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Bryce Holdaway

26/04/2015
Blog post by Bryce Holdaway

Should You Be A Borderless Investor?

So I guess the question for property investors are, should you be a borderless investor and what does that actually mean? More than ever, I’m talking to clients who are keen to not invest in their own backyard and actually look into other states for opportunities to buy because one of the biggest question that I’m always asked, in my role in the show (Location Location Location Australia) and my role here in Empower Wealth, is how is the market doing? It’s kind of a strange question because it’s probably a logical one that people want to know about.

But the question is, are you buying? Are you selling? Are you investing? Are you researching?

There are so many parts of that question and I guess the big part is which part of Australia are you referring to? Because Australia is not one big market and in fact, I think the biggest mistake that one can possibly make when they are thinking to invest in property in Australia, thinking that it is one big market because is it made up of hundreds and hundreds of sub-market. So I was thinking about this the other day, take for example, the period of time from 2005 – 2009. Historically, that was proven as not a very good time to be buying in the Sydney market place because they have flat growth for that four years. So if you were someone who lived in Sydney and is only prepared to invest in Sydney, you are losing to these other property investors around the country who had invested in other market and had probably done really well. Perth for example, performed phenomenally well just before the GFC from 2005 – 2007, getting enormous capital growth. So if you were a borderless investor, living in Sydney, deciding you would move your money out of Sydney and maybe buy into the Perth market around 2006 – 2007, you would have done significantly better than if you would have said, “Look, I only want to invest in my backyard. I want to invest in Sydney and therefore I will just see what happens”. During that time from 2005 – 2009, you have Perth doing really well, you have Melbourne doing really well and you even have Canberra doing really well. But again, Sydney wasn’t doing so well. So it’s important to understand that different states move in different cycles and even if you think of the current market, Melbourne and Sydney had done really well for the last two years but Canberra, Hobart and Adelaide hadn’t done so well. So if I live in any of those cities and I was prepared to invest in bigger cities like Melbourne or Sydney, it’d have done so much better for my portfolio and what it meant was that the equity that I get from those market means I could pull it out and maybe look for the next state that is in the upturn phase of the cycle. So I can move my money and jump into that area.

So in my view, it is important to consider being a borderless investor. There are stamp duty considerations, there’s land tax concessions that you can get and there’s so many wonderful benefits of diversifying your portfolio across the country and moving into markets that are likely to do better as oppose to someone who just says, “Look, I fell comfortable and safe investing in my own backyard” and if they are buying in the wrong time of the cycle, they may not get some growth for the next 2 – 4 years which would be really disappointing. So my message is clear, I certainly encourage people to be a borderless investor, I’m seeing it more than ever where people are more comfortable buying interstate and if you are prepared to do that, the chances are, you will get an outperforming property portfolio that will serve you well into your financial goals.

 

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