If only you had known about the mining boom before it hit. You probably wouldn’t have bought a property in a remote mining town, but maybe, just maybe you would have purchased in Perth and nearly doubled your money!
But alas, how were you to know?
Then came to Sydney boom, perhaps you were one of the fortunate ones to ride the wave of growth. One of our clients made $170,000 in the Sydney market in just 10 months. Insane right! But had you known it was going to be that profitable, would you have perhaps purchased 2 or 3 properties in Sydney or nearby just before the Boom that swept the area in just 3 short years.
But alas, how were you to know?
There were international economists telling us that the bubble was going to burst in Sydney in 2014 and that it was the riskiest market to buy in. They were insisting that values would decline by 40%. So buyers were avoiding Sydney investing like the plague. Some missed out on the growth all together.
But not our investors, we had the data and the stats to show that the Sydney market was just at the early stages of the cyclical upswing. No where near the top of the cycle, not at a peak and certainly not a bubble. So we forged ahead and got most of our clients (the ones that had the budget for it) into the Sydney market and surrounding areas that were a bit more affordable. Our clients have now made a fortune from that strategic decision by our firm. All the while, other investment firms were running for the hills and staying well away from Sydney at the time.
But that Boom has been and gone, so where is the next BOOM?
Let me tell you more….
Firstly, all markets move in cyclical trends, so getting the location that is at the right stage of the cycle is the first important part. That is something that we cover in our one on one strategy sessions as well as our educational events. This is constantly changing as the market changes. But there is one key factor that will cause a rising market to significantly outperform, that is the BABY BOOM!
The Baby Boomers are the largest age demographic and were born between 1946 and 1964. They represent just over 20% of the total population in Australia and they are looking to downsize from their large family homes as they find they are now empty nesters. This is creating a huge amount of demand for properties that suit the Baby Boomers needs, and that includes units, townhouses, villas and duplexes. They are cashed up buyers from selling their expensive homes in the suburbs and they are ready to spend some serious money on their dream retirement home. They are often looking for the sea change or the tree change, but still within a reasonable distance to a capital city or satellite city as they need medical, transport, entertainment and lifestyle facilities. Plus they like to be fairly close to the grandkids and usually our younger generations that are raising families need to be in or near major cities for employment.
So why does this create a BOOM? Because when lots of people are looking for a similar style of property in a finite market that has limited supply, this causes prices to rise resulting in growth.
What doesn’t work? Units won’t perform as well, as they are not limited in supply. They are very easily oversupplied. So don’t bank too heavily on the unit market. However, villas and townhouses require a larger land foot print to build and in areas that are established and land is scarce they can be very limited in supply. Small low maintenance houses on compact blocks are also not to be overlooked for this market sector. But I can’t stress enough that the location and timing in the cycle has to be right also. Don’t buy a villa in an outlying regional area and wonder why it didn’t out-perform. In the right Baby Boomer markets, that are also in the right stage of the growth cycle, these market sectors will be an out-performer in years to come.
The downside to this is that this puts baby boomers head to head with first home buyers, as this is traditionally the same product that first home buyers would go for because it has always represented better value buying at lower price points. This is no longer the case. Baby boomers are pushing up prices for these style of properties, resulting in first home buyers being pushed further out of the market. This is causing first home buyers to have to look to alternate strategies to get on to the property ladder.
But don’t despair first home buyers, we have you covered with our stepping stone strategy, more commonly known as rent-vesting. Read more about that here.