Property professionals and successful property investors are well aware that in order to identify a property hotspot, one needs to seek the guidance of a good buyer’s agent with extensive knowledge of the markets instead of simply listening to headlines across the media.
Simon Pressley of Propertyology, together with his team, goes beyond assisting investors in finding a good property—they work further to analyse data that are necessary for identifying prime real estate markets.
“At the end of the day, Propertyology is a property market research company, first and foremost… [However], you can't make money until you physically buy something tangible, so we combine the market research with buyers' agencies,” he explained.
The managing director shares how they identify property hotspots for their clients as well their company’s goal and their vision for Australian property investors:
How do you go about doing property market research?
Simon Pressley: Specific to data, so much of the reports… that are produced on a practically daily basis [which] you can Google these days refer to property-specific data—vacancy rates and change in median house prices and things like that. All of that's interesting to us, it's really a reflection of the past. If you're about to invest an amount of money in a market today, you can't make a decision in 2017 and then be expecting to get 2015’s returns. The data that we find the most useful is economic data.
Kindly explain ‘economic data’ and its significance for property investors.
Simon Pressley: At the end of the day, when we're investing in property, we're investing in shelter. It's a commodity and wherever there's demand for more jobs in the future, there's going to be demand for more shelter, to put it simplistically. Wherever shelter is more affordable, it's more accessible and there's more people that can potentially compete for the purchase of individual pieces of shelter. So, property economics, that's what our head's in all day, every day.
Is there a guaranteed way to identify a hotspot?
Simon Pressley: It's never one piece of information that underlies our decision, it's a whole heap of information, and, I guess, collectively joining the dots and saying, "Does that look like a [hotspot]?" Well, the crystal ball, at the end of the day... none of us have it. There's no guarantees in investing, is there? We're gathering a whole heap of information and then trying to paint a picture of what the future likes, good or bad.
Can you provide a concrete example of your research process?
Simon Pressley: Let's talk about Hobart. Officially, according to Domain's annual change in capital city property prices released last week, Hobart is… the hottest market in Australia today—15.2 per cent growth in the last financial year, just pipped Melbourne and was a couple of per cent above Sydney. But when you also factor into that Hobart has a higher rental yield than literally any capital city in Australia, the total return on investment is probably about three or four per cent better than the second place location, [which is] Melbourne now.
[In] Propertyology's research, we gave Hobart the green light way back in 2014 at a time when that market was as flat as a pancake. You could have been living in Hobart all your life and you wouldn't have been contemplating investing back then, but understanding the drivers behind Hobart's economy and then filtering in lots of things [through which] we made a judgement call on, [things] that we thought would happen to each of those industry drivers in years to come.
Essentially, Hobart’s good economy made way to a good property market?
Simon Pressley: We could foresee Hobart's economy improving, which affects demand for housing at the end of the day. It's always been Australia's most affordable capital city, so I'd tick that box, especially in a climate where interest rates are rising and credit's getting harder for us to get… We thought that was a good ingredient.
Then we looked from a supply side of things. Whilst the market itself has been flat, rents have been trending up still a little bit, vacancy rates were low, and most importantly, when we dug into the housing supply pipelines—they're the things that aren't built yet but the construction industry were planning on doing—that was still low.
Three years ago, we decided to pursue Hobart, and here and now today, we've helped about 80 clients get into the Hobart market.
How did investing in a “flat market” helped your clients?
Simon Pressley: We weren't behaving like the sheep and investing elsewhere. We were benefiting from little to no competition, so it meant we could pick the best properties, we could negotiate even lower discounts off the purchase price, and then we sit back and wait for that economic activity to unfold, which it has done.
Those who had got in the early stage of property made 20, maybe 25 per cent growth [in] asset value over the last, say, two years. We think that the Hobart market is absolute cherry ripe ready to continue along that trend for some period of time.
Is economic data more effective in determining good locations than historical data?
Simon Pressley: We would [not have] found Hobart if we picked locations based on historical property data or census data because that would look pretty bland or very uninspiring. [We try to understand] economics and how that influences us as professional property investors.
Tune in to Simon Pressley’s episode on The Smart Property Investment Show to know more about the inside track on current market conditions as well as a forecast for what’s to come.