Despite the current downturn in the Sydney property market, investor Chris Gray believes that the capital city continues to be ripe with wealth creation opportunities. How can investors capitalise on the softening market today?
Mr Gray has successfully created a $15 million portfolio with properties spread across Australia, mostly in the NSW capital.
However, while Sydney and Melbourne were able to provide unprecedented returns to investors during the property boom from 2012 to 2017, both capital cities now stand on top of the list of areas with the highest declines on house prices.
Still, Mr Gray finds himself choosing to continue holding his Sydney properties and potentially buying more assets in the capital city in the future.
Is it actually a good time to buy in Sydney at the moment?
The answer largely depends on the current financial situation of the investor as well as the long-term strategy they implement, according to him.
“When it comes to the life cycle of property investing, the first thing is, it’s all about the assets you control. Say you had a million dollars paid off – first in 10 million worth of debt. I’d rather have that 10 million and be worth nothing because 10 doubles to 20,” Mr Gray highlighted.
“My whole thing was get to my number, which I did, and then stop investing. As the market rises by 10 per cent, your gearing goes from 80 to 70 to 60 to 50. My gearing now is about 65. I want another 10 or 15 percent growth. I’ll still gear to 80 but I’ve then got between 50 and 80 per cent that’s then in cash.
“I really want to build that buffer. I’ve learned from very wealthy people that whether you’ve got 10 million or 20 or 30 million in property, your life doesn’t change. You don’t have better houses or cars. If anything, you have more problems. So, I’m happy with the amount I’ve got, I just want to get my gearing down. When the property market rises and I’m 50 per cent geared, then maybe I’ll start investing again.”
As a buyer’s agent, he encourages investors to always take the time to assess their long-term goals in line with their finances and the current state of the property market so they could make the best investment decisions.
“I just encourage people to follow their dreams, do what it takes, but at the end of the day, they have to concentrate on the numbers,” he said.
Apart from knowing the numbers that make up their property portfolio, Mr Gray also reiterated the importance of property research.
Now, more than ever, investors are advised to get in touch with professionals, where appropriate, to get up-to-date data on the property market and ultimately avoid being swayed by the rampant doom and gloom headlines.
Mr Gray said: “My first rule is don’t listen to the media… Everyone knows it’s scaremongering, but they still watch it and they still listen to it.”
“You’ve got to be on the street. You’ve got to be touching it, feeling it or having the advisers that are doing the same kind of things… The mentality of investing is 90 to 95 per cent of the game. The last 5 to 10 per cent is implementation – someone who’s lived in Brisbane or Melbourne for the last 20 years and buying property will [have] better contacts than me.”
One of the most valuable services from experts will be the independent valuation, which allows the investor to get an overview of the wealth creation potential of the property, from the short term to the long term.
Ideally, investors are encouraged to get valuers who work independently from banks, according to Mr Gray.
“Every time we buy a property, we pay $660 for valuation, $440 for a building, $250 for a stylist. We spend $1,350 before we buy any property. Why? There’s no guarantee you’re going to get it back but if you’re spending a million bucks on a property, why wouldn’t you spend an extra thousand dollars to double-check that you’re doing the right thing?” he said.
At the moment, Mr Gray works mostly in areas five to 15 kilometres from the Sydney central business district, where good fundamentals like population and jobs growth and infrastructure continue to support the growth of investment properties.
“We don’t want to bet on the ‘latest greatest suburb’. If I’ve got 10 million of debt, I want to know that if we go into a downturn, my portfolio doesn’t halve in value,” he said.
“Your strategy will depend on what you’ve got. So, the whole idea is: Good properties always sell.
“In the boom markets of the past three or four years, everything sells. But, in the downturn, that’s when the stuff that aren’t right doesn’t sell. If you’ve got no parking, you’re in a big building with lifts, gyms, pools, expensive Strada, or you’re on busy main roads, that’s not selling now.”
At the end of the day, Mr Gray encouraged investors to focus on their personal goals, capabilities and limitations, as well as their research and their investment team, in order to make the most out of the property market – even the areas in downturn.