WA 20 Must Ask Questions research-Perth Results?

Discussion in 'Where to Buy' started by theperthurbanist, 31st Oct, 2017.

Join Australia's most dynamic and respected property investment community
  1. Lawrence Barnes

    Lawrence Barnes Well-Known Member

    Joined:
    13th Sep, 2017
    Posts:
    280
    Location:
    Brisbane
    Hi Anthony, You hit the nail on the head when you said the better locations hold their value compared to the less desirable areas. This is why you only buy in high demand area's. I read all Margaret''s books years ago and over the last 2/3 years started reading all Michael's books which like you say fill in the blanks. Even before i started to read Michael's books i realised that one of my properties in Brisbane consistantly grew and either slightly dropped or held it's value whilst other property in outer area's of brisbane had huge swings in price. The 2011 floods in Brisbane were a good test of this. My property 8km from Brisbane CBD dropped in value in 2011 by about 7.5%, by 2012 it was back up 7.5%. My Ipswich properties took 5 years to get back to where they were. Not to mention the capital growth difference between these properties was massive. Outer area's performed around 3/4%, Brisbane property 7% above on average.
     
  2. Lawrence Barnes

    Lawrence Barnes Well-Known Member

    Joined:
    13th Sep, 2017
    Posts:
    280
    Location:
    Brisbane
    MTR didn't not explain very well then, but fair enough. Long term your Bondi property will outperform your western Sydney property for sure. Western Sydney had a large surge in the recent uplift in Sydney for sure.
     
  3. Sackie

    Sackie Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    25,035
    Location:
    Vaucluse, Sydney.
    The other challenge is to be able to have the finance for blue ship areas or to choose areas and price points which will allow you to keep growing serviceability wise. So needs to be looked at from a holistic approach imo.
     
  4. Lawrence Barnes

    Lawrence Barnes Well-Known Member

    Joined:
    13th Sep, 2017
    Posts:
    280
    Location:
    Brisbane
    Yes all good points for sure. I myself had to sell 2 properties to purchase in one of these blue chip area's in Brisbane. If I can only own 3 or 4 properties I want to make sure they are the best properties I can get. I would rather own 2 great investments then 6 not so good ones in outer regions that are more volatile in price and are not in high demand area's.
     
  5. Illusivedreams

    Illusivedreams Well-Known Member

    Joined:
    3rd Oct, 2017
    Posts:
    2,454
    Location:
    Sydney
    @Leo2413
    Leo do You live in Bondi area? I used to be in the area. I still have an IP in Bondi.
     
  6. Sackie

    Sackie Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    25,035
    Location:
    Vaucluse, Sydney.
    Yes off the beach .

    What kind of ip? would have done very well :)
     
  7. theperthurbanist

    theperthurbanist Well-Known Member

    Joined:
    5th Aug, 2016
    Posts:
    769
    Location:
    Perth
    Agreed, the comparison should definitely be blue-chip vs ‘underdog’ suburbs within the same city.

    My take is:
    (Most) Blue chip suburbs may not have the catalyst for that big surge in prices like (some of) the underdog suburbs do. Ie thy are blue chip because they already have had this price growth. So unless they have serious infrastructure upgrades planned or some other catalyst, they are unlikely to undergo a steep increase in prices above the market.

    However, their good credentials mean they are always going to be in demand, and therefore should be solid long term performers.

    Much like the share market now I think about it.

    Feel Free to argue for/against this point till the cows come home! Everyone has their preferences (and it’s always interesting to hear why).

    Keeping it on topic: it would seem that Margaret Lomas’ technique favours identifying those underdog suburbs ‘before they boom’, partly for the better yields they typically offer above more expensive blue chip areas.
     
  8. Anthony Brew

    Anthony Brew Well-Known Member

    Joined:
    18th Feb, 2017
    Posts:
    1,176
    Location:
    Australia
    I think it is a great strategy to use these 2 concepts together -
    1. Locations going through infrastructure/gentrification
    2. Buying at the bottum of the boom

    How far out of the city are you looking at?

    By the way, locations in outer ring of major cities
    - also can go through major gentrification and infrastructure improvements
    - also have higher yield than inner/middle ring
    - have better long term growth than towns outside major CBDs

    Buying at the bottum end of a boom is a general strategy that everyone should employ unless it is their first or second property and they need a quicker equity gain to leverage and in that case they would benefit more from buying in a rising market.

    This was another thing that concerned me about her writing. She made it seem like you might have 1 year of no growth but otherwise you should get your 5% average most years. In reality it is basically zero for 5+ years, then single digits for a few years and a boom for a few years. If you buy WAY before it starts rising, it could very easily take you 3 or 5 or more years before you can get any growth at all, so you will need to save up the deposit yourself for your next property. This would not be a problem for her with 30+ properties in many locations, but for someone buying their first or second, this would a major problem. This is a very real situation and it is a shame she never mentioned it.

    Anyway, I think outer ring locations in major CBD's at the bottum of the market that have gentrification coming offer terrific opportunity for the reasons you mentioned (lower initial demand and therefore price, plus buying power for further discounting, means more of a rise after boom and gentrification, and higher yield so very cheap holding costs), but I do wonder if it would be better as part of a 2-side strategy were you cash-in on these at peak to pay off debt on high demand inner/middle property to get the best long term growth.
     
    David Shih likes this.
  9. MTR

    MTR Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    27,786
    Location:
    My World

    So why buy at bottom of boom? You could be waiting as long as 7 years for market to start rising? And you are stuck with servicing debt

    Why not buy at the start of rising markets and make money on your investment in first 12 months. Also gives you choice, sell take profit or access equity and hold
     
    Tman88, Sackie and Ross Forrester like this.
  10. Anthony Brew

    Anthony Brew Well-Known Member

    Joined:
    18th Feb, 2017
    Posts:
    1,176
    Location:
    Australia
    I meant bottumed and starting to move in an upwards direction after a long slump, but not yet booming, whereas someone on their first purchase would be better off buying in a market that has already had a couple of years of single digit growth and is now started it's boom phase where yields would already be lower but they can get their equity quicker to get into their second purchase which is most important during their portfolio building phase.
     
    Perthguy likes this.