MARKET UPDATE SEPTEMBER 2018
Welcome to Spring.
Two little (but BIG) headlines caught my attention that have meaning to us:
1. A 100 room hotel is being built on a 327m2 block in Sydney; and
2. The Government shuffling new migrants out of Sydney and Melbourne.
Hotel on 327m2 Block of Land
The hotel is on the site of the Greek club in central Sydney and would comprise 16 levels. People who don’t know real estate say that we don’t have a gold mine in our backyards. But actually, we do.
Let’s think about it. If you bought your family home 30 years ago on a 1,000m2 block of land for $114,000, as was possible back then, you now have an asset worth well over $1m depending on which city. Now in Sydney, Melbourne, and Brisbane 80-100m2 blocks are selling for $1,200-$2,000 per m2. More importantly, these blocks are 40-50km from the CBD.
Your 500m2 backyard could easily be worth $2,000 per m2 which is a cool $1m. In fact, me says that in 10 years 80m2 lots with 3 story designs will be the norm. The land value per m2 then could be as high as $10,000 per m2.
And that, most certainly, is a gold mine in your backyard.
Migration game changer
Scott Morrison has signed off on a new migration policy requiring new migrants live in regions other than Sydney and Melbourne. Wow! That’s huge for us.
Last year we absorbed 240,400 new migrants, plus a further 87,150 foreign students. These are big numbers for sure. Around 53% of those new migrants settled in either Sydney or Melbourne. That would mean 2,450 each week now would be directed to other capitals, mainly Brisbane and Adelaide. Another 1,000-2,000 per week into those regions would make a huge impact, and very quickly.
This might be the most exciting policy change I have ever seen that could launch land values into the stratosphere, particularly in Brisbane/South East Queensland, where they are about to undergo a major infrastructure boom to make up for the lack of spending previously.
Under our 7 Steps model we work in 5 of the local government precincts and now 3 of them have small lot policies with, I’m sure, the other 2 following suit if the population explodes with the new migration.
Our clients own over 2.9 million m2 of land in this region and paid an average of $316 per m2, now worth $627 per m2.
Watch this space.
Mernda goes Choo Choo
Mernda’s train line officially opened for use last week, as population there grew 12.6% in the past year.
Great news for our 60 clients there. They began purchasing 400m2 blocks for $500/m2 and which have grown by 60% to $800/m2 in the past 4yrs.
1,000 success stories
Some people come into 7 Steps and ‘dip their toe in water’, so to speak, by buying a property and then waiting to see if it works! Sometimes the growth doesn’t come in the first 1-2 years and they forget why they really started; to build a land bank to use in retirement.
That’s not the case with Karen from Sydney. She bought into Goodna in 2009 (883m2 block). The floods in 2011 in SEQ halted that market and Goodna was the epicenter, albeit none of our houses were affected.
In 2011 she duplicated into Ropes Crossing in Sydney, she then bought Tarneit Melbourne, and now Seaford Adelaide. She has amassed a land bank of over 2,000m2 in 4 states. She is cash-flow neutral and has had over $340,000 equity growth. More to the point; if her properties grow just 6%p.a., her portfolio will grow more than $100,000 per annum, and that doesn’t account for the cash flow from rental growth!
A great success story.