Are you a trend follower or a true investor?
Are you a trend follower or a true investor?

Written by Mark Thomas

15 October, 2019

Are you a trend follower or a true investor?

Property investors buy and hold while share investors buy stories. But what if there was data that created stories you could buy and sell in property…

We all know that buy and hold works for Australian property but is there any merit in trading property to spice up returns?

Finding suburbs with both growth potential and good rental returns is the key to a great property investment.  But is timing a factor that should be better employed or should you just buy and hold and let time do its thing?

Timing or time in the market? 

Unlike the share market, the property market does not rely on a daily news or price movements to drive the annual price growth.  It is generally accepted that only 10% of the share trading days of the year contribute a large proportion if not all of the total yearly returns.  The market is also heavily impacted by the top 100 company returns that represent less than 5% by number, but 75% by value. In fact the 20 largest sticks account for almost half (47%) of the total market value.

Property market price movements will depend on the mindset of the people buying and selling.  What smoothes the property market price changes is that most buyers focus on what happened last month.  If the suburb boasted an 8% rise last month the buyers will adjust their offer price up by around 5-10%. So buyers are calibrating and calculating where the price has shifted and maybe where it starts to exceed their estimate of fair value.

So generally share investors react to daily information and property investors react to monthly information.  This suggests that property investors are really more likely to be trend followers whereas share investors typically buy and sell stories in companies. 

What is a story?

Netflix is popular because of its repeat business (monthly revenue) and international growth opportunities.

Amazon It is the world’s largest e-commerce marketplace.

Apple stands alone for its ability to generate massive profits through premium pricing and insatiable demand for its products around the globe.

Trade on stories or trade on trends?

But what if property investors were more interested in stories.  What information could they rely on to update their property’s story?

Our friends at TUDI have shortlisted a number of metrics that they believe identify trading opportunities over a 12 month period ie attractive properties to trade in and unattractive properties to trade out. Anticipating demand for growth is a key factor.

The share market is limited to 2,200 companies in Australia. The Australian property market has 9 million homes (2016 data) and 3,800 suburbs. 

But how do you spot the fastest growing suburbs? 

According to  GLENN – THE CENSUS EXPERT · (MARCH 28, 2019)

Everyone wants to know the fastest growing area in Australia. Well, in a sign of the shift of population growth back to the Eastern States, Serpentine-Jarrahdale has lost this title. Camden in NSW, adding 8.0% in a year, or 7,013 people, takes the crown this year as Australia’s fastest growing local government area. This is followed by the City of Melbourne (6.8%), Wyndham (5.9%) and Melton (5.4%) all in Melbourne, then Serpentine-Jarrahdale WA (5.4%). 6 of the top 10 are in Victoria.

Yes, you heard it right, Camden in NSW. Adding 8.0% in a year, or 7,013 people, it takes the crown this year as Australia’s fastest growing local government area.  Why?  Well Camden is right next to the new Western Sydney Airport.

Risk factors such as crime have a bearing on the shifts in people’s mindset as does the quality of schools and access to public transport.

More from Glenn:

What are the fastest growing cities in Australia?

  • Capital cities continue to make up the lion’s share of Australia’s population growth, 79% of the growth of 391,000 people in the year fell into the state capitals and Canberra, with 65% being in Greater Sydney, Brisbane and Melbourne.
  • When we look at growth in raw numbers, it’s a different story. It’s always the City of Brisbane which has the largest growth – because it’s about half the Brisbane metropolitan area and by far the largest LGA by population in Australia. The 22,942 people it added only constitute 1.9% population growth – close to the Australian average. Followed by the Gold Coast (+15,633, 2.6%), and Wyndham in Victoria (+14,251, 5.9%).

 

Fastest growth LGAs in Australia2018 popGrowth 2017-18Growth %Largest growth LGAs in Australia2018 popGrowth 2017-18Growth %
Camden (NSW) 94,159 7,0138.0%Brisbane (Qld) 1,231,605 22,9421.9%
Melbourne (Vic) 169,961 10,8206.8%Gold Coast (Qld) 606,774 15,6332.6%
Wyndham (Vic) 255,322 14,2515.9%Wyndham (Vic) 255,322 14,2515.9%
Melton (Vic) 156,713 8,0955.4%Casey (Vic) 340,419 13,6484.2%
Serpentine-Jarrahdale (WA) 30,933 1,5785.4%Melbourne (Vic) 169,961 10,8206.8%
Maralinga Tjarutja (SA) 64 34.9%Moreton Bay (Qld) 459,585 10,3722.3%
Cardinia (Vic) 107,120 4,7174.6%Hume (Vic) 224,394 9,1564.3%
Hume (Vic) 224,394 9,1564.3%Unincorporated (ACT) 420,960 8,9352.2%
Casey (Vic) 340,419 13,6484.2%Sunshine Coast (Qld) 319,922 8,7802.8%
Kwinana (WA) 43,511 1,6624.0%Blacktown (NSW) 366,534 8,695

2.4%

 

So, if you would like to learn more about trading stories in property, come to the Property Pulse session at 12 noon each day of the Property Buyer & Investor Expo in Sydney and let TUDI explain. Get your free tickets here.