What should you do if you bought at the top of the market? | Finding investment grade locations

Are you concerned that values have dropped since you bought your last property?

Wondering how to find investment grade suburbs?

That's what we discuss in today's show.

Plus I have a very special Mindset Moment for you.

If you bought property at the top of the property market and you’re concerned about falling property values, you’ll want to hear my chat with Ahmed Imam. We’ll be talking about what you can do and whether you need to be worried about your property values falling.

Even if you didn’t buy at the top of the property market, our conversation will be of interest to property investors and homeowners who have concerns about their property market values.

I’ll also talk to Brett Warren about how to find an investment grade suburb. Some suburbs just seem to outperform the others. But are they the ones that show up on those lists of top performing suburbs? We’ll be discussing just how valuable those lists really are.

What Should You Do If You Bought at the Top of the Market? Ahmad Imam

• No one can pick the exact top or bottom
• Owners who are now realising that they bought at the top shouldn’t panic
• Buyers need to remember that property is a long-term journey
• There’s no need to check the performance of the property market frequently. Unless you’re getting ready to sell, once a year is enough
• Sydney and Melbourne are the powerhouses of economic growth in Australia. It won’t take long for the property markets to rebound in those places

Are you looking for an investment grade suburb? Brett Warren

You know…one where properties are likely to outperform and I’m not talking about hot spots, but suburbs that will outperform in the long term.

Well, they are there if you know how and where to look.

Recent property data has shown there are some very mixed results for Brisbane houses over the last 12 months.

Depend on where you find your data, the average house price in Brisbane has grown anywhere from 0.1% to around 1%.

But there are a number of suburbs that have achieved significantly higher growth than the average.

In fact, there are a number of suburbs achieving growth in the double digits.

I check to see that:

1. The local economy is providing new jobs.

A thriving local economy encourages people to move there and ensures locals have the job certainty and the money to buy or rent properties.

2. Local population is growing

Apart from more people, it’s important to have the right demographic moving to the area – people in family formation stage of their lives and people of working age rather than an aging population.

3. Local infrastructure spending

When the local council plans to improve roads, public transport options and local amenity this create more local jobs, which boosts the economy and leads to more people moving to the location.

The Usual Suspects

It’s interesting, but you will be able to identify these suburbs as they make the same list every second or third year.

They always seem to be powering ahead.

They make the list for two reasons – supply and demand.

When I say supply, it means there is less availability of land and therefore properties are in short supply.

And demand comes from a number of factors, including:

• People want to live in these suburbs – They are aspirational suburbs (as opposed to many of the cheaper suburbs where people chose to live because that’s all they can afford.
• They are close to employment hubs where more high paying jobs are being created
• These suburbs are gentrifying – people with higher incomes are moving in
• People living in these suburbs have higher wages growth than the average for the state
• There are local lifestyle precincts – another reason for attracting a gentrifying demographic
• There is easy access to public transport
• There are strong school catchments – a magnet for families

Demand does not wane for these types of locations and they are not building any more of them.

What about all those new Suburbs?

Sometimes new suburbs make the high growth list once, but they rarely make the list again.

They start out as acreages or even small farms that are acquired, subdivided and developed into smaller parcels of land – smallish sites for new homes.

Growth is these locations generally tends to be more physical growth, with towns, shops and schools, etc. rising from the ground in a short timeframe.

One day a large acreage property, 6 months later there are 100 new house and land packages.

Because there is an abundance of land still to be developed there is no shortage of land and an abundance of supply, sometimes lasting a decade or more.

These areas are generally a lot further out from the CBD and usually have inferior infrastructure and public transport and rarely have any of the investment fundamentals, leading to a lack of capital growth.

Sure, these suburbs are more affordable for young families, but the prevailing demographic in these locations tens to have lower wages growth than those living closer to the CBD, another reason these locations suffer from poor capital growth.

A Clear Winner 

For me, it is the usual suspects that I always look to invest my money.

It is the known, proven and trusted locations that will continue to be in high demand and continue to outperform the averages.

They will be able to grow your asset base faster and will have wealth producing levels of income one day.

Newer suburbs will no doubt appear to outperform from time to time, but you need to ensure that investment fundamentals are strong and avoid areas with more and more housing estates still in the pipeline.

These locations may assist with a once of equity boost, but as newer suburbs come up, prices and rents will continue to decline, and that equity will evaporate.

There are clear winners once you can interpret the data and understand the fundamentals behind it.

And remember that while location does around 80% of your property’s long-term performance, of course, you need to own the right property in that location.

Links and Resources:

Michael Yardney

Metropole Property Strategists

Ahmad Imam – Director Metropole Properties Sydney

Brett Warren – Director Metropole Properties Brisbane

Some of our favourite quotes from the show:

”What you need is the right finances to get you through the property cycle, which is what should have been set up long before you bought your property if you did it right.” –Michael Yardney

“What a neat philosophy: to never quit looking for another way to get where you’re supposed to go.” –Michael Yardney

“So, infrastructure spending is good because it actually creates local jobs, it uses local materials, but the other thing is it remains there in the long term as a legacy, so it boosts the economy and it helps people.” –Michael Yardney