Catch the Next Property Wave

Transcription

1 Catch the Next Property Wave A special report on the Australian property market By Michael Yardney

2 Meet Michael Yardney... ALL YOU NEED TO KNOW ABOUT BUYING AND SELLING YOUR HOME INCLUDING 19 WAYS OF GETT ING INTO YOUR DREAM HOM E SOONER Michael & Pamela Yardney with Bronwyn Davis M ichael Yardney is a successful Melbourne based property developer and property investor. As director of Metropole Property Investment Strategists, his opinions as a property commentator are highly sought after and frequently quoted in the press. Michael is publisher of Australia s leading property investment e-magazine Property Investment Update, with more than 28,000 subscribers. He is author of the best selling book How to Grow a Multi Million Dollar Property Portfolio in your spare time, and co author of All You Need to Know about Buying & Selling Your Home. Many regard Michael as Australia s leading authority in wealth creation through property investment. His opinions as a property commentator have recently been featured in the following publications: The Bulletin, Money, Australian Property Investor, Wealth Creator, Your Mortgage and National Accountant magazines The Australian, Australian Financial Review, Age, Sydney Morning Herald, Herald Sun, Western Australian and Darwin Times newspapers Domain.com.au; Property Review and Property Investment Update e-magazines Michael has been interviewed on numerous radio stations and has been a keynote speaker at many major property conferences in Australia and SE Asia including: The World Property Summits in Malaysia and Thailand National Australia Bank s State of the Property Market Seminars The Melbourne, Sydney, Perth & Brisbane Property Expos The Real World Real Estate workshop Law and Finance s Property Development Seminar Wealth Creator Magazine property seminars New Zealand Property Investors Federation Annual Seminar 2007 Michael bought his first investment property over 30 years ago when he was in his early 20 s; without a deposit and not understanding the rules of the game. He then went on to build a multi million dollar investment property portfolio in his spare time. In 1979 he established Metropole Properties, which has become one of Australia s leading firms of independent property investment strategists with offices in Melbourne and Brisbane. Over the years the team at Metropole has bought, sold, advised, invested in, built and project managed hundreds of millions of dollars worth of property transactions creating wealth for their clients.

3 Is it where to invest, or when? A special report... Catch the Next Property Wave There are many key components to being a successful property investor. Michael Yardney explains why timing can be the most important of all... Think of investors as surfers. First they view the surf from the beach, armed with board and wetsuit, and carrying a mixture of envy and awe, and perhaps a tinge of fear. They eventually summon the courage to paddle out through the shore break, and look for the right location where others wait, many with more experience. The smart surfer waits, watching the patterns, and then makes the big commitment: they start moving, selecting a break that seems promising, and rides it to shore. This is a beautiful, exhilarating experience, and it ultimately relies on commitment as does success in property investment. Would you like to become rich through investing in real estate? Then you are going to have to master the art of timing. And, currently, the timing on the east coast of Australia, particularly in the Melbourne and Brisbane markets, is ideal to take advantage of the next property cycle it s the perfect time to catch the next wave. I have been presenting at seminars throughout Australia for some years, and I often ask attendees what they feel is the most important factor in selecting a top performing investment property: What you buy or where you buy or when you buy? By what you buy I mean a new property instead of an established property. Or do you buy a house or do you buy an apartment. When I ask where you buy I m talking about the old story of location, location, location. And when I mention when you buy I m talking about your timing in the property cycle. Very few people raise their hand for what you buy. A few more admit to when you buy. By far the bulk of attendees at every seminar believe that location is most critical factor in choosing a top performing property investment. Before I tell them my thoughts I always tease the audience by suggesting it is possible to get all three right if they buy my book, How to Grow a Multi-Million Dollar Property Portfolio in your Spare Time. I explain how I have an extensive section on each to help them maximise their opportunities.) But if I had to choose just one, I would choose timing when you buy over the others, every time. Let me explain with an example... Go back a few years, perhaps to Australia s property markets were booming. Now imagine you had $400,000 to invest in property. The big question is this: where would you invest? Michael Yardney is a Director of Metropole Property Investment Strategists. You could probably have bought a reasonable property in the booming Sydney market. You probably could have bought a significant property in Melbourne or Brisbane, or several in one of the smaller mainland capital cities. Of course, you could have bought a number of regional properties (since they would have been much cheaper) or even four or five properties in Tasmania. Let s say you chose a Sydney suburb. Australia s biggest city; it s a huge metropolis with terrific infrastructure, strong immigration, business was booming, and the property market was on a high. For all of these reasons, all of them justifiable, you chose a great property in a great Sydney location. Just a few months later in November 2003, with interest rates rising, markets peaked in Sydney, Melbourne and Brisbane. Let s come back to now, mid- 2007, and the value of your Sydney property would be 10, 15 or maybe even 20 per cent less than what you paid for it. This might sound extreme, but those who entered the market as the cycle was at a high four years ago would be facing this scenario. So much for buying in a top location. PROPERTY INVESTMENT REPORT I 1

4 If you had invested in Melbourne or Brisbane, your property s value would have increased through to Christmas 2003, then stagnated for a couple of years. About mid 2006, the markets started moving in both cities, so you might have enjoyed about 10 to 15 per cent growth. That s an encouraging recent appreciation, but over the journey of fours years of investment nothing to get too excited about. If you had chosen Perth and Darwin, for instance, both of which were pretty flat and lifeless, when you purchased your property, it s likely your property s value would have increased two-fold or three-fold. You might even have used your increased equity to make more purchases. But you cannot expect much growth in the coming months, let alone years, with both markets coming off the boil. Both Danny and Michael were professionals who had bought their homes a few years ago. Yet both had different views on the benefits of buying property as an investment. Both stories relate to my friends family homes and not investment properties but the lessons are there to be learned. Their views were so different that you would wonder if they were talking about the same thing. Danny, a solicitor, was a partner in a large city law firm. In the late 1980s the practice was booming and many of his clients were making a fortune out of property developing and speculating. Danny was doing very well from all the legal work for his clients and he had even made a tidy sum by being a silent partner in a few small development projects. In late 1988 both he and his wife felt that they would like to move there were a number of other bidders willing to bid almost as much for their dream house. Well Danny and his family loved their new house and enjoyed the pool and the nearby park, where they would frequently walk the dog. When the recession hit in the early 1990s and property prices started to drop and solicitor s incomes started to decline Danny started to have a little difficulty meeting his mortgage repayments. He considered selling the house, but when agents advised him he would probably only get around $800,000 for it, he just kept paying the monthly mortgage payments to the bank. In 1993, when interest rates dropped from the highs of the late 1980s, Danny refinanced. His plan was to keep up the mortgage payments until the value of his house returned to its previous level, then he There is no doubt in my mind that timing your purchases correctly is critical to creating the short-term growth you need. Even if you had purchased those four little cheapy properties in Tasmania your investment portfolio would have performed better than buying in a prime location in Sydney. What does all of the above illustrate? There is no doubt in my mind that, despite my insistence on buying in top locations more of which later timing in your purchases correctly taking into account our property cycles is critical to creating the short term growth you need to allow you to build a substantial property portfolio. No, there is nothing new about this. I learned the same lesson many years ago, having now experienced five property cycles through my investing life. In my book, How to Grow a Multi- Million Dollar Property Portfolio in your Spare Time. I give the story of Danny and Michael, who tell a very similar story about timing. Allow me to recount it: into a new house. They had bought their family home about seven years earlier at an excellent price earlier from a builder who was in financial problems. Now that property prices had risen considerably, they had built up quite some equity in it. Danny and his wife fell in love with the first house that they inspected in the prestige Melbourne suburb of Toorak. It was architect-designed, had a swimming pool (which was ideal for their two boys) and had been featured in Vogue. In fact, that issue of the magazine, opened to the appropriate page, had been left on display on the coffee table when the house was open for inspection prior to auction. At the auction they had a long bidding war with a couple of other keen purchasers and eventually bought the house for $930,000. This was $80,000 more than the limit they had set for themselves, but they were comforted by the fact that would decide if he would sell or not. In 1996, when his three-year mortgage term expired, Danny again tried to sell his house, but the best price he achieved at auction was $650,000. He could not accept this price as it would mean he would have lost well over $300,000 in capital value from his house (considering the initial purchase price and purchasing costs) and his six years of mortgage payments would have all gone down the drain. Danny kept his house on the market for more than a year with various agents, but did not get any offers that he would accept. When I spoke to him in late 1998, he had just sold his house for a price close to $700,000. He had lost more than $250,000 in capital over the 10 years, as well as all the mortgage payments and all the rates and taxes. He was sure that property was a bad investment and felt that he would be better off renting a house for the rest of his life, leaving all the troubles of property ownership to his landlord. 2 I PROPERTY INVESTMENT REPORT

5 Contrast this to the story I heard from Michael, a successful ENT surgeon only a few days after Danny had cried on my shoulder. He had also bought his family home in the suburb of Toorak, but he bought his in 1993, about four years after Danny. I was visiting my friend Michael because I had an ear infection and as usual the topic of conversation turned to real estate investment, as he knew my interest in the subject. Michael explained to me that he was keen to buy some more property investments he was buoyed by the huge capital gain he had made from the family home he bought in Toorak. He reminded me that when he bought the house in was in the middle of the recession we had to have, when property prices were low and nobody was keen to buy luxury houses. He had to spent about $100,000 improving house, but it was now was worth about $2,000,000. Almost double what he paid for it five years earlier! He told me that agents regularly approach him with buyers keen to purchase his house, and how pleased he was that he had the courage to buy his house when no-one else was interested in luxury property He admitted that today he couldn t afford to buy into the luxury suburb of Toorak if he hadn t taken those brave steps to go against the crowd a few years earlier. So what was so different about these two property purchases? They were similarly-priced homes in what most people would class a top location. Yet Danny had lost hundreds of thousands of dollars and Michael had made close to one million dollars. The difference was the timing. Danny had bought at the top of the boom, when prices were at their peak. In fact, he overpaid for it at the time and its value has still not reached its previous high levels of the late 1980s. On the other hand, Michael had bought his house after property prices had dropped per cent, at the depths of the recession. Since then, others have seen the intrinsic value of similar undervalued houses and pushed up property prices, allowing Michael to sit on (or sleep in) a huge unrealised capital gain. What this story tells you is that, to become a successful property investor, you must act at the right time to identify and take advantage of a trend. Residential property is a long-term, low-yield, high-growth investment, with appropriate timing always a key driver. It s not a get-rich-quick scheme. So back to you, and your decision to purchase in that Sydney suburb. Have faith, it will perform for you in the long-term. I frequently remind readers that, on average, well located properties in our capital cities double in value every 7-10 years, and this trend is particularly true of the better, inner-city suburbs. But as a property investor you also must keep an eye out for the opportunity to take advantage of the medium- to short-term trends. Some trends are complex. You have much to consider: market cycles, demographics, supply and demand, immigration there is no point in placing your faith in one component of these, as they can all impact on any investment strategy. To make sustained success in real estate you need to understand and recognise these trends, grasp the mindset required to strike at the right time, and build the right team of people around you. I guess what I am saying is that to become a successful property investor is, you need: 1. The right knowledge there is so much information out there about how to become wealthy in property the difficulty is sifting amongst the different theories to find some substance. Listen to someone who has achieved what you want to achieve not just a theorist who writes books or conducts seminars. 2. The right system find a system or strategy that is easily reproducible. My system is buying high growth properties in top locations and at a fair price and then adding value to them. 3. The correct mindset INVESTORS: WHY USE METROPOLE BUYER S AGENCY? BECAUSE YOU CAN T AFFORD NOT TO! With all the property marketers, developers and agents out there looking after their own interests, it s a great feeling having an agent working for you... and not the seller. We have offices in Melbourne and Brisbane, and we have access to every property on the market. Our independent network of solicitors, accountants and consultants ensures you solid, impartial advice. Call us today on to discuss your options. Metropole Property Investment Stategists KNOWN I PROVEN I TRUSTED PROPERTY INVESTMENT REPORT I 3

6 successful property investors think differently to the average investor and by doing so they attract wealth. In contrast most Australian act and think in a way that repels wealth. I discuss these concepts at length in my Mentorship Program 4. The right network of people around you successful investors have learned to leverage their time by not doing it all themselves. They build a good team around them, be they accountants, solicitors, property investment strategists, etc., I always say that if you re smartest person in your team, you re in trouble. Back to the surf analogy for a moment. To catch the right wave the right way, and glide into the beach, you also have to recognise everything from current and undertows to (dare I use the term in real estate), the sharks. Real estate trends operate in much the same way as currents. Fight them and you could drown in debt. The good news that I believe they are working well for us now. A huge opportunity exists as I write this. Australia is on the cusp of a momentous property wave that will be underpinned by strong immigration and a major change in our demographics, creating huge demand for housing. Yes, there is no reason why property values won t double again in 7-10 years, as they have in all previous property cycles. And over those next 10 years as property values double, the properties won t care who owns them, and the banks who lend the money against the security of these properties won t share in the growth. But there will be a whole new generation of millionaires in Australia, property investors who have taken advantage of the forthcoming property boom. The chance to get set like this, at the beginning of a property cycle to catch the next wave doesn t occur more often than two or three times in your adult lifetime. No, these big waves don t come along often. Why am I so confident that we will have another property boom? Well... it has all to do with supply and demand. Strong demand from our population growth and our changing demographics and limited supply from the shortage of properties. This combines with strong immigration, full employment, stable interest rates and a buoyant economy all ensure that the next property boom will the biggest in our history. Due to increasing immigration, an ageing population and an increase in the number of births, over the next decade Australia is going to experience huge population growth. Combine this with our demographic changes the way we live and demand for housing will be even stronger. You see with an ageing population, one-in-two 50-yearolds divorcing and more young singles living alone, fewer people are living in each dwelling nowadays. This means we need more dwellings to house our population. While we are experiencing an increased demand for housing, there is a shortfall in the supply of residential properties. Ideally, 169,000 new properties should come into the market each year. In the last couple of years, as markets have stagnated or slumped (depending on which city you live in), the number of new dwellings built has averaged only 146,300. Housing Industry Association numbers tell us that the shortfall started in 2005, the end of which there was about the right overall balance. By the end of 2008, however, the shortfall of properties will be north of 30,000. Owner-occupiers are driving prices up due to this shortage, and there is a very positive knock-on effect for investors; we are currently experiencing the lowest vacancy rate in history, across all of Australia. That is on current figures. Consider now that our population growth is about to receive a major boost. Australian Bureau of Statistics figures support government targets of 135,000 immigrants scheduled CONSIDERING AN INVESTMENT PROPERTY? Whether you are just getting started in property investment, or are looking to increase your existing portfolio, you should attend one of our investor briefings in Melbourne or Brisbane, where our Buyer s Advocates reveal their property buying strategies. Please call to reserve your place at one of our FREE briefings. Delivered by Jack Henderson in Melbourne and George Kafantaris, these 90-minute sessions are for limited numbers only. Learn from our experts, who share their thoughts on the current property markets and explain how they source top-performing properties with strong potential. And discover how Jack and George s years of experience as an estate agents level the playing fields when they act as buyer s advocates to find great investments for his clients. To attend, or for more information, please call I PROPERTY INVESTMENT REPORT

7 to arrive each year. But the Federal government has recognised that this is simply not enough. The workforce is shrinking as our population ages, and a glaring skills shortage is becoming apparent in certain manufacturing sectors. The quality of immigrant is significant in this discussion, too. They come from overseas largely requiring sufficient money and job prospects indeed, many move for the opportunity: historically low unemployment (4.4 per cent), positive GDP trend (up to 2.9 per cent in 2007), low interest rates (a cash rate of 6.25 per cent) and a resource-driven economy that shows little sign of wavering in the medium to long-term. Most of the immigrants will move to our capital cities, and many will want to buy houses, yet there is a shortage. This will push property cycles even higher, to the point where the next boom will be our biggest ever. According to the latest Australian Bureau of Statistics figures, Sydney will have to find room for an extra 390,000 people in the next 10 years or so. Over the same period Melbourne s influx will measure up at 350,000; Perth 220,000; and more than half a million people will move to South East Queensland, with about 60 per cent of those expected to settle in Brisbane. This will mean that more than 50 per cent of our population will live in the three biggest capital cities, Sydney, Melbourne and Brisbane. As a result, in the next decade more people will come to each of our capital cities than in the past 15. If you had been a visitor to an Australian capital city 10 years ago, and you came back tomorrow, you would not recognise most of them (except, of course, the key landmarks such as the Opera House or the MCG and even some of them have changed dramatically!) With this huge influx of people and the change in the way we live, our cities will look vastly different in 10 years time. Hopefully you have a better understanding of how supply and demand will create the next wave of the property cycle. Now let s look at the type of properties that will be in demand by both owner-occupiers and investors so you can take advantage of the next property wave. In a nutshell, our changing demographics means there will be more demand for smaller housing. More older Australians, more divorces and more young singles are just some of the factors leading to smaller households. Since 1990, the average number of people per household has shrunk from 2.75 people per household to less than 2.5 people per household. Estimates suggest this will lead to the creation of half a million more households just to house the same number of people. It is important to understand that one of the most significant factors leading to demand for new dwellings is new household formation and new homes will be forming at a rate outstripping the traditional trend required by population growth. Why? New family units are forming. Here s an example: my wife Pam and I had six children between us. What was once two households (we were each married before) has since become six, as our children have grown up and left home. Single parent households are on the rise; by 2026, 65 per cent of out homes will be two people or less, and 78 per cent will be three or fewer. This again points to an increasing demand for smaller properties, especially medium density apartments and townhouses. Property Investors: Get Insider Secrets from your Millionaire Mentor This top-selling book is written for both the beginners as well as the advanced property investors and explains how our next property boom will be Australia s biggest... and possibly last. Learn step-by-step from expert property commentator Michael Yardney how to take advantage of the next property boom, plus many advanced property strategies. Available at selected bookstores, or order yours online at

8 What about the Baby Boomers? lot has been written on the Baby A Boomers and how they are going to affect the housing markets, particularly as many are heading towards retirement. But, unlike their parents, most Baby Boomers will not be content to sit on the front porch and watch the world go by. They intend to stay as much a part of it as they can. There are about 4.1 million Baby Boomers in Australia at present, but it s not the volume of them that makes them move the markets it is mainly that they represent a 60 per cent increase on the frugal generation that came before them. Their parents, the pre-war generation (which means they were communities or into retirement villages. Many are instead thinking of buying an investment property to prop up their retirement, or to buy a vacation property to rent out part-time. This means that the sun, sand and surf of the coast the vacation spots of today may become the major retirement areas of the future. Many Boomers are looking for sea-change locations close to golf, and not far from major highways, so they are in commuting distance to major urban centres. The demand of the first wave of Baby Boomers heading towards the coast to find their second dream home will make it tougher for those coming after. The high demand has already pushed up prices in coastal towns and strained local infrastructure. For more than 25 years the Baby The problem with all this is that planning restrictions in the suburbs, where most Baby Boomers are going to want to live, are going to push up prices of townhouses. This, plus the higher construction costs of new dwellings, means downsizers will not have much left over to live on as they hoped. Similarly. those who thought they might move to sea change locations will have to think again. The high prices in most desirable coastal locations will mean that many Baby Boomers will not be able to afford to move there. Considering 150,000 Boomers will reach retirement age each year, even if 25 per cent of them decide to downsize, that will still have a significant impact on the market. These empty-nesters will look for infill to medium density development in established suburbs. Others will For more than 25 years the Baby Boomers have driven our property markets, and their retirement isn t going to change that. born between ), number 2.5 million. In the 1960s and 1970s the Boomers parents built their houses but everything that was built for that generation had to be increased by 60 per cent to accommodate the children. The economy had to be geared up to cope with this avalanche of 4.1 million people. It needed more houses, schools, shopping centres and land. In time, the Boomers bought their first homes. They then upgraded these houses to accommodate their families. They account for about 45 per cent of our property market today and it s suggested that in 10 years time, as retirees, they will account for 50 per cent of our property market. It is likely that, by then, around 150,000 will be retiring each year. This equates to somewhere between 75,000 and 150,000 households. But the Boomers are not looking to buy into over 55s 6 I PROPERTY INVESTMENT REPORT Boomers have driven our property markets; their impending retirement isn t going to change that. Property investors should keep this in mind because areas that will be popular with Baby Boomers are likely to grow strongly in value over the years. This generation will soon be looking for a new beginning. Many are selling their homes, which they have now outgrown, as their children have left. The majority want to live in the same locality, in the same suburbs or nearby, but in modern, secure, medium density dwellings such as townhouses. They want to stay near their friends and their doctor and hairdresser. Since they aspire to good accommodation for their retirement lifestyles, this will usually mean three large bedrooms (so friends and grandchildren can stay), a large, open-plan living area and large storage space. They will look for security, modern wiring and good designer finishes. figure that, as construction costs have gone up, there is not a lot of point in selling their rambling house if the same amount of money will only get a smaller house on a smaller block. Another consideration is that many empty-nesters will not retire. Many cannot afford to; they will stay in their jobs longer even if it s only one or two days a week. The wealthier Baby Boomers are going to continue on the trend of buying holiday homes within one or two hours drive of the capital city. They will want the lifestyle but not want to spend an enormous amount of time driving. Others are looking for an investment as well as a retirement home. They are going to look for a property that will act as a retirement home in the future and will also be a place that their children and grandchildren love to visit. If you want to take advantage of the next wave and outperform the property markets, invest with the Baby Boomers in mind.

9 What is the next Hot Spot? know many investors will I become distracted from their plan or strategy for wealth creation as the next property wave rolls on by looking for the next property hot spot or property investment fad. We live in a world with distractions everywhere. It is easy to get distracted by bad advice, get rich schemes, unproven investment concepts, the latest money making venture. Then there are the inevitable negative thinkers who show up in your life that kill your chances for success as a real estate investor if you let them. I remember speaking to a property investor who was considering buying another property part. Remember it s not your job to get them to change (they probably never will). It s your role to keep yourself on track, then once they see the success that you re achieving they may change their outlook. Stay focused on your proven and chosen investment system. You do have a system for your investments don t you? If not I suggest you read my book How to Grow a Multi Million Dollar Property Portfolio in your spare time, where I will give you a system, a blueprint to your financial success. Staying focused is also difficult when you get the other extreme of the distractions and messages out there from many get rich quick schemes and so called property gurus. My recommended property investment strategy is to invest in prime real estate, add value where you value through refurbishments, renovations or redevelopments. Pretty quickly you ll experience captal growth. What about investing where there is going to be new infrastructure? I know some investors are thinking that the State governments in Queensland, New South Wales and Victoria are spending billions upgrading their infrastructure, so it is a good idea to invest where the newly planned freeways or train lines will end. Well maybe... but maybe not! While new infrastructure may make outer suburbs more accessible, the majority of people will still want to live in the inner and middle ring suburbs or near the CBD or near water. Of course, some investors It is easy to get distracted by bad advice, get rich quick schemes, unproven investment concepts and money-making ventures. as they had plenty of equity in her family home. She knew how well property investment works because the one investment property she owned had increased in value over the years and her house had also grown in value considerably. But she decided against investing because her sister told her that it is a bad time to investment, the property market has slumped and property prices won t go up for a long time. When I asked how many investment properties her sister owned she was told none. In fact she didn t even own a house she was a tenant. It just goes to show you have to be careful to whom you listen. The sad part is the biggest negative thinkers you are going to run into are going to be your closest friends and relatives. So, in many cases, it s not easy to ignore their negativity. It takes some effort on your can and wait for the magic of time and compounding to make you wealthy. The problem for many investors is this strategy is boring and some consider it slow. But successful property investment is a long-term affair. Many investors look for the latest fad such as overseas investing or try to finding the next hot spot or speculative growth areas. Other investors consider other types of investments with potentially higher returns. When you are tempted to do this remind yourself that real estate has been the number one long term multi millionaire maker throughout Australia s history, yet most people that speculate in the latest fads have not made much money. You don t have to look for the latest fads or the latest speculative growth areas if you create your own capital growth. Here s an example: buy a good property at a fair price, then add will want to speculate and buy property close to new infrastructure, especially freeways and bypass roads. It is important that they understand that these changes have three stages of impact on property values: 1. The first comes when new plans are announced. Be careful. I ve seen plenty of investors jump in on the strength of an announcement like this, only to see environmental or costs issues, or even a change of government, sink these projects. 2. The second arrives when construction of the new project starts. Something physical like construction always gets investors hearts racing. 3. The third is completion, as people see the evidence of the effect of the infrastructure (quicker access to the city, for instance). Buying on the back of this is not a strategy we recommend. I always look for infrastructure as a bonus; never as a core reason to invest. PROPERTY INVESTMENT REPORT I 7

10 R ather than looking for the next speculative hot spot follow the long-term trend, and learn from history. In previous cycles, as is becoming evident in this one, the inner city and more affluent suburbs will start to grow first. Call it a cycle within a cycle, if you like. Currently as property values increase, the shortage of properties on the market is ensuring some inner city properties especially in Melbourne and Brisbane, has increased dramatically in value. This creates a ripple into surrounding and nearby suburbs, which are often separated by only a main road and sometimes an historical demographic hangover. To better explain the ripple effect, let me use the south-eastern suburb of Bentleigh, in Melbourne, a strong middle-ring suburb, as an example. It is well-catered for by public transport, features established houses, good schools, good land size and some promising development opportunities. As Bentleigh property values took off, it left its neighbouring suburb, East Bentleigh, behind, by almost $150,000 (it had not long previously been a differential of approx $50-70,000). Some people naturally (and wisely) decided to cross the street and buy largely the same property, on the same land size, for up to $150,000 less. Their investment decisions have already paid off handsomely as prices in East Bentleigh have already grown. ALL YOU NEED TO KNOW ABOUT BUYING AND SELLING YOUR HOME TING INCLUDING 19 WAYS OF GET SOONER INTO YOUR DREAM HOME Michael & Pamela Yardney with Bronwyn Davis This is called the ripple effect, and as the cycle progresses, it impacts on the secondary suburbs. It s only in the later stages of the property cycles that the outer suburbs, and more working class areas, are impacted on by the ripple effect. And, of course, the inverse applies they remain in it for a much shorter time when the cycle turns as it surely must. Currently, there is little opportunity in the outer suburbs, where residents have more difficulty coping with interest rates and petrol prices. So, I have painted a picture of population growth, and signs of stirring in certain markets. Hopefully I ve also pointed out a few dangerous currents which might leave our surfer stranded well out to sea or, worse, on the rocks. Where to Buy? A t Metropole, we prefer to invest in tried and true areas, and we then drill deeper than that. Yes, some suburbs have always outperformed others. Yet some streets and have outperformed others in those suburbs; and even some house styles in those streets have outperformed others in those streets. Historically, this information is crucial. Again, work on past trends, not new fads. The suburbs we identify might not have shown the fastest growth in the last 12 months, and they might not be the hottest performer 12 months from now. But over the journey they will be the areas, streets and forms of dwellings that will deliver the capital growth that lies at the heart of a successful property portfolio. This helps you build a system that you can replicate and it means you are not speculating. These more popular suburbs perform well in good times and bad: which is to say, they will not slump (as much) in a downturn, yet simply hold their value while the market adjusts in the outer suburbs and regional areas of Australia. No area is immune, but again it is the long-term position that delivers the reward. A final note: some surfers, er, investors, dip their toe in the water in an area they know. Many call it a home court advantage, and I have no substantial problem with it for the level of comfort it offers. Indeed, it s easier to monitor what is happening close to home, you just might get some inside mail from an agent you know well. But be careful no doubt having this intimate knowledge of an area is a great advantage, but you might be purchasing emotionally. That means buying property near where you want to live, near where you want to retire or near where you like to holiday. But this not the way to chose a top-performing investment property. To take advantage of the next wave, you have to know where it s breaking, and those waves are taking place all over the country. Revisit the core components: get the information, develop a strategy or system, develop the right mindset and, to genuinely take advantage of the property wave about to break on our shores, build the right team. Unlock the door to your dream home... Step inside the minds of more than 50 years combined experience of buying and selling property... in 163 questions, including 19 ways of owning your dream home sooner, Michael & Pamela Yardney outline all there is to know about the property minefield. Available at selected bookstores, or order yours online at

11 Metropole Property Investment Stategists KNOWN I PROVEN I TRUSTED Why choose Metropole? Because we manage your investment like our own. 1. We manage the entire process. 2. We have specialists working on behalf of beginning, advanced and sophisticated investors to help build their property portfolio. 3. We create an investment strategy specific to your financial profile. 4. We search for the most appropriate investment properties. 5. We research the growth potential in the areas where the property is located. 6. We research the rental potential of the property. 7. We advise if the property has renovation or development potential to maximise returns. We provide detailed feasilbility studies for development properties. 8. We produce cash flow projections on your property, showing outgoings, income, tax savings and potential capital growth. 9. We can work alongside your accountant and solicitor to create a solid investment structure. 10. We co-ordinate a team of independent professional advisors specifically chosen for their property expertise. We can refer you for finance, accounting, legal, valuation, depreciation and insurance advice. 11. We remain involved in the long-term property management of your investment. 12. We are the part of the Metropole Properties Group of Companies. Established in 1979, we are Known, Proven and Trusted by property investors throughout Australia and overseas. Call us now on , and build wealth through property. w w w. m e t r o p o l e. c o m. a u