Join us as we discuss the urban sprawl across the country, particularly in Brisbane and the Gold Coast. Traveling around Australia’s third biggest city and just slightly down the road, he delves into details that may surprise you, featuring ‘ugly duckling’ suburbs that are now swanning around the property market pond. If you thought you had missed the boom— it’s time to think again.

Timestamps:
00:51 | Coomera Craziness
03:53 | It Ain’t Over ‘Til It’s Over
06:42 | From Ugly Duckling to Swan
11:02 | Hungry For Property
14:43 | The Gentrification Line
16:46 | FOMO
20:51 | The Next Best Thing
22:46 | All The Pieces of The Property Puzzle

Resources and Links:

[00:11:02] Now, if you look at that particular market alone, you might think, 'Oh, the market's slowing down, property's starting to go backwards,' all those kinds of assumptions. But if you look at the cheaper end of the market, or the more affordable ends, I'm actually seeing a lot more activity at this end of the market. 

This is Property Investory where we talk to successful property investors to find out more about their stories, mindset and strategies.

 

I’m Tyrone Shum and in this episode of Invest Like A Pro we’re chatting with founder and director of House Finder, Simon Loo. He shares his thoughts on the latest Australian property boom, and lets us in on some case studies that may answer the burning question keeping you up at night: Have you missed the boom?

Tyrone Shum:   

While the market and property values have increased dramatically since 2020, it doesn’t mean you’ve lost out if you haven’t acted yet. Loo delves straight into a case study that proves this. 

Simon Loo:   

[00:00:51] The first case study is a property we bought for a client in Upper Coomera, about seven months ago now. And this is an example that I wanted to share to show that the urban sprawl that's happening as a result of this boom cycle, and how it's affecting areas that was once considered average. Not the best kind of areas. And how they're now becoming extremely sought after, and extremely owner occupied friendly, if that makes sense. 

 

[00:01:31] Anyway, we bought this property in Upper Coomera. And by the way, we actually don't tend to target the Gold Coast too much. We're more sort of Brisbane focused. But when this deal came up, this deal actually came out from an agent that we actually do a lot of deals with in the Brisbane area. He had an investor client that wanted to offload this property, off market, back when we bought it was off market. It was a good deal. 

[00:01:55] It was a four bedroom house, a fairly new build, quite common to the Upper Coomera area. So it was probably around about the six [or] seven year old mark. So fairly recent. We paid $460,000 for this property, which at the time, it was a good deal. It was below market value, I would say by around about the 10% mark. But currently, if I look back at some of the properties that are selling in Upper Coomera, that's almost exactly the same type of house style, specs, land size, and the rest of it. It's worth somewhere in the vicinity of $700,000 to $750,000 at the moment. This was within only a seven month period that we've seen that ridiculous amount of growth or distance or equity, or whatever you want to call it, I think at the end of the day. 

 

[00:02:55] So I think it begs the question: Has the ship sailed? Are we at a point in Brisbane or southeast Queensland where the boom is nearing the end? Or has gone a bit too crazy, so to speak? And my answer— and this is going to sound biased— is no. I think we're still in very early stages of the boom cycle. 

[00:03:26] And I'm not only saying that as someone who's a buyer's agent buying heavily in Brisbane at the moment. But I'm also saying that from as an investor, with currently 18 properties in Brissie. And I'm not selling any of them at the moment. I'm keeping them, rented out. I'm not thinking, 'The boom's gone crazy. It's at the very top at the moment, I'm gonna offload a bunch of them and move my capital somewhere else.' 

[00:03:53] The reason why I say that it's not over is based on a few fundamentals about Brisbane itself and property market as a whole. Sydney, Melbourne, and Brisbane [are] obviously [the] three largest cities in Australia. While Sydney and Melbourne has experienced the boom of a lifetime in over the past 10 years, everyone knows that Brisbane has kind of just sat on the sidelines. Basically done nothing. A little bit of percentage growth here and there, but nothing to write home about. 

 

[00:04:34] And the growth that we've seen over the past 12 months, as rapid as it has been— from what I can see on the ground that's been buying in all these cities, is that there's been that kind of pent up pressure for it to catch up to cities like Sydney and Melbourne. And the crazy boom that we've seen in many ways has been that pressure being released to some degree. 

  

[00:05:07] From $460,000, using my example to $700,000, although might seem excessive— at $700,000, given its location, given where it is, given the fact it's in proximity to Gold Coast and even Brisbane City— all those kinds of factors and fundamentals in place suggests that that $700,000 for a four bedroom family home is still affordable.

Tyrone Shum:   

[00:05:34] And you can't even buy that across Melbourne and Sydney.

Simon Loo:   

[00:05:37] Melbourne and Sydney, impossible.

 

[00:05:39] And when I say it's affordable, it's affordable. I mean, it's a lot of money, obviously, $700,000. But based on median income, based on affordability, based on metrics and those kinds of things as well, like what a typical family earns— it's not out of reach for even lower income families. We're not even talking about median income families. 

  

[00:06:04] So it gives me a lot of confidence that a city as big as Brisbane, and rapidly changing and growing as Brisbane, has a lot of steam left. I don't want to say how much, I don't want to say how long it's going to be because I don't have a crystal ball. But like I said, if you look at areas that are maybe slightly further out from the city, not necessarily within the city itself, I feel like that there's still a lot of opportunity here for gentrification, for demographic change, for desirability, all those kinds of factors as well that come into play, and it's actually playing out now. 

  

[00:06:42] As some listeners know, I'm very heavy in the Logan market, in the Moreton Bay market as well. And these two locations used to be ugly duckling areas. [They] used to be working class, used to be some parts were low socio economic. But recently, urban sprawl has meant that it's grown quite rapidly. But even still, it's more than affordable for average people to get into from an owner occupied perspective. So I think that tells me that this boom run has a lot of leg left at the end of the day.

Tyrone Shum:   

[00:07:20] It's really interesting that you say that as well, too. And no one knows unless you have a crystal ball to see the future. And so when the boom will end, we can only basically look at it how it happened in history and learn from history from what it is. Because there will be a time since cycles in the market can go for seven to 10 years. It's been very interesting in the last, probably decade, since I've been more involved in the market. I've seen ups and downs, and even the last, say, five years or so. Prior to COVID, we had a massive boom, and then sort of plateaued out a little bit, then COVID hit and even more of a boom. So sort of these sort of really interesting small troughs. 

  

[00:07:56] And the question is, When will this get to a point where it'll stabilise? I don't think it'll have a huge drop. I haven't ever seen that happen in any particular history point in time, unless there was a catastrophic type of thing that was like the flooding. That's obviously why Brisbane market dropped dramatically, because of the flooding.

Simon Loo:   

[00:08:16] I mean, Brisbane floods every year. I mean, obviously, if it's a massive flood event, then yes, it could have a big impact. But interestingly, the reason why Brisbane took such a big hit, or the property market during the last flooding event was that the flooding event came off the back of the GFC. So the GFC happened. 

[00:08:39] Australian property was relatively untouched from the GFC. But it was kind of teetering on the edge, you know what I mean? And I think what happened in Brisbane, when that massive flood event also came through, it kind of just pushed a little bit over the edge. And that's when we saw a little bit of a correction in a lot of Brisbane markets during the consequent years. 

 

[00:08:57] But what I'm finding interesting now is that, because recently, there's obviously been talks of interest rate rises, actually there are interest rate rises happening— with banks at least, not necessarily with the RBA. And also with lending restrictions as well. The market is kind of being more sort of segmented into the cheaper ends, or the more affordable end of the market and the more premium into the market. 

  

[00:09:25] Now, previous to talks of interest rate rises, previous to talks of lending restrictions, the premium market was going absolutely nuts. You were getting houses, especially in Sydney, for example that, you know, were $3 million becoming $6 million within a matter of months. 

Tyrone Shum:   

[00:09:44] I know, that's crazy, like, how is that possible? And I kept asking that question, 'Why?'

Simon Loo:   

[00:09:51] I think all of us are asking that question why and there are several factors as to why people are buying $6 million houses to live in. And one of the main reasons is, is because they're also selling a house at $6 million. 

  

[00:10:10] But what I'm finding interesting now is that that particular premium end of the market, even in Brisbane— in Brisbane, we're not talking $3 million to $6 million, maybe around about the $2 million mark— it's not only quietened down a lot, but there's been a lot more listings coming on the market as well. 

[00:10:28] And that's down to the fact that what we're seeing is that there's been a lot of... I wouldn't say greedy sellers or greedy vendors, but obviously vendors that are waiting for the boom cycle to max out before they put their property on market and get the highest price. 

  

[00:10:45] And we're starting to see a flood of listings in the market at the moment in the very premium end. And when you go to auctions, they're nowhere near as packed, as they were from three to six months ago. And we're seeing properties that are listed for a lot longer. 

 

[00:11:02] Now, if you look at that particular market alone, you might think, 'Oh, the market's slowing down, property's starting to go backwards,' all those kinds of assumptions. But if you look at the cheaper end of the market, or the more affordable ends, I'm actually seeing a lot more activity at this end of the market. Because the people that used to be able to afford or were maybe comfortable buying $1 million to $2 million worth of property are now looking at cheaper alternatives. 

 

[00:11:31] So the appetite for property hasn't stopped. Especially with the buyer's agency that I run, demand is higher than ever before. But the type of properties that people want to buy now are more affordable, they're a lot less risky. And also the cash flow seems to be a lot higher as well. And they're seeing more potential here because I think at the end of the day, if people can only afford to borrow a certain amount of their times of their income, which is basically what the lending restrictions are all about, then they're going to be looking at stuff that's going to be cheaper, really, at the end of the day. 

 

[00:12:20] So whilst the premium market's cooling down, we're seeing affordable market becoming more heated. And I think that's happening not only in cities alone, but it's actually happening within cities itself.

Coming up after the break, we discuss the socioeconomic impacts that affect different areas…

[00:14:43] But these areas also tend to have the most potential to experience gentrification. Demographic change. 

Why sticking to the area you know best isn’t always the best strategy…

[00:18:29] The fundamentals still need to make sense. It's about buying. It's about not being limited to your own bias.

He explains why you shouldn’t get to the point where you’re ready to buy, but sit and wait for ‘the right moment’.

[00:21:41] I remember pre COVID, there were so many people waiting, because of the uncertainty of COVID, obviously. And rightly so, nobody knew what was gonna happen. 

And that’s next. I’m Tyrone Shum and you’re listening to Property Investory.

Tyrone Shum:   

Coming back, Loo explains the elements that often shape investors' property moves and goals, and why they differ greatly between each individual.

Simon Loo:   

[00:13:13] I think it depends on so many factors. [It] depends on your income, depends on how much money you have, and so on, whether you're starting out, it depends on how many properties, like, so many, so many factors. One of the biggest factors is it also depends on people's goals. You know, some people don't want to buy five or six properties. And maybe they just want to park their money in properties that's...

Tyrone Shum:   

[00:13:45] Like blue chip properties, four, five and that's it.

Simon Loo:   

[00:13:49] Over a very long time. And they're happy with that. But from an investor perspective, where their goal is to achieve long term passive income or expose themselves to a lot more capital growth, my pick has always been... not the super cheap end of the market, but definitely not the blue chip end of the market. I would say somewhere in the middle. Somewhere in the middle, maybe erring to the side of more affordable. 

  

[00:14:17] Because time and time again, these are the areas that experience the most percentage growth. And it comes not only because it's starting off from a lower price point, it's much easier for a $500,000 house to become $1 million, than $1 million to become $2 million, based on affordability, all that kind of stuff. By achieving 100% growth. 

  

[00:14:43] But these areas also tend to have the most potential to experience gentrification. Demographic change. Because the blue chip suburbs that we're seeing today used to be crap. Used to be working class, used to be inner west of Sydney.

Tyrone Shum:   

[00:15:01] Sydney, typical examples. Yes.

Simon Loo:   

[00:15:03] Exactly. Even some of the inner parts of Brissie used to be really sort of rundown. But over time, during a particular boom cycle when people can't afford that particular blue chip property at that time, they bought the next best thing, which was a little bit further out. 

  

[00:15:20] So I think if you buy well as select these particular areas that I would consider are next in line to gentrify, I think that kind of puts you in the best position from a growth perspective, but also from an accumulation perspective. Because those properties happen to provide the best cash flow. And good cash flow means you can buy more. [It] means you can potentially borrow more as well. 

  

[00:15:45] So I always still prefer to pick that end of the market purely from an investment standpoint. And they're somewhat what I call bulletproof. Whether there's COVID, whether there's good times, or bad times, or whatever— if you're buying [in] a major capital city built up area where there's consistent population demand, affordable enter the market will never be stagnant. From a rental perspective, from a people wanting to live in perspective. 

  

[00:16:18] At the end of the day, housing is definitely a necessity. And affordable housing is always needed. From young families, from people starting out, from people that are new to the city, perhaps, or maybe people that have had an income decrease and they need to live more frugally. So from an owner or landlord perspective, I think it's a lot more secure also.

Tyrone Shum:   

[00:16:46] I agree with you on that side. And let's talk a little bit about this FOMO, you know, fear of missing out. Because I think a lot of that, due to COVID has also pushed a lot of people to buy. A lot of people I speak to, particularly first home buyers, even some of my relatives who are still just recently getting into the market, because they're still young. I've got young siblings, so they're like, 'It's so expensive here living in Sydney.' But they're worried that they'll miss out because the prices keep going up. 

  

[00:17:15] But when you actually look at it from a long term perspective, it's not about necessarily that you'd be missing out. You've got to look at it from a long term perspective that you jump into the market at any point in time— could be when it's the lowest or the highest, no one knows. But getting into the market, as long as you're in the market, you allow for the capital growth to happen over a period of time. 

  

[00:17:39] And this is what I was just saying, like what you're saying, exactly spot on. Even though those properties have gone from, say, $450,000 when you first purchased it 12 [or] 18 months ago, up to, say, $700,000. At this point in time, that is what the market is. But in, say, 10 years time, the properties could be doubled, from $500,000 to $1 million. Especially in those particular areas, because it's affordable. 

  

[00:17:59] So I think in the perspective for investors, as we're talking about here, is to look at it from the timing perspective. Is that when you can afford to buy right now, or when you can afford to buy a property, that is probably going to be the ideal time. You're not going to miss out on anything because that's basically just market hype. But if you're looking from a long term perspective, just get into a market that is affordable for your situation and what your goals are.

Simon Loo:   

[00:18:24] Just to add on to that it's not necessarily just affordable, and go for it. Like the fundamentals still need to make sense. It's about buying. It's about not being limited to your own bias. I see this a lot, especially from Sydneysiders, because for some reasons people can live in Sydney love to only buy in Sydney. Absolutely no sense. Anywhere in Sydney that you buy today, you could have bought within the last 10 years, you could have bought for at least half. So without having a crystal ball, we all know that at least you've missed out on that growth already. 

  

[00:19:09] But they're still fixated on buying in Sydney because it might be a fear of missing out, it might be the fact that they think that it's like a runaway train and it's just going to keep going and going and going. Which is not possible. I'm not suggesting that Sydney is going to experience a massive drop in income soon. But there will be a point where it's going to plateau, or maybe even drop a little bit for an extended period of time. So dont be afraid.

Tyrone Shum:   

[00:19:36] Just also add, as well too, when you think about it, if for example, employment and also people's wages don't increase and it stays to an average of where it is— for it to be able to allow people to afford the average $1.5 million to $2 million home in Sydney, there's no way that prices could continue to go up that high unless there's old money or people have actually made a lot of money from elsewhere to be able to buy. But the average person that lives in Sydney, you can't expect to be affording to buy a $1.5 million property just in an average job. So therefore, prices can't keep going up the way they are.

Simon Loo:   

[00:20:11] $1.5 million can't get you anything in Sydney.

Tyrone Shum:   

[00:20:14] That's what I'm trying to say, that's the biggest issue. So therefore, if you think that the price is going to double in, say, 10 years— maybe it will, I don't know. But just historically, it has been. But until the wages or people's income increases, there's really no way for that to happen. 

 

[00:20:31] And all the government can do is either reduce interest rates— but then that just increases the debt— or somehow put incentives in place to be able to keep these prices at a reasonable price. But that's probably the reason why people keep moving out Sydney and going to more affordable locations such as Brisbane to be able to still get something that's affordable for their family and stuff.

Simon Loo:   

[00:20:51] Just jump around. I grew up and lived in Sydney, I love Sydney. Even now, with all the traffic and all the craziness. But even I recognised very, very early on that Sydney was at its peak. And that's why we've been buying heavily in Brissie. And when Brissie gets to a point where it's at its peak, we'll be buying in the next best thing. And the next best thing after that. 

  

[00:21:17] So it's kind of just moving around and ensuring that we're buying in areas that at the end of the day fits the numbers, fits the strategy, fits your own goals. Consistent action moving forward is super, super important. You never want to wait for the right time to buy. Because in reality, there is no such thing as the right time. 

  

[00:21:41] I remember pre COVID, there were so many people waiting, because of the uncertainty of COVID, obviously. And rightly so, nobody knew what was gonna happen. So they waited, waited, waited. And then after COVID, when everything was going up rapidly in Brisbane, Sydney, everywhere, they were giving themselves a different excuse. 'It's moving too quickly now. I'm gonna wait until it slows down.' 

 

[00:22:08] But it's kind of like an endless cycle of waiting for different reasons. Now, I'm not saying this to suggest that you just go out and buy everything. But it's about having that goal. It's about working backwards from that goal and figuring out, 'Okay, if I want to achieve X amount, how many properties do I need to buy over a certain amount of timeframe? How often do I need to buy it?' And when you break it down like that, you can see very clearly, let's say over a 12 or 24 month period, what you need to do, you might need to buy one property consistently every 12 months, or every 24 months. And that's how you move towards your goal. 

  

[00:22:46] Whether that property is in Brisbane, or Adelaide or Perth or Sydney or Melbourne, it almost doesn't matter. If you're buying at the right time in the right market cycle at the time, and also buying the right property— which we always talk about is buying distressed below market value houses, good cash flow, capital cities, good built up areas, high demand, all those kinds of factors in play—that's how you set up that initial portfolio that's going to ultimately get you to a point where you've got either a lot of equity coming through, or you've got a lot of cash flow. Or both. So just keep your eye on the end goal.

Tyrone Shum:   

[00:23:26] And that's a really, really good point that you've made there. That's why I love this conversation that we're having. Is that ultimately, you've got to really be clear about your goals that you want to achieve. Everyone's situation is going to be different. Simon's and my situation is completely different. We've got different families here and our goals are different. 

 

[00:23:45] But ultimately, whatever you choose as being your goal, you've got to be able to fit those criterias to match it. Because otherwise, you can say, 'I want to go and buy 20 properties', but what's the real reason behind it? You've got to really dig deeper and say, 'Okay, is it to fund charity events? Or is it to fund a lifestyle? Is it to fund this, X, Y and Z?' And if you're not clear about those goals, then yes, it'd be very easy to say, 'I'm missing out,' because of FOMO. 

  

[00:24:08] But when you take that all aside— and that's all market noise as we all know— and you go okay, look, I want to achieve, say $100,000— this is just a random number that I'm picking— that will be able to cover all my expenses and I can live comfortably with my family enjoy time and travel etc. Then that's ultimately the goal that you got to say I'm going to aim for, and then I've got to work backwards and break that down to go this is the x amount of properties I need to buy to be able to achieve that goal. Whatever it is. 

 

[00:24:34] So it's so important to be there and I think this has been a fantastic conversation that we've had because the topic, obviously I've said 'Have you missed the boom?' But you never will miss the boom to be honest in our opinion, because there's always gonna be one.

Simon Loo:   

[00:24:49] There will be one at any point in time wherever you are, unless obviously there's like a massive global event.

Tyrone Shum:   

[00:24:56] I don't know if I'll be able to handle another one of these global pandemics for a while. I hope not!

Simon Loo:   

[00:25:00] But even the pandemic didn't stop some cities. It temporarily did, but I was talking like something huge. But I think at that point, property is probably going to be the last thing that people are going to be thinking about.

Tyrone Shum:   

[00:25:12] Yeah, exactly.

Simon Loo:   

[00:25:15] But just be logical about it. Just take action and steps moving forward. Make sure you're getting good deals. Don't get FOMO, don't give yourself any sort of time pressure to do anything. And yeah, happy investing.

Thank you to buyer’s agent Simon Loo, our guest on this special episode of Invest Like A Pro presented by House Finder. 

Also, for being a loyal listener of the podcast, I’ve asked Simon to offer a free 1 hour strategy session normally valued at $500 to help you put together an actionable property plan.

To get your free strategy session, simply visit housefinder.com.au and fill out the contact form, or call Simon directly on 0415 626 342 and quote “Property Investory”.