Property types to keep an eye on 2018 – Simon Cohen

keep an eye on 2018

Property types to keep an eye on 2018 – Simon Cohen

Simon Cohen identifies the growth areas in Sydney, Melbourne and Brisbane as well as looking at the areas that are slowing.  He also makes some predictions about what to look for in 2018.

Transcript:

Kevin:  Let’s have a look at some of the key areas around Sydney, Melbourne, and Brisbane. A lot of talk about what’s happened with property prices, particularly in our capital cities. We’ll look at the growth areas. I want to also look at some of the areas that are slowing down around Australia and the property types you can keep an eye on for next year, 2018. Joining me to do that, Simon Cohen from Cohen Handler.

Simon, thank you very much for your time.

Simon:  My pleasure, Kevin. It’s great to be here.

Kevin:  Let’s have a look at some of these areas around Sydney, Melbourne, and Brisbane. Is it still possible to find areas in those cap cities that are still growing quite well, Simon?

Simon:  Absolutely. I think the main thing to look for when you buy any property in any of these cities is areas that have infrastructural reasons for growth as opposed to just the market growing. So, if you look for areas where there are new transport facilities going in or new office complexes or new hospitals being built, whatever it may be, if you look for key factors why people will ultimately need to move there, you’re definitely going to see some growth. And if those areas are close to the city or easily accessible to the city, they’re certainly what I’d be looking for.

Kevin:  Yes, the thing, I think, in Sydney and Melbourne is that to get close to the city, it’s going to cost you a fair packet. You need to go out a little bit more into some of those outer areas for it to be a little bit more affordable. Then I guess the question is what sort of infrastructure is going in there, Simon?

Simon:  Absolutely. If you look at Parramatta two years ago, the time when it was one of the fastest going CBDs in Sydney, you had a lot of head offices moving their offices there, so great factors for growth. And if you can look for those sort of areas in whatever city you’re in, and then you have the accessibility, the transport, and the ease to get into the CBD, you’re going to have a win-win.

Kevin:  Are you sensing any areas in those cap cities? Let’s talk about Sydney and Melbourne for a start. Well, maybe Brisbane; we’ll throw that into the mix. Are you seeing any areas that are starting to slow down a little bit, Simon?

Simon:  I think the further away from the city you get, we’re definitely seeing areas that are slowing down. But the market that has slowed down in all the major cities seems to be – and it hasn’t died, that’s for sure; it’s dipped a little bit – is the investor market.

As banks tighten up LVRs and things like that, we’ve seen investors slow down a little bit. But then we’ve seen an increase in first-home buyers, and those first-home buyers are buying a little further out just to get a foot into the marketplace. As you say, close to the city is definitely pricey.

Kevin:  What areas in Brisbane are you finding that are really worthwhile having a look at right now?

Simon:  I love blue chip areas in any major city. In Brisbane, it’s of Ascots and New Farms that for me are always the safest. I love the lifestyle style, they’re close to the city, they have the cafés, the transport, and there always new shops and hotels and things opening up there, which means that it’s always growing areas.

Kevin:  One of the things that we’ve had a lot of conversation and concern about in this last year has been an over-supply of units, and we’ve heard some horror stories about what’s happening in Melbourne with additional units coming onto the market.

Are you buying units for your clients, or are you mainly looking at house and land?

Simon:  I’ll say to you this: we very rarely buy off-the-plan properties. It would be a very minuscule percentage of the properties we buy. We are definitely buying units, but we like to buy established units in boutique blocks that you can add value to, that when you come to resell or rent out, there’s far less competition than an off-the-plan property. You also know what you’re getting, and you’re not market-reliant on if things are going to dip in two years because you’re buying off the plan.

Kevin:  If you’re looking at buying an established unit, would you look at the percentage of owner-occupiers compared to investors? And if so, just walk me through why you would do that.

Simon:  It’s a good question. It really depends on the size of the block. I would in certain buildings absolutely, and I do it because if my client was an owner-occupier and they wanted to live in the property, we wouldn’t want to buy a property that’s heavily tenanted. Tenants care less about how the building looks, how it’s maintained, how it’s established, they’re typically messier and aren’t fussed on upkeep.

So, I’d be trying to put my owner-occupier client into a property where it’s everyone in the same boat, if that makes sense, and they want to keep the property looking good and ultimately keeping it to its highest value.

Whereas if they’re investor properties, investors typically don’t want to spend the money to clean buildings up, doing the things that need to be done, because they’re out-of-pocket expenses. But if you live there, you see it every day and you want it to be nice.

Kevin:  Just getting that balance, if I was an investor looking for a unit, I’d probably want to buy in a block that’s predominantly owner-occupied for the very reasons you’ve just mentioned there. So, as my investment, it’s being well looked after.

Simon:  Absolutely. Well looked after, well maintained, and you know there are like-minded people in the building.

Kevin:  So, what are the property types that you’re going to keep an eye on in 2018, and why, Simon?

Simon:  Always boutique block apartments, established older style that you can cosmetically renovate and update and add value to that are close to the CBD or in areas outside the CBD that have those great infrastructural reasons for growth. In those three major cities, absolutely.

I would definitely be staying away from off-the-plan, bigger style properties. I think they’re too risky, and they’re the ones where you hear the horror stories. As population grows and the dwellings don’t get that much bigger, I’d be looking for subdivision-type properties where you can put two or more dwellings on one property, for obvious reasons. They’re the main things I’d be looking for.

Kevin:  What about state by state? Are you a cap city buyer only, or do you look at the regions?

Simon:  Me personally, cap city.

Kevin:  What about for your clients?

Simon:  Typically cap city.

Kevin:  And which areas will you be looking at in the cap cities?

Simon:  In Sydney, again, it’s the blue chip areas around the CBD. And there are some areas in the western suburbs, Blacktown, for example, the hospital there is becoming the major cancer hospital in New South Wales. It’s going to create a heap of new jobs, there are going to be a lot of people needing to rent there. They’re going to be great tenants, they’re going to be doctors and nurses and things like that.

So, outside of the CBD, I look for areas like that, like Parramatta two years ago. But definitely in Sydney, it’s anywhere around the city. Ultimately, it’s anywhere from Bondi to Surry Hills, but it could be Kirribilli, it could be Balmain, in that CBD radius.

In Brisbane, again, I love the Ascots and the New Farms. They still have great entry level prices, sophisticated tenants, and really strong yields. And in Melbourne, anywhere close to the CBD. But again, I like boutique areas like Toorak, for example. It’s close to the city, it’s [7:50 inaudible], it has good transport. And also if you can find boutique style properties in the CBD, I think you’ll also do well.

Kevin:  Good stuff. Simon Cohen from Cohen Handler has been my guest.

Simon, all the best for the Christmas and New Year break, and I look forward to talking to you in 2018.

Simon:  And to you and all the listeners. Thanks so much.

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Kevin Turner
kevin@realestatetalk.com.au
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