Expert Bust #5 - No need to buy near CBD

I thought I'd try to replicate some prior research done on correlating distance to the CBD vs. capital growth. Here's one from the RBA and the Real Estate institute of Australia...


It shows that the gap widened between inner ring and outer ring prices from 2006 to 2014. The conclusion many drew from this was that inner rings outperform. But I replicated the chart for the 8 years prior: 1998 to 2006...



It shows the opposite happened for Sydney, Melbourne and Perth. And there was no difference for Adelaide.

There's more evidence to suggest CBD proximity is over-rated in the full article. It's topic #5 in the expert-busting series on the Select Residential Property website.

 

People prefer to invest where they are comfortable. My personal journey is that my entire portfolio are only made up of properties traditionally classified as "outer" suburbs. For instance I hold properties in Bella Vista, Baulkham Hills, Castle Hill & Winston Hills. ALL of these hills suburbs were considered in the boondocks for decades. Literally not a single person wanted to live here and every person was advising me why are you buying in outer western Sydney you'll never make a single cent. These are all 35km+ from the CBD easily. Some suburbs in the Hills are pushing 40km+ and selling for $2M+.

Well well well...................look at it now. $2M+ per property in the hills area and every dick and harry wants to live in those suburbs.

This is the EXACT same thing happening to me for a second time around in areas around St Marys/Colyton/Tregear/Willmot/Mt Druitt/Lethridge Park etc....but this time with MASSIVE government money and private investment money pouring into the area.

I absolutely love investing away from the CBD and its where I made my fortune and will make more around St Marys in the next decade. I'm a big advocate for investing in the Suburbs and I'm a great example of what can be achieved by doing so.

 

Lower cost, higher portfolio liquidity, higher cashflow, CG friendly on the way out....a great low risk approach and highly under rated strategy IMO...the only reason it isn't popular is that it isn't glamorous

 

Being glamorous is very very very low on my scale. All I care is about making $$$ long term.

Seems to be working out brilliantly.

 

I'm personally based in Melbourne so I'm not really familiar with any of the mentioned suburbs. Is someone who lives in Sydney able to describe what changed for these suburbs to increase so much?
I am assuming people initially didn't want to live there because it was surrounded by barren land and lack of infrastructure?

 

The most basic answer is the new metro goes to the hills district with lots of development in the area resulting.
Where he refers to suburbs being second time round is due to the new western sydney airport, Others can chime in with a more detailed analysis but you are correct on barren land and lack of infrastructure being part of those areas previously.

 

To be honest with you the boom in the hills area was already many years into the making long long before the metro in Norwest even began. Even before the M7/M2 upgrades many moons ago houses in the hills area already were selling for $1M plus and IF I am brutally honest to get from my home currently in Castle Hill its still a pain in the ass. The metro isn't even near Castle Hill in terms of walking distance and I still have to drive everywhere.

There has been infrastructure upgrades everywhere over 10-15+ years which all add up don't get me wrong but I just think initially the Hills started to climb simply due to price point. It was low cost entry point before in the outer suburbs. Thought of by many as where all the blue collar working class could only afford with no chance of improvement/gentrification or capital growth. Now its viewed as prestigious. LOL.

Once more and more families started moving in the gentrification begins and with that comes upgrades to shops, roads, more cafes, more woollies and coles, more car dealerships, JB HIFIs, etc....better Schools with Baulkham hills high being top 2 or 3 high schools in the entire of Sydney.

Now, where I refer to the second time around of this with areas like St Marys/Colyton/Tregear/Willmot/Mt Druitt/Lethridge Park etc.....there is MUCH MUCH more money going into the area and in a much shorter time period than the Hills area ever had.

NONE of the Hills suburbs are a Major transport hubs. NONE of them. On the other hand St Marys is going to be one of the biggest transport hubs in Sydney. It will connect to the main train line, it will connect to the Metro line, it connects literally 5 mins to the M4 and M7 which is the main route back to the CBD and Liverpool and is also 5 minutes to The Great Western Hwy. Not to mention St Marys is close to Penrith, Blacktown and Parramatta. 3 of the biggest mini CBDs in Sydney outside of Sydney City itself. Parramatta will be Sydney's biggest CBD soon anyway.

Now, there are multi-billion dollar government refresh happening already in St Marys/Mt Druitt and hundreds of millions of dollars in private investment going on in terms of units and shops. Just by walking on Queen St last weekend compared to when I invested in St Marys its already night and day difference. I cant wait until what I see in 2025.

The Hills never had this much government development going on in such a short time and look how much that area changed and rose in value. I'm willing to gamble my entire net worth on the development of the St Marys/Colyton/Tregear/Willmot/Mt Druitt/Lethridge Park etc etc...areas I'm so confident in it.

I just laugh at guys buying $1M+ investments where the yield is so low and the opportunity of gain is small relative to whats happening around those areas when you can invest in greater sydney where all the money is currently going. If your a serious investor and cant see the writing on the wall for western Sydney I think you should really open your eyes.

 

There’s no land. You have to drive all the way out to the fringes of the Hills district to see open fields.

I remember not having to drive far from the Melbourne CBD and I was already seeing cows and sheep. Wtf. It surprised me as I always thought Melbourne was as dense as Sydney.

Brisbane is the same.

That’s why I’d be cautious about applying Sydney’s learnings to other cities.

Fundamentally lack of supply of land trumps everything.

 

That's now. Not when I started investing. I could see 1000s of cows and sheep and horses on acres and acres of land. The entire hills area was farm land before.

Things change quite quickly from acres of land to no land.

 

I am referring to the hills district though.

 

Do you think units in St Mary's will also provide good return or will it be just confined to houses?

 

Depends on how long your looking at. Eventually units will benefit but if your trying to get any significant capital growth out there you want to be buying land right now (i.e) 600sqw with a run down house or something that needs reno. That way in 2025 and beyond you can potentially knock down that house and build at least a duplex turning 1 property into 2. If you can find 700+ sqm and depending on how the land lays you may be even able to put on 2 duplex's. That will turn 1 house into 4 houses potentially and by that time hopefully each house is also $1M plus there as well which is a very very realistic number.

I'm actively buying in all those suburb's there now as well. My serviceability is kind of limited due to my large portfolio in Brisbane as well but I'm trying to get another $1.5M+ loan from a bank or from any lender to be honest. Then I will buy 2 properties out that way as soon as I can.

Not sure you been paying attention but every damn house out there is also selling within a week now and for higher than list price. Open homes have 30+ ppl deep looking at each house. The news is well and truly out about those areas so everyone is jumping on the band wagon. They all know the potential out there.

 

This maybe a good buy. Might drop by this Saturday on the open home. I think this will sell very close to $600k in todays climate but it will be interesting to see. I think I bought a house off this guy 10 years ago. Hahahaha

https://www.realestate.com.au/property-house-nsw-north+st+marys-134708202

 

Thunder, I appreciate your feedback and agree with most of your opinions.

But please stop hijacking thread after thread away from the OPs topic while I’m still confused with what OPs trying to imply here. Near the CBD, good or bad?? Title and charts conflicting...

 

Highjacking? Ops thread is saying there is no need to invest in proximity of the CBD when there is equivalent or better investment outside of the CBD. Whats not to understand about that? I'm providing my input on how I've made money investing OUTSIDE of the CBD areas and very successful at doing so and sharing my knowledge on where to invest now.

I would say that is very very relevant to this thread. The first post from the Op is quite clear

 

The chart for 2014 compared to 2006 shows otherwise, look carefully.

Not sure if this is applicable in Australia due to different lifestyle... In China, Shenzhen city Centre is around 20 k per sqm. While 50-60 kms North in Huizhou price is as low as 100 per sqm. In 1990, the city Centre worth not more than 10x. Both flat lands.

 

Granted, China is even more off topic...

 

Anyway, I believe scarcity will continue to play a big part in CG. Especially inner city. Always does around the world.

 

People often live within commuting distance to work. A lot of people work in the CBD of capital cities. There must be a maximum commuting distance which would be a factor for many when buying. Work from home may as well go a long way from CBD

 

Inner and outer rings might not be the point. Maybe it is more to do with amenity and transport links. Outer ring suburbs with great amenity transport schools etc. might well do bettter than innner ring with less