How Experienced Property Investors Are Planning to Invest
Key points covered in the video:
- After the last boom that ended in 2003, many doomsday experts predicted a 40% price drop. But data from the Australian Bureau of Statistics shows that the median price in Sydney dropped only 10% from 2003 to 2008 – which was the lowest point for prices in Sydney
- During the same period, Brisbane prices rose 35% and Perth prices rose 70%
- There is almost always a market that is growing in Australia. Right now, all roads point to Brisbane – but you need to be careful.
Hey, it’s Niro here from Investment Rise, and over the last few weeks, while we’ve been helping a number of our clients find investment properties in great growth locations, a major concern that’s been coming up for so many of our clients is, “Niro, will the property market crash?”
So many of them have seen some of these media reports that talk about this 40% price drop in the market, and I’ve been talking to them about how, yes, property prices are falling in both Sydney and Melbourne, but it’s not a crash by any stretch of the imagination. Rather, it’s just a clearance sale where we’ve got too many properties on the market right now, and so prices are being discounted slightly in order to clear that excess stock.
Once that excess stock is taken off the market, as the population keeps increasing in Sydney and Melbourne, we’ll see then prices go flat for a while, before the next boom. The reason why I’m so confident of that pattern is because that’s what almost always happens in the Sydney and Melbourne markets.
For example, the previous boom, which ended in 2003, prices dropped back then as well after that boom. Now, the question is, “How much did they drop?” Because back then, many of the so-called doomsday guys, the property gurus out there who were talking about the property crashes, were also predicting the same 40% price drop.
But when I went through the Australian Bureau of Statistics and tracked the median prices every year from 2003 until 2008, so 2003 was when the boom ended and 2008 was the low point for Sydney prices, do you know how much prices fell by? They fell by 10% over five years.
Now, think about that. A 10% price drop over five years is 2% per year. That’s not a crash in anyone’s imagination, right? And then, of course, what happened is then prices went flat for a while before they started rising significantly in 2012. So from the end of the previous boom to the start of this recent boom was nine long years. Prices didn’t crash.
At the same time, though, anybody who invested in the Sydney market in 2002, 2003, 2004 went through a number of years of pain because rents didn’t cover the mortgage, interest rates rose, and I know many people who in fact had to sell their properties before this recent boom started because they just couldn’t afford the cash flow concerns. Others chose to do nothing, they just waited and waited, and after nine years felt that they were no further ahead.
However, there were some investors who chose to invest interstate in other markets. One thing I keep talking about in many of my videos is that Australia is not a country of one property market, we’re a country of multiple property markets. While the Sydney market dropped 10% from 2003 to 2008, the Brisbane market, for example, it rose by 35%.
So that was the start of its boom, and in fact the Brisbane market, if you look at the statistics, from 2002 to 2010 rose 148.5%, before now going flat until really the start of this year, maybe late last year.
But for those of you who know my story, you know that I chose not to invest in Sydney after the previous boom in 2002, I chose to invest in Western Australia, where Perth prices, for example, increased 70% from 2003 to 2008.
So what’s my point here with all this data? Simply this: the Sydney market is not going to crash, but at the same time it’s not the place for you to be looking to invest if you’re looking for capital growth over the coming few years.
I’ve spoken a lot about why I believe the Brisbane market has the strongest market potential for capital growth over the coming few years. Not so much the Perth market, it’s still suffering the overhang from the mining bust, I guess As much as I’d love to be able to say that I’m confident in the Perth market, I’m just not. But the Brisbane market has a lot going for it.
In fact, BIS Shrapnel has already come out and said that it expects the Brisbane market to be the strongest performing market for capital growth. CoreLogic, formerly RP Data, have also come out and said that they expect the Brisbane market to be the strongest performing market for the coming few years.
So look, there’s no crystal ball, there’s no guarantees, past performance is no indicator of future performance. But my key message here is this: we know, for example, Sydney prices, according to CoreLogic, have fallen about 6-7% from their high in July 2017, and people talking about prices dropping from their previous high about 10% like previously, maybe 15 this time just because prices went up so much.
Still, that’s not a huge drop at all, in the great scheme of things. Melbourne prices are also falling, again, not a huge crash. But there are other markets that are starting to grow right now, and Brisbane is the strongest performing market, it’s the market that’s showing the most amount of potential going forwards.
Remember, we can’t take advantage of any of the past capital growth, we can only take advantage of future capital growth by getting in at the right time.
So I really hope this video helps allay those fears about, “Can you make money in property right now? Should you even be investing in property?” The answer is, there are some great opportunities. No, there’s no crash coming in Sydney and Melbourne, but neither of those two markets are places to invest in for great capital growth over the coming few years.
I really hope you enjoyed this video as much as I enjoyed making it for you, going through the data and putting this all together for you. And if you believe this can help someone else who’s looking to invest and not sure if they should or not, please share it with them. Otherwise, I look forward to speaking to you soon. Bye for now.
September 17, 2020
September 8, 2020