Is 2021 A Good Time To Invest In Property?
2020 has been a chaotic year in financial and property markets with a lot of uncertainty. As we move into 2021 we want to ask the question is now a good time to be investing in property?
Today we talk about the past, where things are at now and where they may be going in the future. We don’t have a crystal ball
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0:00 – Introduction
0:45 – Looking at the history of the market over the last couple of years
6:40 – Where we are now
7:28 – What does the future look like?
13:14 – A framework for the future
14:42 – Finding areas of opportunity
22:48 – Has Hobart Peaked? Has Darwin Reached its Bottom
25:00 – What’s coming next
29:11 – What the government is doing
31:28 – Is 2021 a Good Time to Invest?
35:35 – Taking a Longer Term View
2020 has been a chaotic here in financial markets and in the property market with so much uncertainty happening due to the Coronavirus and the economy and everything associated with all those sorts of lockdowns. As we move into the new year as we move into 2021, I wanted to ask the question is now a good time to be investing in property. And so today, I’ve got with me, Ben Everingham, buyer’s agent from Pumped on Property, to talk through this to talk about the past, talk about where things are at now, and where things may go in the future. So hey, Ben, thanks for coming on today.
Hey, man, I love this stuff. You know, I’m such a data geek. So looking forward to sharing some of the great info we’ve both read lately.
Yeah, so things have, you know, been chaotic this year. But to start with, I want to kind of take a step back in time. And for those who haven’t been following the property market as closely, as me and Ben do over the last couple of years to kind of set you out, give you some context on what we’ve been through. And because that has an impact on where we’re going to go. And me and Ben did a video two years ago now talking about his 2019 a good time to invest in property. And so I’ll link up to that down below if you want to see some historical context in there. But at about nine minutes, I think Ben was talking about, we’re heading into the mid cycle slowdown, you know, late 2019, early 2020, we’re going to see something happen, that’s going to cause a mid cycle slowdown.
What we’re coming into over the next two years is the mid cycle slowdown and what a mid cycle slowdown point represents people feel like the whole world is going to fall on its head right now where generally stock markets will get hammered in the next two years, particularly the American one, which is run away in the last couple. And so what happens is stock markets get hammered business sentiment and, and consumer confidence declines. And we entered this point where property prices in some markets can go flat. Some markets, they’ll decline. But as someone who’s got a 15 to 20 year strategy that wants to use smart timing to buy. Yeah, far out, there’s an opportunity.
So it’s cool that you know, a couple years ago, we’re talking about this, though, and this is where we’re at now. So, you know, let’s go back, Ben, I guess, to you know, 2016 2017 and start there and walk people through it.
Sure. Do you mind if we go back to 2011? Because that was kind of the start of the next global cycle. Okay, yeah. So
well, 2008 was obviously the global financial crisis, which had an impact on markets around the world, as well as Australia, Australia handled that quite well with the stimulus packages and goes through without having a recession. And then that brings us to 2011.
You know, say 2011 kicks off. It’s when I started to invest in Sydney in the Central Coast, it was a time of like, mass fee, because it hadn’t been like a bad year, it had been like three to four really, really negative years for investors. And so the sentiment at that time at the very, very bottom was very, very low. Most people weren’t investing most people weren’t re entering stock markets, most people weren’t buying and what happened is from 2011 through to about 2019 we got this incredibly consistent bull run in stock markets around the world, particularly the European and American markets like Australia went through a period of almost like deflation really like it just if you look at the stock market now it’s just still sitting at like the the highs back then as well. Like it really hasn’t done much in 10 years. And so, you know, we go through this period, what happens during that first off of the cycle generally, and that’s called the first expansion is Sydney and Melbourne went absolutely off their head and the market surrounding them the jalama the Central Coast and Newcastle’s the woollen gongs Rose with them as people flooded out of the cities and into those markets for affordability. And if you look at the first half of a cycle, the same thing happened in the New York’s the LA, the Chicago’s, you know, the big cities in in Asia, the big cities in Europe, generally those more diversified economies do much better in the first half. And what we saw around the world is these big markets increased by 50 to 100%, on average, and then everyone went, holy hell, government stepped in started to increase interest rates. The market started to get a little bit more bubbly and bouncy. And then we moved into this part that we’re in at the moment, which is our mid cycle slowdown. So two in
Australia, property markets, Sydney and Melbourne in particular, and this is something that will come up a lot over this episode as Australia is not one market. So if you’re looking at investing, don’t just say, Oh, this is what’s going to happen in Australia, because as an investor, you’re not investing in Australia. you’re investing in one state in one city or town in one suburb in one straight in one house. You know, unless you’re someone who’s a multi million multi billion don’t invest, buying, you know, huge blocks all over the place. But for most people, single property, so Australia is not one market, it’s multiple different markets. So we saw the rise of Sydney and Melbourne up to 2017. And Melbourne was a couple of months delayed by Sydney, but both peaked around mid to late 2017 Abra, stepped in, made some changes to the lending environment made it more difficult. There was difficulty for investors difficulty for overseas investors, a bunch of stuff that happened that saw the property markets in Sydney and Melbourne, start to decline in 2017, they then declined all through 2018, there were declining in the first half of 2019, as well. So big drops, you know, anywhere from like 10 to 20%, depending on the suburbs and the areas you were looking at. And then bottom of 2019, or middle of 2019 sorry, was when we had the election, and labor looked like labour was gonna get in, they’re gonna remove negative gearing. There’s a lot of negative sentiment around the market there. But it actually happened that liberal Guardian, and then we started to see a surge in the Sydney and Melbourne market, massive jump, basically making up for the last 18 months to two years of decline in a six month period is what happened there. So that kind of happened from middle of 2019 into the start of 2020. And then obviously, anyone who lives through 2020 is going to know about the Coronavirus and what happened there. And so then we saw a decline in the market due to that from about march through to you know, June, July kind of August. And then we saw market start to pick up again, obviously, a lot of stimulus has come into play in 2020. But we’re kind of ending the year in 2020, with markets nearly higher than where they were pre Coronavirus. And definitely, pretty much all markets, all capital cities are on an upward trajectory, with the exception of you know, maybe Melbourne is lagging a bit behind because they went through more of a lockdown. But if you look at month on month, pretty much most capital cities in Australia are growing at the moment. So that’s kind of a brief history and bringing us to where we’re at, at the moment with the markets with all the stimulus with increasing consumer sentiment. So it’s a very different position than we were going into, you know, two years ago.
Completely man like, we’ll talk about that a lot today. But just you know, we’re in terms of the last seven years sentiments at its highest point, confidence in property prices and expectations for growth is solid. People like Westpac and CBA, coming out with predictions where they’re saying, Perth and Brisbane look like they’re going to do at least 20% growth in the next two years. 2021 2022 they’re saying 10% in Melbourne, 14% in Sydney. And you know, people have been sitting on the sidelines, like a lot of people have been sitting on the sidelines since almost 2017. There’s a huge amount of money. Like if you look at Commonwealth Bank, they estimate that over $100 billion in additional household savings have been accumulated this year in Australia alone, which is about 15% higher than what the long term average is sitting at. And they’re expecting that savings to end up in stock markets, property prices, the retail sector, and tourism again, which is going to be one of the ways that we start to bump ourselves through it. But the reason it’s important to note is we go through this, you know, seven, sometimes nine year period, which is the first part of the cycle. And then as Ryan said, you know, we talked about it in 2018. We go through this mid cycle event. Now, it’s important to know that these events historically, for the last 200 years in America and Europe have only lasted between nine and 18 months. Normally stock markets gets slaughtered in the first nine months. They generally go down by 38%, sometimes as much as 55%. But they do recover in the second half of the cycle. property prices are important because only certain capital cities around the world have gone crazy in the first expansion. And you know, places like Brisbane, Perth and Adelaide are actually cheaper when Cole logic looks at them than they were 10 to 14 years ago right now. There are no relation. Exactly. They’ve gone through not two things happen in property prices go up then they come down by 1520 30% like we saw in Sydney, or Newser in the GFC at all places just go dead flat for 10 years. And with inflation of two and a half percent. It’s actually like a 25% decline. But instead of happening in one year, it takes 10 years to buddy get there. You know what I mean? Yeah, and that’s happening in Perth and Brisbane and Adelaide at the moment. So we come through this mid cycle slowdown. Then we get the second expansion, which normally last according to Phil Anderson’s work, and he’s got some incredible stuff on his website. Thought that people can have a look at property share market economics. But you know, he’s got this thought process that based on his study of America and Europe, prices go up again. You know, and this is when we move into a different phase though, because the mid cycle slowdown is bad, but people sort of that wasn’t too bad. It wasn’t like a GFC. You know, confidence comes back, government starts spending a shitload of money around the world on infrastructure, we’re about to go through the biggest infrastructure boom in human history. The next thing that’s coming in the Treasury has already said it in Australia in the last month, easy money, relaxation, of credit. So they’re relaxing, all of the things they put in place in the Royal banking commission. They’re also relaxing all of the rules they put in with the Australian banks in the GFC. America already did that back in 2018, as soon as Trump got elected, rolled back all of the safety nets that Obama put in after the GFC, to protect Americans from the banks, and most importantly, men. You know, even overnight, I just read an article where appers effectively said to CBI, you no longer need a billion in cash, we’ll let you go down to 500 million in cash. That’s $500 million of credit that was created overnight that can now be lent out. And you look at the number of new mortgages being written in Australia, particularly Brisbane and Perth. They have just gone through the roof in the last two months. Well, that which has a very, very strong correlation with coming capital gains. Well, that’s it
I did a video on that talking about the correlation between new mortgage growth and property growth. So I’ll link up to that down below if people want to get into the nitty gritty of that. But I think talking about all of this kind of big cycle stuff is really important for people looking at investing in property because you need to understand that sometimes it doesn’t make what you would assume to be logical sense with the property markets, like we just went through Coronavirus, right. cities all across Australia were locked down. People weren’t able to get out of their houses, spend money go out all of this sort of stuff. So you would assume in that time, so many people lost their jobs, property markets going to go down, right? You know, the markets going to crash, we’re going to see huge reductions in everything. But there’s so many factors in play that just as normal people we might not see or might not realize everything from like lowering interest rates, making it easier for people to service larger loans, banks willing to lend more money government’s putting in stimulus to help people get by but then sometimes they overstimulate and people have more money than they would have had otherwise, which we saw with the job Kiba and the job seeker programs and things that happen there around Coronavirus. So, just because like we went through this recessionary period of the Coronavirus, it doesn’t necessarily call correlate to property prices, there’s so much more you need to take into account. And that’s why me and Ben always say we don’t have a crystal ball. We don’t know what’s going to happen. Because it’s not like okay, let’s say we’re reaching the second off the soco, the economy’s going up, you know, it’s not perfectly correlated to property prices, there’s just so many factors to take into account.
It’s an incredible thing, like, you know, field calls it remembering the past, you know, we have no idea how to predict the future, but there’s hundreds of years worth of data in Europe, America and Australia now, and you can use that to make certain decisions. So what I went and did is, you know, generally we get this five year period six year period up, he’s saying about 2025 2026 will be the next up then we get ourselves into a bigger pickle and we’re in at the moment and you know, the market comes back which is an incredible buying opportunity for anyone that’s bought in this market they know that
and that’s it you know, framework that we’re working with, right, which is we’ve been through the mid cycle slowdown, we now look like we’re towards the bottom if we haven’t already bottomed out already and on this, like upward trajectory for the next you know, five years, six years, obviously we’re going to keep track of the data over that time period. You never know like a bunch of things can change over that time period. But that’s kind of I guess the framework that we work within was this stuff from Phil Anderson that then we take other data sources and we say okay, does this line up you know, we can we adjust this etc but heading out towards you know, potentially in for the next recession might be a much bigger one and that might affect property prices a lot more in five to six years time.
So what I do is I go like he said Australia is in a market. I go Where’s done really well in the first half. And can I see that market doubling again, and I go, well, Sydney, Melbourne have done well, but without the self managed Superfund money without the big international investors and without the international students moving in Canada, Australians earning 200 grand a year per household in Sydney. Support properties that are worth 2,000,010 years time? Absolutely not. But will the Australian Government let a hell of a lot of people in in the next three years? Let all the students back in like at one point there was a million Chinese students in Australia? Will they let the self managed super money and the international money back to speculate on Australia to say that we’re trying to get the economy going in? Hell yeah. So, Sydney’s really expensive if you’re an Australian, and absolutely dirt cheap for the safety if you’re an international investor with a lot of money, and people underestimate it. Like I’ve got clients at the moment in Hong Kong, where two people this year in America worked with Europeans. Sydney is like 25% of the price compared to most of these global cities, because they cities never stopped the international speculation. And therefore, Russian Chinese American money can come in, and if that happens, Sydney is cheap. If it doesn’t happen, then you know, we we know that there’ll be a period of deflation because locals can’t afford it. But, you know, I then go well, Sydney and Melbourne don’t make sense for me, because I’m not going to go spend one and a half mil to get 800 bucks a week in rent.
Well, that’s it, I’m not going here that Sydney and Melbourne won’t grow in the next year, or in the next five years, they could definitely grow and they could actually double but it’s more Sydney and Melbourne went through massive growth cycles from 2011 to 2017. They’re now back to nearly at the all time highs of what they were in 2017. So they’re kind of already been through really strong growth trajectories over the last 10 years or so. Can they continue that or let’s look at other markets, which we’re going to do right now talking about Brisbane talking about Perth, which haven’t been through extremely strong growth cycles, and may offer lower risks or may offer a potential for a higher growth trajectory.
You know, when I looked at the last 60 years of data, and overlaid the cycle, and in the five year, we know that we’re coming into the all previous cycles, where Sydney and Melbourne both did over 100% growth in the next five years. There are other cycles where it only did 30%. But looking at Brisbane and Perth, they didn’t have a performance under 80% in the coming five years. So for me, as an investor who’s looking for capital growth and cash flow medium to long term. Again, it’s not that Sydney is not going to work or Melbourne is not going to work. I’m sure they will, it’s more, I just don’t want to put one and a half million dollars in there when I can put 500 k into Perth or or or Brisbane. And so when I go Perth versus Brisbane, I look at the vacancy rates, you know, the suburbs in both cities that you want to buy and have vacancy rates below 1%, which is a very, very strong indicator of what’s to come. Already in both cities, rents are moving in both cities, there’s massive amounts of people moving in at the moment to Perth, it’s being driven by the mining companies, companies recruiting people in Brisbane. It’s been driven by Sydney and Melbourne people that are looking for a lifestyle and work from home change. And then I go well for me Brisbane parts of the city allow me to do houses and secondary home so two incomes. And then within Brisbane, there’s parts of the same a day that have already doubled in the last 10 years. And then the crazy thing about Brizzy is there’s suburbs next to that suburb that have only gone up by 20% in the same time that represent ridiculously good long term value.
Yeah, I think it’s really interesting. Like people underwrite Perth as a city, especially Australians on the East Coast who have never made it over there. They just think Perth, this little dirt town or something across the way the country but it’s nearly as big as Brisbane. So I’m just looking at populations here. They’re saying, Oh, this was back in 2016. But Brisbane was about 2.3 million and Perth was 1.98 are like, you know, around 2 million. So they’re actually quite comparable in terms of size, which you definitely wouldn’t expect with those cities. But how? Again, it shows those shows not one market is that Perth went through a massive boom and then has been declining for what 5678 Now
Paul logic said it’s cheaper to buy in Perth now when you take out inflation than it was 14 years ago. Yeah, it’s it’s gone through like almost a 35% decline from peak to where it is now.
Yeah. And then Brisbane over that time period didn’t really have a big decline at any point, but just kind of stays stagnant or just a really slight sort of growth curve. And as Ben was saying, as you get more into the nitty gritty of these particular cities and suburbs, there’s areas within Brisbane that have you know, doubled or have gone up extremely high in value. And there’s other areas sometimes quite close by a couple of suburbs over that haven’t really seen any growth at all or some suburbs that have seen negative growth. So I’m not just saying okay, Brisbane may be poised for growth is not enough as an investment. All you need to say, Okay, what areas in Brisbane have grown, what looks like they have potential over the next year of next five years. Then also Ben is talking about his strategy, which is capital growth and cash flow, just something that he wants in his portfolio. So you’ve got to overlay your own strategy on top of this as well and say, Okay, what city what area can I invest in to get what I want. And so if you want cash flow and you want to build a granny flat, you need to look at certain parts of Brisbane and certain councils where you can actually do that, then find the suburbs within that. So just looking at the cities never enough, definitely never enough for us. It’s always getting down to the suburb level.
It’s always getting down to the street level as well. Completely man, like if I go, you know, because this is what I’m trying to help people do. Then I go, okay, Perth and Brisbane, both look good. But then I look at the Australian Bureau of Statistics and they say that 75 to 80% of Australia’s growth in terms of population incomes and jobs in the next 20 years will come in Sydney, Melbourne, southeast Queensland. Perth is going to be about eight to 12% of that, and the rest of the country has got to pick it that 10% that’s left over. So for me, I go. When I look at the Coronavirus infrastructure bailout plan, and I go, Queensland is receiving more infrastructure per capita, then Victoria, then Perth by far as well as New South Wales and I go Well, for me, the infrastructure is going there. The people are moving there. The places being dead flat, I can get two incomes, it’s coming off a ridiculously low base. The average household income in Brisbane is higher than Melbourne now. Even though the prices are 50% cheaper. There’s beachside suburbs in Brisbane, if I look at them in comparison to Perth, Sydney or Melbourne, these beachside suburbs would be 25 to 30 cents in the dollar in comparison to the same distance from the CBD in those other cities. And for me, I go, Well, you know, I’m that opportunistic investor that will look at the entire market and then reduce it down. And then even in Brisbane, there’s really shitty pockets, there’s really good pockets, and it’s not even good enough to just go Brisbane, which part of the city north south east west, which as you said suburb within that pocket, the other day, we opened up a new part of the city looked at 55 suburbs, reduce it down to 15. And within those 15 there’s winners and losers as well. It’s like to do this really well. And to get above average long term returns from a cash flow and a growth perspective. Like it’s just important to understand the big cycle but then as Ryan said, all those micro details as well.
Yeah. And so what else are we like Hobart is one that continues to baffle me. Hobart has gone through a massive growth cycle have grown continue to grow. Even when Sydney and Melbourne went through their decline. Hobart just looked like it was nonstop still growing at the moment. And so for me, I it this is the same sort of bafflement that I had in Sydney back in like, 2016 2015, where I’m just like, Can this continue to go up? And usually I’m a couple of years ahead, where I’m just like, this is getting ridiculous. And I feel like Hobart, for me, at least, is kind of at that point round. Like, how much can this? Let’s face it, like it’s a smaller city? How much can this continue to grow and continue to go up that many people migrating to Hobart only has just 2016 was 206,000 people, which is, you know, pretty tiny. So what what is going
on with more than Brisbane and Perth? Yeah, I get really excited.
And as well, like Darwin has been through a massive decline as well, even bigger decline than Perth went through, that’s on an upward trajectory at the moment, quite a steep one. But again, Darwin such a small city, this is hanging around 132,000 in 2016, the Darwin’s a really tricky one to look at. Because the population so small, the numbers are so small, it can fluctuate just based on the volume of the market on that month, and what types of properties sold in that month. So it’s always really hard to look at Darwin’s daughter and get any prediction on that one. But because it’s so small, I guess less people are speculating on Darwin.
You know, for me, I’m, I’m not an I’m not a gambler. Like that’s what I’ve realized as an investor, if these IBS says that Brisbane is going to be 5 million people, if 75% of Australia’s population growth is going to be within 2000 kilometers of each other, if that’s where the income earners, the jobs, the major corporations, if they’re the only three cities in Australia that have been put on the International Monetary fund’s long term global cities to watch over the next 50 years. You know, the other things that I look for but like what’s coming next to give people an idea is when you’ve got great sentiment, when you’ve got really easy to access finance, which we’ll see over the next five years, really low finance, really like motivated people to change their lives. Because a lot of people have just gone through this year and gone back these like, I don’t want to be here anymore. I don’t want to not have these choices in the future myself included on like, next time we go through this, I don’t want to be stressing about it. You know, and then you look at the public infrastructure spending. So one of the best things that I’ve ever subscribed to is the Commonwealth bank’s economic issues update. It’s very, very difficult to get to on this, you know, people, but they’re talking about what’s in the pipeline, $116 billion of infrastructure projects planned for 2021 2021 financial year alone, which is up 36 or $31 billion on the year before. Like that is important to note, because the way that we get out of this situation is lavish government spending on infrastructure, the next stage of the cycle, leading to a construction boom, a job boom, Commonwealth Bank says that unemployment by the end of 2022, we’ll be back at 5%. Now, something that you said before man is so important for people to realize, when you think about the worst economic event in history, what what automatically comes to your mind, like
the Great Depression.
So when you look at the Great Depression, which Phil Anderson and CBI did this year for me, and everyone else that subscribes to their stuff. In the Great Depression, you would have thought there would be blood on the streets, everyone was getting food stamps, everyone was freaking out, everyone was living in a really poor position. But when you break down the number inside that 20% unemployment, the same industries, retail, hospitality, tourism will happen. If you look at the number of people that were unemployed, that had tertiary education of a TAFE, a trade or union degree. In the Great Depression, less than 7% of those people in that demographic were unemployed. If you look at the unemployment rate in total, the reason that was so high is that people under 25, about 25% of those people are unemployed at that time. If you look at Coronavirus now, it’s a, it’s a thing that 100% of people in Australia think is affected them economically, that for most people, in fact, over 85% of people, it’s massively improve their financial position, because their interest rates are lower, their savings are higher. They’ve got secure work. If you look at this market of one point, I thought that cooking the books so bad that unemployment was about 20%. But if you look at the people of education, only six and a half percent of them were unemployed. So it’s like, in all of these markets, you just cannot I’ve just learned and we talked about in the previous video, you just cannot buy the hype in the media, you’ve got a look into the data and say what’s really going on whatever. And she’s been amazing.
Like this is kind of the first recession that I’ve lived through. Because 2008, Australia didn’t have a recession, I was kind of you know, had recently been out of high school was only early into my career at that time anyway, but also talking to my mom about the recession in the early 1990s. What did that feel like? What was that like? And really, she didn’t like know much about it, or have much memory of it. Interest rates were high at the time, but she had a job and she had a good paying job. So life was just kind of normal. And that’s something that I saw through this recession, as well. Obviously, our lives change because of lockdown and everything like that. But for a lot of people, their financial situation stayed the same or stayed improved. And sometimes we can get so scared by the media, and by the figures that are put out of high unemployment, all of this sort of stuff, and not realize that even at 10% or even 20% unemployment means that 80% of people may have been uninfected or maybe growing at that point in time.
It’s incredible man, like, you know, something that I think I would want to know as an investor that wasn’t following all of this stuff is the government has done everything they can do to get us out of this and globally, they’ve committed to doing by any means necessary, get the global economy out of it. So helicopter money, reducing interest rates, government spending, bailouts in certain industries, printing as much money as they want to buying a shitload of 10 year bonds buying a shitload of two year bonds. There’s just everything they could possibly do, except taxing the rich has been done at this stage of the cycle. And I don’t think that’s going to happen. And so if you can, if people can learn to differentiate what is a mid cycle slowdown, and that is a time when the government will get you out of it because they can be Government went into this position really, really well could borrow money and could bail us out. But when we get to the next one, government’s going to be in $800 billion worth of debt. At some point, they have to let the speculators blade, and they have to let some of the banks play, they cannot bail everyone out at that time, because the money globally just dries up. And so it’s important now to, for those people that can that are in a really safe position, go get great financial advice, go get great accounting advice, find a good buyer’s agent, or whatever your thing is to do. And then to slowly and safely watch the markets, find that sweet spot, get a couple of good assets under their belt. And if not, that’s completely okay, as well. And then recognize that at some point in the next four to five years, you’re going to have to start thinking like we were talking about in 2018 and 19, getting in a safe position, reducing your interest rates, getting a strong buffer in place to carry you through something that’s going to be a lot more severe than this. But those timeframes vary like Phil and Fred, say 2026 is the top, you know, 2028 might be a crash, but it’s like, those dates can vary by years. So people have to take responsibility for their learning. You know, follow those guys and see what they’re saying leading up to it and watching things as they change in happen.
Yeah, and so I think looking at 2021, is it a good time to invest in property, obviously, it depends on you and your situation where you’re looking to invest what you want to get out of it, definitely the sentiment is a lot higher, and the growth predictions from all the major people who, you know, collect the data and things like core logic micro McKusick, you know, CBA, and stuffing, stuff like that the gross predictions there are a lot higher than we were looking at back in 2018. So sentiment there is really good. But again, we would say to you is that you need to do your own research, it doesn’t mean that is buying anything anywhere is going to be good. And we would never ever say that about a market because you need to know, you need to have a plan for yourself, you need to have a property investment strategy for yourself going into this market. And know you know where each city is in the cycle, where the suburbs are in their cycle as well and how that lines up with your strategy. And where you want to get to as well.
You know, Phil Anderson just said in his latest update that we’re now past the mid cycle slowdown in his mind, and that 2021 will be the best year to invest in the last decade. So I’ve got no frickin idea. I’m so skeptical of everything he says that I say that everyone says, you know, always safety first, always managing cash flow risk debt, always having great advisors around you to protect yourself from your blind spots. But as an individual, I’m super excited, bro. Like, I actually haven’t been this excited about the financial markets in a long time, it’s gonna take years for the average person to feel like this. I honestly don’t think until 2023 to 2025 is when it will really kick off. But for smart people that are in good financial positions that want to take calculated risk, packets can be a good couple years, you’re not in any fee, if you’re a buyer at the bottom of cycle guy like I am in Perth or Brisbane for like good buying,
you know, well, that’s why I’m I’m getting to the point where I’m like, Okay, I need to save this deposit so that I can get into the market and not miss it. But I’m also aware that markets go in cycles, and there’s always going to be another around the corner. Or even if I missed one year of growth, it’s not all going to happen in one year. It’s not like Bitcoin, where it’s just gonna, you know, all the way in one year go up. And so you know, there’s, there’s time to that. And also, I love my business, I love my job, I’ve got a long term strategy that I want to employ. And so yeah, I think market timing and videos like this, and discussions like this are really important, but it’s just one piece of the investment puzzle. And one piece of the strategy, it’s not the only thing it’s not like you have to buy at the exact right time to make my property. And because I know you have, you know, you’ve made your fair share of mistakes, then as a buyer
so much like, you know, timing is one part of it, but all of the Great Investors said it’s time in the market, it’s not timing it. You know, these are really spit the specific things that we talk about the people that just love this stuff like us, but the reality is if you had a board in Sydney in 2011 or 2013 you’d still be sitting on an incredible return right now. So it’s just not getting caught up with the hype not getting caught up with the fear of missing out and just like Ron said making a really strong one step at a time as opposed to like, feeling like you’re missing out like Bitcoin people were or feeling like you’re missing out like people will feel intense. 2025 and, you know, just being aware that like likely said before, like in this market, the best time to buy was at the height of the fear. In the future, the best time to sell or to be conservative will be when everyone in Australia is talking about a property in five years time and everyone’s buying and everyone’s excited and let those people drive your prices up. But, you know, they have this strategic times to not get caught up with the hot
Yeah, well, that’s like you’d be bought in Sydney, or Melbourne, at the height of it in 2017. But even it’s really interesting to look at the longer term view as well, because me and Ben will often say, like, people also go down the coast and one of your mates was asking, you know, what’s, what’s the market going to do next year and your line is perfect is like, I don’t know what’s going to happen in the next one to two years. But when I take a longer term view of 15 years, 30 years, 50 years, do I think that Sydney, Melbourne, Brisbane, Perth are going to be cheaper in 15 3050 years time than they are today? Do I think rents are going to be lower than they are today? Once you take that longer term view with your strategy, you really start to say, okay, yes, I want to maximize my timing. And if we’re reaching the bottom of the market, and might be on a growth trajectory, that can lower my risk to get into the market might be able to get some capital growth, if things work out, that I can leverage against to grow my portfolio, all that stuff’s really good. But it’s like, it’s more of a long term view, if you’re investing for the long term investing for financial freedom for choices in your life. Ultimately, that’s what matters is taking the long term view and my long term view of the world, my long term view of Australia is that long term, the world’s going to become more prosperous, we’re going to become richer, Australia is going to become there’s going to be larger populations, more people want to live here, the quality of living is going to go up incomes are going to go up all of that sort of stuff over the long term. So while we talked very granular about the next year, in this video, I do want to outline that people should be thinking about the long term when they’re investing. You
know, I 100% agree, Bro, I don’t even think anything less than 15 years as an investor now, and the funny thing is off camera you and I laugh. Like since 2017, I just don’t even look at Capital Gains as a part of my investment criteria anymore. Like, I know that I’ll get it if I buy in Sydney, Melbourne or Brisbane long term. But what I’m most interested in is high quality assets in great suburbs with potential, but most importantly, incredible cash flow that produces a passive income that I can own outright in the future and not stress out on like the capital gains will come but you can’t, you can’t eat them. But I remember when I first got into this stuff 10 years ago, as an investor, every year, I’d be like, Look getting valuations and I’d be going a car made 200 grand a year paper money this year, and then a shit you would come through the market and you’d lost 100 grand and it’s like, it’s just such a shallow game to chase short term money. If you can, like level up focus on what you really want and who you want to be in 15 years, and then design a really simple strategy, like the two properties to financial freedom, or three properties to financial freedom that’ll get you there with that 60 to 150 grand a year of income year after, then everything that happens in between is irrelevant. Like I just don’t care if it goes up or down. Because looking at enough history, it will it 100% bounces but long term, I think Sydney’s done 190% in the last 20 years. brisbanes done 170% put, nobody’s done like 215% growth in the last 20 years. Like, if I get a quarter to half of that. I’ll be stoked, you know, and then and then cashflow on top of that for life. It’s just, you know, it’s all coming for people that are patient.
Well, that’s here with the two property to financial freedom strategy, which I’ll link up to the video you and I did on that down below, which is it’s a buy in a high quality high growth area. So ideally, you get that growth, but you don’t actually need the growth to be successful. So you’ve got the cash flow from the two incomes from the one property by building a granny flat on it or a tiny home on it or doing dual occupancy sort of situation is that the cash flow from that and the people paying the rent, pay off your mortgage. And so eventually you own that property outright over time. And then as the market goes through its ups and downs, sure your property might go up in value or down in value over that time. But if you own it outright, Are you stressed about Oh, if I have to sell, I’m going to lose money. Or if I have to sell I’m not gonna be able to pay my bank loan back like you don’t have to worry about that sort of stuff, especially if you’re living off the rental income of the property. If the property market drops by 20%. Your house is now worth 20% less than what it was but you still getting the same rent or maybe a little bit less per week and it’s paying for your life and you got multiple ways Those, it’s like, Where is the stress in that, like, it’s not that big of a deal. Once you have that strategy in place, once you’ve got that longer term plan in place, and you’ve also had the time to see it through and get yourself in a position, and I was talking to a mortgage broker just yesterday, actually, and he was saying, banks are now offering discounts for people in a low risk position. So if you’ve got, like 60%, or 50%, loan to value ratio or lower, you can actually get a better interest rate on your home loan than someone who’s at 80% or 90%, LVR. So it’s like, you know, if markets go up and your loan to value ratio improves, then your interest rate could improve, which could help you pay off the property faster, and you kind of on that upward cycle over time.
And the reason the banks start doing this stuff now, man, because they understand this stuff, is it makes their balance sheets look bigger. So as people want to start speculating, in three years, they’ve got 20% of their loans sitting in an LVR, below 50%, which means when they want to start speculating and writing loans at 95, or 97%, which they will, they will, at that time, just, you know, have a balance sheet that looks safe, and takes after his boxes, but then we’ll come into a correction and people start defaulting. And it’s like, it’s just, it’s just a beautiful thing. Like when you understand the history here, it’s just a series of events that happen at different times. But there’s like a series of things. And the to to look out for is massive amounts of infrastructure, followed by, you know, really, really, really easy credit to get. And those two things on top of really low interest rates and good sentiment and capital gains coming short term and the stock market doing well, is just a fire that once turned on can only start with like the opposite. You know what I mean?
Yeah, so obviously, we have a pretty positive view on where the markets going to go. But I also want to stress that we don’t have a crystal ball. I don’t know, we don’t, we don’t know that it’s gonna grow in 2021. We don’t know what’s going to happen there. We’re just trying to look at the data and look at the history and try and speculate and to say, okay, where is this going to go. And we still definitely advocate for a safer sort of investment strategy, not a high risk strategy, either. So if you’re someone out there, and you’re like, Okay, I think I want to get into the market, I want to use this opportunity. And it’s time to start investing, but you need a little bit of guidance, you need a little bit of help, then Ben and the team over Pumped on Property, have a free strategy sessions here. So you can get on the phone to them, talk about where you’re at, where you want to be where the markets are at the moment. And they can help you out there. So if you go to onproperty com.au, forward slash strategy, you can learn more about those strategy sessions over there and booking a time that suits you. They are booked out, well in advance. They’re very popular those. So check it out, see what’s available. But yeah, go to onproperty. com. au for strategy to check that out. And always do your own research as well and have a good strategy yourself before you go out and invest. Don’t just listen to us and think we were right, because we don’t even think we’re right now,
I’ve got no idea but I am a collector of information. And so the people watching that and you know, good luck collecting that info and hopefully setting your family up long term.
Yeah, so we wish you all the best out there. I’m going to link up to a video me and Ben did talking about our biggest learnings of last year both financially and property related as well as personally. So go ahead and check out those videos. Otherwise until next time, stay positive