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Co-founder & CEO of AllenWargent property market & hedge fund advisory.
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Co-founder & CEO of AllenWargent property advisory, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.
4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.
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Thursday, 16 January 2014
Read Matusik on population growth
If you are interested in property as a means of investment, I strongly suggest reading this article on Property Update by Michael Matusik on population growth in Australia.
I've heard all the arguments from "positive cashflow" investors about buying property out in the sticks which superficially might provide a half decent rental return.
But, being British, I've also seen what happens in a major downturn to property prices in remote regions where demand is low...and it is not pretty.
Contrast this with the fortunes of London where supply is severely capped but demand continues to grow by the year. Prices simply continued to tick on ever upwards, so I'm glad to be a property owner in London, but not in, say, the north of England, where the yield-chasers recommended buying in the period up to 2007.
This is why in Australia it's best to stick to suburbs where supply is all but fixed but there is an ever-increasing demand from homebuyers and investors.
Not only can you get strong capital growth, but you can be more protected in a downturn because there is an effective conveyor belt of new potential buyers each year.
Note how Sydney's population is soaring at 63,700 persons per annum.
That's a lot of new demand.
Melbourne has even greater population growth at 79,000 per annum.
Perth (+66,400) and Brisbane (+44,600) aren't far behind.
But then the numbers drop off quite sharply. Adelaide, for example, only has a population growth of 13,300 per annum, which is essentially little stronger than Gold Coast (+11,400).And then come the regional centres.
The problem with the idea of investing in remote cities is that not only is the population growth lower, the land available for release is generally greater, and therefore the demand can far more easily be absorbed. This is not a dynamic which produces strong capital growth.