Australian Housing Market Predictions And Insights
How can you predict the property market? Is there even such a way? Today on Property Investory, research analysis expert John Lindeman shares his powers of prediction in the Australian housing market.
With many years at the Australian Bureau of Statistics, Lindeman quickly formulated his own trend analysis of the housing market. This led to countless purchased properties for clients, without a single poor investment.
On the podcast, Lindeman will discuss with host Tyrone Shum how he found his calling in housing market research, and how high cash flow properties outgun high growth properties at the time of retirement.
So to begin, in 60 seconds or less, what do you actually do in any given day?
Property, it’s a combination of two things; one what I do is I prepare, I do lots of presentations around Australia so I’m constantly preparing information for those and I also write for a number of property investment magazines and newsletters so I’m always looking out for new angles and stories of information of interest to investors for those. So that’s pretty much what I do most of the time.
But how does one man so accurately predict the future? Well, he doesn’t.
Well luckily, I have a team of researchers that I can rely on so not as much as it used to. You know, we’ve got about three people on our team who are full-time researchers and looking at various markets and providing me with their findings so it probably takes an hour or two a day. That’s quite enough for me to get a good understanding of what’s happening anywhere.
With all the data he could ask for, at his fingertips, Lindeman uses this knowledge for presentations and his next book.
And also a lot of it is because the presentations, a lot of time is spent travelling. We use that time, you know; I’ve written two books about the property market and I’m in the process of writing another one and also researching markets, we’re doing on the ground research. So if we’re in a particular locality we’ll go and look at areas that have promise and report back on those.
And while getting on the ground of a potential suburb or property can be exciting; some prove too much.
Yeah and I mean, it is fun in some cases, you go to really exciting places that are great to visit but in other cases, of course, you’ve got to go to areas that you’d rather not visit at all, but it’s all part of the research process.
Although he may make it sound so easy: don’t let Lindeman fool you. It takes an abundance of hard work to gather and sift through the research that he uses to accurately predict the housing market.
Well I, we do research, there are three different levels. The first is we look at the dynamics of any market and by dynamics I mean the causes of change which are usually it’s like population growth, people moving into an area, the availability or need for finance, so you know, if they’re first home buyers they need finance but if they’re retirees obviously they don’t need any at all. And then the actual state of the local market is there a shortage of types of properties that are in demand. So that’s the first level. The second level is then looking at the numbers, the number of sales that are occurring, the number of properties listed for sale, how that’s changing, rental vacancies and changes in asking prices. You know there are all sorts of little tricks you can use to really find an area that’s got a lot of growth potential or not. And then the third level is to go and have a look, which as I said can be fun or it can be rather daunting but that’s, they’re the three levels of research that we do.
With over 40 years of experience as a property investor, it’s unsurprising that Lindeman has changed his perspective of what makes a good investor over the years.
Many years ago I would have been an investor who’s looking for high growth. I think that property investment is a journey and it’s unique to start by leveraging as much as you can, buying properties in areas that have got high growth potential and leveraging off that growth, by that I mean borrowing money, so 5% and getting 20, 30% return on that investment. But then, as you go on in life, and I’m not young anymore, there’s not much point in doing that so when you’ve got sufficient portfolio properties you switch them to high cash flow because that’s where your income is going to come from. And if you still have growth it’s fine, but you’re really only going to leave that to the kids or grandkids anyway so you know, cash flow is king when you’re approaching retirement.
With yields in Australia averaging between 4 and 6%, swapping to a cash flow strategy can be a risky business if the yield is not accompanied by high demand.
Yeah, I mean it’s lower in places like Sydney because of the high growth that’s occurred because rental yield is a combination of rent and price so, it’s the return your getting on the amount of money you’ve paid for a property. You can get high yields, but what you’ve got to be careful of is that yield is not caused by price falls but is actually being caused by the demand for rental properties, so it’s a genuine rent yield caused by rent demand. There are places in Australia and some in Tasmania, for example like Queenstown and Zeehan where the rental yield is–those reports you get that show the highest rental yield in suburbs around Australia, they always appear in there but it’s yield caused by the fact that prices have just been plummeting for years and the median price increase is seventy thousand dollars you know. It, you can buy a house very cheaply, and the yield is high, but no one wants to rent there so you’ll end up with an empty property.
With many years living in Melbourne, Lindeman grew to know the housing market of its suburbs, as well as raise his family.
I grew up in Sydney and when I was about twenty years old I met a girl from Melbourne and so naturally I had to move to Melbourne at that stage. And then I spent about fifteen years living in Melbourne.
Oh wow, okay. So you’re originally from Sydney…
…went to Melbourne, and now you’re back in Sydney.
And the girl you met in Melbourne, what happened there?
We had a long and happy marriage, a couple of kids, and then we parted ways about ten years ago so, which is fairly common these days you know, marriages don’t last a lifetime. But you know, no regrets; it was good and we had two kids and it was a nice experience. But you know, the reason I married at the age of twenty, it was all the wrong reasons so.
Lindeman’s influences for entering the property market were set in opposition to his parents.
I think, yeah my parents grew up in, you know, after the depression and the war, and they were very anti-debt. It was all about bought a house as soon as you can, pay it off as quickly as you can, don’t get into debt. And had I known then what I know now about debt; that there’s good debt and bad debt, and good debt is the sort of debt that gives you return which is greater than what it costs for you to do, you know, in interest. Bad debt is credit cards, personal loans, that sort of thing that costs you money. So, had I known then what I know now I think I would have gone ahead and gone into property investment in a much more ambitious way than what I did. So yeah, they taught me something which was the opposite what was actually the right thing to teach and I guess that took me a long time to learn.
It seems that the desire to learn more has been present with Lindeman throughout his whole life. As though the majority of years in Melbourne he managed a family, full-time work and a part-time postgraduate degree in marketing.
No yeah, I got, I had a job with what was then the PMG and became Telstra. And then while I was there I completed my education so I’ve got a postgraduate in marketing. That was over the years that I was in Melbourne and so it was always, I was always employed and I was always virtually studying part-time as well.
Lindeman’s leap into property analysis came from the most abundant source of research and data that this country has to offer; the Australian Bureau of Statistics. Using his own initiative at the ABS, Lindeman experimented with the idea of applying trend analysis to the housing market; with amazing results.
Yeah, I saw the job advertised and I thought that’s the one I want and it was fantastic and I learnt so much. Not just about the housing market but how to analyse change. They had a thing called trend analysis which is where you look at trends and you can predict what’s likely to happen by the way that the trends are going. So I then adapted that to the housing market and said, does it work the same way and I discovered that it does. And as long as you’re looking at the right sets of numbers you can make fairly accurate predictions as to which way the markets are likely to move.
So what in his research does Lindeman consider the most important? What can you use that will help you in your next property venture?
Well, I guess the, two things. One is that when you’re looking at areas where there’s a lot of investors, and a good example of that would be the mining boom towns of a few years ago like Moranbah, Dysart, Emerald, and over in the west, Port Hedland and South Hedland. The first indicator that something was wrong with those markets was way back in 2013 and that was the number of rental vacancies was starting to rise. And if you’re an investor you’ve got to have a tenant and if you can’t find tenants, of course, you can’t make the repayments and you try and sell the property. So the whole thing goes, goes bad. And that was one of the things I learnt, it’s the rental vacancy trend in those sorts of markets, it’s the first early warning indicator that something could be wrong. And it was a very, very valuable lesson because a lot of people were still moving into those markets at that time and I was advising anyone that I was associated with not to do that and stay well away from them, because they started collapsing as markets almost immediately after that, you know, because of the fact that there were too many investors and not enough renters.
To further your own research Lindeman recommends heading to free sources.
It’s free, you know you just go to realestate.com.au, or domain, and look up the area you’re interested in and see how many rental vacancies there are and just follow that number and if you see it going up that’s bad. So very easy to do.
Lindeman discovered early on that the renovate and sell strategy would be a winner in the older suburbs of Melbourne.
What I discovered was that you could buy old terrace houses in the suburbs of Melbourne for, you know, very inexpensive and then renovate them and sell them for a lot more. And that was something in Sydney at the time that already had become a very fashionable thing to do in places like Paddington and Balmain. Booming markets but that hadn’t happened yet in Melbourne so I thought let’s buy an old terrace house, do it up and sell it. We did that and it doubled in price in three years so I was convinced even at that early age that property investment was the right way to go.
From that first success, Lindeman knew he still needed to learn a lot more as a property investor; where his time at the ABS truly came in handy.
Right, that was because of–it was a long process, but after that experience, the first house I bought, and the fact that it doubled in value and I thought this is fantastic, I’m going to do it again. The second house we bought we did the same thing and then after three years we had to sell it. But the market had changed and so prices had gone down and we lost a lot of money on that second purchase. And then I thought to hang on, I don’t really understand how the market works at all, you know in one case I made a lot of money, the next I’ve lost a lot. There’s something going on here which I don’t understand. And I really wanted to, I said, “I want to be able to do what I did the first time over and over again”. So I started reading every book I could find on the property market and went to seminars and webinars and boot camps and workshops and so on. And although all the people I learnt from taught me a lot, none of them could actually tell me how the market worked and so it was about 1990, I joined the Australian Bureau of Statistics and that point I decided that that was going to be my calling. And I spent five years professionally researching the housing market with them and then I moved on to other data providers that–in total fifteen years of research has elapsed since then.
Once this trend analysis was applied, Lindeman’s success as a property investor skyrocketed.
Well that was when I decided to really spend some time learning how the market operated and that took quite a bit of time. I didn’t buy any other investment properties during that time because I didn’t want to repeat the nasty experience of the second property so I thought, I’m not going to do this again until I really know what is going on and then once I’d known that then I started buying investment properties again with great success. You know, I bought a property in Mount Isa in 2011 and that was in the next two years the highest performing market in the whole of Queensland, so you know, it picked like that which allowed me to claim the sort of record for accuracy that I’m renowned for.
At the moment Lindeman’s portfolio is progressing well, as he focuses on high cash flow over high growth.
Well as I said, we’re moving from growth to cash flow but we have properties in three states at the moment: Queensland, New South Wales and Tasmania. And they’re all, all the ones in Tasmania are high cash flow properties.
Certainly, money situated around Hobart in the six thousand commission areas which where you’re getting about 7, 8% yield. And then the ones in New South Wales in places like Cobar which is a mining town but it’s, according to our figures, it’s you know, it’s got good growth potential but it’s also delivering a very high yield. And then in Queensland most of the properties there are in what we call tourist areas so the demand is being sustained by the tourist industry and the number of people working in that industry. So places like Cairns, they’ve got a lot of people working in the tourism industry and that’s increasing during, because of the Chinese tourism market which is booming. So yeah, we’ve got properties in those areas as well.
Merging from high growth in youth to high cash flow as you age seems to be the best strategy according to Lindeman, who recognises the advantage of leveraging what you have when you can.
I’ve written two books on how to invest in the market and both of those explain this process, the idea of leveraging, of getting as much growth as you can; so you’re starting with little money of your own but you’re borrowing a lot, but you make sure you’re buying in high growth potential areas and then swapping over to cash flow areas so as you get older. And so that’s the model I’ve used and adopted for myself.
Before Lindeman had gained his skill and reputation as an infallible predictor of the housing market he made one crucial error that dampened his perfect record.
Well, I guess it was because I was just, with the first property it was pure luck. It was in Hawthorn in Melbourne and I had then, and this may sound ridiculous, but I was watching the AFL footie on TV in Sydney and this Hawthorn club playing really well, and I thought oh gee they’re a good club to follow. And so went from there to Melbourne, I said, “I want to live there near the Hawthorn football club”, you know, that was it. And it just so happened that that area had a lot of old terrace houses and the market was about to boom. But then when I bought the second house I then thought, well hang on now that worked. But in Sydney, I lived near the beach and I thought it would be nice to buy a house near the beach in Melbourne. And I think that will have a lot of growth potential.
So I bought this place right on the bayside area near Mordialloc and unfortunately the Melbourne market is not like the Sydney market at all and the people don’t live near the beach for the same reasons they might do in Sydney and it’s a different market. And so that growth just didn’t eventuate, in fact, it went backwards. And so I was going on all the wrong things. I was buying on emotion, using my heart instead of my head, and as a result of that I lost certainly the second time around and it was a big lesson, but I didn’t understand what I’d done wrong until years later when I realised that’s what I did, I bought using my head, sorry my heart, and not my head.
With that blunder seated firmly in the past, how is that area of Melbourne doing today? Will we see a rise in the property that fell for Lindeman?
Oh no it’s, I mean markets change over time and it recovered quite well and it’s now a very popular area of Melbourne to live in. But, and the house we had is still there by the way but it’s, Hawthorn still went up a lot more, you know, if you compare the two; the average growth rate was about 10% per annum which is much better than Melbourne as a whole over that time so.
Lindeman’s “aha” moment came at a time that most people would find filled with mistakes and losses; the Global Financial Crisis.
Well I did and it was when I was looking at–it was during the global financial crisis and a number of the major lenders, the big banks, came to us and said, ‘we are concerned because we think that housing prices could fall’. And the problem with mortgage lenders is if mortgages fall over they tend to do so in the first year, a lot of them anyway. So if people get past the first year they’re okay. So they were saying can you tell us whether or not housing prices are likely to fall over the next year and I started studying the, what I call the indicators, you know a whole range of indicators, like time on market, and vendor discount rates, and number of listings, and average hold times, and, you know, all of those things, to try to work out if any of these could give you an indication as to whether or not prices were likely to rise or fall in the short term.
And that was when I discovered that the two that can tell you that our listings and sales and that’s because the housing market is just like any other commodity, it obeys, you know, exactly the same rules. So it’s like you go to an apple shop and there’s hardly any apples, the price is going to be high. But if there are heaps because nobody wants them they’re going to knock the price right down. And so it’s the same with housing; if the demand is high then prices go up, and if it’s high then the supply will go up even more you know, but if there are too many people trying to sell than want to buy then, of course, prices will go the other way. And that was the “aha” moment when I realised that you can predict the future by using those two sets of numbers.
So Lindeman can tell us exactly how property markets will change. But why do they change?
Well, it’s for that simple reason; supply and demand. So if you’ve got a mining town and the mine closes and people leave, and nobody wants to live there, then the supply is suddenly going to be much higher than the demand and prices will fall. Whereas if you live in a market where people want to buy properties for whatever reason then – and there’s a shortage of them – then prices will go up. So it’s, the only complication is the fact that you’ve got two types of markets: rental markets and owner occupy markets, but as long as you’re aware of which one you’re operating in, then you can use things like the rental vacancies in markets where there’s a lot of investors and renters and you can use the sales and listings in all markets because that will give you a really good indication as to what the immediate future holds.
A good example of Lindeman’s spot-on prediction skills is the Sydney market boom from the last five years.
Yeah, they doubled between 2000 and 2002…
Then growth stopped in 2003, went backwards slightly.
And then nothing for ten years until late 2012 they started going up again. And the very first part of Sydney where that occurred was round the Blacktown area and we picked that up, we suddenly saw hang on the number of properties on the market is dropping dramatically here and it’s getting to, you know, that ratio; so you get to the point where prices are going to start going up. And so we predicted the, not a boom, but the prices would go up in Sydney, and people laughed at us and said, “well that’s ridiculous, they haven’t gone up for ten years”, and I said, “well, this is how the market works”. So this is, in answer to your question: it doesn’t go up regularly; when you look at that 8% average growth, there are long periods of time where there’s no growth and suddenly it shoots up and doubles in a few years, and then you get a long period of time with no growth again. So when you look at what Sydney’s done over the last ten years that growth rate is right on 8%. Melbourne’s about the same. So both these markets are actually now performing at long term growth rates, so they’re not housing bubbles or anything to worry about unless of course, the growth keeps ongoing, then I think I’d be getting a bit worried. But right now they’re right where they should be based on long term performance.
So with the Sydney market stabilizing, and the Melbourne marketing beginning its own boom, which capital city is the next to take off?
When after Sydney boomed and Melbourne sort of boomed, a lot of experts started saying oh Brisbane will be next because it always follows Sydney and Melbourne. And I said, “no, it won’t be next”, because that ratio of demand and supply is not there, there’s not enough demand and there’s too much supply. And we had a situation in Brisbane where all the construction workers from the mining towns were moving back to Brisbane and building houses everywhere, so all the outskirts of Brisbane, there are new housing developments, and that was having a downward effect on prices because there was just too many being built. So I said, “I don’t think that Brisbane is going to be the next boom city at all”, and then people said, “well, what do you think it will be”, and I looked at Hobart and I said, “I think it will be Hobart” because the demand there was rising dramatically because of the fact that prices were very cheap, rents were high, and a lot of people were retiring there, investors were moving in, and, of course, Hobart’s been the second-best performer over the last year, so, you know, that prediction came true. But when Brisbane goes it will be when people least expect it. They’ll give up on Brisbane and then suddenly, when that ratio moves suddenly, then Brisbane could be the next booming city.
So what is Lindeman’s next prediction? With people moving out of Sydney, where is the next good place to get excited about?
Well, I think that what excites me is that there’s always areas of potential. You know, people say we can’t afford to invest in Sydney, we can’t afford to invest in Melbourne, it’s too dear. I say that there’s always–when there’s growth in one area, it produces the opportunity for growth in others, and a good example of that is the, what we call the ripple effect, where that high growth Sydney is now moving upwards. People over fifty are selling their homes because they’ve doubled in price in the last few years and then they’re moving up the coast or down the coast and buying properties for a quarter of that price and using the rest as sort of a piggy bank for the future. So that excites me because I see a lot of growth occurring right now in areas north and south of Sydney and I think that will continue for some years so there’s a lot of opportunities and people shouldn’t say well I can’t afford to invest in Sydney. My view is well don’t because you don’t want to invest in a city that’s already had three years of growth, go to an area where there hasn’t been any but there’s potential for that growth to occur.
…the best growth potential areas in Australia in Hobart, Tasmania, the coastal areas, where retirees are moving…
Facts About The Australian Property Market With John Lindeman
When diving into property investing there can be many uncertainties, and these doubts and fears can have a major impact on the success and longevity of a person’s property investment journey, as Lindeman understands.
I think the greatest obstacle that first time investors have is that they sort of go into this world of uncertainty you know property is the biggest investment that they will make in their lives and they think this is a lot of money putting on the line here and if I get it wrong it could affect my future for a very, very long time and there are lots of stories out there about people who have lost a lot of money and it almost ruined their lives because they made bad decisions.
So I think that the obstacles that people face is that coming onto loops with the uncertainty and the fact that it can hold you back so I would say to people who are in that position is, as long as you invest in good areas with growth potential you’ve got nothing to worry about because the property market is always improved over time it always gone up and it always will because there are more people who want to buy another property when it is available that is just the way it is, don’t worry just be careful where you invest and type of property you buy.
With his speciality in research, Lindeman understands every aspect of his supply-and-demand research, as well as the people that first developed it.
One thing I did when I was researching the market I would look at the number of studies that have researched over the way the market performs and there was a one really interesting study which was conducted by this, this Dutch professor. He researched the performance of houses in one street the canal in Amsterdam called the Herograph canal and those houses had not changed in 400 years they were the same house so he analyzed the changes in prices that had occurred in 400 years and that is where he first came up with the idea that he thought all about supply and demand.
As long as demand for these houses was higher than the number of houses then the price would rise and if price went down demand would fall away or go down and there has been a number of other similar experts who have done similar studies on the performance of markets and they all say performance is in accordance to the laws of supply and demand. So I think rather than any particular mentor it was more of using the resources of people who have written PHDs and so on, on this subject to use their research in this way and to say how one can I convert this information into a form that investors can make use of and that was the idea of looking at the ratios of supply and demand in a very simple way that gave you the power of all that research being conducted over hundred years on property market performance and put that into good use yourself.
Lindeman always recommends doing thorough research on potential mentors to find the absolute best option for you.
Well, I would if you rely on genuine experts in the market that have done all the work for you, that’s the best thing you can do and the problem here is because it is an unregulated market and what I would like to say is have a look at actual performance these days it is not very hard to hide. You can google anyone, I will welcome you to google my name, John Lindeman, and see what comes up what I have predicted and actually happened because some of these people you will find are being investigated by ASIC and trade practices and they claim to be on your side and there is other people who will also claim to be on your side and they are really seller agents masquerading as buyer’s agents so they got their own hidden agendas, so do your research in the actual person giving the information and their track record and their bonafide because that is going to stand you in good stead.
I am not saying everyone is always going to be 100% correct you know, but it’s the logic behind it why they saying this and if it is not hopefully not to further their own nets and that they genuinely believe in areas that have potential and the reasons why I explained then I think that the sort of advice you need to take.
Once again, the genius of Robert Kiyosaki has proven powerful in providing advice for all property investors.
Well, I think the idea that they are good debt and bad debt, umm which comes from “Rich Dad Poor Dad” the book. Because for the first time I released that debt was different depending on what you did with the money, so if you get a credit card and you max it out and you pay off the monthly repayment that is bad debt, it’s costing you money all the time and what you bought with it probably does not generate any income, but if you borrow money to buy property at the end of the year that property goes up in price or turns more in rent than what you paid for interest then that’s good debt that is the best advice I ever received. There is a distinction and the sooner investors realize that there is good debt and they need to know how to use it properly. That is the 1st step to success in property investment.
What are the steps in moving into high-growth property investing? Next, we’ll hear Lindeman’s step-by-step guide to starting as an investor.
Well, I think initially the only way let’s say you start on as an investor for the first time you might have $30,000 or something you know, as a deposit so you are going have to borrow say $120,000 to buy a house for $150 000.00 though, the first thing you need to do is say I want to buy the $150,000 house in an area where it will go up as much as possible in the next few years maximizing the growth because let’s say like the Hawthorne house that I bought doubled in price in 3 years. If that happened then your property is now worth $300,000 you pay back the bank $120,000 you lost your 10% for the cost of buying a house but you end up with about $130,000 instead of your $30,000.
So you have suddenly made $100,000 and then you do that again and so, I think the steps are to keep focused on that goal that I am going for growth and I am going to find areas with high growth potential that’s what I did and I discovered ways of finding those sort of areas. Then I said if you would like to know what those secrets of finding these steps you can read my books or magazines because I make it quite available to everybody, how you can do this, but consistency is the real main aim in all this, to be consistent and not to lose track of what you what to achieve.
So what’s the best plan of action for Lindeman’s strategy? If you have a range of high growth properties but need to move into high cash flow as you approach retirement, should you draw out equity or simply sell the properties to purchase high cash flow properties instead?
That depends entirely Tyrone on what the prediction is for in that area. So it’s not so much a matter of time, it’s a matter of performance or likely performance and we have a very simple technique we use to work that out, and that’s to compare the number of sales to the number of properties listed for sale. And this information again is very easy to obtain, the number of properties listed for sale you go to realestate.com.au or domain and look it up for any suburb. And it gives you a number so it says there thirty or forty, you know, houses for sale. Then you look up in say your investment property magazine in the back that same suburb and see how many were sold over the last year. And the amazing thing is it took me two years to work this out, that if the number sold in the last year is about the same as the number that, you know, people are trying to sell right now, then that’s what we call a neutral market and that means property prices aren’t moving. But as soon as that ratio changes, so if you’ve got more people wanting to buy, in other words, sales are higher than the number of properties listed for sale, then prices tend to go up. And if you’ve got more properties listed for sale than were sold over the last year prices tend to go down.
That’s a very, so you know, the greater the difference, the greater prices are likely to be going up or down. And you can track that over time yourself, so you do it once a month and that tells you when the tipping point is reached where prices are not likely to be going up any more. So that’s what I do and we look at the suburbs where we have properties or we’re looking for growth and when we realize that there is no more growth likely we then sell that property before the growth actually stops. And find other areas where there’s growth potential and buy in those areas. Now you’ve got to be, when you do this, of course, you’ve got to be careful because the cost of selling a property is about three to four per cent the value of that property. So you know, you’ve got to pay agents, you’ve got to have the house staged, there are legal fees and so on. When you buy a property it’s about four per cent of the price, of the purchase price, because you’ve got to pay stamp duty and you’ve got to pay some more contract fees, you’ve got to get an inspection done and so on. So you’re losing about eight per cent every time you buy and sell. So unless you get eight per cent more growth you’re going backwards. And the interesting thing about the property market is that the long term average growth rate in the market is about eight per cent. So you’ve got to find areas that are going to do better than the average performance rate.
So what about the buy and hold method? Favoured by many of the guests featured here at Property Investory? Is there a buy and hold option in Lindeman’s predictions?
And you know, running at eight per cent. So it means that unless you can find areas or are sure of finding areas where there’s higher growth than that, and you know we’re looking say twenty or thirty per cent growth over the short term, then you are better off just buying and holding because that eight per cent growth will mean that the property will double in value over about eleven years. So you know, it can double eleven years which is great so that’s a good thing. But that’s all you can expect to achieve in those sorts of, most of the markets in Australia.
With the temperamental nature of the Australian housing market, what does Lindeman recommend to keep your portfolio safe?
I definitely think you should spread your risk, but I have had people come to me and say I’ve got a balanced portfolio, and I say what do you mean by that and they say one third in commodity, one third in shares, one third in housing and I say well that’s not a balance at all. Because it should all be in housing, because housing will give you, the best, you know, returns, as long as you find the right areas. So then other people say ‘ ah well I have got a balanced housing portfolio, where I have got two properties in Queensland, two in WA and Two in South Australia.’
So that’s not balanced either, because all you’re doing, is, you know, they could be the same types of markets in each State. So the idea of, of minimizing your risk is to buy in different types of markets. Not different States or whatever.
So at the moment, you might say the best growth potential areas in Australia in Hobart, Tasmania, the coastal areas, where retirees are moving. That’s got a lot of growth potential, but then there is a lot of Chinese tourists arriving and they moving to, you know, spend a few weeks in places like Cairns, Port Douglas. So you think ‘well I could buy a property there and then do very well out of that as well, or say the Whitsundays or even the Gold Coast in certain parts’
So depending on the type of markets, you’re going to get a good result. So these are the way in which I say you should, you know, minimize the risk is by, going for areas where the growth is, is coming from a particular type of buyer and then if one doesn’t work the other will but it could well be that they will both, both count and one is not going to cancel out the other.
Exactly how many markets are there in Sydney? And which ones should you invest in?
There’s actually, probably, about 6 different markets in any city and if you look at the rental market, you’ll find there are young people that leave home for the first time, and they set-up as singles, couples or group households. They rent and they live in certain, in urban areas, in new apartments so you get high rent demand for those.
Then you have got overseas arrivals, that need to rent for a couple of years, who now go out to the more cost affordable areas where there is work and public transport, like Burwood and Strathfield and Parramatta.
So different market again and then you have got what I call an opportunity sector, that is which students, in capital cities, live near universities and you have got out of Sydney, whole towns, like Armadale is a good example, 25% of the people living in Armadale are the working education or are students themselves and so the rent demand, generated by that is huge.
So there are those rebel markets, then the ‘owner occupy’ market, you have got first home buyers, you’ve got upgraders and then you have got retirees. So looking at which areas have got the most potential for one or more of those types of buyers or renters is going to get you the best results.
It is clear that research, research, and more research is the key to Lindeman’s predictions, but remaining aware of all that information is a skill in and of itself.
I think the consistent analysis is the most important thing. So even for existing properties, keeping track of those, number of listings, number of sales rental vacancies, what are prices doing, what are the neighbouring areas doing. Those habits and continuing to do that are essential and there are many, many investors who buy property and just let it go and not worry about it and suddenly they say ‘they should have sold a year ago’.
Prices have plummeted, it’s too late because they were not tracking those trends and so that I think is the most important habit. To be consistent and maintain an ethic, every Saturday morning, half an hour, I will just track how my properties are going or areas that I am interested in. So I know where I am going to buy next and I think that’s a large part of anyone’s success.
With years of meticulous research and predictions under his belt, it is only natural that Lindeman recommends his own books as an in-depth source of knowledge on property investing.
Well Tyrone, yes, of course, I would recommend that people, your listeners, buy my books. My first book was published by Wileys in 2011, it was called “Mastering the Australian Housing Market”. And you can buy that as an eBook or online. It is no longer in print but the second book which is called “Unlocking the Property Market” was published by Wily’s last year and that is still available in book stores or you can buy that online as well.
They are the two books that summarize all the methodologies and principles that I’ve been able to, you know, discuss with you.in the course of these interviews and what they do is explain exactly how you can go about doing the things that I did not learn will give you the best possible results.
The dead-on predictions that Lindeman makes in his books and in his work are the source for many property investment successes, both by Lindeman, and those he has helped.
They have in general been very, very accurate we have had a lot of people, I won’t say that every prediction has resulted in a doubling of in prices, but we have had situations we have predicted Hay, which is in Southern New South Wales, as a boom area. Prices doubled in nine months there and another one was Berry in South Australia, where we said the drought’s over and the price is going to escalate and we had people buying properties there which doubled in just over a year.
Despite the age of some of Lindeman’s books, the relevance to the public is still paramount.
“Unlocking the Property Market” was only published last year. So that’s fair, it’s not five or six years old, it’s quite recent. And a lot of the information is updated information from what was in the earlier book, but I still get, when I do presentations around Australia, I get people coming up to me with the first book “Mastering the Australian Housing Market”… and it’s all dog eared, falling to bits and they say ‘we still use it, it still maintains its relevance’ I think that the principals of housing market investment don’t change and whereas mining booms may come and go and different interest rates may go up and down the principles that guide all these things don’t change, so the books are still quite relevant.
But Lindeman’s not done yet, with the third book on its way sometime in the future.
What it is, is a composite of all frequently asked questions that investors have asked me at presentations. We run a property education course called, or online program, it’s called ‘Seven Steps to Success’. In that people ask me questions that I answer them. So I thought I would all of these together so it would be everything you wanted to know about property investing that you are probably too scared to ask or something like that,. And that would give them the next book but it will be a little while longer, I think.
Do you have a question for Lindeman? Or wish to get in contact with him? If so…
The best way is if they subscribe to a newsletter, which is a free newsletter. It comes out every month and if you go to the, I mentioned seven steps to success, that a website, that’s our education program. If you go to that site, just the number seven, steps and the number two, success. So 7steps2sucess.com.au and you can see there, you can just simply register with your first name, email address and then you can get regular information from me in the form of a newsletter. And it will also tell you where I am presenting because I am constantly presenting around Australia.
And most of those are free presentations. So if you would like to come along to one of those it shows you the links to register to one of those. If you do come along and as the result of this interview, let me know that Tyrone sent you and I would love to see you.