Manage episode 288662365 series 1537109
One of the most significant changes in the time I’ve been investing in property, and that’s close to five decades now, is the availability of data.
When I first started investing in the 1970s there weren’t any blogs, podcasts, YouTube channels and the only way to get property data was to be part of the secret inner circle – which was then a men’s club of Real Estate agents – because the lag in publicly available data was often over a year.
The estate agents were custodians of the data, because back then the Valuer-General would only publicly release property once a year.
Over the last decade, there’s been an abundance of monthly data available to property investors and over the last year, most of the data houses have been providing weekly updates.
But in our current fast-moving market sometimes even this is a little bit too slow.
For property investors who need to make important financial decisions, the lagging available data can be an issue and the other significant challenge is understanding which data is important and which isn’t and that’s the topic of my chat today with financial adviser Stuart Wemyss.
At the end of the show, you should have a much better understanding of what data you should be paying attention to and where to find it, and this should help better property investment decisions.
Filtering Property Data
It seems that currently every man, woman, and pet dog is upbeat about our property markets.
Just look at the messages we are getting in the media.
It seems that all the economists have now done an about-face and agree we’re in for strong property markets for the next few years, with some being comfortable using the word house price boom.
In fact, they seem to be out doing each other to see who can come up with the most upbeat price increase forecasts.
Six percent gains? How about eight percent? No, it will be double-digit growth. What about sixteen percent over the next two years!
But looking back over the last few years, we know that most economists have had a very poor track record, and we know much of the information we read is not useful.
So, today in my chat with Stuart Wemyss, we get an understanding of what information is relevant and what is not.
The media tend to only run stories that they consider newsworthy.
Newsworthy often means that the information is time-sensitive e.g. what happened yesterday or what will happen tomorrow. This short-term information does not help if you intend to own a property for many decades.
So what information is relevant?
Very little from the media.
A good and bad property costs the same to hold. You will pay the same amount of interest with respect to the mortgages. And the income and expenses will be relatively similar. The biggest difference between a good and bad property is capital growth. That is, what will the property be worth in 10, 20, or 30 years?
In this regard, when selecting a property, there are three fundamentals you must consider:
- Land value
- Past performance
There’s only a handful of important macros considerations
- Population growth
- Money supply
- Diversified employment opportunities
Ignore the rest!
Property investment is part art and part science, and that’s where investors who only base their decisions on data get it so wrong.
I know there are a number of people out there currently saying that they research every market around Australia sitting at the computers all day. Unfortunately, what they are missing is the perspective – they have the same speed right but not the bit right – not the on the ground knowledge - you can’t get it by flying in & flying out and speaking to a few agents – perspective takes years to develop – it’s something you can’t buy.
Some examples of when the data can lie to you
- Not enough data
- Not long enough time between transactions
- Too hard to ascertain its current value
- Our sales did not represent Fair market value
- You overpaid for the property when you purchased it
Links and Resources:
Stuart’s Book – Rules of the Lending Game
Shownotes plus more here: What property data should I be paying attention to and what should I ignore? with Stuart Wemyss
Some of our favourite quotes from the show:
“I think we’ve got to remember that the media’s job is not to educate you but to entertain you.” –Michael Yardney
“Part of an investor’s job is to maximize their returns while minimizing their risk.” – Michael Yardney
“The few who do succeed are able to do so when the pain that does come to them – they can endure it because they prepared for it.” – Michael Yardney
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