Property Investing in the Beaches vs The City

Is it better to invest near the beaches in Brisbane or is it better to invest near the CBD? In this episode we look at the pros and cons of investing near the beaches vs investing near the city.

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0:00 – Introduction
2:00 – The beaches are more affordable than the CBD in Brisbane at the moment
3:19 – Property on the beaches is 15-30c on the dollar compared to Sydney/Melbourne
4:45 – The beaches are only just getting connected to the city with improved roads and public transport
6:30 – There is potential to manufacture growth and cash flow with renovations or granny flats
7:03 – Brisbane city council you can’t build granny flats
8:25 – Near the city is more owner occupied
10:05 – There are opportunities to manufacture big growth near the CBD in Brisbane
12:00 – Look for pricing disparities
12:25 – Buying closer the the city traditionally performs better from a capital growth perspective
14:25 – Places with water views perform better than properties without it
15:45 – Some perspective on the Brisbane market

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Transcription:

Ryan 0:00
Here we are on the beaches in Brisbane, absolutely beautiful day up here in the middle of winter, which you wouldn’t expect coming from Sydney or Melbourne or something like that, that is this beautiful and we buy a lot of properties for clients in and around this area. And we also help clients buy properties towards the CBD as well. So in today’s episode, we want to talk about the beaches versus the city, because the beaches here around you know, 20 to 25 K’s from the city. So it’s a bit further out from the city compared to you know, the stuff we buy 10 to 13 K’s from the CBD

Ben 0:36
people always send me the like, you know, are there beaches in Brizzy? And what are they like, and as you can see at the back there, it is a flat water beach. There’s no breaking waves, but it’s freaking beautiful. Like you can see, as you’re recording this, how many people are walking behind us. You’ve got like cafes and bars. You’ve got money being spent here in terms of local council making it a bit nicer, you know, and I think 15 years from now it’s going to look very, very cute.

Ryan 0:59
Yeah. And it’s also there is a mix in the suburbs here with some suburbs being more affluent than others, even though they have the same beach. And so it’s just it’s a really interesting situation here looking at it, how far it’s come in the last 10 to 15 years in gentrification, but still how far it has to go. There’s this amazing suburb that we’re at the other day on the beaches, which is still going through that gentrification process, and we’re talking to a guy down at the beach, and he was like, it’s super nice and the council come down and clean it, but there’s also like a homeless man that lives there.

Ben 1:33
That cleans up the beaches. So it’s like you’ve got this mix. in this situation. I love it like because as these homeless dude living down there, and he’s cleaning, constantly cleaning up the beaches, and then the council is also paying someone to come out and clean out the beaches, and then the council is paying someone else to come and move him off the beach is like Jason’s lazy guy.

Ryan 1:54
He’s like, he’s doing his public services, like cleaning the beaches. But yeah, so anyway, let’s talk about the city versus the beaches. What are the benefits of each of them. So one of the benefits of being at the beaches at the moment is just the price compared to the CBD. So it is a lot cheaper up here than it is in the CBD. Yeah, so

Ben 2:14
what we’ve seen in Sydney and Melbourne because I’ve reviewed all of the suburbs on the beaches versus suburbs within 10 K’s of the city down there to understand what’s going to happen in Brisbane and Perth long term. And what we found is that these beachside suburbs in in here are probably 20 to 30, maybe even 40% cheaper than some of the suburbs within 10 K’s of Brisbane right now. But if you look at Sydney and Melbourne, the price point of the beachside suburbs are the most expensive suburbs in Sydney and Melbourne. So it’s kind of been flipped on its head. And I think it was actually originally the same like thinking that 20 years ago, when we were growing up in Sydney, remember how affluent some of those suburbs were within 10 Ks of the city where all the beautiful private schools are, and how pavo like Coronado Beach was, for example,

Ryan 2:57
it wasn’t even necessarily that karnala was pavao. But it’s like as you go out from granola towards, you know, engadine and stuff like that, that was always seen as a pub area. Whereas now it’s not now it’s quite an affluent area, and so everywhere from granola all the way out, has definitely had that growth cycle and changed a lot.

Ben 3:15
You know. So I think, right now, as you said, that’s a huge one. Another big one is when you compare the price of these beaches on the northern side of Brisbane, but there’s also really nice beaches on the eastern part of Brisbane, closer to the city. And then on the south side as well. You know, you’re really looking right here in the north side at like buying property between 15 and 30 cents in the dollar, compared to the same price as you’d buy on like the eastern beaches in Melbourne or the eastern northern or southern beaches of Sydney. So I think long term, it’s quite undervalued right now as well.

Ryan 3:47
Yeah. So why do you think it’s undervalued up here? Compared to you know, what was happening? Like, why is it so cheap? So nice.

Ben 3:55
If you look at the last 10 years, Brisbane prices have grown by an average of 1.9% per year, which is under inflation, where prices in Sydney and Melbourne on those beaches have grown by between 55 and 100% over the same time, so it’s not necessarily that prices in Brisbane are super cheap, cheap. It’s just Sydney and Melbourne have gone off their head and Brisbane just hasn’t gone through a growth cycle since the last year say yeah, so it’s more like it’s just it hasn’t caught itself up yet.

Ryan 4:24
And do you think that distance from the CBD here keeps people out of this area?

Ben 4:29
You know, there’s just a preference in Brisbane right now to live closer to the city because you know I can buy a home within 10 Ks of the city for 550k right now and renovated up Yeah, or I can buy a home within seven Ks of the city for under 650k. So it’s kind of like you know, because that’s not where 2 million bucks yet. You know

Ryan 4:48
a lot of people aren’t getting pushed out and being like okay, I’m going to move out further out and live the lifestyle here.

Ben 4:53
It was also just recently that the roads got upgraded here. The m one and the M threes are being upgraded. You’ve also got a train station which opened up about two years ago which for the first time connects people to the beaches from a public infrastructure perspective so i think that’s part of it and also just like anywhere like it takes time for that ripple effect to flow out and it’s just it’s taken a long time for this area to improve like 15 years ago it was a bit of a housing commission slumming area where now it’s really starting to change and every time you come up you probably notice it

Ryan 5:25
yeah every time you can’t you see new developments happening new houses being built whether it be for clients or whether it be other people in the street renovating their homes or lifting up houses and filling in underneath so there’s a lot happening in this area it just feels really exciting having grown up in quinoa and having seen the transformation that canola went through in sydney in that time and obviously seeing what happened to prices back there like my parents bought their house back in the in 1988 when i was born and for 100 and something 1000 where you know and so now seeing it or 30 years later so obviously a long time but now being worth you know well over a million dollars that house and then coming up here and seeing how cheap this feels compared to sydney is you know really exciting really interesting and seeing how nice it is and there’s good coffee shops around and all of that sort of stuff so definitely opportunities here and clients are picking up properties for you know 370 to $450,000 with granny flat potential on them so you can secure a good location within you know one to two k’s from here where we are right now but then get that cashflow potential they also have potential to manufacture growth through renovation so it’s not just like okay clients are buying in the area because it’s about to boom it’s none of that it’s like okay we can see the 1520 year long term potential of this area so let’s secure a great property where we can minimize our risk by manufacturing growth and getting cash flow and then just securing that location for a great long term investment as this area continues to grow so now let’s talk about the cbd so one thing to consider with the cbd is you know we’re in a council area right now where you can build granny flats and do dual income brisbane city council you can’t do that at the moment so a lot of the properties that we’ll look at closer to the cbd will still be in this council area where you can build granny flats but if you’re looking in the cbd that’s definitely something to consider you

Ben 7:25
know we help people do two things in the city there’s some suburbs within 12 hours sorry 10 to 13 ks which still sit in this council area where you can buy really good quality houses and that’s where i showed you george’s place the other way

Ryan 7:37
yes city views we’re talking to city views overlooking the city of brisbane

Ben 7:41
900 square meter block not yeah under 500

Ryan 7:45
it was ridiculous i’m not

Ben 7:47
ready to like that’s not normal and that’s why george jumped on it because he’s a smart dude but you know that’s something interesting you know i own in that area as well i also learned just down the road here like i’m sort of hedging my bets and i think you people can afford it it would be really nice to be able to do one or two on the pages and one or two closer to the city like if you’re really looking to transfer money and create wealth through this next brisbane cycle that’s sort of my plan but you know in terms of the two options there’s some really really high quality areas in this council area close to the city where you can do the granny flats with great school districts and massive incomes way way way more owner occupied than any other part of brisbane like i’m talking between 80% up to 90% of the people living there a mums and dads that own their own homes so very small percentages of renters very high incomes very high quality

Ryan 8:41
unoccupied areas then here on the beaches yeah

Ben 8:43
yeah that’s that’s the same as sydney and melbourne you know more investors speculate around beaches than they do around the cbd yeah that’s always been the case and beaches are always going to have a higher percentage of renter’s generally between 30 and 40% yeah were some of those suburbs close to the city in sydney that aren’t filled with units are still very much owner occupied as well yeah so you know there’s that option which looks really interesting and i really like but then if you go closer to the city i was speaking to a brisbane based client earlier this week just on a session and he was saying you know he’s picked up this home in a great suburb called wavell heights nine ks from the city it’s an expensive suburb it’s extremely cheap in my opinion now like half the suburb literally has these beautiful south facing city views of the house the whole skyline yeah and he bought this home for $800,000 it’s just a pretty very very simple high end like a renovated three bedroom house that he can literally lift up one of these neighbors has just knocked down and rebuilt sold his for 2.2 mil on the other side someone else’s just lifted it up to legal height fully renovated the top and building bedrooms downstairs and sold it for 1.5 mil so

Ryan 9:56
turn it from a three bedroom lifted it up to get the views and then filled it in to turn into probably a five bedroom. You know, this is what’s interesting about Brisbane right now. And

Ben 10:04
you used to be able to do this in Sydney and Melbourne until the market price shitbox is at the same amount as renovated homes in 2017. But he’s bought this property for 800k. Now one option is he could knock it over and spend 500 grand building. And then 500 grand will get you a palace in Brisbane, like a six bedroom four bathroom home. That’s massive. Yeah, you know, he could do that, and effectively sell it for 2 million bucks. So he’s in it for like 1.3 million, sell it for two mil. Or he could do what his neighbor did and raise the place out for 300 grand. Now he’s in it for 1.1 million sell it for 1.5. And, you know, these are interesting things about Brisbane right now that you know, the reason smarter investors are coming this way. Because there’s not just timing opportunity, but there is actually capital value add opportunities or renovation opportunities as well.

Ryan 10:56
Yeah, I knew within that CBD area, there’s that sort of stuff makes sense. And that’s the thing, like if you’re here on the beaches, doing something like that, probably not going away, it’s not gonna get you the capital growth return that you could get in those areas where there is that disparity between the really expensive properties and then not so expensive.

Ben 11:13
House just so down here on the beach for 12 mil, lack of not j, one home just so down here at the end of the point, it was on full blocks, one big home 12 million bucks. So there’s a developer by it, it was it was actually built by one of the biggest mining magnets that everyone in Australia knows. And then the mining thing didn’t go so well. They spent 20 mil on it. And then someone else has come and picked it up for steel at 12 mil. So this magnets like an $8 million bath, that I think you know, it’s amazing that that’ll sell for 12 mil and then you can buy it literally the street behind it five times that, like this is why I get excited about this shit. Because when you understand where it could go,

Ryan 11:57
yeah, it’s and this is something to look for, whether you’re on the beaches, or whether you’re in the city, like I remember, we’re driving around, you know Prejean beach, on the Sunshine Coast, which is where I use. And it’s like the same sort of thing where you’ve got these million dollar homes where the house itself would cost about a million dollars to build not even including the land, and then next door to it or behind it or the street back, you’ve got this old fibro shack, like holiday house that

Ben 12:21
was built in the early 1900s sort of thing, something to that data wise. And I think it’s important to add to this conversation of buying closer to the city is Michael mateesah recently did a review, which he just published through his weekly newsletter. And he looked at all suburbs within five K’s of Sydney, Melbourne, Brisbane and Perth or suburbs within five to 10. And then 10 to 20. And then further than 20. And what he did is he looked at the average annual price growth per year for the last 10 years. And it is crystal clear in every market in Australia that within five K’s of the city is where performs the best, then five to 20 Ks Yeah. And then if you’re further than 20 Ks in the city, it definitely has an effect in all of those markets by at least almost one if not 1.5% per year, which is, you know, just

Ryan 13:08
like it’s big money. So in terms of growth potential outside, the inner city ring tends to perform the best, then the middle city ring, and then the outer city ring doesn’t perform as well.

Ben 13:20
So there’s no data that I can find in Australia, outside of what I’ve done is a personal comparison, just to make sure I was doing the right thing for my own properties is I can’t find out does buying 10 K’s in the city performed better than buying 20 Ks in the city but on the beach. Yeah. That, you know, looking at my own comparisons, you know, mainly bondad coronella St Kilda port of Melbourne, you know, if we look at like wynnum or manly in Brisbane, these areas are premium. And I think longer term just, you know, because they’re all infield, now they’re just going to get better and better.

Ryan 13:57
Yeah, there’s not extra land available around the beach, but I

Ben 14:01
don’t have data to support it. But I can just say it in the median prices like they’re significantly more expensive. For example, in manly. in Brisbane, the average property price is sort of 700k to a male, you know the same distance, which that’s 16 case from the city, the same distance 16 case in the city somewhere else in Brisbane might be at 500k. So there’s obviously a value premium. Yeah. And then Michael McKusick also did some other data crunching, which sorry, I just I think it’s interesting, but he looked at places with water views are a water aspect. And they perform about 80% better in the last 10 years in places without one. So if you can afford a water view and that, you know, you know that that limited resource that most people can’t, even in the same waterfront suburbs, the value premiums about 80 came 80% over 10 years, which is insane,

Ryan 14:51
which is insane. So obviously there’s some similarities and some differences between the beaches versus the city. The main thing that you’re looking at is the price difference. at the moment with the beaches being much more affordable still good long term capital growth potential but more of a cash flow potential here with that long term growth whereas as you move closer to the city the yields might be a little bit less the property is a bit more expensive there are some areas where you can still build granny flats and so you can still get positive cash flow you know rental yields of six to 7% in those areas if you go ahead and build a granny flat so you can kind of do that or as ben was saying you know even closer going into brisbane city council there’s those opportunities to you know there’s a disparity in the pricing and so there’s opportunities to manufacture growth there and then be in the middle ring to get the longer term you know ideally boosting capital growth compared to what you might get in the middle ring or out here on the beaches

Ben 15:46
what i just wanted to say like to put stuff into perspective for people that don’t understand brisbane and that are starting to try and figure it out you’ve got properties on the central coast and you’ve got properties in you know newcastle you’ve got properties in wollongong and the incomes in those areas are not even comparable to brisbane the potential size of those regional markets versus this city is not even comparison the population growth rates is isn’t even close and you’ve got properties in a lot of those areas on the beaches they’re selling for literally 50 to 100% more than what you can buy phone for isn’t right now and you know if some of these suburbs on the central coast and wollongong can be million dollar suburbs you know artists look at brisbane as insanely jilong like jilong is in the middle of nowhere to melbourne like let’s get real about it like it’s a full on regional market

Ryan 16:36
we just lost all of our jilong listeners that you

Ben 16:39
know like you know maybe if they put connect the high speed rail that will be an option but it’s kind of like living in newcastle and commuting to sydney you do it if you have to do it but most people won’t ideally you just live there and what the it’s kind of just you know somewhere like your lawn can have an average price point of 800k and a waterfront property there has been selling for 1.4 million bucks recently like get your head around brisbane guys you know if you can buy this across the road just one straight back from the beach for 400 to 500k you know it represents really really really good long term buying or everywhere in australia is completely overcooked and you know they’ve got big corrections to come back to reality yeah i think brisbane is just highly undervalued

Ryan 17:22
yeah so yeah i guess time will tell we don’t have a crystal ball so we don’t know what’s going to happen in the market we just kind of do our best to look at the situation

Ben 17:32
i’m thinking 20 years i’m not talking like this year five years you know who knows what’s going to happen yeah 20 years from today this will look very different here and

Ryan 17:40
maybe we’ll be sitting here without gray hair in 20 years time already kind of gray

Ben 17:45
eyebrows here

Ryan 17:48
say maybe we’ll be here in 20 years time telling the story of you know what did happen in the next 20 years from today so it’ll be really interesting but yeah we do definitely try and minimize our risk at all points by buying property at a below market value with opportunity to manufacture growth to get cash flow so you can afford to hold it for the long term and so you can weather different growth cycles whether the market be flat or growing or declining you know you can withstand that and hold that you just got this well balanced portfolio that suits your needs and moves you towards your goal which for a lot of our clients is financial freedom so yeah so take all of this with a grain of salt just really interesting because we do kind of specialize in those two different areas so interesting to talk about the differences that we’re seeing between the beaches of brisbane and you know closer to the cbd of brisbane so if you are interested in investing if you’re looking at okay i want to get into the market pretty soon but i’m just not sure what i want to do or what strategy is going to work best for me and how i’m going to get to my financial goals then ben and the team over pumped on probably do offer free strategy session so you can jump on the phone to them talk about where you’re at and where you want to go and they can help you understand okay what strategy is going to help you build the property portfolio that you want you can then go and do that yourself or you can hire them like a lot of clients do and had the opportunity to work with them and get their eyes on the ground till you find a great property so what you do is up to you those sessions are completely complimentary just go to onproperty com au forward slash strategy you can learn more about that over there and book a time those sessions are currently booked out a month in advance which is crazy they are very limited so yeah definitely for people who you know already and on that journey to about to start investing we really want to help you out and help you get set up for success

Ben 19:37
awesome man i’m so excited about the next five to seven years here like i don’t have a crystal ball but i know 20 years from today it’s gonna be all good

Ryan 19:46
yeah and we’re gonna be great

Ben 19:50
hopefully chanda like chillin

Ryan 19:55
just chillin on the angel batches so yeah okay well obviously love the beaches on the beaches and so yeah but no this has been a fun one we hope that you’ve learned a thing or two from this go ahead and check out the previous video that we did on what sophisticated investors are doing in the current market i’ll link up to that one go ahead and check that out otherwise until next time stay positive

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