CoreLogic stated in their February update that inflation has outperformed Brisbane property growth over the last 10 years. Does this mean that Brisbane is technically cheaper than it was 10 years ago?
0:00 – Introduction
0:35 – Over the last 10 years inflation has outperformed Brisbane average house growth
1:48 – What exactly is inflation?
3:16 – Brisbane looks affordable at the moment
6:00 – If Brisbane hasn’t grown how likely is it to go backwards?
6:43 – Brisbane long term growth rates
8:36 – Is Brisbane in the same “Bubble” as Sydney and Melbourne?
13:13 – This is another piece of information to consider when looking at buying
13:56 – Minimise your risk of downside with the right strategy
15:42 – Taking advantage of sentiment to buy at the bottom
18:52 – It about you making an informed decision about how you want to invest
19:41 – If you want to invest but need help do this
The Mid Cycle Slowdown – https://www.youtube.com/watch?v=Ncqw2dhqw3U
Looking at the annual growth of Brisbane over the last 10 years versus the annual inflation rate. Kind of suggest that Brisbane is actually cheaper now than it was 10 years ago when you take inflation into account, which is a crazy, crazy thought given. We talk about how property doubles every seven to 10 years or people have talked about that. So today I haven’t been Everingham from pumped on property on the line to talk more about this idea of how affordable Brisbane is right now compared to Sydney and Melbourne. Hi Ben. How’s it going?
Yeah, good man. How you doing?
Yeah, good. So this idea you kind of mentioned in passing in a previous video that we did that I wanted to just elaborate on now and it’s the fact that over the last 10 years, Brisbane hasn’t seen a lot of growth and inflation has actually probably outperformed the growth of Brisbane market.
Good as a whole. Yes. I was listening to Tim lawless from coal logics monthly housing update yesterday in Australia and there was just this little line in it, which is almost like a throwaway. Um, you know, Tim was talking about how expensive Sydney and Melbourne are right now and how they’re declining in value and you know, everyone knows that. And he was, he just, he talked about Brisbane and he said the average annual growth rate in Brisbane over the last 10 years has been 2.2% per annum, which is shocking. Now, suburbs in Brisbane have done zero other suburbs in Brisbane over the same period. I’ve done five or 6%. Remember we’re talking averages here, but he then went on to say that when you factor in the inflation rate over the same period of time, Brisbane is effectively champion to buy in 2019 then it was in 2008 that’s pretty insane when you think about it. Yeah.
And so for those of you who don’t understand what inflation is, I’ll just kind of give a quick outline of that. So inflation is actually the devaluing of money. So over time, bit money becomes less valuable. So inflation, oh, how would you, how would you explain it, Ben?
This is why people can’t save their way to financial freedom because it’s fucked as it is. Money actually declines in value over time. You know, we can all think about our grandma who used to earn $100 a week to do the same job today, she’ll be earning 800 bucks, awaken in, you know, 40 years time, the same job. We paid $2,000 a week. So yes,
placed on the show. We all have grandparents or parents who talk about when they were kids, they could go to the store and for one or two pennies, they go by however many lollies or an ice cream for 5 cents. I remember when I was a kid buying paddle pops are about 50 cents
and then my dad talking about those same paddle pops being worth 5 cents and now I’m paying three bucks for them with my kids. Yeah.
So that’s overtime money becomes less value. So things increase in how much they cost from a perspective. But that’s mainly because money and cash is actually losing its value over time. So inflation is the rate at which it does that. So when you’re talking about a two and a half percent inflation rate, it means that money has lost two and a half percent of its value over the course of that year.
I’m not sure what the inflation rate was in Australia over the last 10 years. I don’t have that number, but let’s just pretend it was 2.5% per year. So the value of money growing by 2.5% per year where the value of houses in Brisbane only grew by 2.2% so it’s just an interesting way of looking at the current market. And then he went on to say that, you know, Brisbane looks extremely foldable. It’s at the stage of the site where it has been flat for quite a while. Um, you know, there’s a good chance that over the next 12 to 18 months it will still remain that way just because of sentiment Australia wide. But with the population growth, infrastructure growth, the increases in wages, the return of mining mining is going to come off in a big way, I believe in the next four years.
Again, it’s going to be Queensland. And Perth that really get the benefit of that. It’s just, it’s kind of really exciting to me to have this perfect little storm lining up, particularly in an election year and a year where people don’t feel good because prices in Sydney and Melbourne are going backwards. Like I’ve been saying this now and I want it recorded that, you know, if you’re not into Brisbane in the next two years, you are going to miss the bottom of this opportunity. You know, it doesn’t mean that if you didn’t buy in Sydney in 2008 and you bought in 2012 that you are any worse off. Um, but you miss that hundred thousand dollars that everyone else forgets about. That was easy money to be made at the start of a new cycle.
And so we also adjusted a video on the mid cycle, slow down, which I will link up down below as well, where we talk about how the economic cycles and how Brisbane kind of fits into that and tends to grow better after the mid cycle, slow down and how that may happen again. Obviously we don’t have a crystal ball, but yeah, just a quick video today just because this was just such an interesting fact that you’re not going to hear anyone else talk about, you’re not going to hear from another source because we have seen Sydney and Melbourne grow so much over the last few years. That’s what people talk about. You’re now seeing Sydney and Melbourne decline. That’s what people are talking about. The fact that Brisbane has grown but only by a little bit, but you’re often not comparing it to inflation. So you might say Brisbane’s going by 2.2% per year, but then factoring in a similar amount of inflation.
That’s, that’s kind of no growth because it’s still the same value as it was 10 years ago. Just in monetary terms. It’s more expensive because you need more money. But in terms of overall value, because money is less valuable, it’s actually basically the same. And so it’s just a really interesting to see that slow growth of an area like Brisbane may indicate that Brisbane actually hasn’t grown over the last 10 years, which means how likely is it to then go backwards at this point in time if it hasn’t had a huge upward trajectory over the last 10 years
or if it does go backwards because sent him in Australia wise drags it down. It’s not going to jog by the 10% a year. But Sydney and Melbourne are saying because you know it’s actually very, very affordable in reflection to wages. In fact, it’s perfectly aligned with longterm averages in terms of the average combined income versus the average house price is perfectly aligned with 30 to 50 year averages. So you know, if we talk about some other things about Brisbane, because we haven’t talked about it, the ages, like it’s done 2.2% a year for 10 years, but the 20 growth rate, even with the GFC has been 6% a year. The 50 year growth rate according to homely, has been 9.7% per annum on average. Now that’s how I than Sydney and Melbourne three years ago, I remember everyone was talking about a unit over supply issue in Brisbane because the population growth has been so much stronger than expected and because some projects didn’t start, there’s now an undersupply. Brisbane is the only city in Australia with an undersupply of units. Darwin, Sydney, Melbourne, Perth, as well as Canberra, all live a supply with units. Brisbane’s the only one. Brisbane’s had this thing shot effect of like the mining thing slowing down, but now mining’s kicking back because he Aussie dollars getting cheap and more and more people are visiting southeast Queensland. Tourist numbers were up 20% last year on the sunshine coast in the year before.
Do you think the floods would have had an effect on the Brisbane market as well?
Massive effect. But if you understand enough about history, I know that Brisbane isn’t the market to invest in historically straight after JFC, Sydney and Melvin. Ah. So if you understand that a lot of people would have been putting their money there because those economies recover quicker by 35% of the Sydney market place in terms of its jobs are in the finance industry. When the finance industry gets hammered, it has a massive knock on effect to property prices down there. But the finance industry keeps off very quickly after a GSA too because it’s a service industry and therefore, you know, there’s just all these little things that are going on that people don’t think about. But infrastructure was,
yeah, I think it’s really interesting as well to have this conversation because when you do look on the media sites or when you hear on the news, often they have people on talking about the Australian property bubble. They talk about how expensive it is in Australia,
some big men, these property bubble is a Sydney and Melbourne issue, which has massively reduced itself in the last 12 months. And I think,
but that’s the thing. That’s what I mean, it’s, it’s interesting to have this conversation because they talk about the Australian property bubble, but then if you look at somewhere like Brisbane that has higher average incomes per household than Melbourne, but is way more affordable than men,
60% cheaper than Melvin.
How can you say that Brisbane is in the same bubble as Melbourne or Brisbane is just as unaffordable as Melbourne when they are so different. So I think it’s really important to have this conversation because otherwise everyone’s just talking about Australia is in a property bubble and yes, maybe Sydney and Melbourne are unaffordable and we are seeing them come backwards. People are talking about reductions of 20% they say if we have, you know, if the world economy goes into a depression, then even more than that, but then, yeah, looking at Brisbane at the potential downside feels a lot less to me. And maybe, I dunno, maybe I’m reading into it
very wrong, but I, I, I think that over the next seven years, the market’s going to do what the market’s gonna do and the conversations we’ve been having for three years now, again to show like anything that anyone watched us talking in 16 or 15 about sitting in Melbourne, I’m just like, this is exactly what’s going to happen. Like you don’t have to be a rocket scientist to look at fundamentals and interpret them like Brisbane represents extremely good value over the next 20 years regardless of what happens in the next two. You know, there’s a, there’s a chance that sentiment is just like shape moving in a field man. Like sentiment may affect Brisbane and it may pull prices down by five or 10% epic life. I hope it does because it means you, me and smart people get to buy it and even more distressed prices than it already is right now.
Like it’s, it’s so interesting to see the population growth here. Infrastructure growth, like the job growth. Like people get concerned about the wrong things. Like he’ll get concerned about trade tariffs. People get concerned around mining booms or busts. People get concerned around infrastructure spending. They get concerned around an Australian dollar, like if the Australian dollar comes down, right? People stop going overseas. Where do people go? They fly to Queensland for a holiday because it’s affordable. Like property prices in Sydney and Melbourne get to hire. Where do people move somewhere else where there’s jobs. You know Brisbane’s going to be the exact same size. Sydney is right now according to the Australian Bureau of stats within 25 years. So knowing that and knowing that 25% of Australia’s population and jobs will be tried in southeast Queensland in the next 10 years, what is stopping people outside of the sentiment and listening to people?
You hold back this swearing
man, like I can see it on your lips. Like you just pause for a second. What’s, what’s honing what sounding people that have a 15 to 20 year plan from learning about the market over the next two years and figuring out something that works for that which you could have done in 10 years ago in Sydney or Melbourne and you might be able to do in five or 10 years in Sydney and Melbourne again, but it’s not right now. Like people have to accept that the horse has bolted and that things aren’t as bad as people are saying. Like there’s people like Simon priestly saying that within two years Brisbane will be in double digit growth figures as well as Perth. Now, I don’t know if it’s going to come true or not, but he was the only guy in Australia in 2014 that called high bod is a market where he said, hi bought in 2012 or 13 he said by 14 would be in double digit growth. Like this smart people out there that you know had done enough analysis to understand what may happen or may not happen. But you know, there’s, there’s information out there for people to follow. But it isn’t just German gloom and it’s no where near as bad right now as people think it is. Um, and you can see that in the, in the pricing of stocks and stuff like that that are forecasting six to 12 months into the future.
Yeah. And so I think, um, this is just another bit of information for people out there that is kind of chance for the rent. It’s no go for it. It’s kind of just counter coach, not countercultural, but counter sentiment in terms of, okay, well let’s actually look into the data as of Brisbane compared to Sydney and Melbourne. Let’s actually look at is this overpriced? Is this in a bubble? And Are we
see Melvin of fully priced in Brisbane is not yet. And that’s exciting to me.
Yeah. And then let’s overlay our strategy on top of that. And we’ve talked so much about strategy. I hope you’ve been following us. If not, go back and watch our older videos talking about strategy, but overlay or strategy that you don’t need massive capital growth in order to achieve financial freedom. So what we’re talking about here is minimizing your risk of downside investing in a market that hasn’t ballooned over the last five years, that potentially hasn’t even grown because of inflation. Now someone could go through and do the figures and say, well actually it has inflation’s been less, you know, but the fact of the matter is it hasn’t grown as much as Sydney and Melbourne. Overlay your yourself
Lola, sign that. Then number one, analytics or analyst in Australia from a market perspective, that’s not, I don’t care. Like that’s not me or you. That’s like the number one dude in Australia in the report that everyone watches saying that, you know, I call logic only trenches data man. But that’s all they do and I’m sure suburbs in Brisbane have smashed inflation. But yeah,
and I’ll go, I’ll grab that link to that video of you and I’ll leave that in the description down below as well. If anyone wants to go ahead and watch that call logic video. But yeah, investing in such a way that you don’t need that massive capital growth. It’s a cashflow play where you can pay off those properties. The two property to financial freedom strategy, doing that, but then minimizing your downside risk by investing in the right market at the right time of the cycle is just going to make it so much easier for you to achieve financial freedom and you’ll be investing with less risk and more security that you’re going to be able to afford these properties in the future that these properties will pay for themselves. That if something happens and you lose your job, you don’t need to sell your properties because then negatively geared and that you can ride the longterm wave, which is where you’re going to make that money and see that financial freedom. So yeah,
if you want to make really quick money in the next two years, do absolutely nothing in Australian property right now, like just straight up, don’t buy it. Start a business. If you are interested in taking advantage of sentiment and buying counter culturally or when other people aren’t, not in Sydney and Melbourne but in the right markets and you have a longterm perspective and you want great cash flow now and you actually want to buy it a true bottom, then seriously start educating yourself on other options out of those two markets. Because there are cracking options around that. You know, while Sydney did minus whatever last year, 10% sunshine coast did 6.9% like suburbs in Brisbane that we bought in, did 2% suburbs in Brisbane that we bought in did 12% you know, like things are happening above or below averages everywhere. It’s up to the smart investor to have the right strategy to go.
Sydney’s not one market. You know, western Sydney did 70% in the last 10 years of growth, but the northern beaches did 140% in the last 10 years of growth. So you’ve got an opportunity now that you can buy other markets close to their bottoms when other people aren’t rushing into the market. So you’re not competing and going, what is going to be the outperforming pocket of Perth in the next 10 years and how can I buy that at this time? Like Perth vacancy rates have literally dropped from 12% last year. The 3% now really crazy stuff is starting to happen, man. Like in a positive way. And with mining coming back on and tourism, it’s just, you know, start educating yourself guys, because you only get this opportunity once every 10 years. In the last time there was this opportunity, if the next two years was in 2008 it was called the global financial crisis, but that is going to be a lot worse than this is all history will show us that. I think I might be completely wrong. I am just looking at vacancy rates for Perth at the moment. I’m gonna like go to look at suburbs within earth obviously, but you know, sound southern, looking at the major area and yeah. Vacancy rate 3% yeah. And has been higher. Well, it’s talking about
overall like it was at 6% and it’s now dropped down to 3% looking at this data you can go to on property dot Kondo, you forward sash vacancy and that will then redirect you to sq m researchers site where you can see uptodate vacancy rates, but
it’s just an understanding of that. Like if you’re thinking about timing, a lot of people said people should start getting into Perth 18 months ago. I’m like, Turkey is three years away because the vacancy rate means there was an oversupply issue in rentals and in properties at 3% that’s still an oversupply to me. I would want to say vacancy rate sitting at one to 1.5% before I consider that market. But knowing that one piece of information chose me when I need to start considering Perth, there’s a proper option. Yeah. So many little things people can do and it’s just education we’ve talked about at all in these vins before. Yeah, and so this was meant to be a really quick video, but we’ve gone about 20 minutes talking about
this, but I hope that this has been really interesting to you out there. Again, it’s just collecting all those little data sources, all those little bits of information to help you make an informed decision about how you want to invest, whether you want to sit on the fence for the next couple of years or if you’re ready to go and you think that this strategy, which is a cashflow play mixed with timing the cycle and trying to reduce your risks, that might mean that you can take active action towards securing your financial future at the moment rather than waiting for a couple of years. And so it’s really up to you what you do with this information. Thanks so much Ben for sharing this and taking the time out of your busy schedule to do this today. If you guys are interested in investing in the two properties to financial freedom strategy or you want to just buy a house, good quality property in the Brisbane market, then Ben and the team over at pumped on property can help you out there and they are offering free strategy session.
So go to on property.com.au or you can learn more about them and those free sessions over there and you can book a time that suits you. But yeah, I think it’s really good to look at these data points for us to have our rants. I think I ranted in the last video now. It was your turn and hopefully you get as passionate about property and without cycles and everything as we are. So going on property.com dot. Au you to learn more about that session and book one if you want. Otherwise, we wish you the absolute best in your property investment journey and until next time, stay positive.