Lessons from Michael Metusik’s Masterclass
Ben recently attended Michael Metusik’s masterclass. Here were some of his biggest takeaways about the future of the Australian property market.
Hey guys, Ryan here from on-property, don’t call Donna, you helping you find positive cash flow property and today I’m with Ben Everingham and yet again, which just seemed to always meet up online man, excited and Ben has recently been to a my cool Matousek masterclass and so we’re going to be talking about some of the things that he learned from that and what you took away from that. So this will be a learning experience for me as well as for you guys as well. So me and ben were meant to record episodes last Thursday, but he ditched me for Michael [inaudible] is massive.
I felt a bit rejected. Been upset, but it’s creating content for today. So I’ll let you off the hook this time then. Yeah, some really cool things that came out of the master class, which I think you’re going to make up for us missing last week. So I’m excited about it as well. OK, so for people out there who don’t know who Michael Metusi gears or they don’t know what this masterclass is, can you give us a brief overview of what it is and then we’ll talk into some of the cool things that you learned. So Michael [inaudible], I’m one of the leading property analyst in Australia. So, um, I was talking to him on the day, he’s 50 something on at the moment and he started his business when he was 26, so that business has basically been looking at data related to the Australian property market and then helping investors and developers make better decisions around data.
So, um, he produces a wakeley email, which I strongly recommend people subscribed to it for that to me all the time. You’re always so excited about the data. You love data data. Say you know, he just, he questions things which I like, you know, the Australian Bureau of stats will come out with a number and he’ll go well and have a look into it and go based on that number. The Australian Bureau of stats, he’s completely exaggerating or under exaggerating a point based on the political agenda at the time, so it’s just nice to get a lot of this stuff in the property market is. It never fails. It’s always great, but I also like to get Michael’s email as much as it freaks me out sometimes to just sort of counterbalance where my head’s at all the time as well. Oh yeah. So it’s good to not just only receive emails and only receiving information for people say the market.
The market is great, the market’s great. Um, it’s good to get both sides of the story. Yeah. And he tells a really positive story. That was the biggest takeaway for me that the Australian economy housing market outlook for the future looks amazing because our population is growing so rapidly at the moment by over 400,000 people a year and is projected to grow by at least that for the next 10 years. He said the long-term outlook for Australia looks really positive because of that growth. And because you know, I’ve country lucky enough is filled with so many resources under the ground that everybody wants coal, gas, potentially uranium in the future. And all of those are the good things we’ve got. So that’s a really, you know, sort of get out of jail free card. Our country has a lot of other westernized in developed countries no longer have, so yeah, I guess 400,000 people coming into the country who are being born each year.
Eventually you’re going to need housing as well if you’re looking over 10 years, what’s that? Another 4,000,000 people or so and um, you know, that that is one of the positive things and that’s, you know, combination of people moving here from other countries. The combination of people having babies like pumping them out there like kicking the average. Let’s go from law. Um, I think just an important side note for people with population growth, something really good that I got from Jeremy Shepherd who runs Dsi data, which has now changed to location score, I think it’s called, um, is that population growth doesn’t necessarily just drive prices up its population growth. Where there’s not enough new housing to meet the demand of the population growth. So when people hear this that, you know, there’s 400,000 people coming into the country each year. There’s also new houses and new properties being built each year as well.
So, but generally speaking, I’m pretty sure population growth has outstripped new construction, which is why the government’s put all the [inaudible] and all the packages and stuff that you get all these bonuses. If you build something new, look after this workshop that’s questionable whether we actually do have, you know, we’ve built a lot of stuff in Australia in the last five years. Most of it’s been the wrong type of product, which is, you know, high rise in the city dwellings increase in Sydney and Melbourne. But um, you know, that that figure is, is highly questionable whether we’ve actually got enough demand. You know, there’s, at any point in time you’ve got people that own multiple properties, you’ve got people with multiple dwellings on properties that are sitting vacant. You’ve got normal vacancy rates. You’ve got people that buy a property. Just the Holden for capital growth that don’t actually rent them out.
So if you take all of these ghost properties that are in the market place, there’s more than enough houses in Australia to sleep. Everybody, it’s just um, he didn’t have, most of the stats don’t actually take into account all of those properties sitting there where you’re taking me from being extremely confident about the next 10 years. So that quiet, scared, but nothing. Nothing’s wrong with a balanced supply and demand. You know what I mean? Like that’s, that’s a positive thing for everybody. You add another 400,000 people on top of that balance supply and then the couple of hundred thousand dwellings in the next year, you know, the balance starts to create the out again, which is what keeps driving this cycle. And I suppose, well that’s something I never really thought about because my dad lives in Granola in Sydney, in this epic, straight one straight back from the beach. And there’s this house in the street that no one lives in that’s just like run down. It’s got boarded up windows. It will be worth a few million dollars at minimum. It’s in such a good spot as really, really good house and yeah, no
one lives there. So even though that technically exists on the market and could probably has three to five people, whoever owns that is not letting anyone live in.
Um, the really interesting thing to me, which you just mentioned about, did you say it’s gone from Dr Sata Location School? Yeah. That’s awesome. So what, um, you know, one of the big things that I learned is, you know, he’s looking at the trends for the next 10 years about where the Australian population is growing. So we’re all these new people. What he said that over eighty five percent of the population growth is going to be spread between four areas in Australia. He’s saying 25 percent will be Sydney, 25 percent will be Melbourne and Sydney is basically willing going to central coast and Melbourne is Bendigo, Ballarat, Melbourne. And then we’ve got um, southeast Queensland when she’s Gold Coast, Brisbane, sunshine coast. So 25 percent will be split between those three major markets. And then he thinks about 10 percent will go into way, which means that 15 percent of the rest of the population currently is right out in every Australia. What he also said, which was crazy, is that eighty five percent of the growth in jobs and income is going to be Sydney, Melbourne and South East Queensland. So if you’re rolling the dice on, you know where it’s going to have, as you said before, the most limited amount of future supply and the strongest demand and strongest incomes. It’s without a doubt those three markets, which is what you and I in a lot of other people have been saying for the last three, four years. Anyway.
I guess I would just put a caveat on that to say it’s the right product in those markets as well because there has been a lot of oversupply. I know in Melbourne and Brisbane, the inner city apartments and stuff like that. So just because there’s job growth in these areas and people moving into these areas, you still got to buy the right product in the right suburb.
It’s such a good point because if you look at Sydney for example, um, you know, Sydney’s average on your right in the last 20 years has been eight point five percent a year, but certain units and certain suburbs have growing by five percent. Certain houses in high quality suburbs have grown by 15 percent a year. So there’s a huge discrepancy even within markets around different product types.
And what’s this? Here I’ll go. Ben sent me his notes that he took, which make no sense to me because they’re really short. So what’s this here about confidence and the Virginia back confidence score
and full time jobs. We’re talking a lot about in the session it was really personal because there’s only about 10 people there. It was very one on one and sort of back and forth. And one of the questions someone in the room ask was how do identify confidence and what’s an early indicator of where trends in Australia heading, you know, sooner rather than later. So everyone knows that long-term things look great. How do you get an accurate idea of where the economy’s going in the next six months and of the things that he mentioned, which, you know, um, I suppose gets you in that position where you can sort of say six months roughly into the futures that Westpac confidence score. Um, and that’s just a sentiment score as we all know, at the end of the day, confidence drives the market as much as, or more than anything else, when people are really excited, when people are being paid well, when people have full time jobs, when people have the opportunity to, um, have a better tomorrow than they did today, then competence is high.
The flip side of that, which we have an experience for awhile is when confidence is shocking. People can’t borrow money. Unemployment’s going up and sentiment is really low. Then that has a really negative effect on short term growth as well. So, you know, understanding where that confidence thing is. That was just one of the little things that he said is a good thing that every investor that likes the data should be following. And literally it’s as easy as WESTPAC confidence score into Google and you’ll find it OK, cool. So that’s something that people can look into if they’re more interested in what are some other things that you took away? Maybe less sort of broad, big market sort of stuff and some things that people can apply themselves or start to think about themselves.
Just having a big sorta stuff at a lot of it’s big picture. Like Michael is not really the guy that talks about the local suburb stuff. I suppose that’s more you and I. He calls himself a futurist man, that’s his name. She’s like all about the big picture stuff. So what does that say about bitcoin? Then I’ll wait to get us to distracted in terms of what drives market demand, which is one of the most interesting things that I thought I got out of it. Obviously jobs, income and population growth are the three biggies. So that’s a no brainer for anybody that’s been focusing on this stuff in the past. But I think if you look at where the jobs are going at the moment, jobs in southeast Queensland are growing faster than any other place in Australia. Think they were up four point eight percent in the last 12 months.
Interstate population growth is now moving into southeast Queensland faster than anywhere else in Australia right now. Overseas population growth is still going into Sydney and Melbourne, but a lot more of it’s starting to arrive in Brisbane and why people are moving into Brisbin. Is the cost of housing pushing them out of Sydney and Melbourne or is a lifestyle. Because, let’s face it, it’s awesome up here. Or is it something else? Michael says that it’s, um, people came to Queensland for two reasons. They’re here for jobs and lifestyle or they’re pushed out of Sydney and Melbourne from a price perspective and right now they’re being pushed out, which isn’t the ideal way for southeast Queensland to grow, but it is the way that it’s growing at the moment. So, um, I think Macquarie Bank came out recently on the ABC and said that a hundred and 40,000 people will sell out of Sydney.
And Melbourne in the next two and a half years in that money between the sunshine coast and Gold Coast, most of it going into Brisbane. So you know, one thing that we talked about on the day was Sydney being a hundred and five percent more expensive than Brisbane now, but the average wage or household income only having a 12 percent difference. And the thing that just rocked me and blew my mind was property prices in Melbourne, a 57 percent more expensive than Brisbane, but the average household income in prisons now more higher than Melbourne, which. So it completely blew my mind. So basically you’re saying that Sydney prices are more than double Brisbin, but soon the income is only 20 percent more than that. Embarrassment, you know. And then Melbourne is 50 percent more expensive than Brisbane or 57 percent, but people in Brisbane on average more than people in Melbourne.
Crazy. Hey. Yeah. That’s insane that, that just rocked me. Like I always have these assumptions that Sydney and Melbourne kick-ass and so many of those assumptions have been broken in the last year is I’ve got access to new data. You know that, that’s interesting to me what he talked about, long term affordability thing sometime somewhere around that five to six times your average annual income Sydney sitting at 12 times right now, Melbourne sitting at 10 and a half times, but brisbane sitting in that sweet spot still. What was really interesting is it’s cheaper to rent in Sydney and Melbourne as a percentage of income than it is in prison right now. So again, all these assumptions about cost of living, only 20 percent of the income in Sydney on average goes to rent when Queensland, it’s 26 percent. So all of these different little snippets of, you know, just these messages that the media pumps out of just complete bs after going to something like this.
I think even the assumption that income growth is such a big driver of price growth in an area, you know, that brings that into question as well because yeah, that’s just, yeah, it’s good to have everything challenged. It’s good to have surf challenged. And one other thing that he talked about, which I really liked and you and may have been transitioning this way again for three or four years now. You’ve always been on the bandwagon, which is passive income, but you’ve got me more and more intuitive as I’ve learned more from you. Um, this concept around what, what type of dwellings Australia and aids in the future and he believes is going to be a massive trend to smaller, more affordable lots with higher density housing in those lots. So this concept of buying a house and adding a granny flat, he loves, um, you know, this concept of building a dual income property and getting two sets of income.
He even had a concept of, you know, finding your standard block, building a four bedroom home with a nice big kitchen and two living spaces. And then in each of the bedrooms, putting a little study nook and its own en suite so that you can actually lock the door and rent by the room I’m in. But 10 year I was just checking out, but 10 years a suburb on the sunshine coast that my office is in and I was looking today online, just having a look that was a house for 650 k, it’s renting for 950 bucks a week. And what I looked at the floor plan, I thought, Jay, that rent returns, food, what’s going on, you’ve actually built one of these and they’re just replacing each of the rooms to individual people because there’s this whole market place for single moms, single dads, um, people that have gone through divorce, young couples saving for money and you know, it’s, it can be a way to increase your rental return up to that eight, nine, 10 percent mark, which is kind of a really nice place to be in. Is definitely got me thinking about some things as well.
We did a full episode on renting by the room a while back. I’ll have to find that for people and I’ll let her know what the link is. I’ll do that now as you keep talking. Cool.
Um, yeah, but you know that I suppose the sweet spot based on what he was talking about in terms of the Sydney, Melbourne and Brisbane market places at the moment, I’m hate, hate, hate, hate, close this position in the market, the last middle. So that is the five kilometers, the 20 kilometer radius from the same day. If they stray cities when he actually broke down where, where these population growth is occurring. Yeah. Fifty percent of the population growth is between 20 and 40 kilometers from, they say bay days because it’s affordable, but then 45 percent of the population growth is occurring between five and 20 kilometers, but the density isn’t really increasing in those particular areas. So he thought if you’re looking for long-term capital growth, buying that five to 20 kilometer ring or buying high-quality property right on the beach is sort of that nature, that marketplace, that values surrounding those three capital cities.
I can’t find this episode we’re calling. Somebody must have called it something weird. Is it the one how to get an eight percent rental yield in a capital city? Is that when we talked about it? I think it might’ve been OK, so if anyone’s interested in learning more about rent by the room, go to on-property dot com. Forward slash three, nine, three or 393. It was that episode there. I’m pretty sure if you go there and we’re talking about something else, I do apologize, but I’m pretty sure that’s it. OK, sorry I’m back.
Yeah. But you know, this concept of getting long meaningful capital, long-term capital growth, getting great rent return and you know, doing something on the way in to add some value or doing something over the course of hiding it, you know, it really re offend these master class. Some of the things that we’ve already been thinking about talking about. And he did talk about timing a lot as well. Now Michael at the moment is sitting on the fence with buying property. Um, he’s sort of the hidden self described himself as a glass half full guy. Um, you know, but he said if you are going to enter the property market at the moment, know making sure that the property is ticked, those boxes, high quality data marketplaces, you know, much higher cash flow so that you can, you buffer yourself without things that may or may not come up in the future.
And so can we just summarize because I was so distracted about, you know, how you’re talking about the city population growth and 50 percent of it’s going to be in the outer ring. So 20 k’s out or more then 45 percent is going to be in that kind of middle ring. Did you say from five to 20 ks is the outer ring? Are you saying that the outer rings not as promising because it has room to expand further out or to increase density. Whereas the middle ring is where there’s a lot of growth but the density is not really increasing. Cause I would imagine in a city is kind of, well there’s only five percent growth, but that would be a lot of very high density sort of stuff.
Incredibly high density in that [inaudible] K if 33 cities, but then that five to [inaudible] bring the density of a time shooting trace. Um, you’re already starting to say that a little bit in Sydney and Melbourne were sites that were traditionally houses have now been taught, turned into duplex triplex sites, you know, six pack sites or even more than that. But right now, you know, there’s, this council is not really changing the density too much between five and 20 ks, for example, in Brisbane City Council. And so if you buy the right site with the right size piece of land, close enough to train stations and transport and all those other things that matter, um, if you’re holding that product for the long-term, you know, he was sort of suggesting that that type of product long-term looks really interesting because there’s no more vacant land in these areas. The density’s going trays in there for the overall value of aged piece of land has got to increase long-term. They might be a period of, you know, flatness, there might be a period of decline over a 15 year period in all these markets. There might be a period of upside, but the long-term averages look promising for these types of areas. That’s cool. That’s really cool. Yeah. I think it’s good to look at these stats in to say
things from a new perspective and to look at bigger picture sort of stuff.
What was just interesting from my perspective is the big picture is nice, but then reducing that bigger picture down to a local market, a local area within a market and just all of these pieces of information help you refine skype. If you know that the population is going into three areas in Australia and the population within that growth and where the job income’s going to be carrying is within five to 20 cases of the city. Then it enables you to just sort of get really laser focused on your strategy, ignore the rest of the noise and start to think about quality as opposed to volume. That was another thing way talked about a lot was this concept of, you know, in the past there’s just been these massive push for how many properties can we own an old these books written on, you know, just the properties in three and a half years, you know, 10 properties in 10 years.
I’m like confessions of a real estate millionaire like this. All of these sizzle around just taking it to that level, like this ridiculously high level. But the cool thing about Michael and something that I really resonated with with him is it’s about lifestyle and it’s about choices and you’ve taught me this as well. Like it’s about less bang more. I suppose I could be much better in a couple of quality properties that rent for a thousand bucks each week. <Unk> 10 properties being super leveraged and smashing yourself at some point during the cycle because it doesn’t work out the way that you hoped it would. Just being prepared I suppose and thinking about things a bit more strategically
when I’m thinking about things differently and the fact that you don’t need excessive amounts of property which will lead perfectly into our next episode where we’re going to be talking about four properties to financial freedom. So that was a great segue.
He sees a bit of a boring episode for some people, but I also know that half of the people that reached out to me through your channel and your podcast, love the data and like really get off on that. How can I do a bit better? Like how can I beat the market average by one or two percent per year and as boring as it might be for some people. This stuff like this is really the stuff that gives you that extra edge in the marketplace in means that you buy the right sort of stuff and you know, it puts that extra hundred, 200, 500 K in your bank account over a year period, which you know, who doesn’t want the extra money.
Yeah. And I think it’s really good. We’re really good at the lowest, sort of like smaller areas, analyzing suburbs, analyzing properties, getting really practical and all of that sort of stuff, but I think we’re also missing out on that bigger picture stuff in terms of the economy of Australia in terms of the overall look of the Australian market and learning this stuff about where population growth is going, like what cities and what areas is going into as well as that five to [inaudible] sort of region. Learning about this sort of stuff. As you said earlier. It really helps you hone down from the map of all of Australia and then get down to specific areas and then you can take the practical stuff that we talk about every day. How to research a suburb and all that sort of stuff. You’ve now you’ve narrowed your area, chosen your markets that you want to focus on, and then you can get more specific. So I think it’s really helpful. I think it’s. I’m glad that we had this conversation today because it’s something that we’re lacking in what we’re teaching people about and so thanks to you for ditching me on Thursday and going and thanks to mark Matousek for all that he does and all the data and the way that he thinks about things as well.
Yeah, highly recommend at least subscribing to his newsletter and getting a different perspective and he produces some really cool reports on actual suburbs and each week, you know, I’m always learning something from him because he’s so data driven so you know, there one, two minute rates Max and they keep you really well posted with what’s going on and it’s not always the perfect rosy picture or the really bad pitcher either. It’s just information and you can interpret it the way that you want to.
Yep. So I guess the call to action from today’s episode is don’t just follow one person in the property investment space, whether that’d be me and Ben, but get out there and look at other people’s opinions and take the good stuff that they give out to help you formulate a full picture of the Australian property market as well as help you create your strategy for what you want to do moving forward. Any of you do need help with your own strategy. If you need help saying, OK, how can I move forward? What steps do I need to take? What’s going to be the best strategy for me? And you don’t know what the next step is. Then ben and his team over at pumped on property, a offering free strategy sessions to followers of on-property. So head over to [inaudible] dot com, forward slash session if that’s you. And you can book a time with Ben or one of his team over there. So thanks so much for your insight today. Ben. Thanks to Michael and to seek for putting this on. Uh, and until next time guys, stay positive.