The secret to COVID-safe, high-return investing
There is cause for optimism in the current property market despite the COVID effect. inSynergy CEO and Chief Property Investment Advisor Richard Sheppard explains where to invest now and why. The secret to COVID-safe, high-return investing
Using safer property investment strategies and high-grade returns, as rent growth generally precedes capital growth, research to invest in certain property markets can yield great just as it did in Sydney before our last boom. However, returns, even in tough economic times. Three major markets don’t expect the Sydney market to grow well over the next are highly likely to grow by 70 - 100 percent over the next seven years - it’s likely to be one of the worst performing seven years while also providing rental returns to make most markets in Australia over that period. properties cash-flow positive, even when borrowing all the funds you need using equity from another property.
Current inSynergyCurrent Forecasts inSynergy - by cityForecast - by city FAST FACTS Residential Property Residential Property • Brisbane, Adelaide and Canberra are Total growth Total growth predicted to grow at a rate 3 to 5 times 100% 100% next 77 yearsyears that of Sydney over the next seven years 80% 80% 70% 70% • Every time there is a boom in Sydney property prices Brisbane, Adelaide and 50% 50% 45% 35%45% 35% Canberra follow some 5 to 10 years later. 25% 25% 20% 20%20% 20% • Net rental returns in Brisbane, Adelaide Adelaide BrisbaneAdelaide CanberraBrisbane CanberraPerth DarwinPerth TasmaniaDarwinNewcastleTasmaniaSydneyNewcastleMelbourneSydney Melbourne & Canberra are 55-100 per cent higher
Port Adelaide H+U Manly H City Fringe U than Sydney City Fringes U TheCaloundra H+UsecretTurner U to COVID-safe investing is to only invest in Airport Area H+U City Fringe U Campbell U • 30% equity in your home can enable Kingston U those property markets that are forecast for the highest you to buy a cash neutral investment growth over the next seven years, as these are usually the property with 100% finance safest markets and the ones least likely to go backwards. Typically, these markets also have the highest rental
Net rental returns in Brisbane, Adelaide and Canberra are 55-100 per cent higher than Sydney
Use your equity to invest and help pay off Net rent differences - based on $1M property your home safely without using cash Sydney Brisbane Adelaide Canberra When you have around 30 per cent equity or more in your home, you can use that equity as security to borrow all Gross Rent 650 900 1000 1100 the funds to invest in a property. Costs 200 200 200 200 Net 450 700 800 900 Refinancing to do this will almost always help you achieve a far better interest rate on your home and other debts, saving Net Rent significant interest and improving cash flow. Importantly, Difference 55% 75% 100% it can help you invest in higher growth and rental markets outside of Sydney, to maximise your cash flow while also The vast majority of typical investment properties in areas diversifying your portfolio. A cash reserve buffer can also with higher net rental returns are cash-flow positive, even help reduce risk should anything unforeseen happen in when borrowing the full purchase price and costs against your personal life or financial situation. equity in your home or other property.
PAGE 1 The property market typically works in a repetitive five to seven-year cycle
Brisbane vs Sydney price difference This cycle is the most repetitive and predictable cycle in property, and has continued on despite all major national Brisbane 1,600 Sydney 400% and international financial shocks, including the GFC in vs Sydney 375% 350% 2008, the recession in 1991 and the stock market crash in 800 price 325% 1987, so there’s no reason to believe it will not continue 300% difference 400 during and post COVID. In fact, COVID is likely to drive Brisbane 275% 250% even higher interstate migration from Sydney to more 200 225% affordable markets like Brisbane. 200%
100 175%
Price at the Time($'000) Difference 150% 125% 50 100% 75% 25 50% 25% 13 0% Jun-68 Jun-70 Jun-72 Jun-74 Jun-76 Jun-78 Jun-80 Jun-82 Jun-84 Jun-86 Jun-88 Jun-90 Jun-92 Jun-94 Jun-96 Jun-98 Jun-00 Jun-02 Jun-04 Jun-06 Jun-08 Jun-10 Jun-12 Jun-14 Jun-16 Jun-18
• Brisbane property prices lag Sydney by 5 to 10 years • The price differential over this period is 125% to 25% • This cycle is the most repetitive and predictable cycle in property!
Canberra and Adelaide property markets Orange line: Average Sydney property price. subject to the same phenomenon The Orange Sydney line demonstrates that sometimes The Canberra and Adelaide property markets are virtually growth is very strong (where the line is steeper), often on the exact same market cycle as Brisbane, however, referred to as ‘the boom’. Then, after a small decline, the with smaller populations, they don’t require as much growth is very low (where the line is quite flat). This slow interstate migration to cause similar growth. period is typically called ‘the plateau’. On average, the boom is around seven years and the plateau is about the same. Currently, Canberra also has average incomes about 25 per cent higher than Sydney, while property is nearly 40 Blue line: Average Brisbane property price. per cent cheaper, so affordability is more than twice that The blue line representing Brisbane property values of Sydney, while Adelaide has some of the highest value shows that every time Sydney booms, Brisbane booms technology and industrial projects ever undertaken in about 5-10 years later, which is largely influenced by Australia, including $80B in Government spending to interstate migration and affordability. When Sydney gets increase the Australian Navy fleet, and $5.4B North-South to about double the value of Brisbane, people move from Highway corridor (78km long) jointly funded by Federal Sydney to Brisbane and the Sydney market slows, while and State government under construction. Brisbane grows, until the price difference decreases again.
Grey line: Demonstrates the percentage price difference between the Sydney and Brisbane property market An invitation to get started The grey line shows this repeating cycle, with the price inSynergy’s personalised property investment difference oscillating between about 125 per cent and 25 strategy and planning workshops, ongoing advice per cent. In addition, rental returns in Brisbane are similar and support will teach you how to safely build a to Sydney’s before the boom in 2008 where returns high-performance property portfolio, optimise of about $550 a week for a $550,000 property can be your cash-flow and plan for your future security. achieved, but, at a time where interest rates are much Call us now to arrange a no-obligation chat. lower, so it’s cheaper now to own a property than it is to rent, which will see buying demand surge again.
PAGE 2 Richard Sheppard is the CEO & Chief Property Investment Advisor of inSynergy Property Wealth Advisory; a company that specialises in empowering property investors with the knowledge, tools and strategy to make safer, more profitable decisions. inSynergy are experts in residential property investment. Our experienced team have been offering premium property investment advice and education to Australian property investors for more than a decade. We’re passionate about helping our clients safely build a successful property portfolio and to achieve their financial goals whilst maintaining their lifestyle. inSynergy: a full-service property investment advisory • Property investment education & strategy • Specialised mortgage broking • Investment property buyers’ agent • Property market research & economics
Contact us on 1300 425 595 or email [email protected] to book your complimentary 1 hour property investment planning consultation.
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