a hold of these reports. You can do that by going to the website, Propertyology.com.au. My guest has been Simon Pressley.
Simon, thank you so much for spending some time with us today.
Simon: Thanks for having me, Kevin.