Property Hub - Investment Insights & Inspiration - Realty Talk: Stop the Clock! + Mortgage Mountaineering + True Price Drivers

Episode Date: June 2, 2023

Given our fascination with property and our desire to predict property values, we’re quick to jump on the property clock, cycle and curve models, but do they help us time the market? Renowned property analyst John Lindeman suggests we stop the clock and consider better approaches. As news continues to be filled with talk of rate peaks, fixed rate cliffs and widening chasms in home lending, it’s all sounding like mortgage mountaineering so Suvidh Arora from Cinch Loans joins us to show you what you can do about it. And to close the show, Evan Thornley from Longview unpacks their recent whitepaper to debunk misleading myths and reveal what really drives house prices.  RealtyTalk is part of the Property Hub podcast channel, your home for property investment insights, inspiration, and stories from Australia’s top property experts, investors, leaders, and analysts. Subscribe now to get every RealtyTalk episode delivered to you each week for free, and also get full access to Get Invested, the leading podcast for Australians who want to unlock their full ‘self, health, and wealth’ potential and get inspired by the stories of investors, founders, and entrepreneurs. Subscribe to RealtyTalk on the Property Hub channel: Apple Podcasts | Spotify | Google Podcasts | Email Property Hub is a collaboration between Bushy Martin from KnowHow Property, Kevin Turner from Realty, Andrew Montesi from Apiro Marketing and Apiro Media, and Australia’s largest independent podcast network DM Media. Business and partnership enquiries: [e-mail] omnystudio.com/listener for privacy information.

Welcome to Realty Talk, the show that brings together the country's most authoritative and respected property experts. Follow us on all the socials and subscribe for updates and exclusive offers. Realty Talk is powered by Realty.com.au, connecting buyers, sellers and agents differently. Welcome to your Property Hub's longest running Australian property show, Realty Talk. Your trusted voice for property investment insights, inspiration and stories from Australia's top property experts, leaders and analysts. I'm Bushy Martin from KnowHow Property Finance and we've got another Cracker Jack show for you this week. Given our fascination with property and our obsession with trying to predict property values, we're quick to jump on simplified property clock, property cycle and property curve models.

But do they really help us to time the market? Renowned property analyst Don Lindemann suggests we stop the clock and start to consider better approaches. As news continues to be filled with talk of rate peaks, fixed rate cliffs and widening chasms in home lending, it's all sounding like mortgage mountaineering. So Suvid Arora from Cinch Loans joins us to show you how to navigate the challenging lending environment

and what you can do about it. And to close out the show, we test the question of whether property values are driven purely by interest rates. Evan Thornley from Longview unpacks their recent white paper to debunk misleading myths and reveal what really drives house prices. Now, before we get underway, make sure you hit the subscribe button wherever you're listening to or watching the show to ensure that we continue to attract the industry's best of the best so that you can enjoy Leading Edge Insights. and if you'd like a free copy of my award-winning book get invested make sure you also sign up on the realty.com.au homepage we've got a lot to unpack so let's get underway successful property investment is a game of finance do you have the right team and the right game plan realty talk is brought to you by know how property more than mortgage brokers bushy martin and his team of

investment architects set you up with a sustainable strategy structured to lower your costs, tax, risk and stress while increasing your capacity for growth. KnowHow has helped over 1,900 homeowners and investors secure more than $800 million in property wealth. So get set to live more, work less and live your legacy. Want to know how to invest in your freedom? Visit knowhowproperty.com.au. As Australians, we all have a fascination with property and property prices. And as investors, we're always trying to pick the best time to buy a property and to predict the future of what's likely to happen with property values. But reading property price movements is a bit like trying to forecast the weather. A lot of post-justifying science has

developed to try and simplify the very dynamic complexity into quite simple mind models based on past behaviour, and they all sound great and are easy to comprehend, but rarely do they prove accurate or stand a test of time. It seems that lightning just doesn't strike twice when it comes to property. But as a result, there's been a plethora of theories and experts that have emerged over the years to try and encapsulate all of this into property prediction tools like property cycles, clocks, growth curves, you name it. But, and it's also fair to say that on occasions I've been guilty of some of this myself. So we end up constantly conflicted as one expert warns us about the perils of trying to time the market, while another eagerly assures us that the turning

point's arrived and it's time to buy. Now, they can't both be right, so can we time the market or not? Well, to test the validity of all this and to help you better predict the future of housing price movements, we're joined by long-term show favourite and one of Australia's leading property market analysts, who's got a strong and long track record of correctly predicting housing movements. And of course, I'm talking about John Lindemann, who's the CEO of innovative property market research firm, Property Power Partners. So welcome back to Realty Talk, John. Hi, Bushy. It's great to be here. And hello, everyone. John, great subject today. Really enjoyed reading a recent post you put on LinkedIn

on this very subject. But to sort of set the scene and put some shape around the discussion, What are property market cycles and property clocks in basic terms? What they are, they're devices that are used by investors and experts to try and work out what stage of the property market we're at. And I guess they're based on the idea that there are ways you can time the markets, you can work out what's about to happen. And I think, you know, they're popular because human beings hate uncertainty. They don't like to not knowing what's going to happen. It fills us with anxiety and worry. And so it's nice to have some sort of indicator that tells us which way markets are heading.

Yeah, spot on. We're always looking for simple ways to reduce complexity down, as you say, and reduce the perception of certainty because that's about all it is. But sort of taking it a bit further then, John, why do you believe that they don't work? Well, I've gathered about 20 different market housing cycles and property clock examples over the years. I've been around commenting on the market for a long time and picked all these up and they range from four to six

to eight to 12 years. There's even one I found that goes for 18 years, the property market cycle, and they can cover suburbs, regions, cities or even entire housing markets you know so they're always pointing in different directions at the same time because they're looking at different things but the main reason they're inaccurate is because they assume that the market is always regular that there are immutable laws which govern which way prices are going to move and and the fact is Bushy if we look at what's happened in the last few years and we've gone through a pandemic we've gone through lockdowns

we've had a number of records, such as record low unemployment, higher overseas arrivals, low rental vacancy rates, you know, a record number of interest rate hikes. And you see, none of these things were predicted by the experts, and even our most revered economists didn't pick up these things were going to happen. And they all impact the housing market. So how on earth can you rely on a housing market cycle or clock

that doesn't you know didn't know any of these things were going to happen yeah spot on so given that context then can we actually predict the future of housing prices and if so how john yeah it's a good question but she had it's something that i've devoted a lot great period of my life to doing you know working i've written books on the subject and back in 2011 i started developing a database which actually gathered all of the relevant data for property markets such as listings, sales, rental vacancies, asking price trends and so on. So we've tracked every single suburb in Australia to try and work out which way prices and rents are likely to move. Now I can tell you that we've been doing this for over 12 years and in that time we've had a predictive accuracy

rate both in terms of the direction and the intensity of price changes of over 90 percent so we know we're not 100 accurate we're like the weather bureau we always put it in percentage terms but yeah it's a great tool to have at your disposal because it actually removes all of this dependence on on laws and and cycles and so on that don't work yeah it's and you're basing it on hard data not uh not soft opinion that tends to be a little bit of a case in the in the media at least uh in in recent times but uh look uh really appreciate you opening your eyes for that are there any sort of key indicators within your data uh that uh you know those who are serious about trying to get some sense of you know anywhere near your 90 plus accuracy level need

to focus on, John? Well, there are three main indicators, and I call them the three P's. They are population, growth, and movement. That's really the main indicator of housing demand. If people are moving into an area, they're going to need housing, and that means that housing demand is going to go up. Now, they might be renters or they might be property buyers, so the next P is purchasing power, and that means that if people have got the ability to buy property and they want to buy property because some people don't like students and construction workers might prefer to be renters but you look at well what you know what is their purchasing power and how does that reflect in terms of that particular area where people are moving the third p is actually

properties is there a shortage or surplus of the number of properties available in an area of the right sort you know that the sort that they want to rent or buy and if you put all those three together and it's not that difficult to sort of work out well has this is this area growing in popularity of people wanting to move in are they renters or buyers and look at the number of listings or rental vacancies to get an idea of what's available and you can do what I do on a big scale you can do that yourself on a fairly small scale and remove that you know idea that it's part of a cycle or whatever because that's got nothing to do with it I love it mate you always have this ability to cut through to the the uh the stuff that's really important for us

to take on so i really want to thank you for uh sharing your always informed perspectives on property john and thanks again for joining us on the show today it's been a pleasure wishy thank you thanks john well there you have it the facts always speak more quietly but much more clearly than the fiction when it comes to predicting the future of property price movements so if you're serious about ignoring the noise and actually getting the good oil on what you need to be doing you can't afford to miss John's property predictor reports including his latest the good the bad and the ugly report that you can find at lindemanreports.com.au stay tuned for more here on Realty Talk. Property deductions can save you thousands of dollars each

year to make sure you maximize deductions you need to work with the most experienced quantity surveyor in the country. BMT Tax Depreciation is the leading specialist in the industry. They've completed over 700,000 tax deduction schedules for residential investment and commercial properties Australia-wide. BMT guarantee to find double your fee in the first full financial year deductions. Call BMT on 1300 728 726 today for an obligation free quote. Now as inflation and interest rates rise and your home loan buying capacity and your property purchase price power plummets, many borrowers have become stuck with talk of rate peaks, mortgage prisoners, fixed rate cliffs, and widening chasms between what hardworking

Aussies want to do and what they can do. It's all starting to sound a bit like mortgage mountaineering. So what's causing this? Where is it all heading? And what can you do about it to successfully navigate the mountainous terrain in order to minimise your costs and risks while optimising your ongoing opportunities? Well, to give us more insight on all of this, we're joined by fellow finance broker and Mortgage Sherpa, Suvid Arora, the CEO and Chief Solutions Officer with Cinch Loans.

So welcome to Realty Talks, Suvid. Thanks, Bushy. Thanks for having me here. Looking forward to having a chat, mate. It's a very interesting market condition at the moment as we just spoke about off air, but to sort of kick things off, can you start by giving us a bit of a snapshot summary, I can't even say properly, on where things are at in the world of property finance and what challenges are homeowners facing and where's it all heading?

Oh, well, for those who've been living under a rock, interest rates have been rising for the last, what, 14 months now. And look, on the outset, it paints a very bleak picture, right? People are struggling. There's obviously been record low interest rates, which people have fixed their mortgages at for the last few years. and we are approaching the point where a majority of those fixed rates are coming to expire and they roll off into variable mortgages and that's where you know that's the biggest challenge people are facing um or likely to face i would say uh currently anyone looking to get into the property market obviously with those increased rates there's much lesser borrowing capacities and and

people are just finding the situation a bit more challenging than than we've been used to in the past few years i guess yeah yeah very good call well the old 64 million dollar question around interest rates is uh in your opinion and and i'm going to ask you to pull out your crystal ball here at this this point so that uh how much more do you think interest rates are likely to rise and and when do you think they're likely to peak look if i had a crystal ball i wouldn't have got it wrong the last month to be honest when i thought i personally thought in the interest rates shouldn't gone up in may to be honest yeah but they did uh and obviously the rba wants to take things in a certain direction and make sure the market's stabilized before they start you know reducing

the interest rates again but honestly speaking i i think we are pretty much at the peak or very close to it i don't think there's a lot more left in terms of interest rate rises um if at all we might see one more in the next few months but apart from that i i honestly believe by the end of this year we'll start seeing a reversing of the trend yeah no good call so what effect do you see this having on the creation of mortgage prisoners fixed rate cliffs buying capacity and and our property purchase price power and what if anything can and should we be should we be doing about it then so look the mortgage business thing is an interesting concept because um when the loans were done when all these fixed mortgages were taken out obviously the banks have

their own uh you know buffers that are built in and then we with responsible lending we make sure that we go a little bit over and above those buffers as well and make sure people can service at a much higher rate so we are currently at sort of that tipping point where those buffers are pretty much exhausted right um if we go much beyond that that's where we might see people struggling to make repayments because there are people who've you know stretched out their borrowing capacity as much as possible during those times when the interest rates were really low and property prices were increasing yeah having said that that's one of the reasons i think you know the government and the rb are going to be prudent enough to try and understand

that they need to find some other levers to pull now rather than just keep increasing rates because otherwise it's going to become very difficult for the average household no question about it now i guess there's a little bit of green shoots of of improving situations there it appears now that some lenders are actually reducing the three percent surfacing buffer down to one percent on dollar for dollar refinances in order to boost buying capacity so they can refinance in order to reduce their costs yeah are you able to shed a bit more light on this and and what it means again i think it's uh some lenders coming to the market with or or just thinking with a common sense approach and trying and understanding that the interest rate peak is very near and that's

another indication right because they are getting rid of those buffers because they also understand that it's highly unlikely the interest rates will go further up so they don't necessarily need those buffers as long as people can service the loans at the existing rates which is close to the peak they're happy to take them on and provide them with that respite from you know going at an interest rate which might be exorbitant and purely because their current lender can do it and hold them prisoner so so yes some lenders are coming to the party and being you know playing the playing playing by the right rules i would say right that they they are trying to help people out and i i see the market moving in that direction in the next few months yeah it's i

guess it's a bit overdue from where i sit uh i mean if if you're if there's someone purely looking to refinance to reduce their repayment costs and they've been able to service a loan in their current condition, you would think that it's common sense for, you know, a more appropriate servicing buffer to be added to the equation. It's refreshing to see that some of the lenders are now coming to the party on that. So some good news for particularly people

who are just trying to cut their costs in the current time. but uh you know on a slightly uh different subject but as associated with this uh most lenders are now microscopically scrutinizing borrowers living expenses so uh what can home liners do to better improve their buying capacity and their lending options as you say look i think again going back to the time when the interest rates were really low and people had a lot of disposable income i think we sort of let go of our apprehensions in terms of spending money and which which has also kind of led to or been a contributing factor towards the inflation going up because people are spending freely um and i think the most prudent thing to do for the

average household is to just do simple things like proper budgeting looking at what their average expenses are looking at what is necessary and what is not um you know doing energy comparisons doing their electricity bill comparisons internet comparisons and just cutting on those costs which Or, you know, how many, what you call that, OTT subscriptions do you have? How many Netflix and Amazon Prime and everything you have? And are they actually necessary, right? Because if you start looking at that, there are certain elements that are just there which you don't need. And once you cut back on them, your budgeting becomes much easier.

It increases your disposable income, your savings, and it makes you a much more attractive client to all these banks as well. yeah one of the things that you and i probably take for granted a little bit but a lot of people overlook at times is the fact that if you've got interest-free store cards or credit cards with limits there's an assumption by a lot of people i never use the card so what are they worried about that for but as you and i know for every thousand dollars worth of limit you have on a card whether you use it or not it reduces how much you can borrow by anywhere between three thousand to sort of six seven eight thousand yeah who the lender is so there's a novice opportunity for people to very quickly improve their uh horsepower in that regard if they just trim the limits back

to what they actually need so uh and on that i was i was showing a client this morning who was struggling with their borrowing capacity yeah you know they came for a refinance and they have sixty five thousand dollars worth of credit cards that they don't use they just they just have them because they got points right they have no use for them and suddenly you know they've gone from oh, we can't service this loan. We've now got a $300,000 surplus in our borrowing capacity. Just something as simple as that. Yeah, well, it's even more reason to be engaging

a savvy mortgage broker like yourself to assist, to understand where the banks are coming from and to be able to potentially fit what might appear like a square peg with one lender into a round hole with someone else. So as always, Siddharth, I want to thank you for these very timely reminders and thanks for your time on the show today.

Thanks, Bushy. It was a pleasure being here. Thanks, Stephen. Well, as we repeatedly reinforce, property is a game of finance. So when it comes to overcoming lending obstacles, where there's a will, there's always a way

when you have a savage mortgage broker guiding and supporting you and looking after your best interests. Stay tuned for more on your Property Hub's trusted voice for all things property here on Realty Talk. Successful property investment

as a game of finance do you have the right team and the right game plan realty talk is brought to you by know how property more than mortgage brokers bushy martin and his team of investment architects set you up with a sustainable strategy structured to lower your costs tax risk and stress while increasing your capacity for growth know how has helped over 1900 homeowners and investors secure more than 800 million dollars in property wealth so get set to live more work less and live your legacy want to know how to invest in your freedom visit knowhowproperty.com.au as we've noted repeatedly here on realty talk there's a misleading myth being perpetrated by the mainstream media that property values are purely driven by interest rates but this is a

overly dramatized simplification that belies the true facts. So what really drives Australian property values over the long term and what does this mean for you and other property investors? A recent data-driven white paper prepared jointly by Australia's leading online property exchange network, PEXA, and an integrated residential property business, Longview, unpacks the revealing facts that undermine the misguided fiction. And to discuss the details, we're joined by the founder of Longview, Evan Thornley. So welcome to Realty Talk, Evan. Good to see you, Bushy.

Thanks for joining me, Evan. You've done some great work with the white papers, so to sort of kick things off around that, media commentary on Australian house prices typically focuses on interest rates and tax policies. Are these usual suspects really driving Australian house prices over the long term? Well, I think the key point there was over the long term, right?

The funny thing about the property industry is you ought to be thinking about the medium to long-term if you're an investor, right? I mean, that's how you make your money. And yet all of the big companies associated with the property ecosystem are all short-term, transaction-driven. Banks are all cutting each other's throats

and churning mortgages. Sales agents, you know, want to get the next listing and go on to the next deal. Developers have got product they want to flog. And so people, all the commentary around the industry, I don't think they're being misleading. It's just their own focus as big businesses is all very short term. So all the commentary in the media from all of those major media commentators is all what's happened in the last 15 minutes.

And, you know, our interest rates went up and prices moved. And, you know, if you look at it on any sort of if you zoom out to, say, a decade long, let alone a century long view, it actually gets disarmingly simple. right australia has had a almost dead straight line of seven percent compound annual growth in house prices for a hundred years right and you know people say to me oh aren't we in the middle of some debt funded bubble it's going to be another property crash and my first question is when was the last property crash and they'll retail fictions to you like oh you don't remember but Paul Keating, 17% interest rates. We all had to work three jobs to pay our mortgage.

I'm like, I do, actually, and it was awful. But how much did house prices decline? Oh, it was a disaster. No, no, no. How much did house prices actually decline? Answer, almost not at all. As it turns out, if you look at the graph, right, I mean, this is from, you know, the Reserve Bank

or the Bureau of Statistics figures. This is not, I'm not making this stuff up. So what we did was look at what are the consistent factors that have driven Australian house prices. And then one of the factors that sort of influenced the blips on the curve is the curve's going up at 7% per annum. Sometimes it's up a bit higher, sometimes it dips back, but the long-term trend is 7% upwards.

Interest rates is one of those things. If you look at, and you'd see it in the white paper, if you look at interest rates versus property prices over 60 years, you can see a 30-year period where interest rates were either flat or going up, and property prices doubled every decade. then you see periods where interest rates were flat and property prices doubled every decade and then you see the more recent time where interest rates were either declining or flat and property prices doubled every decade so there's a picture emerging here and I'm not saying

of course if you have the fastest rise in interest rates in history really which we've had in the last few months yes it's impacted house prices a little bit like nationally national average house prices are down about eight percent now of the biggest rise in interest rates in history in proportion in terms of the fastest time so i'm not saying that there's no impact i'm just saying zoom out a little and the much bigger impact is something that everyone so takes for granted that it's hidden in plain sight and no one talks about we have the second highest population growth rate in the world right i mean apart from sub-saharan africa in the developed world People don't realise this.

Even places like America, which has high population growth, are only about two-thirds the population growth rate of Australia. Israel is the only country in the developed world with a faster population growth rate than Australia over the last two generations. And so if you have more and more people coming and they all want the same scarce pieces of land in Sydney, Melbourne and Brisbane in particular,

then the value of that land is going to go up. That's just inevitable. And so that's been the dominant factor, has been consistent high population growth and consistent high concentration of population, particularly in those three main urban centres. And so everything else has some impact. Negative gearing has a little bit of impact.

Chinese money has a little bit of impact. Supply-side factors have a little bit of impact. Interest rates have some impact. But all of those pale into insignificance compared to the long-term consistent rise in population, which drives land values, which drives house prices. Which is, given what's about to happen in the country with the floodgates opening in recent times,

is a pretty clear indicator of where things are going to go to. We had a little pause of population, right? And I'm not saying this happens overnight, right? We had a pause in population. Prices actually went up during that period because there was a lot of government money and a bunch of other things. But looking at it in a sort of medium and long-term trend, And, you know, we're about to have another 300,000 people

hit the shores, right? You know, I'm in Melbourne. I always say to people, look, an MCG and a quarter of people are going to move to Melbourne this year. Where are we going to put them, right? And, you know, likewise, not quite as many in Sydney. And obviously Brisbane's growing fast as well. But that's the tsunami.

the slow-moving tsunami, is our world-leading levels of population growth. And that makes our market very different to other markets that we often compare ourselves to. Yeah, let's jump on that. So put some context around this if we can then, please, Evan. What does make the Australian residential property market so unique?

Well, so our unique demographic and geographic massive population growth for you know since before any of us were born into mainly three urban centers that drives long-term land values which drives population growth yeah so what does that mean what that means every property market in the world is some trade-off between capital growth and yield we'd all love to get lots of capital growth and lots of yield but it doesn't work that way because if you have capital growth prices go up and less rents are going up as fast as prices then yields are going down that's that's math right yeah australia's here right we are one of the best capital growth markets in the world what that also means unfortunately if you're an income

oriented investor this is one of the worst yield markets in the world yeah you know if you're in atlanta or houston or cleveland you've got gross yields of eight or nine percent uh terrific right but you have three percent capital growth we're kind of in the reverse you know we've got seven plus percent average capital growth rates but yields typically closer to three so so as an investor in australia it doesn't pay to use business models or thinking that come from other markets even the commercial property market in australia is much more yield oriented and much less certain about capital growth but if you're talking residential property in australia it's one of the best capital growth markets in the world but it's not a great place to be looking

for income growth um that's just that's not our strong suit yeah yeah well as a as a way to grow on nest egg there's no better vehicle in this country particularly when it's tax incentivized to uh grow that nest egg uh so i'm really glad that you sort of well and of course where that becomes critical as well and we'll come back to interest rates as part of this but if you're making money on the bank's money then capital growth is your friend okay you buy a million dollar property um maybe if it's your home 20 equity is yours 80 debt from the bank okay it grows seven percent per annum you sell it 10 years from now for two million dollars the bank gets their 800 grand back that doesn't change what you owe them

all the equity is yours you've gone from 200 000 to a million two you've made six times your money in a decade levered equity returns the stronger the capital growth in the market the more powerful it is uh to be levering your equity with debt from the bank yeah extremely well said so given that combination of factors that we've touched on then evan what's your most important advice to property investors based on the data that you've analyzed well the first thing i would say is i've talked all about averages here um and but you don't buy the average you buy a property right and i mean we do scatter diagrams of the capital growth property by property in any market and they're incredibly varied so the biggest mistake people make is they say oh i'm buying

property it'll double every 10 years right some do some do better than that a lot do worse than that And the favourite trick of property developers and real estate sales agents is to trick people into thinking that anything you buy will deliver that. And particularly, for example, high-rise apartments will never deliver that in a million years, right? Our data science teams analyse every sale price of every property in Australia for 50 years, right? I can give you the names and addresses of every property that's, for example, ever been sold at a capital loss. and 85% of those properties have an address with a slash in the middle and two or three digits before the slash, right? That's not where the growth is. So the first thing I would say to you is, and we say this to clients all the time, you buy a property, you don't buy a suburb.

I can show you two properties in the same street, even next door to each other, and they'll have different capital growth potential. So there's no shortcut. You've got to choose the right asset. That's the single most important thing. And don't choose it on suburb average or believe you're going to get market average. The individual asset quality, and there's a range of ways of assessing that, is critical. The second thing I would say is there's so much focus on is now the right time to buy, you know? It's a bit like the sales agents, you know? Did you know today's a great time to sell?

Today's always a great time to sell if you're a sales agent because they want the commission. Market's going up, great time to sell. market's going down good time to sell market's a bit choppy but it's good time to sell and so the same mentality comes into buying you know is today a good time to buy what the data shows is it matters much more what you buy than when you bought it yeah if you're buying a property that's doing eight or nine percent compound growth it's doubling every nine years or eight years it doesn't matter much whether you bought it at the top of the cycle or at the bottom of the cycle.

Of course, you'd prefer to buy it at the bottom of the cycle. You've got it a little bit cheaper, maybe 10% cheaper. What matters is it's going to double in eight years, right, versus a property that's doing 2% or 3% and will take 20 or 25 years to double. So, of course, you would rather buy at the bottom than the top. But the much more important thing is what you buy. And there's much too little focus on choosing the right asset

and far too much focus on what the timing is or, again, a whole lot of other factors like, oh, you get this depreciation level or you get all these other things. And it's like, yeah, those things are real. They're just about one-tenth as important as whether this is a high capital growth asset or not. Absolutely.

And given what we've just been through with the second highest property boom in the 230-year history of the country, the asset quality is now more important than ever and focusing on the areas that have the growth drivers that are going to continue that level of growth also becomes very important. Right, but then finding the individual properties

in those areas, right? I mean, I'll give you an example, right? Our data shows that a lot of people are familiar with the idea that a good school zone gives a price premium, right? You might pay 20% more to be inside the school zone than outside the school zone. okay well that's important to know um but if 10 years from now the premium is still 20 then from

an investment point of view you've had the same investment returns you've just gone higher price to higher price at the same level yeah but if you look at i'll take a local example here the glen waverley secondary college school district you used to pay a 15 premium to be inside the school district versus not you're now paying a 40 premium so where the whole of the suburb of glen waverley has done eight percent growth per annum which is great doubling every nine years the glenn waverley secondary college school district has done 11 per annum doubled in seven years yeah but even then we had a client who had a property inside that school zone and guess what we had the hard task of telling that client we didn't sell them the property we didn't buy the property for them we

just managed it for them we managed 4 300 rental properties yeah but actually they wanted to sell and they were almost certainly going to get less than what they paid for it 10 years ago, even though it was inside the Glen Waverley Secondary College School District. Now, in this case, it was a one-bedroom apartment. They bought off the plan in a large scale development. So you've got to look at the individual property

as well as the surrounding area and the drivers within the area. It's more work, but, you know, these are, we're talking half a million, million, million plus dollar investment decisions. You need to do that work. absolutely no very important lessons there in terms of that that quality focus is no question and talk of medium prices and property markets is a misnomer in itself well let's think about it

both property developers and real estate agents both have a benefit in talking the myth of the suburb average right the developer's got a development in that suburb so they try and say this is a great suburb as if that matters right the sales agent almost certainly only covers two the three suburbs so they're always going to say so both of them have you know a mythology of this is a great suburb therefore our new development will be a great investment and in most cases unfortunately that's simply not true it doesn't mean there aren't great investments in that suburb it's just as they say in star wars these ain't the droids you're looking for yes and then there's lies lies and statistics uh as far as that goes evan look uh really

appreciate your insights on that and thanks for these quite refreshing and revealing uh looks at the whole equation. And thanks for your generous time on the show today. Thanks very much, Bushy. Thanks, Evan. Well, it's now obvious from the data that the current housing crisis and property values in our great country

are less affected by interest rates and more driven by our long-term unique demographics and the shortage of available residential land near jobs and services. So ignore the media's fear-mongering indicator of the hour and defer to reputable data-driven research like the white papers that have been produced by Longview and PEXA

that you can access for free and in full directly from Evan and his team at longview.com.au. Keep watching and listening to Realty Talk, your property hub's go-to place for all things property. And that's a wrap for this week's show. Another big thanks to our special guests, John Lindemann, Suvid Arora, and Evan Thornley. And before we go,

make sure you don't miss another episode of your trusted voice for all things property by subscribing to the Property Hub on your favorite podcast player now where you'll also enjoy the Get Invested podcast delivered to you each and every week. Thanks again to Realty.com.au, BMT Tax Appreciation,

Apiro Marketing, DM Media and Southern Cross Austereo for their ongoing support. I'm Bushy Martin from KnowHow Property Finance and along with Kevin Turner and the entire Property Hub Realty Talk team, please remember that your time is free

but it's priceless. You can't own it, but you can use it. You can't keep it, but you can spend it. And once you've lost it, you'll never get it back. That's more food for thought, and we look forward to seeing you again next week. Miss something in this week's show or want to catch up on past shows? Do it anytime at realty.com.au, where we connect buyers, sellers and agents differently.