WEBVTT - How to pick a suburb ripe for booming house prices 0:00:11.200 --> 0:00:14.560 Hi. I'm Julianne Sprague, Wealth editor at The Australian. I'm 0:00:14.560 --> 0:00:17.200 filling in for James Kirby today, who is on a 0:00:17.360 --> 0:00:20.320 very well deserved break and today we want to get 0:00:20.320 --> 0:00:23.520 stuck into how you can pick the right spot for 0:00:23.560 --> 0:00:26.680 an investment property. You might want to buy an investment 0:00:26.680 --> 0:00:30.040 property or add to your existing portfolio, but how do 0:00:30.120 --> 0:00:33.680 you get the spot that will deliver you the maximum return. 0:00:33.840 --> 0:00:35.360 You might think that there's a city that you want 0:00:35.400 --> 0:00:37.240 to invest in, maybe it's a city that you live in, 0:00:37.520 --> 0:00:40.199 but how do you get the right suburb the best suburb. 0:00:40.600 --> 0:00:43.560 My guest today is Ben Kingsley. So Ben is the 0:00:43.600 --> 0:00:46.280 chair of the Property Investors Council of Australia and he 0:00:46.360 --> 0:00:50.880 has more than twenty five years of investing experience advising 0:00:50.880 --> 0:00:53.960 people in property markets. He's also the co author of 0:00:54.040 --> 0:00:58.240 two books with his fellow empower Wealth business partner Bryce Holdaway, 0:00:58.640 --> 0:01:02.560 and together they host the Property Couch podcast. But today 0:01:02.640 --> 0:01:05.040 Ben Kingsley is joining us right here on the Money 0:01:05.040 --> 0:01:08.200 Puzzle to share his top property investing tips. Ben, thank 0:01:08.200 --> 0:01:09.840 you so much for joining us on the Money Puzzle. 0:01:10.360 --> 0:01:11.759 Delighted to be here, Julianne. 0:01:12.160 --> 0:01:13.679 We wanted to have a chat to you because you've 0:01:13.680 --> 0:01:16.080 got a lot of experience in this area. All of 0:01:16.120 --> 0:01:19.920 the stories we are putting together at the moment appointing 0:01:19.959 --> 0:01:22.480 to property growth over the next twelve months. It just 0:01:22.640 --> 0:01:26.280 seems that things have aligned, the property prices will go up, 0:01:26.880 --> 0:01:30.160 but not all property markets are created equal, and within 0:01:30.360 --> 0:01:33.520 those there are little subsections. So I want to ask you, Ben, 0:01:33.640 --> 0:01:37.040 how do you determine where is the best place to 0:01:37.080 --> 0:01:40.280 buy an investment property? What are the fundamentals you look to? 0:01:40.800 --> 0:01:43.040 Yeah, so how long have we got? But we'll start 0:01:43.040 --> 0:01:47.480 with the big ones. So absolutely there are markets within markets. 0:01:47.520 --> 0:01:51.120 That is proven to be true that different property cycles 0:01:51.160 --> 0:01:53.960 can occur in different markets, and there are different reasons 0:01:54.520 --> 0:01:58.600 behind why those particular activities happen. So we break it 0:01:58.640 --> 0:02:02.680 down into if you think about short term usually what 0:02:02.720 --> 0:02:06.560 you're talking about there is the sentiment, and you're also 0:02:06.640 --> 0:02:10.520 looking at demand and supply, so you're looking at certain 0:02:10.720 --> 0:02:14.760 variables that will determine, you know, whether a market is 0:02:15.120 --> 0:02:18.080 in balance, in equilibrium, or whether it's out of balance. 0:02:18.120 --> 0:02:21.359 And of course you know in terms of a shortage 0:02:21.360 --> 0:02:25.360 of supply does put pressure on capital growth over time. 0:02:25.440 --> 0:02:28.400 So supply is the enemy of capital growth is often 0:02:28.440 --> 0:02:31.000 what you would say, and so when you're thinking about 0:02:31.000 --> 0:02:33.840 it in the short term, you're looking for those variables, 0:02:33.840 --> 0:02:37.440 so things like auction clearance rates, days. 0:02:37.160 --> 0:02:40.519 On market, stock on market, and if your. 0:02:40.639 --> 0:02:43.040 Days on market is coming down, that means that there's 0:02:43.040 --> 0:02:44.280 obviously a. 0:02:44.280 --> 0:02:47.080 Body of demand that's there. 0:02:46.680 --> 0:02:48.679 And so and then on the supply side, you're looking 0:02:48.720 --> 0:02:51.760 at things like what is the you know, the future 0:02:51.960 --> 0:02:55.680 building approvals and what commencement have started, and so then 0:02:55.760 --> 0:02:58.400 you start to think about, you know, those markets in 0:02:58.480 --> 0:03:00.000 terms of well, if I've got a lot of vacant 0:03:00.200 --> 0:03:03.480 land around me, then potentially there is risk that there 0:03:03.480 --> 0:03:06.000 will be future over supply and that might taper my 0:03:06.440 --> 0:03:09.680 future capital growth. So short term, it's very much a 0:03:09.680 --> 0:03:12.160 story of supply and demand and looking for those markets 0:03:12.200 --> 0:03:15.320 where you know there might be an inbalance between. 0:03:15.040 --> 0:03:15.960 Supply and demand. 0:03:16.600 --> 0:03:19.360 And then over the medium to longer term, it's absolutely 0:03:19.440 --> 0:03:22.880 got everything to do with economic activity. And so what 0:03:22.919 --> 0:03:26.120 I mean by that is the economic activity is going 0:03:26.160 --> 0:03:28.280 to drive that population story. 0:03:28.400 --> 0:03:32.520 So if you think about a thriving city that needs. 0:03:32.280 --> 0:03:35.560 Workers, those workers will arrive that would put pressure on 0:03:35.640 --> 0:03:38.360 housing both from a rental point of view, but also 0:03:38.520 --> 0:03:41.560 potentially from a future purchasing point of view. And so 0:03:41.680 --> 0:03:44.760 that's why we see the capital growth in our major 0:03:44.800 --> 0:03:50.280 capital centers usually performing quite strongly during times of economic 0:03:50.280 --> 0:03:53.360 growth and strong population growth into those centers, and of 0:03:53.360 --> 0:03:56.280 course we see the reverse when you know, if you're 0:03:56.280 --> 0:03:58.560 as old as I am, you will know that during 0:03:59.160 --> 0:04:02.600 the sort of John Kurrent era, and we had some 0:04:02.720 --> 0:04:05.360 failures in Melbourne in terms of the economic situation, we 0:04:05.400 --> 0:04:07.840 had a lot of debt and the economy wasn't performing 0:04:07.920 --> 0:04:10.000 very well and we see a lot of migration up 0:04:10.040 --> 0:04:15.040 into Queensland, and the property markets suffered quite considerably during 0:04:15.040 --> 0:04:18.880 that time because you know, we also had pyramid building 0:04:18.920 --> 0:04:21.880 society and some banks failing, so it wasn't a good time. 0:04:21.960 --> 0:04:24.320 So we do know that if there's no jobs here, 0:04:24.320 --> 0:04:27.360 we're not going to necessarily move that population here, and 0:04:27.400 --> 0:04:29.880 that's not necessarily going to then bode well for that 0:04:30.320 --> 0:04:32.240 population story and that demand story. 0:04:32.680 --> 0:04:36.000 If we look at the information at the moment, though, 0:04:36.040 --> 0:04:38.560 it does seem we have a supply issue. There's just 0:04:38.560 --> 0:04:42.600 not enough supply of housing across the country that's fed 0:04:42.640 --> 0:04:45.600 into things. You know, we had thirteen interest rate rises 0:04:46.120 --> 0:04:49.000 and property prices didn't fall as a result, it didn't 0:04:49.000 --> 0:04:51.840 do what typically property markets have done. And now we're 0:04:51.839 --> 0:04:57.000 in an easy cycle again, given how much property markets 0:04:57.000 --> 0:05:00.240 have risen and how much they are anticipated to keep going. 0:05:00.680 --> 0:05:02.800 What are the risks though for investors? How do you 0:05:02.839 --> 0:05:04.440 make sure you're not sort of getting caught out here 0:05:04.480 --> 0:05:05.560 and you're buying right at the top. 0:05:05.720 --> 0:05:10.000 That is a great question, and let's unpack. You know, 0:05:10.120 --> 0:05:13.400 traditionally you are right, higher interest rate thirteen rate rises, 0:05:13.800 --> 0:05:15.919 you would normally see a correction in the market. But 0:05:15.960 --> 0:05:20.080 what we also saw during that time was the immigration program, 0:05:20.120 --> 0:05:22.200 which delivered over sort of six hundred and seven hundred 0:05:22.200 --> 0:05:24.440 thousand people, and over the sort of last two or 0:05:24.480 --> 0:05:26.839 three years, we've got a minion extra people in this country. 0:05:26.880 --> 0:05:32.640 So that along with record low unemployment or record high employment, 0:05:33.160 --> 0:05:36.720 also meant that people could continue on with making their 0:05:36.760 --> 0:05:39.400 plans for their lives, so buying their homes and so forth. 0:05:39.760 --> 0:05:42.760 So that's why we can sort of say, okay, we 0:05:42.800 --> 0:05:45.240 can make a case as to why property didn't normally 0:05:45.240 --> 0:05:46.239 do what it normally does. 0:05:46.720 --> 0:05:48.440 If those arrivals. 0:05:48.040 --> 0:05:51.880 Didn't come, and if unemployment had risen higher, then we 0:05:51.920 --> 0:05:54.560 wouldn't have seen any sort of price growth during that 0:05:54.760 --> 0:05:57.520 higher cost of doing business when it comes to the. 0:05:57.480 --> 0:05:59.000 Mortgages we have on our properties. 0:05:59.480 --> 0:06:01.560 So let's talk about today and what's going to be 0:06:01.560 --> 0:06:03.919 the catalyst for that growth. So there's a couple of 0:06:03.920 --> 0:06:06.000 things that are going to go on, and I want 0:06:06.000 --> 0:06:07.480 to talk on the investor side. 0:06:07.720 --> 0:06:08.920 We are seeing a lot of. 0:06:08.839 --> 0:06:13.000 Animal spirits in the investment space at the moment, and 0:06:12.160 --> 0:06:17.560 those animal spirits are potentially getting ahead of themselves in terms. 0:06:17.400 --> 0:06:20.080 Of buying in the affordable quartile. 0:06:20.440 --> 0:06:23.840 So the bottom twenty five percent of properties are very 0:06:23.920 --> 0:06:27.480 attractive to obviously first home buyers, but they're also very 0:06:27.520 --> 0:06:31.520 attractive at the moment to investors, and investors are certainly 0:06:31.560 --> 0:06:35.039 looking for that sort of classic recantile home that might 0:06:35.080 --> 0:06:36.279 be an existing property. 0:06:36.400 --> 0:06:37.200 Because back to your. 0:06:37.160 --> 0:06:41.560 Point earlier, Julianne, in terms of this shortage of accommodation, 0:06:42.080 --> 0:06:45.560 since twenty nineteen, the cost of build a home has 0:06:45.640 --> 0:06:49.280 basically gone up almost fifty percent being able to provide 0:06:49.400 --> 0:06:52.360 new stock. So there's been a lot of pressure on 0:06:52.440 --> 0:06:55.640 the existing stock market, and that's why we're seeing the 0:06:55.640 --> 0:06:58.960 best performing market at the moment is that bottom twenty 0:06:58.960 --> 0:07:02.200 five percent. The percentage price growth that we're seeing in 0:07:02.240 --> 0:07:04.920 those areas are outstripping what we would call the middle 0:07:04.960 --> 0:07:07.880 tier suburbs and certainly what we might judge as the 0:07:09.000 --> 0:07:11.960 prime or the blue chip suburbs in our inner city 0:07:11.960 --> 0:07:16.160 areas in most capital cities with the exemption of the Act, 0:07:16.680 --> 0:07:20.520 which is performing in a more natural way because unfortunately 0:07:20.520 --> 0:07:24.679 that they policy settings are very anti investment at the moment, 0:07:24.960 --> 0:07:27.400 so they're not getting that investment activity. All the other 0:07:27.400 --> 0:07:30.520 states and territories are enjoying that, but they're certainly not. 0:07:30.840 --> 0:07:33.800 We'll get to that lower end of the market soon. 0:07:33.840 --> 0:07:35.760 I do want to get your thoughts on what might 0:07:35.840 --> 0:07:38.560 happen in that area given the expanded first home buyers 0:07:38.560 --> 0:07:43.240 scheme from the federal government. But can we talk about 0:07:43.320 --> 0:07:47.360 how you identify different areas of a market you've chosen 0:07:47.440 --> 0:07:50.160 So say, we published a story recently in The Australian 0:07:50.440 --> 0:07:52.600 where there are a couple of experts that tipped Perth 0:07:52.800 --> 0:07:55.680 or Southeast Queensland as a sure bet for investors over 0:07:55.680 --> 0:07:58.720 the next twelve months. They are still bullish on Melbourne, 0:07:58.800 --> 0:08:00.360 but there are all the taxes and all the other 0:08:00.400 --> 0:08:01.800 things going there. So to say, if you want a 0:08:01.840 --> 0:08:05.440 sure thing pers or Southeast Queensland. Now say if you 0:08:05.480 --> 0:08:07.840 take that proposition, go, Okay, I'm feeling good about either 0:08:07.880 --> 0:08:10.320 of those markets. How do you then zone in and 0:08:10.360 --> 0:08:12.960 go which area of that particular market should I be 0:08:13.040 --> 0:08:15.720 buying in? Because not all suburbs are created equal. 0:08:16.640 --> 0:08:19.240 Yeah, great question. So what we would then start to 0:08:19.240 --> 0:08:21.520 do is as we go through the macro down into 0:08:21.560 --> 0:08:25.480 the micro, we're starting to then analyze the data that 0:08:25.480 --> 0:08:28.400 we're collecting, and we usually collect that at the suburb level, 0:08:28.800 --> 0:08:30.720 so we're able to get quite a lot of rich 0:08:30.840 --> 0:08:33.719 data at the suburb level around those some of those 0:08:33.800 --> 0:08:36.520 variables that we were talking before about. So we think 0:08:36.880 --> 0:08:40.000 along the lines of auction clearance rates. If it's a 0:08:40.040 --> 0:08:43.640 heavily concentrated auction market, they're not so good if it's 0:08:43.760 --> 0:08:46.600 not a high concentration of auctions happening in that area. 0:08:46.679 --> 0:08:48.040 So just to drop in on that bit, but say, 0:08:48.040 --> 0:08:49.680 if you're going for auction clearance rates, what am I 0:08:49.720 --> 0:08:51.840 looking for? What exactly should I zone in on? 0:08:52.200 --> 0:08:54.560 Yes, So if it is a high area where you 0:08:54.600 --> 0:08:57.800 do get lots of auctions and the clearance rate is 0:08:57.880 --> 0:09:02.280 above seventy percent and moving into five eighty percent, that's 0:09:02.320 --> 0:09:05.880 giving you an immediate market signal in that area. That 0:09:05.960 --> 0:09:09.440 there's more buyers than there are sellers, and so that 0:09:09.600 --> 0:09:12.320 is becoming a selling market and so that's going to put. 0:09:12.160 --> 0:09:15.240 Pressure on prices. So if there is you know, four. 0:09:15.120 --> 0:09:17.920 Or five people or even six, seven, eight people competing 0:09:17.920 --> 0:09:20.600 at auction, you're really clear in terms of you've got 0:09:20.600 --> 0:09:23.640 a really strong signal that that's a market that's under 0:09:23.640 --> 0:09:27.080 pressure in terms of demand, and so that's going to 0:09:27.120 --> 0:09:31.240 potentially force prices higher as more of those people decide 0:09:31.559 --> 0:09:33.199 that they want to get into that location. 0:09:33.600 --> 0:09:36.439 And then a market like Perth that doesn't really have auctions, 0:09:36.559 --> 0:09:38.199 is it a matter of do you sort of sort 0:09:38.000 --> 0:09:39.800 of rock up to some home opens and to see 0:09:39.800 --> 0:09:41.280 how many people are trying to get in? 0:09:41.840 --> 0:09:44.800 That's right, I mean, certainly that's another indicator in terms 0:09:44.800 --> 0:09:47.120 of as you so you know, we don't know that 0:09:47.160 --> 0:09:49.520 if we're if we're doing our research, you know, the 0:09:49.760 --> 0:09:51.959 in our offices as opposed to being in the field. 0:09:52.400 --> 0:09:54.920 The first things we start to look at is things 0:09:55.040 --> 0:09:58.559 like stock on market and then days on market, So 0:09:58.640 --> 0:10:01.960 how long is it taking for those properties to sell 0:10:02.400 --> 0:10:04.920 over time? And if we're seeing the trend coming down, 0:10:05.480 --> 0:10:07.720 and then we then go out and do our field research, 0:10:07.760 --> 0:10:10.600 and yes, to your point. We attend some of those opens, 0:10:10.840 --> 0:10:13.559 we will start to see the number of people going 0:10:13.600 --> 0:10:17.360 through those particular properties. Then we're also tracking things like 0:10:17.760 --> 0:10:20.480 number of offers, number of contracts that are being issued 0:10:20.840 --> 0:10:23.719 on that particular property. So we're starting to get that 0:10:23.840 --> 0:10:27.280 those signals, and those signals are stronger than the general 0:10:27.360 --> 0:10:30.079 noise that we might see in other areas. And then 0:10:30.360 --> 0:10:32.920 what you then do is you munge all of that 0:10:33.040 --> 0:10:35.959 data together and you give certain wetings. 0:10:35.480 --> 0:10:37.320 To some of those variables. So this is the demand 0:10:37.440 --> 0:10:41.080 supply score or demand supply ratio. So you know, you might. 0:10:40.960 --> 0:10:44.440 Measure eight, ten, twelve, fifteen variables and you're putting all 0:10:44.480 --> 0:10:47.080 those together and you've got you've got a belief around. 0:10:47.080 --> 0:10:49.760 You know, if it is a high auction market and 0:10:49.840 --> 0:10:52.080 you know where most properties are sold by auction, and 0:10:52.120 --> 0:10:53.839 you're seeing those high things, you'll give a. 0:10:53.840 --> 0:10:55.360 Higher weighting to that score. 0:10:55.520 --> 0:10:58.720 We score every property in Australia out of one hundred 0:10:59.040 --> 0:11:02.120 and so if we basically then see high scores. 0:11:01.920 --> 0:11:04.160 Then we know that there is an imbalance in that market. 0:11:04.160 --> 0:11:05.800 And then we go and validate that out in the 0:11:05.840 --> 0:11:08.160 field to the research that we were just talking about, 0:11:08.160 --> 0:11:10.560 which is how many people turned up to the open 0:11:10.600 --> 0:11:13.320 for inspections, what number of contracts were issued, And we 0:11:13.360 --> 0:11:16.000 know we're going to be in a competitive market, but 0:11:16.000 --> 0:11:19.880 we're also then confident in that competitive market that the 0:11:20.000 --> 0:11:22.959 level of demand, you know, in terms of the depth 0:11:23.000 --> 0:11:25.640 of that demand is strong enough. And so that's that 0:11:25.760 --> 0:11:28.720 supply demand story. Then we've got to lift our eyes 0:11:28.920 --> 0:11:31.559 back to the question you asked earlier around say Southeast 0:11:31.600 --> 0:11:34.920 Queensland and Western Australia, namely Perth, but even some of 0:11:34.960 --> 0:11:39.520 the commutable areas of inter Perth they're also under good review. 0:11:39.559 --> 0:11:42.000 Because that's when I come back to the whole story 0:11:42.040 --> 0:11:44.880 about economic activity. You know, if you've got a strong 0:11:44.920 --> 0:11:49.320 economy and that strong economy is driving the migration of 0:11:49.360 --> 0:11:52.720 people into that market, then that's when you're going to 0:11:52.720 --> 0:11:55.320 have longevity in regards. 0:11:54.800 --> 0:11:56.360 To your investment returns. 0:11:56.400 --> 0:11:59.760 And you mentioned really earlier when we started recording around 0:12:00.280 --> 0:12:01.880 this idea is how do you know that's going to 0:12:01.880 --> 0:12:04.560 be sustainable? Well, that's the whole you know, that's one 0:12:04.600 --> 0:12:06.679 of the great messages I want the community to take 0:12:06.720 --> 0:12:10.160 away today. If that's all been driven by investors and 0:12:10.240 --> 0:12:14.200 investors only and there's no fundamentals underneath that then you're 0:12:14.240 --> 0:12:16.440 going to be exposed and there's going to be risk 0:12:16.880 --> 0:12:19.000 that you will be potentially buying at the top of 0:12:19.080 --> 0:12:22.720 market and you may experience a downturn in property prices. 0:12:22.760 --> 0:12:26.800 So you need to understand the short term drivers, which 0:12:26.840 --> 0:12:29.960 is the supply demand and that economic stuff, and then 0:12:30.520 --> 0:12:33.000 make sure that the economy is still strong, because if 0:12:33.000 --> 0:12:35.920 it is going to be artificially inflated by investors who 0:12:36.000 --> 0:12:40.560 are ill experienced, or they're being coached by enthusiastic buyers 0:12:40.600 --> 0:12:43.520 agents who really don't know what they're doing, and they're 0:12:43.559 --> 0:12:46.840 taking you into these regional markets or some of these 0:12:46.840 --> 0:12:50.160 types of markets, you do run the risk of basically 0:12:50.240 --> 0:12:53.720 buying into a dud market that will show its face 0:12:54.120 --> 0:12:56.319 as the tide goes out over the next five years. 0:12:56.480 --> 0:12:58.360 I'll ask you about buyers agents in the Sex But 0:12:58.679 --> 0:13:02.199 just further on that, are you talking about the economy 0:13:02.200 --> 0:13:05.160 for the state or the city in question. Say you've 0:13:05.160 --> 0:13:07.559 decided it's Southeast Queensland or state it's Perth, and you're 0:13:07.559 --> 0:13:09.600 happy about the profile for the next whatever it might 0:13:09.640 --> 0:13:12.240 be five to ten years. I can imagine I wouldn't 0:13:12.240 --> 0:13:13.640 be the only person to think this, that you go 0:13:13.679 --> 0:13:15.320 into a suburb and it's running hot, and I would 0:13:15.360 --> 0:13:17.480 look left and right that there's some suburbs sort of 0:13:17.520 --> 0:13:20.160 around the fringe and they look better value to me. 0:13:20.880 --> 0:13:22.320 But what do I need to be careful about. 0:13:22.840 --> 0:13:26.000 Well, let's also introduce another concept which I think is 0:13:26.000 --> 0:13:30.520 a really important concept, and that is investors in residential 0:13:30.559 --> 0:13:34.200 property shouldn't be the price maker, they should be the 0:13:34.200 --> 0:13:38.199 price taker. So ultimately, what you're looking for there is 0:13:38.400 --> 0:13:42.280 that the fundamentals are grounded in owner occupiers wanting to 0:13:42.320 --> 0:13:44.880 live there. If you don't have that, again. 0:13:45.080 --> 0:13:48.200 You're giving yourself the risk of well, this has all 0:13:48.240 --> 0:13:53.160 just been in speculative returns because someone picked a hot 0:13:53.160 --> 0:13:56.120 spot and half a dozen buyers agents all agreed and 0:13:56.160 --> 0:13:58.360 they all went in there and artificially inflated the price. 0:13:58.880 --> 0:14:01.240 So it does come back to what you were saying before. 0:14:01.600 --> 0:14:05.000 I'm looking at the economic activity that's happening in that center. 0:14:05.400 --> 0:14:08.920 So if I'm buying in Perth, well, the economy, it's 0:14:08.960 --> 0:14:11.600 the best economy in the country. The government's got very 0:14:11.600 --> 0:14:14.319 low debt in comparison to other states and territories. 0:14:14.760 --> 0:14:19.000 The incomes enjoyed there are the second highest across the country. 0:14:18.679 --> 0:14:22.880 Per capita, and the livability of living in a city 0:14:23.040 --> 0:14:26.080 like Perth is very high. So you've got and you're 0:14:26.120 --> 0:14:29.760 starting to see a stronger diversified economy, and the icing 0:14:29.800 --> 0:14:33.840 on the cake, their cost of electricity through their gas 0:14:34.000 --> 0:14:35.960 and their cost of gas and all of those inputs 0:14:36.360 --> 0:14:38.440 is also at record low levels. 0:14:38.560 --> 0:14:40.920 But it has been boom bust Perth. People were listening 0:14:40.960 --> 0:14:42.280 to this sound. That's all very well and good that 0:14:42.400 --> 0:14:44.000 it sounds good now, but you know. 0:14:44.280 --> 0:14:47.280 Perth's already had a double digit run and it's probably 0:14:47.280 --> 0:14:49.960 moved about thirty or forty percent as is already, and 0:14:50.000 --> 0:14:53.520 then everyone's sort of saying Perth done well. It's still 0:14:53.560 --> 0:14:55.880 performing in the top two. Darwin is the number one 0:14:55.880 --> 0:14:58.400 capital city at the moment, but Perth's a strong second. 0:14:58.920 --> 0:15:01.960 And that's because again they didn't look and lift their eyes. 0:15:02.280 --> 0:15:05.520 These runs can go seventy eighty percent in some cases, 0:15:05.720 --> 0:15:08.000 and that's because the fundamentals are good. 0:15:08.280 --> 0:15:09.040 Whereas if I. 0:15:08.960 --> 0:15:13.600 Take an example of maybe Townsill, Okay, which is a 0:15:13.640 --> 0:15:16.640 regional town, there's no easy to commute down into Brisbane 0:15:16.680 --> 0:15:18.360 for a job. You can't commute there for the day, 0:15:18.680 --> 0:15:20.480 so you've got to then start to say, well, what's 0:15:20.520 --> 0:15:24.760 happening in towns will from an economic perspective, because if 0:15:24.880 --> 0:15:27.200 I've only gone in there because I've been told that 0:15:27.240 --> 0:15:29.680 rents are really high, and so I'll go in there 0:15:29.720 --> 0:15:31.720 and compete against all the other investors who are. 0:15:31.680 --> 0:15:34.720 Going in there, what's the fundamentals. 0:15:33.920 --> 0:15:36.600 Like if you don't have that economic activity, well, where 0:15:36.640 --> 0:15:38.640 are your renters going to come from? And what if 0:15:38.640 --> 0:15:40.560 they don't have the jobs, why are they going to 0:15:40.600 --> 0:15:44.080 stay there? They'll just relocate to another town. So that's 0:15:44.120 --> 0:15:47.280 why it really is critical that you need to understand 0:15:47.320 --> 0:15:50.560 what are those medium to long term drivers to get 0:15:50.560 --> 0:15:51.440 into those markets. 0:15:51.480 --> 0:15:53.040 Now back to Perth, you. 0:15:53.000 --> 0:15:55.080 Were saying, Yep, it's a you know, it's basically a 0:15:55.080 --> 0:15:57.880 one trick pony town being a mining town. All the 0:15:57.960 --> 0:16:00.440 reality is is, you know, that's not necessarily the case. 0:16:00.440 --> 0:16:02.720 We've got the Orchest deal coming in there. 0:16:03.200 --> 0:16:06.000 We've got shipbuilding, we've got industry that's running at a 0:16:06.080 --> 0:16:09.320 competitive advantage compared to the East Coast, and so if 0:16:09.320 --> 0:16:12.200 I'm the multinational and I want to potentially set up there, 0:16:12.480 --> 0:16:15.360 the conditions are better in Perth than they certainly are 0:16:15.400 --> 0:16:18.160 in Melbourne. An ex example in terms of attracting me 0:16:18.280 --> 0:16:20.720 to want to set and make that investment up and 0:16:20.760 --> 0:16:23.440 then to basically bring the jobs into that particular market. 0:16:23.480 --> 0:16:27.400 So now the fundamentals economically for Perth are really sound, 0:16:27.400 --> 0:16:29.000 at least for the next five or ten years. 0:16:29.160 --> 0:16:33.280 For anyone listening, I promise I haven't paid ben to Perth. 0:16:33.440 --> 0:16:36.760 It is my favorite city. It is the city I'm based. 0:16:36.520 --> 0:16:38.360 And I love it and world champion and I live 0:16:38.400 --> 0:16:39.160 in Melbourne. 0:16:39.520 --> 0:16:41.080 We've got to head to a break soon. But I 0:16:41.080 --> 0:16:43.000 do want to get that sense of whether you should 0:16:43.080 --> 0:16:45.640 be looking at the suburbs across that are cheaper or 0:16:45.680 --> 0:16:47.560 if you run the risk. It's our idea of if 0:16:47.560 --> 0:16:49.960 you're buying an investment property you want to maximize your dollar. 0:16:50.440 --> 0:16:51.920 Is there any risk to that or is it actually 0:16:51.920 --> 0:16:54.080 a smart strategy to say this suburb is on fire 0:16:54.120 --> 0:16:56.160 but you just sort of look, you know, I don't 0:16:56.160 --> 0:16:58.760 know as five case circumference or something. What's the metrics 0:16:58.800 --> 0:16:59.560 that you would use. 0:17:00.080 --> 0:17:00.960 At the end of the day. 0:17:01.040 --> 0:17:04.359 The land is what we're trying to hold long term. 0:17:04.359 --> 0:17:06.720 That's where the appreciation happened. It's not in the buildings, 0:17:06.800 --> 0:17:09.199 it's in the land. And so let me introduce you 0:17:09.240 --> 0:17:11.920 to other concepts, which is human interest in human behavior. 0:17:12.359 --> 0:17:15.960 So in some respects, a lot of the land carry status. 0:17:16.359 --> 0:17:17.320 You know. 0:17:17.960 --> 0:17:19.879 One of the interesting things about property in the way 0:17:19.880 --> 0:17:22.919 always say it's why it's owner occupier appeal because they 0:17:23.000 --> 0:17:24.399 buy where their heart's not their heads. 0:17:24.680 --> 0:17:25.800 So the reality is. 0:17:25.960 --> 0:17:29.119 When you find those blue chip locations, that is all 0:17:29.160 --> 0:17:32.320 about my success and showcasing my success. So how do 0:17:32.400 --> 0:17:35.000 we show off, you know, aspiration, We show it off 0:17:35.000 --> 0:17:37.400 in the houses that we own, the cars that we drive, 0:17:37.480 --> 0:17:40.680 the jewelry, et cetera. And so you do have this 0:17:40.920 --> 0:17:44.639 aspirational element of living in the best suburbs around that 0:17:44.760 --> 0:17:48.320 and so ultimately those suburbs come at a premium because 0:17:48.320 --> 0:17:52.120 there's exclusivity, and that's where that land value appreciates over time. 0:17:52.160 --> 0:17:54.399 So if you're in a fortunate position where you can 0:17:54.440 --> 0:17:58.480 potentially buy and hold and investment property in those higher markets, 0:17:58.800 --> 0:18:01.879 you are going to pretendctually see strong the land appreciation 0:18:02.000 --> 0:18:06.840 because ultimately that is all about how humans activate in 0:18:06.880 --> 0:18:09.440 the ecology of their lives and the biology of who 0:18:09.480 --> 0:18:13.080 we are as living in villages. So that is true 0:18:13.280 --> 0:18:16.040 if your budget doesn't allow for that, and the income 0:18:16.119 --> 0:18:18.520 off the rental needs to be an important part of 0:18:18.560 --> 0:18:21.280 sustaining the holding of that property, then you're going to 0:18:21.280 --> 0:18:24.560 move out to the mid tier suburbs or into the 0:18:24.600 --> 0:18:27.760 sort of outer fringes of the market. And that's how 0:18:27.840 --> 0:18:30.960 the land is priced. It's ultimately priced from a ripple 0:18:31.000 --> 0:18:34.520 effect where the most expensive land is located closer in, 0:18:34.960 --> 0:18:37.280 and so it's looking at that land and looking at 0:18:37.320 --> 0:18:40.720 its future productive use in terms of what it can do. 0:18:41.080 --> 0:18:43.639 A single home can potentially be a duplex in the future, 0:18:43.680 --> 0:18:45.439 or it could even be a block of flat or 0:18:45.480 --> 0:18:48.359 some townhousers. So that future productive use of that land 0:18:48.400 --> 0:18:51.440 in that more exclusive area is potentially going to generate 0:18:51.480 --> 0:18:55.640 you a longer term return over the decades. But of course, 0:18:55.680 --> 0:18:57.919 if you want to invest, it's around your budget. So 0:18:57.920 --> 0:19:00.359 if your budget allows you to take you into the 0:19:00.400 --> 0:19:03.000 outer suburbs, then we still want to make sure that 0:19:03.119 --> 0:19:05.960 there's low scarcity in terms of not a lot of 0:19:06.040 --> 0:19:07.080 vacant land around you. 0:19:07.680 --> 0:19:09.960 Okay, good tips, all right, Ben. When we come back 0:19:09.960 --> 0:19:12.080 from the break, we'll have a chat about what you 0:19:12.080 --> 0:19:14.440 think will happen to the market now that the government 0:19:14.560 --> 0:19:18.359 is expanding the first Home Buyer scheme. I'll get your 0:19:18.560 --> 0:19:21.960 top tips where you think the best property investments will 0:19:22.000 --> 0:19:24.480 be over the next year. And also I wouldn't mind 0:19:24.800 --> 0:19:27.040 your thoughts on some of the common mistakes people make 0:19:27.280 --> 0:19:29.560 with property investing. We'll have that chat when we come back. 0:19:39.800 --> 0:19:42.040 Thanks for joining me on the money Puzzle. I'm your 0:19:42.040 --> 0:19:45.200 host Julianne Sprague, a wealth editor at The Australian, filling 0:19:45.200 --> 0:19:47.760 in for James Kirby, who's on a well deserved break. 0:19:48.080 --> 0:19:51.280 I'm chatting with Benett Kingsley, a property expert. You can 0:19:51.320 --> 0:19:55.520 find him at Empower Wealth and at the Property Couch podcast. 0:19:55.760 --> 0:19:58.240