With the speed at which property prices across much of the country are rising, many home buyers and property investors have been “panic buying” for fear-of-missing-out, often with little research or “due diligence” before signing a contract.
Buying on emotion with a rushed (or no) inspection of a property can mean costly hidden issues get overlooked and come back to bite you later – leading to a world of financial hurt. Don’t let this happen to you!
Experienced property mentor and eagle-eyed investor Brendan Kelly steps through the essential “physical due diligence” that every property investor should undertake PRIOR to signing a contract.
You’ll learn expert tips on how to quickly spot and avoid hidden costly issues before committing to the purchase of your next home or investment property.
Property values have been rising at the fastest rate in 32 years. One thing is for sure – the current rate of growth can’t last forever. But while it does, there are opportunities for savvy investors to capitalise on this “wave of growth”.
Many investors are now jumping back into the market, hoping to get on the bandwagon and fearful of missing out. But the reality is that not every suburb, nor every property within a suburb, is rising in value. Some have already peaked or are actually declining fast – and if you don’t know how to tell the difference you could end up badly burned.
No-one wants to get caught out buying-in at the top.
If you’re considering your next property purchase – whether it’s an investment property or your own home – then check out this important webinar to discover how to:
– avoid buying-in just as the market peaks;
– know whether growth is likely to continue in a specific suburb;
– tell which kind of property to buy for the best growth potential;
…and more!
Property mentor Brendan Kelly joins “2020 Strategic Investor of the Year” Sam Gordon to discuss how Sam created a substantial positive cashflow property portfolio by his early 30’s.
Sam details how he was able to acquire 26 properties (including 11 properties in just a short 12-month period), with an estimated portfolio value of over $8M that now generates a 6-figure positive cashflow!
Property mentor Brendan Kelly is joined by two of our mentoring program students, Ernest and Mogan, who step through the case study of their recently completed renovation deal where they made a profit of over $110K in only nine months – in spite of multiple lockdowns and market disruption!
It’s a great practical illustration of how intelligently applying the right strategies can help you create wealth through property in ANY market conditions.
Property mentor Brendan Kelly is joined by one of our mentoring program students, Zoltan, who’ll step through the case study of one of his latest property deals and explain how he recently created a $950K+ profit.
In fact, Zoltan’s property successes have enabled him to ‘escape the rat race’ and become a professional property investor. Zoltan will also be explaining the property investing strategies that enabled him to chuck in his day job and achieve financial independence.
“The Big Banks were WRONG in 2020…
Will they be right about the property market in 2021?”
For much of this year investors were bombarded by “doom and gloom” headlines about the future of the property market.
Here at Results Mentoring, we were one of the few market commentators confident throughout 2020 that a property market crash wasn’t on the cards, in spite of the pandemic and recession.
In fact we went on record in April with our analysis that property prices would most likely fall only gradually and by single digits across the middle of 2020, before rebounding in late 2020 / early 2021.
But the big banks and most economists had a different view, and their own predictions ranged from dire to apocaliptic!
Back in May, Westpac and the ANZ were both predicting a 10% decline in national property values. The NAB predicted falls of up to 15%.
Not to be outdone, the Commonwealth Bank also made headlines in May with a claim that house prices could collapse by up to 32%!
My how things have changed!
Lately the big banks have reversed their forecasts for the property market.
ANZ is now predicting 9% growth in 2021, the NAB and Commonwealth Bank are forecasting 5% growth, and Westpac sees a 15% “surge” in property values over 2021-2023.
Many economists have also now backtracked on their earlier dire outlooks…
For instance, AMP’s Chief Economist Shane Oliver, who as recently as August had forecast price falls of between 5-20% around the country, commented this month that “the property market has held up a lot better” than he anticipated 6 months ago, and might even see average capital city dwelling prices beat their September 2017 record highs by April next year.
And head of SQM Research Louis Christopher is now predicting capital city prices to rise by 5-9% in 2021 – a far cry from the 30%-fall-in-12-months scenario painted by SQM Research back in April.
It’s astonishing to see just how consistently wrong all the big banks and economists were in the first place… and disturbing because many investors and home buyers actually bought-into their highly inaccurate forecasts!
Will they be right this time around?
Meanwhile, the property market in 2020 has tracked almost perfectly in line with our own predictions…
Back in April, as the pandemic began to take hold in Australia and we could the potential economic impact, we went on record forecasting that property values would likely decline gradually by single digits over the year before bouncing back in late 2020 / early 2021.
Here are some of the statements we made “on the record” at the time:
“The recent run-up in prices was driven by owner-occupier demand, NOT investor speculation. This provides inherent support for property values and mitigates against volatility in the property market.”
“As demand falls, supply is falling too (as sellers keep their properties off the market) which will help support prices or mitigate price falls.”
“We anticipate a noticeable drop in transaction volumes and a (temporary) slow down in the market. City median values may show some pull-back, but this will obscure individual suburb performance, with many suburbs maintaining value.”
“High numbers of forced sales are very unlikely due to the banking sector allowing up to 6-month deferred loan repayments for impacted home owners.”
“Stimulus and support measures are creating the foundation for a significant and sharp rebound late 2020 / early 2021.”
At the risk of sounding like I’m saying “I told you so” 😉 …we’ve been proven right on every count!
How did we get it right when so many banks and economists got it wrong?
We based our forecasts on the same proven analysis and predictive techniques that we had used to accurately pick the bottom of the property market in May 2019, and the subsequent boom in property values in much of the country during the latter half of last year.
These same techniques have been shown to be 90% accurate in forecasting market direction – right down at the individual suburb level.
Our analysis is built on an understanding of how the property market in Australia actually works…
It’s a basic understanding of property market dynamics that, surprisingly, most economists still fail to grasp.
Most property investors don’t understand it.
The media most certainly doesn’t.
Yet it’s so simple, and really comes back to some of the most basic of economic principles — which is why it’s so surprising that most banks and economists just don’t get it.
Economics 101
You see, it’s not pandemics, or recessions, or unemployment rates, or wages growth, or government grants, or even interest rates that drive property price behaviour.
If that were true, then property values in every suburb across Australia would always behave the same way at the same time.
But they do not.
What drives price behaviour in real estate is exactly the same as what drives prices for any other “product”…
As any student of high school economics ought to know, prices of goods and services move up and down in response to the balance of supply and demand.
And it’s no different for property.
(Every economist should know this, but for some reason when it comes to the Australian property market they think the basic rules somehow do not apply!)
When attempting to predict the property market, most economists focus just on the DEMAND side of the equation – what’s influencing buyer activity – while failing to understand what’s happening on the SUPPLY side.
The pandemic naturally dampened demand from buyers for property in many areas, as people worried about their job security or couldn’t even inspect properties due to lockdown restrictions.
But at the same time, sellers restricted the supply of properties in the market. They took listed properties off the market, and put off listing their homes while they waited for greater certainty about the outlook.
Because of measures taken by the Government and the banks to ease financial pressures during the pandemic – like income support and loan repayment holidays – those sellers who did not have to sell simply didn’t list their properties.
So, while demand fell temporarily, supply also fell – keeping the overall market more-or-less in balance… and helping to support property values.
It’s simple economics!
No Single Property Market
And it’s not enough to look a the overall level of supply and demand across the country, or even across a State or city.
We CANNOT treat the Australian housing market as if it is just one single market where all areas perform the same.
(Yet this is another mistake that most economists and, in particular, property market doomsayers constantly make.)
Rather, the Australian housing market is a collection of around 15,000 individual suburbs – each representing its own unique market with its own unique balance of supply and demand.
This means that even in a pandemic, there will be suburbs where prices are going up, down or sideways – while others perform differently.
As sophisticated property investors we need to understand what’s going on in the specific suburbs where we hold real estate or plan to invest – a rather than fretting about generalised forecasts from economists (which won’t help you make any kind of informed investing decision).
The reason why our forecasts have been so accurate is that we examine the dynamics of the property market right down at the individual suburb level.
This is the ONLY way to see what’s really going on, and to make accurate forecasts about what’s most likely to happen to property prices.
Where next for Australian real estate?
Banks, economists and the mainstream media are only just waking up to the fact that the outlook for property values in 2021 is very positive.
All capital cities and major regions are showing growth in property prices according to the latest statistics. Of course, some areas will see prices rise faster than others, and it’s essential to know how to tell which locations will outperform.
Consumer and business sentiment is improving, with progress on COVID-19 vaccines to have further positive impact. Record low interest rates and recent tax cuts are also helping to underpin property values.
Major changes in the pipeline are likely to further support demand for property, with easier borrowing rules, stamp duty reforms / incentives, “equity share” schemes and more coming in 2021.
But with home buyers and investors returning to the market faster than sellers, buyers are likely to face a shortage of supply next year.
And as property prices are a function of both demand AND supply, more buyers than sellers means property prices are likely to keep rising into 2021.
A great way to get on the property ladder, or to jump higher faster, is by doing a “live-in” renovation project. This strategy can help a new property investor create significant equity in a relatively short timeframe – with the added advantage of not having to pay for an extra roof over their head!
Property mentor and highly experienced renovator Brendan Kelly is joined by one of our mentoring program students, Brock from Queensland, to discuss the real-life case study of Brock’s own “live-in” renovation that made him a tidy $76K profit – highlighting the success secrets and hidden “gotchas” of such a reno project.
It’s amazing how much has changed in the property market in just a few months.
Cast your mind back to this time last year. Do you recall what was in the news headlines about the property market?
Let’s take a brief trip down memory lane…
Late 2018 – predictions of a 40% CRASH!
In September last year, with property prices around the country falling, Channel Nine’s ’60 Minutes’ ran a feature with the sensational and alarming headline:
“Aussie housing prices could fall by as much as 40% in next 12 months”
When the article aired, I received numerous phone calls and emails from investors and home owners who were terrified about what this meant for home values – and whether they should sell up fast!
At the time, we wrote our own article explaining why such a property market crash was extremely unlikely, encouraging investors not to panic.
Clearly we were proven right, as a 40% price crash DIDN’T happen!
(In fact, according to market analysts CoreLogic, the peak-to-trough fall in Australian house prices was only a little over 8% before prices began recovering mid-2019.)
While suggestions of a 40% price fall were a bit extreme, many analysts believed the trend of falling prices was entrenched, and could go on for quite some time…
“Australia’s property downturn will be the longest and largest since the 1980s, say Morgan Stanley”
– SMH, 11 Oct 2018
As Christmas approached, investors fretted about what the Financial Services Royal Commission would mean for lending restrictions (not much, as it turned out) and worried that a Labour victory at the upcoming election could spell the end of negative gearing and CGT tax benefits.
The gloomy mood was reflected in the media, with an ABC News headline forecasting more price falls to come:
“House prices in sharpest decline since global financial crisis and ‘will continue to trend lower'”
– ABC News, 3 Dec 2018
Early 2019 – prices dropping with “no end in sight”!
The New Year got off to a rough start, with global credit ratings agency Fitch Ratings releasing a report in January predicting that Australia’s housing market would under-perform every other developed country in 2019:
“Australia to see worst 2019 house price fall: report”
– ABC News, 16 Jan 2019
In February, forecasts of a property market “BLOODBATH” dominated the headlines, with some in the media predicting 40-50% price falls ahead…
“‘Let the bloodbath begin’: House prices in Sydney and Melbourne ‘could halve’ in the worst crash since the 1890s”
– news.com.au, 20 Feb 2019
Based on our own analysis and forecasts however, we didn’t see any kind of property market Armageddon on the horizon.
Instead we predicted that price falls would moderate, and that property values would soon level out before beginning to climb again.
Still, the media couldn’t see it (yet), with headlines forecasting worse to come:
“House prices keep dropping – and there’s no end in sight”
– the Guardian, 21 Mar 2019
In April, investment analysts Moody’s predicted that prices would fall further, by another 10%, but offered a glimmer of hope that growth might return in 2020:
“House prices set to fall another 10pc before 2020 rebound, Moody’s Analytics says”
– ABC News, 9 April 2019
May 2019: The turning point…
In May – to the surprise of many – the Coalition won the Federal Election, and just a week later APRA abolished a significant lending restriction (the 7% interest test on loan applications).
Our own analysis was already showing the market levelling out, and we went on record to call the bottom of the market in May.
On May 25th, I declared to a room of around 200 property investors that we had reached a turning point, and that the market in much of the country would shortly begin rising again.
Most analysts and market commentators at the time believed the market still had further to fall, or that it was too early to tell, or that the market might only start to bottom-out a year later in 2020.
Since May…
The media started to get a sense that something was different around June/July, but they weren’t convinced:
“Housing market at its slowest in 12 years – but is that about to change?”
– ABC News, 10 Jun 2019
But eventually, market commentators started waking up to the fact that the market had shifted – and the headlines turned from negative to positive…
“National property prices increase for first time since 2017”
– 9 News, 1 Aug 2019
By September there was no denying the new momentum in the market – at least on the East coast:
“House price surge in Sydney and Melbourne drags index higher”
– ABC News, 2 Sep 2019
Most recently…
Lately, the headlines have changed from “doom” to BOOM!
“New property boom looks imminent with a range of indicators pointing to price growth”
– news.com.au, 30 Oct 2019
Indeed, house prices in Sydney and Melbourne have rebounded off their lows at a record pace…
“Melbourne, Sydney record biggest property price gains in a decade”
– news.com.au, 1 Nov 2019
…and the forecasts have shifted from prices falling “with no end in sight”, to predictions of double-digit property price growth in 2020!
“Sydney, Melbourne prices to surge up to 15pc”
– Financial Review, 14 Nov 2019
From “BLOODBATH” to “BOOM” in a handful of months!
The obvious lesson, looking back at the headlines of the last year, is: do not take your property investing advice from newspapers!
But why did the media get it so wrong?
And how were we able to confidently pick the bottom of the market, when so many “experts” couldn’t see it?
The reason is that every most analysts and commentators treat housing in this country as if it is one single market where prices everywhere move the same way…
It is not!
The Australian property market is made up of over 15,000 individual suburbs and towns, each representing a discrete market with its own unique dynamics.
Every suburb performs differently, and at any point in time there will be suburbs that are rising, suburbs that are flat, and suburbs where property prices are in decline.
The trick – and the key to understanding and predicting the property market accurately – is to be able to tell which specific suburbs are most likely to rise next, and which ones will fall.
Sydney, for instance, is a collection of more than 650 discrete suburbs, all behaving differently.
Right now, Sydney’s overall median house price is rising – but this disguises the truth that while some suburbs are rising, and rising strongly, many are not. Some are actually in rapid decline.
And the forecasts for price movement at the individual suburb level are quite mixed too.
It is only by understanding how the market behaves at the individual suburb level, that you can really assess how the local market is likely to perform over the coming months.
Once you learn how to to “read” the property market at the individual suburb level, you can ignore media hype about booms or busts, and make more informed, more confident investing decisions. (Not to mention sleeping easier rather than worrying about your property investments.)
Keep an eye out for coming live training workshops and webinars where the Results Mentoring team and I will be teaching effective techniques for analysing the property market – right down to the individual suburb level – along with many other great practical strategies and tactics for maximising your property investing success!
Until next time,
Invest wisely!
– Simon Buckingham
James demonstrates how he just created a 6-figure profit from one of his latest property deals, and explain how he went from having zero property investing experience and working in a high-pressure corporate IT job, to being able to retire from the ‘rat race’ in just 5 years by using active property investing strategies.
