Are you currently doing research on the Queensland property market?
I know many investors around Australia are, as jobs and affordability bring people to the sunshine state.
While history is not always a good indicator of future growth, it is certainly something you should consider as part of your research.
Many investors I speak with only undertake their research back 5 years or so - barely one full property cycle.
This may be due to the fact that many of the current, generic research centres only highlight these shorter time frames.
You should be going back further than that and as a bare minimum I would suggest 20 years would be a good place to start.
I know at Metropole, we have our own in house research database tracking back 30 years.
This allows us to study how these locations have performed over multiple financial, economic and property cycles.
So, here they are, Queensland’s best performing suburbs for houses over the last 20 years.
I must admit seeing these staggering amount of capital growth took me by surprise, especially when you consider all the headwinds, we have faced over that time frame.
From economic events like the stock market crash in the early 2000’s to the Global Financial Crash to round out the previous decade and a mining downturn also didn’t help.
While most states went on to recover, Queensland faced a range of natural disasters from floods to cyclones that also took its toll on our economy.
So, despite all of that, these are very impressive figures.
While I am not suggesting the same amount of growth will occur in the next 20 years, I would certainly like to evaluate these suburbs and understand why they stood out.
Here is how I would suggest using this data to make an educated decision on where you should consider investing if you are considering Queensland.
What do these suburbs have in common?
Once you have digested the information, you should be asking yourself that question.
If you do not know where to start, here is what I can tell you from buying in the Brisbane market for the past 15 years.
I will give you my top 4;
- 80% of these Suburbs are located within 10km of the Brisbane CBD.
- 80% of these suburbs have a train line
- 80% of these suburbs have a highly desirable school catchment
- All of these suburbs have incomes well above the Queensland average
For those that know these suburbs more than half of them have all 4 of these key drivers – why fight the big trends?
What is your investment horizon?
How long is your investment horizon?
With a whopping 400%+ in growth, surely this sends a message that “time in” the market is far more important that “timing” the market!
Likewise, can you imagine the huge amount of time, effort and risk involved to attain similar returns by renovating or developing and flipping properties.
While some may be retiring over the next decade, they should look beyond this to create generational wealth, a concept I have spoken about previously.
Use the equity and cash flow from these assets to set both yourself up and future generations, rather than selling down your portfolio.
Think longer term, lower the risks and maximise your time in the market to create wealth.
How can I outperform the market?
Well, being the best performing suburbs, these suburbs have outperformed the market.
However, these numbers are just the average for that particular suburb, meaning some pockets would have performed better and some worse.
By having an on the ground perspective, you will get an understanding of what those streets are and have a superior return.
But that only comes from years and decades of experience and specialising in a certain location.
Once I have found the best street in the best suburb, I would then be looking for something where I may be able to add value to the property.
In the current environment, growth will be subdued for the short term, so undertaking a renovation or even a development will help speed the process up.
Buying brand new will require you to rely on the market to do the heavy lifting in what is expected to be a low growth environment.
Once you understand all of this, next you will need to understand What Will Drive Property Prices Moving Forward?
I would argue that it will be the same 4 factors that drove growth in the last two decades.
- Jobs - Access to our larger employment hubs
- Public Transport – Our roads will get busier
- School Catchments – A priority for families
- Incomes – Affordability
Arguably I see Affordability being a major issue moving forward – but it may not be what you think.
You see with inflation at record lows and our economy tanking, most wages are not growing fast enough to produce large amounts of growth over the short term.
So, I would be targeting the very small amount of locations where wages will still grow due to;
- Professionals in high paying jobs and may receive bonuses, commissions etc
- Investors who receive additional income from property
- Investors who receive additional income from shares and equities
- People with a side business – additional income
In short, you need to target areas where people have superior wages or multiple streams of income.
I argued before that this may be the most important piece of property data for the last decade.
Because these people will still be able to pay more for property, they will continue to buy emotionally and pay too much for property or overcapitalise on renovations or building new.
The majority will be at a breakeven point as they live pay check to pay check.
Despite economic crashes ad mother natures fury, Queensland’s best performing suburbs over the last 20 years have stood the test of time.
It certainly highlights why most successful investors see property as a long-term strategy.
They don’t try to time the market and get in and out to make short term cash flow.
Instead, they focus longer term and have time (in this case decades) in the market to ride out the ups and downs and stick to a longer-term growth strategy.
This presents an opportunity here to understand why these suburbs have performed the way they have.
For mine it gets back to good old-fashioned supply and demand.
While there may be the odd vacant block of land or knock down in these suburbs, there certainly is not large parcels of land waiting to be developed.
Being so close to major employment hubs, certainly boosts incomes and wages and being close to a train station or having a prestigious school catchment will send demand soaring.
The only thing left to understand is that on the ground perspective, to know the superior streets form the inferior streets.
But that may take years to understand, or you can hire a professional to do that for you.
In fact, that is exactly what we do for our clients on a daily basis.
Brett Warren is a director of Metropole Properties in Brisbane and uses his 18 plus years property investment experience and economics education to advise clients how to build their portfolios.
He is a regular commentator for Michael Yardney's Property Update.
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.