It’s official. The world has gone mad. And I saw it coming. Did you?
In this week’s news: buyers are willing to pay more than a MILLION dollars to live FIFTY kilometers from the centre of Sydney.
And I am not talking about buying a mansion. But a small two up two down townhouse.
Source – Domain.
Is this not a CRAZY sum of money?
And yet, it’s entirely predictable based on where we are in the cycle. And expect things to get even crazier. Because we are now entering the ‘winners curse’ phase of the current cycle.
(The winner’s curse phase is the final few years into the peak of a cycle where things hot up and go over the top).
If you are in, or considering entering the property market, you must pay close attention to what I am about to tell you.
The secret to the hottest real estate markets.
From the above article. Bolded text is my own.
Living close to Sydney’s CBD is all the rage when purchasing a property, but buyers are willing to spend more than seven figures to live further from the city centre, with house prices in one particular suburb outstripping neighbourhoods even closer to the CBD, data has revealed.
This is an excellent summary of a critical underlying driver for land values this late in the cycle.
Let me explain.
Once all vacant and empty space within the confines of our major cities pushes prices to a point where they are realistically beyond everyone’s ability to pay, would-be buyers are forced to look further away.
This small wave of potential buyers soon becomes a flood as buyers attracted to a more affordable price point move in.
The focus of the above article is Leppington, once a semi-rural area around 50km outside the Sydney central business district. While house prices there were up 5% last year, they have been up over 100% in the past five. The median price is more than $1,162,500 if you can believe that.
Now, here’s a critical point that you must understand. If you have ever hoped or dreamed of making millions for yourself in real estate, there is one simple and elegant rule to follow.
Again, from the article.
The allure of living closer to the city has very little sway on buyers these days, according to Slavko Romic of RomicMoore Property.
“The suburb is quite self-sufficient these days,” he says. “Years ago, you’d have to go into the city for certain reasons, but now everything is here from the airport, the Leppington train station, major shopping centres, schools and restaurants and cafes, and jobs … a lot of workplaces nearby make living here convenient.”
If you view this through the lens of the real estate cycle, the formula is clearly spelt out here. Infrastructure builds, once the gains manifest from them, is eventually captured by the surrounding lands.
This explains the meteoric rise in prices since 2019. They’re even higher than some of the suburbs closer to the city.
Incredible really. Most of the buyers here couldn’t afford similar prices in inner city suburbs in the first place. Now, those too late to the party have also been priced out again!
This dynamic isn’t only seen in Sydney though – it’s a global one.
This is a worldwide phenomenon.
Let’s find another example of this – with a slightly different dynamic. To see this, we travel to wee bonny Scotland now and visit Glasgow. Once again, the price point for average people in the countries capital Edinburgh have now reached a level beyond the ability of most folk to buy.
Not to mention the rental prices too. For most, there is only one solution: to move further away.
To explain why Glasgow is the location of choice then, we turn to a recent investment report from Joseph Mews entitled “Best Places to Invest in UK Property in 2024”.
Bolded text is my own again.
With the largest economy in Scotland, Glasgow generates nearly £27 billion every year thanks to a strong industrial and manufacturing foundation, recently boosted by the £118 million new campus for the local university, earning it the nickname of ‘Scotland’s Silicon Valley’ and further demonstrating its potential as one of the best areas to invest in property.
A minute of contemplation is all you need to realise the parallels between Glasgow and Leppington are clear.
Once again, the gains from massive infrastructure construction are now being reflected in higher prices for the surrounding land.
This equates to a 136% increase in values in just a decade for Glaswegian property.
Secondary cities are now growing faster than primary ones. Another example can be found in the city of Georgetown in Texas, which is now America’s fastest growing city. This has led to an almost 15% annual increase in property prices.
It’s now one of a handful of suburbs and regions that US real estate experts are labelling as America’s “most affordable”. Georgetown is about thirty miles away from the state capital of Austin – which last decade was the hotspot for the country. It has now been superseded; it seems.
Naturally, there has been significant government funded infrastructure in and around this region. The U.S. Department of Commerce’s Economic Development Administration (EDA) is awarding millions in grant to Georgetown County for infrastructure improvements to support business growth and job creation.
Part of a wider initiative called the “Assistance to Coal Communities” which was designed to assist communities who were once reliant on the coal industry to adjust to a greener world.
The history of the real estate cycle tells us we should be seeing buyers looking further afield to find an affordable place to live and work.
And so, areas like this will be, for the next few years, some of the hottest remaining markets if you are looking for outperformance in your own investment portfolio. So, you need to ensure your own focus is laser sharp to identify similar set-ups before they happen.
Wait too long, and you’ll be priced out once again, and thus you have only one option: search even further away from your friends, your job, your children’s schools.
But know this; here’s something else history teaches us. Not only are you going to have to borrow much more than you first realised if you hope to buy, but its these very same marginal suburbs that are the first to break when the bust comes.
If you are in, or about to enter the property market, you need to learn this lesson well. It can both make or utterly break your financial future.
Your key for success then comes down to timing, and here’s where you develop that timing: with a membership to the Boom Bust Bulletin (BBB).
Let me guide you through the turning of the real estate cycle, show you how to identify it’s timing and the opportunities such timing can give you.
It can provide the surety that can help you buy the right property at the right time.
The formula here after all is proven and scalable. Research where your local council or governments want to build. For example, for Leppington and surrounding suburbs, they were part of the NSW Government’s Southwest Growth Area masterplan.
Find where future infrastructure will be built and buy ahead of it before the gains manifest.
But the Winners Curse is named thus for a reason!
Don’t be going in blind during this stage and most definitely don’t be overleveraged.
Use our knowledge to keep you safe in the last final stages of the cycle.
You can’t say I haven’t given you due warning. I look forward to you becoming a member and truly understanding how the cycle operates so that you can safely navigate the days ahead.
Best wishes,
Darren J Wilson
and your Property Sharemarket Economics Team
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This content is not personal or general advice. If you are in doubt as to how to apply or even should be applying the content in this document to your own personal situation, we recommend you seek professional financial advice. Feel free to forward this email to any other person whom you think should read it.