QLD Brisbane/QLD Overhype

Everything's easy in retrospect

We were looking for another in Manly , but the market went Beserk and it's hard to pay an extra 40-50 k than you would have paid 1-2 months before .

We got out bid on one property and the next one we went too had the agents let people in one by one as someone came out as it was too crowded inside . That one went about 60 k above what we expected and was in probably the worst street in the area .

Land tax would have been painful and at the prices we would have been paying we would have been seriously cash flow negative .

In retrospect Mt Druitt could have been an option ( though land tax would have hurt ) but we looked at nicer areas in Brisbane , could see lots of choice and with better cash flow could afford to buy more and also without having to pay land tax .

We were able to go up and look for good properties in good locations , take our time , make low offers and not fight against 10 other bidders for what ever sh..t box came on the market in Sydney .

My wife does occasionally bring up the one we missed out on in manly . That would have gone up by around 450 by now , but it's easy to see that in retrospect .

Again in retrospect , we would have made more in Brisbane if we'd bought another load of cheapies in Logan , but we bought nicer properties with the intention of keeping them long term with minimal hassles , which is what's happening so far . Even the one OTP we bought in an upmarket block in Tenerife is making just under 6 %.

Cliff

 

Sounds like a great time to get in, also not to have all eggs in one basket.

Gotta love the bayside area, would not mind one on the hill behind Manly to live in.

 

I believe there is strong long term growth for the Brisbane freestanding housing market.

One major thing to consider and that is the affordability of the Brisbane market compared to other capital cities in Australia. Brisbane’s closest neighbor Sydney has an average income of Sydney is $88,692, Brisbane is $82,980. This show the average salary in Sydney is only 6.9% higher than Brisbane. Now compare the differences in average house price: Sydney average house price is $880,000, Brisbane is $535,000. That shows Sydney’s average house price is 64% higher than Brisbane’s, and they only get paid 6.9% more!

This affordability will cause many interstate investors to invest in Brisbane. So as long as the unemployment is low, salaries are high and yields are strong, there will be nationwide investor demand for freestanding houses in Brisbane. This will ensure sales volumes remain high and that capital growth continues.

 

Thanks for that Scott

Didn't realise the income levels were so close . Seen a few stats in the last week that have just reassured me about Brisbane .

Cliff

 

Hi Scott, I think the average house price in Sydney is ~$1mil? $880k sounds like what you'd get if you include all unit dwellings.

 

Brisbane 2028 Olympics and coming transformation:

Brisbane: Still our country cousin?

 

I'm more confident than ever about the Brisbane market. It will be a fascinating two speed market over the next five years. The unit market is going to implode and the housing market will prove to be the most steady marjor market in Australia.

My company is buying a property a day in Brisbane (sometime more). We still find deals for under $300,000 and renting for over $360pw. With these numbers you cannot go wrong.

We buy properties in other parts of Australia but no one market can compare at this point in time. This is due to a combination of good yields, tight vacancy rates and capital growth upside.

Scott O'Neill

 

Sounds like you have a good crystal ball scott

 

I'm not fully sure I'd agree with you. Oversupply in the unit market probably won't see it implode as you are saying. It will experience difficulty yes..but not carnage. I say this because there is a shift for inner city living that will continue and likely gather pace in the next few yrs. This will still result demand behind supply but not so significantly that it will cause a crash.
As for houses...as mentioned in another post, the inner and mid oo dominated ones will outperform. As will townhouses in this bracket.
Outer- it's a tough one to call..yes, they maybe cheaper, but there isn't much economic activity in outer and likely more land...gotta think that will limit cg- unless you buy itat very good prices.

 

• No offense, but I have been hearing you saying this statement over and over again in last 2 years..but lacked evidence/data to back your view.
• I understand you purchased in Carina Heights in 2014 or there about.
  
• Let's use your purchase in Carina Heights ,"an inner/mid OO dominated suburb, versus Woodridge, "an outer/cheapie suburb" for comparison to see how they performed in the past.
• If you compare the last 17 years (1999-2015) of house median, Woodridge increased 371%, Carina Heights increased 293%
• If you compared the last 2 years (2014-2015) of house median, Woodridge increased 23%, Carina Heights increased 9.9%
• If you compare the falls in the last 17 years (1999-2015), Woodridge fell 13.4%, Carina Heights fell 12.6%
  
• No matter how you slide the window in the below median houses, Woodridge, an "outer and cheapie suburb" performed better than Carina Heights..
  
• Whether Carina Heights will perform better than Woodridge in the next 1 , 5 or 17 years I do not have the crystal ball.

A comparison of JDP1's "Outer/Cheapie" Versus "Inner/Mid OO" Brisbane Suburbs...

 

Brisbane apartment building slowdown 'too late' to stop price falls

when the glut of apartments come online, combined with OTP purchasers unable to settle, there is likely only one way for rents and prices to go -> down.

Just like what happened down at the gold coast apartment scene many years ago, we could be seeing half priced units pretty soon in Brisbane and no one buying..

 

I would take into consideration tenant risk also.

For a long term hold there is benefit in buying a property that will appeal to higher socioeconomic status tenants.

What those above figures don't take into consideration is cost of lost rent due to rental arrears and tenants trashing your house.

Bad tenants can make you want to throw in the towel with property no matter what the potential profit. So definitely something to consider IMO.

 

This is exactly the sort of comparison that made me buy outer Brisbane or any cheaper area in most time frames. Percentage wise the cheaper areas do as well and certainly if you get you timing correct , better .

The one thing you didn't point out ( which is very relevant with regards to timing ) are the bigger drops that occurs in the cheap areas after the peaks compared with the " nice " areas . This IS A RECURRING PHENOMENA in these kind of areas .

The peak to trough drop from 2009 is bigger in Logan and the rise since 2009 is lower . I see that as a good thing .

They drop back more , so if you buy in the troughs you can get a bigger gain , OR , the ongoing gain in the nice areas acts a signal that the gains are going to start again so you can time you buys in the cheaper areas for either a greater percentage gain or with a greater certainty of short - medium term gains .

Back to Goodna ( OK , so we weren't talking about Goonda on this thread but .... ) the reason why we chose Goodna this cycle over Logan was that Logan had already reached its previous peak ( as you figures show ) while goodna was ( when we bought ) still below , while in previous cycles had reached similar levels to Logan .

Cliff

 

On the topic of inner vs outer I've seen a couple of cycles in Brisbane and I know people who bought different sorts of property. I know people who own in really Blue Chip areas who bought a long time ago and I know people who bought properties out on the fringes Forest Lake North Lakes out by Ipswich etc what I have seen based on my own research of those outer areas for investment purposes and from talking to those people who bought in those outer areas and also from looking at historical data analysis I see the outer areas as being more volatile and slower in gains.
I think the strategy in Brisbane and possibly anywhere really is to get as close to the CBD as you possibly can if we are talking about long run capital gains
That's just my 2 cents based on what I've seen on the ground however there's plenty of people here who have a lot of properties and have made money investing in the fringes.
In New Zealand the phrase Location Location Location applies to real estate I think here they say position position position I worry about people who pay relatively more for the house than the land as I've seen in areas out on the fringes with new or relatively new builds with 4 bedroom 3 bathroom type stuff why not buy A2 bedroom in a better location and work out some way to add a third bedroom

 

Whitecat... take some deep breaths

 

What would happen to those percentages if changed slightly in the time horizon?
Correct me if wrong, but this is what @seachange is implying - that the outer cheapies can have the %growth.. But only if you buy at the right time ie time the market... Not a bad thing in itself, I haven't seen anyone consistently get timing right asset after asset whether shares, property or something else.
Not saying good timing is a once off lucky shot...but consistency in good timing for all types and markets is unheard of.

 

JDP

I don't have any interest in getting the timing of all types of markets right.

Just the ones I decide to invest in

Cliff

 

It's interesting that a huge percentage of the growth in Woodridge occurred over just 3 Years since 1999.
2003 wow, so volitile, timing looks like its much more important than a typical middle ring suburb.

 

Yeah, I don't think it's going to be consistently that way over time.
Sometimes crap (but undervalued) suburbs have a bit of a catch up, not going to perform that way all the time.

 

• As you requested, I have included a comparison when Brisbane undergoing declining/recovery market transition (this, we would probably have to agree occurred during 2008-2015) Refer to Table 2.
• I have also included Goodna in the discussion. See Table 1.
  
• Hovering over 2008-2015, we see Woodridge increased 17%, Goodna increased 5% and Carina Heights increased 33% during this period. This is a difference of 16-28% over a 8 year when Brisbane is declining/recovering
  
• Is this 16-28% difference significant to drive our beliefs that cheapie/outer suburbs fell much harder than inner/OO suburbs in the declining>bottom>recovery market?
• On the contrary, let's look Brisbane's 8 years (2000-2007) before this , assuming the rising > boom transition market. See Table 3.
• During 2000-2007, we see Woodridge increased 303%, Goodna increased 287% and Carina Heights increased 196%. This is to say the outer/cheapie suburbs outperformed 91-107% more than inner/OO suburbs during this period

In Summary,

1. A cheapie/outer suburb outperformed approx 100% than an inner/OO suburb in a rising/ booming transition (8 years) but underperformed approx 25% in the declining/recovery transition(8 years).
2. Over a "long term investment" (last 17 years) that I have data for, a cheapie/outer suburb increased 308-371% compare to an inner/OO suburb that had increased 293%.
3. If your argument is that cheapie/outer suburb has bigger falls in a declining market then let's take a look at those as depicted in red in each Table below. Woodridge -13.4% total fall, Goodna -18.3% total fall, Carina Heights -12.6% total fall. This is to say outer/cheapie suburb fell only 0.8-5.7% more than an inner/OO suburb in a declining market.
4. You also mentioned "timing" over and over again and how these cheapie/outer suburbs a timing sensitive. However if I have purchased a cheapie/outer suburb in 1999 and have NOT kept a track of the time or slept through to today, I would've made 100% more than a inner/OO suburbs.

Table 1: Outer/Cheapie Versus Inner/OO Brisbane 1999-2015 ( 17 years)


Table 2: Outer/Cheapie Versus Inner/OO Brisbane 2008-2015 ( 8 years, declining > recovery)


Table 3: Outer/Cheapie Versus Inner/OO Brisbane 2000-2007 ( 8 years, rising > booming)