Exclusive interview with property investment and real estate expert, John McGrath

Property investment and real estate expert, John McGrath, sat down with Property Observer to discuss how the markets are currently performing, where he considers the hotspots to be, and how to get the most from a suburb.

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Transcript:

0.03

I often say to people "which market?" because there are multiple markets within Australia, there are multiple markets within each capital city. I'll talk and drill down into the different price ranges, the different geographic locations, the different style of property. But generally speaking, Australia is in a pretty good state. We've been through a few tough years like the rest of the world, property has been knocked around a little bit, but not as much as perhaps some other asset classes. I think we're at the beginning of the next cycle; recovery with growth for three to five years. I think we're at the beginning of that. 

Sydney is probably leading the way slightly for the rest of the country. Sydney is a little bit further progressed with regard to the demand out there, but there are cities like Melbourne where the market is very, very strong. Cities like Brisbane and the Gold Coast I think actually offer outstanding value for people, they have been hit pretty hard and I think are going to bounce back very strongly over the next 12 to 18 months.

0.59

I think there are some basic things there nowadays via the internet; there's really no excuse for not doing all your due diligence and research. As a buyer you should be turning up with better information, perhaps better educated than the agent, because you're focused on a specific type of property, price range and area, while agents often have to handle multiple price ranges and property. You really should be researching very hard to make sure you know what good value looks like.

I also try to give some practical tips. I suggest people don't look for bargains, because bargains are rarely great properties for the future. They're normally things that are cheap because no one wants to buy them. So I think as the market improves, I say to people just look for a fair market value property that has capital growth opportunities written all over it.

I'm a great believer in capital growth as opposed to yield. Yield is relevant and important but at the end of the day whether your investment is yielding you 4% or 5%, it is not going to change your world. If you pick the next growth suburb or one of the next sweet spots around the country, then you can find that your wealth can increase almost over night. Over the next few years you can have a dramatic uplift in your wealth.

2.08

Be prepared to take some calculated risks. We know the obvious ones, it's not hard to know that Albert Park is a great area to buy in, or in Sydney, Paddington. But what's the next Albert Park for Melbourne? Have a look around at what areas are on the fringe geographically, where are the trendy new cafes, retail outlets, strip shopping starting to move in? What has the feeling, the earmarks of a great capital growth area?

What areas are going to benefit from infrastructure that's about to be put into the city? So have a look at is there going to be a new light rail? Is there a new rail system being put in? Is there a new roadway that's going to make an area better or make an area that's going to be more accessible to the CBD?

Have a look at all of those sorts of things and then be prepared to take a couple of calculated risks as to where you're prepared to invest your money.

2.54

Especially cities like Sydney, Melbourne and Brisbane, as they become bigger, harder to access, to get in and out of. A lot of people want to have themselves right there on the doorstep of the city, and of course that's where a lot of the cultural pursuits, a lot of the activities and the best restaurants are going to be within that 10 kilometre radius. So I always say to people draw a circle around the CBD that you choose, and all those cities are great investments, and have a look for where are the areas that are less fashionable at this point. And what's happening in those areas? Are they industrial but becoming more residential? Or are they heavy industrial and going to remain that way? Is something going to happen that sparks off interest in a suburb that adjoins a really popular trendy area?

Have a look around, get out on the street, drive around, walk around, go to cafes. Speak to different agents, really research the market until you know more than the agent.  

3.48

A lot of people call them 'grungy suburbs'. They're often trendy for renters and they're often near universities and educational pursuits and they sort of haven't quite had the polish put on them yet. But they have got really strong growth opportunities. 

In Sydney it's areas like Dulwich Hill, St Peters and Tempe that are not the Paddingtons and the Surry Hills, but they're only about four or five kilometres away and they're about 40% less expensive to buy into those areas. So that's what I'm looking for.

Note: John McGrath was interviewed at the Property Millionaires Tour, held at the Sofitel in Melbourne.