2020+ Melb/Syd to outperform Brisbane again?

But it is reflected in the ratios as they are average incomes so the higher incomes help form the average . If a city has an extremely high ratio from global standards it’s a strong indication that if there’s not a bubble than at least there are not good prospects of strong capital gains unless income grows significantly .

 

I've been hearing almost the same thing for 18 years.

I don't buy into the hocus pocus stats. Last booms, the market sentiment and most economists were quoting all kinds of negative numbers and doom and gloom. Shortly after our two major markets absolutely exploded.

Not so long ago people were talking about no growth for 10 years and more doom-and-gloom. You wake up one morning and pretty much bam 20% growth.

Knowing exactly what makes markets grow and explode is pretty much impossible to really determine. If we really knew the exact mechanism, a lot more people would be multi-millionaires and billionaires.

I buy according to my risk profile, and the merits of the deal. That's it. I leave the macros and stats to the economists. It's what's worked for me since day one so I'll just keep doing what I've always been doing. Whatever works for the individual.

 

Strangely, on my math, Sydney/Melb prices were very cheap pre-election last year (admittedly some of those same experts noted thought I was nuts). IMO, it's not as simple as '$800k - wow so expensive'. If you limit your analysis of a market to an absolute number and think its large, or use macroeconomic DTI ratios (that very few actually understand and a measurement tool that doesn't tell you anything about efficient credit allocation) - then you'll never buy in Sydney. Not in 2012, not in 2014, not in 2019. For the forseeable future (my lifetime!), Syd/Melb will always be significantly more expensive than other markets.

In 2019, Sydney was an economy that had rampant population + jobs growth for a number of years, prices had fallen 15% and the actual price of credit fell substantially & one that consistently responds to rate cuts (same as Melbourne). Some quick servicing calcs & affordability calcs show Sydney flashing green for its own relative affordability. I.e. it was near decade high affordability levels once the price of debt is factored in. Its still reasonably close to it, and if further rate cuts and helicopter money is on the horizon, I have no doubt that Sydney and Melbourne will continue to do very very well. Regulators, IMO, would be creating big societal problems for sure, but the market doesn't care for that & will run away to a whole new level to reflect its affordability again and a slow supply response.

Using the same math, if you want to answer whether Brisbane will do well over the medium term...I think people should focus on:
- What will Brisbane's economic growth drivers be?
- More specifically, is GSP likely to outperform itself and are jobs going to be created...fast?
- In absolute figures, how many jobs will be created over the past 12 months - 3/5 year window.
- And importantly, how has supply responded?

If employment growth is strong, population growth is strong and supply is relatively constant...Brisbane may well boom. Nonetheless, being 'cheaper' then eastern seaboard cities is not an ingredient for growth on its own. Answer these questions about each city, and you'll get some insight into what'll markets will do well. Those that did their research into Tas pre-boom would've shown a lot of green lights to those questions.

For the newer investors - stick to @Sackie strategy. Ignore all this mumbo-jumbo, put it in the 'not relevant' basket, and just invest according to your own mapped out strategy and don't put too much weight on short term price movements in your own investment strategy. It's simply background noise to someone with a clear well crafted strategy of what they're seeking to do.

 

Youre pretty much one of the only few people I know who mixes economics with common sense and actual wealth creation principles. And has achieved. So does @petewargent .

 

Melbourne and Sydney are Global Cities, Headquarters to large multinational corporate businesses paying large salaries to people with expensive tastes, sucking in money from around the world, economic powerhouses, and financial centres, Sydney is ranked #10 and is in the same category as New York, Singapore, Tokyo, San Fransico, Paris, London, Seoul , Ammsterdam Berlin and Hong Kong. Brisbane does not belong that basket and cant be compared with them. It is the same as comparing Lemons and Oranges because they are both Citrus.

 

there's a good argument to say too much info is counter-productive, causing way too much analysis paralysis

in stocks, the biggest driver of 10-20 year returns is how much you pay, an awful lot of the rest is noise

in property, does macro analysis ever help? not a lot!

 

Hey Pete, would be great to hear your thoughts on house price growth prospects in Brisbane and what that may look like over next 10 years

We bought in Nudgee about 2 years ago, house on 600sqm. It's a bit hard to see what the suburb did over the last 2 years but it definitely is below what i expected.

 

I’m intersted in that! I thought Nudgee was to boom:

 

what makes you think that?

 

Overthinking often leads to inaction, under-thinking often leads to un-informed risk taking. Its hard to find the balance and to be self-aware at what end of the spectrum you sit as an investor. Although, to your point, there's plenty of accidental millionaires in this country who've managed to retire comfortably through bricks and mortar while the academics slave away on low wages trying to pump whatever savings they can into LICs and Index funds.

 

Ripple from Nundah Hendra
By the beach
Good distance to airport

 

Thanks mate. Non of those advantages have played out by now by it's sounds optimistic

 

Stretching a bit to call that a beach, but I get your sentiment

 

I'd be interested to see people's thoughts and stats on these questions specifically applied to Brisbane

 

.

ha, a bit snarky!

but it's true, a lot of fundies have been v defensive about the fact that know-nothing homeowners w/ leveraged 1950s fibro shacks in Sydney have outdone quants & their stonks over 15 years

cycles, but

 

The way I see it is as simple as it gets. You want guarantees for long term Growth then invest in Melbourne and Sydney.

You want a more speculative approach then invest in any other state.

I’m not saying you won’t do well I’m just trying to keep this as simple as possible for anyone who wants to take a passive approach to investing.

 

Accidental ??

My perspective is that some academics think that everything is explainable and logical , but the reality is ít isn't .

The prime driving force behind market movement is human behaviour and that on many occasions is completely illogical ....

But just because it's illogical , doesn't mean that you cant watch it happening and take advantage of it and profit from it

So if you've specifically done that , does that make you an accidental millionaire ? or just someone who's smarter than academics who can't find a logical reason for price movement , and therefore aren't prepared to act on what is observable to some people who look at human actions rather than looking for underlying "fundamentals" which could explain actions ....

Cliff

 

Cliff I know quite a few people, highly intellectual, very logical and unemotional with their decisions basing everything off charts and stats. Most of them are more intelligent than myself and all of them ( at least that I'm aware of going by their conversations with me ) have achieved far less than I have. And they are all older than me.

Wealth creation has little to do with being logical and regimented because as you point out, the very mechanism which causes rises and falls in markets ( human behaviour) is as illogical as it is unpredictable.

I firmly believe the best philosophical framework to base investment decisions around is understand your risk profile, learn the basics and fundimentals of PI ( this encompasses a lot imo) and take action when you feel a deal meets your buying criteria.

I have never waited for prices to drop before buying. If I believe a market shows no value to me, I look at other markets and deals.

 

Sackie and Cliff

Two great posts with wisdom in each.

I think the one thing that people get wrong (the people with charts, stats etc), is that they think they are smarter than the market - whereas typically, the market, with it's millions of participants, is generally correct.

One example is hotspotting: when people think that they have found something undervalued, where as really the market thinks it is just cheap. And the market is usually correct.

Wisdom of crowds vs the madness of crowds ....

One small thing I would add, is that bubbles are not always irrational - usually they are rational in fact. Most bubbles derive from changes in policy or deliberate expansions in credit. You can't always pick which asset gets inflated (tulips, Nasdaq, real estate), but you know that there will be a bubble. And bubbles are often the market reacting rationally to the policy landscape: low interest rates, fiscal stimulus, subsidies etc.

 

Sackie .

Depending on what stats are being analysed , they can be interpreted as reflecting a change in human emotion.

I do look at charts .

Cliff