Terry Ryder is the creator and founder of hotspotting.com.au, Australia’s premier property hotspot locator. While the company and its website has been around since 2006, Ryder has essentially been working in the hotspotting industry since the early 1980s. He moved to Australia from New Zealand in the ‘70s to play rugby and planned to stay for a year. After quickly— and reluctantly— landing a job in property journalism, he discovered he loved it and 40 years later, he’s still here!
In this episode we’ll hear about all the steps that led him to where he is today, starting from that ‘working holiday’ he’s technically still on! After knowing no more than ‘it’s about houses and stuff’, he now can sniff out a property hotspot
with the faintest change of wind. He shares some fascinating tales of the newspaper industry in the ‘80s and how he managed to find so much information, even without the Internet (or even Encarta 95)! We’ll also hear his tips for picking a potential hotspot, and the characteristics of properties he looks for in those areas. Plus, you may think he has learnt all the lessons there are, but just wait until you find out the one he’s learnt more than once!Timestamps:
03:33 | Information Overload
8.25 | If You’re Going to Do It, Do It Well
13.01 | Research, Don’t Recycle
16:20 | Terry Ryder, Property PI
20:33 | The View Philosophy
23:57 | After the Seventh Move in a Year...
00:36 | Nevertheless, He Persisted
03:17 | Even the Pros Need Reminders Sometimes
08:47 | Hotspotting Beginnings
14:01 | From Blue Collar to the Blue Mile
17:11 | Don’t Follow the Herd
26:15 | Look to the Regions
31:59 | The Importance of Accumulation
Resources and Links:
[00:14:33] There's all this conflicting data swimming around in media, and I think people are confused and a little bit daunted by it all. So that's one of the reasons we have a business. People need services like ours to try and make sense of it.
This is Property Investory where we talk to successful property investors to find out more about their stories, mindset and strategies.
I’m Tyrone Shum and in this episode we’re speaking with Terry Ryder, creator of Hotspotting, which analyses property markets to identify areas where property is about to boom. He shares the story of how he came to Australia for a year in the ‘70s to play rugby, and how he landed in property writing to become Australia’s hotspotting property hero!
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Terry Ryder spends his days scouring for information and crunching numbers, keeping an eye on property markets all around Australia.
[00:00:29] I'm the managing director and founder of hotspotting.com.au, which is a website which was set up in 2006 essentially to advise property buyers [of] the best places to buy around Australia. Taking a medium to long term view, looking for the characteristics of the future hotspots and alerting people to them before they become hotspots. Because I think that's the essential thing that property investors are looking for, they want to know that the prices are going to rise before they rise.
[00:01:22] A large part of the day for myself and my team is involved in gathering information. We're scanning all kinds of sources via the internet and in other ways, trying to pull in as much information as we can about what's going on in economies and property markets around Australia.
[00:01:44] We fundamentally believe that real estate markets arise out of the local economy, not so much about national economic factors like interest rates, or the banking Royal Commission. It's essentially about what's happening in local economies. So we're looking for growth drivers, we're looking for events that will alert us to potential future hotspots. So we're searching through newspapers around the country, Google Alerts, all sorts of sources, trying to pick up on hints and indicators of areas that are going to go ahead or are going ahead as potential hotspots.
[00:02:25] So that's a large part of what we do. We're putting together reports for both Mum and Dad investors, but also we have B2B services, businesses that are involved in the real estate space, often looking for custom built reports on the areas that they're interested in. So the team's also putting together those kinds of reports. They also spend a lot of time talking to media, because media is always hungry for information about what's going on in markets around Australia. So I spend quite a bit of time talking to television, radio and newspaper journalists.
Ryder recognises that there’s so much information available, which is a problem that many real estate consumers have.
[00:03:33] That's why we have a business, that's why we provide the service we do, essentially. There's just too much stuff out there for people to gather, even if they knew where to go to find it. Gathering it all together takes a lot of time, and then making sense of it— that's the hard part.
[00:03:50] And so we just have a system where various members of the team have certain areas that they're searching for information, and that's all fed through to me and every day I'm sending that information off in various directions electronically, we file with an electronic filing system under various category headings. Hundreds of different locations around Australia have their electronic file and while I'm doing that process, it's alerting me to indicators of areas we maybe need to delve a little bit deeper into.
[00:04:28] A new piece of infrastructure announced, for example, something that's come through the information channels we tap into, telling us that a market may be potentially rising. So we'll look a little bit deeper into that. Maybe talk to some people like all real estate professionals on the ground, valuers and buyer's agents, etc. And that all feeds into the process whereby we create reports. Essentially that's what we're doing. We're creating reports on locations. Mum and Dad investors have a need for that, and businesses that are in the real estate space also do.
[00:05:08] Once a month I do a live Facebook Q&A, where I invite people to throw their questions at me via Facebook and I answer the questions live via that medium, and 90 or 95% of the questions I get are about location. That's essentially what people are interested in. They want to know, 'What do you think of this suburb? What do you think of this town? I'm going to property here, should I keep it? Should I sell it?' That kind of thing. So people are very location driven when it comes to real estate investment.
He was born and bred on the South Island of New Zealand, and came to Australia in 1978 for a year-long working holiday. Over 40 years later, he’s still here!
[00:06:24] I actually came to Australia to play for a rugby union club, who were short of players and poor high New Zealanders have a pretty good rugby player.
[00:06:36] I started out as a newspaper journalist, and I was working in a newspaper in Wellington, the capital in New Zealand, and wrote an article about a guy from Rugby Club in Ipswich in the Brisbane metropolitan area, recruiting rugby players. And anyway, I decided to become part of that as a working holiday adventure. But having arrived in Australia, one thing led to another and I never left.
[00:07:06] I was a general news reporter at the Courier Mail in Brisbane in the early '80s, when the editor called me in one day and told me that he's decided to make me Property Editor. And I protested, because I didn't know anything about real estate. And he said, 'You'll find out, it's about houses and stuff.' Which says something about the way newspapers were run then and still are, I'm afraid.
If You’re Going to Do It, Do It Well
[00:07:31] I was appointed Property Editor and decided, 'Well, if I've got to do it, I'm going to do it well,' and decided to do a lot of research. There wasn't much research available in those days, I created my own research exercise, and decided to make a specialty. And it just evolved from there, from the Courier Mail to the Australian Financial Review, and then became a freelance consultant. And other things have evolved from that.
[00:08:00] So I became a property expert quite by accident. Just a bit of a twist of fate that comes along in people's lives. You know what they say, life's what happens while you're busy making other plans. I never planned to be a real estate specialist. But that meeting in the office of the editor of the Courier Mail, way back about 1982, was kind of fate for those terms that sort of dictated the future.
[00:08:59] Did you actually study in journalism when you actually were over in New Zealand before actually moving across?
[00:09:05] My first job was in a bank and I very quickly realised that wasn't for me. But accidentally, it made me realise that I wanted to do something in the writing space, because I failed to show up for a staff meeting at the bank one day and they appointed me branch correspondent to the national magazine. So I decided if I was going to write reports for this magazine, I was going to have some fun with it.
[00:09:30] So I satirised everything happening in the bank and I noticed that people who worked in the bank absolutely loved it. And I enjoyed the fact that they enjoyed what I wrote. So I decided I wanted to become a writer. So I went to journalism school, and then started to work in newspapers. And that led me to working in the sports department of the major newspaper in Wellington and my encounter with The Man from the Rugby Club in Ipswich on the fringe of Brisbane and that we're on to everything else. It's amazing how step by step, little slices of fate lead you to where you end up.
Ryder has published four books so far, with the last being released in 2004.
[00:10:43] The novelty wore off, I guess, so much work goes into them. I am planning to return to publishing books on real estate topics and other things. The ones I have published were very much orientated towards the consumer protection side of real estate, alerting people to the perils and pitfalls. And some of the shonkier elements or real estate they needed to be aware of. Buyer Beware was one title. I also wrote a book called Real Estate Without Agents, which was designed to show people that they can actually sell property themselves without needing to pay real estate agent commission.
[00:11:22] So I've published four books of that nature, and plan to go back very soon. Part of this year's plan is actually to get another book written on real estate topics. So that's something I love doing, it's just very time consuming. And running a business and writing books aren't necessarily compatible timewise.
Research, Don’t Recycle
With so much writing experience under his belt, Ryder says the biggest change he’s seen over the years is in the research area.
[00:12:28] When I was property editor of the Courier Mail in the early '80s and then at the Financial Review in the mid ‘80s, there was really no source you can go to for real estate information. There were no Domains or CoreLogics; realestate.com.au didn't exist. And so I decided that I was going to do my own research. So I created a research exercise myself. I used to work very long hours, because I just became fascinated by it. I didn't just want to recycle press releases, or just report what people were saying in the industry, I wanted to know what was going on.
[00:13:07] So I started researching what was selling, how much it was selling for in the commercial space, as well as residential, who owned the big buildings, etc, etc. And that became the basis of everything I did and also became the basis of my consultancy when I evolved out of newspapers into becoming a consultant to major property firms. And I used to write research based reports for them. No one else was doing that at the time.
[00:13:41] So the big difference now is that everything's changed in that regard. There are so many research sources, obviously, the evolution of the Internet, and computer technology has revolutionised that. And so now we've got to the point where there's, as I said earlier, there's too much information out there and it becomes mind boggling for people. Particularly as to a certain degree, all the information about residential property is dodgy data, or rubbery figures to a certain degree.
[00:13:41] So we pull in price data from, say, six different sources, and they've all got six different numbers for the same market. Some claim a particular market is rising, and other sources do have figures that indicate it's falling. So how do people make sense of that? And that's the problem that consumers have. There's all this conflicting data swimming around in media, and I think people are confused and a little bit daunted by it all. So that's one of the reasons we have a business. People need services like ours to try and make sense of it.
Information wasn’t as readily accessible and available before the Internet came along, so how did he find his data back in the day?
[00:15:26] It was like just setting up an exercise and then talking to people in the industry. Each of them knew something, and if you talk to enough people, you find out everything you need to know. I remember, there was one phase in Brisbane, where all the best corner sites in the centre of Brisbane were occupied by traditional old pubs, and developers were buying them because they were prime real estate to build office buildings, primarily.
[00:15:57] So I created an exercise finding out where all the pubs were located in central Brisbane, who owned them, what lot size they were, et cetera, et cetera. And that became a valuable piece of information for the industry, because a lot of people were looking for that kind of property to buy to redevelop. But it was just a lot of foot slogging and phone calling in those days.
Terry Ryder, Property PI
[00:16:20] And you're almost like a private detective, except not searching for the person who's searching for property.
[00:16:30] Being a newspaper journalist in those times, and certainly, the reporting of real estate was very different then what it is now. Today is pretty much an exercise in recycling press releases, which to me isn't journalism at all. Publishing a press release was a sacking offence when I was working as a property editor in the '80s. So you were generating your own articles by going out and talking to people in the industry and finding out what's going on. And the idea was to be the first to know of the major deals that were coming up. And you could do that if you talk to enough people. So it was a very good way to learn about research, research was about foot slogging and talking to as many people as you could to find out what was going on. To a certain degree, that's still the case.
[00:17:34] The resources in newspapers were a lot more than they are now. So you did have, to a certain extent, the resources to do things well, but my section of the Courier Mail was a weekly section published on a Friday, so you had the week to get your stories together. But if something was really hot it would go on the general news on the day, but generally speaking, we were working week to week. We were working Monday to Thursday getting together articles and features to be published on Friday.
[00:18:04] So it was not quite the daily deadline pressure that people working in other sections of the paper had. So that was a little bit easier. But a lot of work. We worked long hours to try and do it well, because I've always had this obsession with whatever I'm doing, and kind of do as well as I can. So I've always been a bit of a workaholic in the area that I'm interested in working in, which isn't a bad quality to have, as long as you can keep it under control.
Ryder has certainly spent a lot of time helping others onto the property ladder, but he didn’t hop on himself until later.
[00:19:15] Initially, I was interested in the subject because I was appointed to do it. So I thought, 'Okay, I'm going to do it as well as I can.' But I wasn't that interested in wealth accumulation. So I was slow to get interested in investing personally, but eventually I did. And early on, I think anyone you talk to— I'm sure you've heard this experience with anyone you've interviewed, who's had a long history with real estate investment— will tell all the mistakes they made early on. I think everybody has had that experience. No one's had a clean sailing career as a property investor and with the wisdom of hindsight you wish you'd done things differently.
[00:20:00] Early on, I was buying and selling. Now with hindsight I wouldn't have done that, I would have accumulated and just kept what I initially had owned and just added to a portfolio. But I didn't understand in the early days the importance of doing that. So I was buying something and after it'd grown, I'd go selling it and buying something else. And do quite well from that, but I would have done a lot better, I think, long term, if I'd kept everything that was good, and just accumulated a grown portfolio.
The View Philosophy
[00:20:33] But early on, I had a philosophy that whatever I bought, it was going to have a view. I decided that property with a view had a selling feature. And that seemed to work pretty well for me. But along the way, I just noticed that things— even ugly real estate, this is one of the things I still believe to be true— ugly real estate grows in value, often as well as pretty real estate. It's all about affordability for a lot of people and what it's close to is more important than the actual look and feel of the property itself.
[00:21:08] Well-located property close to a train station, for example, that's affordable, close to shopping, close to schools. All those basic things that I started to pick up on early in my property investing career and still, I believe, remain. I've added that extra element through the hot spotting process where firstly, we're looking at really great locations that have an underlying economy that's going to support superior growth, but within that, then looking for a property that's got good proximity to public transport, shopping, and schools as the fundamentals to look for.
He points to recent research that indicates where people have been looking at property outside of the major cities.
[00:22:26] They are looking for shiny objects. The vast majority of searches from people in Melbourne and Sydney outside of their own areas were focused on the Gold Coast, for example.
[00:22:38] The Gold Coast does not have a great track record for capital growth, particularly the high rise market has a very poor record. But people are lured by those sexy locations, they've got a bit of sizzle that appear like great places to own real estate, but they're overlooking the fundamentals. And I often contrast the capital growth record of, say, a Surfer's Paradise apartment with a three bedroom house in Dubbo in regional New South Wales. Dubbo is by far the superior investment over time. But a lot of people don't appreciate that. Or they're not understanding the fundamentals of what makes a good property purchase.
After the Seventh Move in a Year...
As for his own property journey, Ryder was renting and tired of constantly moving for reasons outside of his control, which gave him the push he needed.
[00:23:57] There was one year in which I had to relocate six or seven times, because the landlord decided to sell or I'd offended the landlord in some way and he kicked me out. And I said, 'I'm sick of this, I'm going to buy my own place.' And it cost $25,000 and it was in a very modest suburb in Ipswich in the far southwest of the Brisbane metropolitan area. And at that point, I was actually working at the Courier Mail so it was a very long commute. So it's interesting that there's a lot of media today about first time buyers can't afford to buy and they've got to go to the far outreaches. Well, it was the same situation way back then, more than 30 years ago when I bought my first place. That was the best I could afford. I couldn't afford to buy closer in and so to get on the property ownership ladder, you've firstly got to be prepared to make sacrifices and compromises. No one gets their dream home and their dream location with the first purchase, even back then where things were cheaper. But incomes were lower as well, so it's all relative.
[00:25:05] So that cost $25,000. And whenever I drive past it these days, I look at it and think, 'My god, I can't believe I lived there, it's the ugliest piece of real estate I've ever seen.' But it grew in value, in a couple of years, it grew from $25,000 to $40,000. And I sold it and my second purchase was a lot closer to the centre of Brisbane. And so I kept doing that until maybe on my fourth purchase, I was closer to what I regarded as the dream home. And as I say, with hindsight, I would have kept those properties and just made them part of a rental portfolio. But I didn't understand the wisdom of that back then.
[00:26:12] In some respects it was harder back then because there weren't the borrowing options that exist now. The only place you could get a loan was the people you'd banked with for several years and built up a record with. And there were no government grants or stamp duty concessions then, so in many respects, it was harder.
[00:26:40] In the mid to late '80s interest rates were above 10% and Paul Keating kept raising them to try and dampen down the boom. But the boom keep raging and mortgage rates did get up to 17 [or] 18% before the boom stopped in the late '80s, and I experienced that. So in all those respects, that was harder back then. So all relative. Prices in the biggest cities are pretty high, but if people are willing to make sacrifices and compromises and that's the key thing, they can get their foot on the property ladder.
[00:27:15] Increasingly, we're seeing people now going down the rent vesting path, which is probably a good compromise. If people decide, 'Well, we do want to live in certain areas of Sydney or Melbourne. We can't afford to buy there, but we want to live there so we can buy our first property as an investment property in maybe a good regional centre that's affordable.' And I think that that's a great compromise to make.
Coming up after the break, Ryder delves into the early days of his career and how instrumental they were to his success today...
[00:08:47] Going back more than a dozen years, when I was planning to create this business, I started out by doing a series of articles for Money Magazine, where each of the series dealt with a different aspect that my research showed created hotspots.
The regional markets around the country he has his eye on...
[00:14:26] A lot of the rising areas in terms of real estate have very strong proactive councils that go out there and actually encourage people to come and live, encourage people to come and invest and set up businesses.
He lets us in on where he’s planning to purchase next, and it’s not where you’d expect.
[00:18:30] My next purchase will be there because I really believe in what's happening. And it's going to be very exciting. But as I say, most people pack animals, they'll follow the herd when they read that there's a boom happening.
And that’s up next. I’m Tyrone Shum and you’re listening to Property Investory.
Nevertheless, He Persisted
Coming back, Ryder reveals the property he most wishes he’d kept, despite all its shortcomings.
[00:00:36] It was my first house actually, close to the centre of Brisbane. And it was quite a modest, and ugly little place. And it cost, I recall, about $50,000. But it was on a great block of land. It was elevated with views looking out the Brisbane River to the Gateway Bridge. And I sold it for $110,000. So I doubled my money in a relatively short space of time, and I thought I'd done very well. But I noticed last time I drove past it that someone had bought that, knocked it down and built a mansion on that block of land. So imagine what it would be worth today.
[00:01:11] Probably... not worst experience, but a good object lesson was from some years ago, buying— or trying to buy— a property in regional New South Wales. And for a whole host of different reasons, every property I tried to buy just didn't come off. Someone bought it out from under my nose or the vendor changed their mind and decided not to sell after I'd done a lot of work and spent a lot of money on searches and valuations, etc. And it just dragged on for months. But I persisted. And eventually, I ended up getting a good property in that location.
[00:01:52] And there's a number of lessons out of that. And that is, it does happen that way sometimes, and you have to persist and be patient. And the other lesson was that never to be repeated bargains happen almost every day. So you think the property that's your first target is the only one that's going to fulfil your dreams in that location, and you miss out. But another one that's even better will pop up. If you persist.
[00:02:18] One of my mentoring clients has actually been through that process, just in the last several months, just constant frustration of targeting properties that look great, exactly what we're looking for. And then for some reason, someone beats them to it or they do the building and pest inspection and find it's riddled with termites. It's taken him about four months, he's finally bought a property. And that's probably the best that we've looked at in that four month process. But if he'd given up and lack patience and persistence, he wouldn't have got there.
[00:02:53] I totally agree. And then that is so so good, that lesson for people to learn, because that's where you find the best deals. I know people who start out buying property, they can take anywhere between six to 12 months, and sometimes they throw it in and say, 'I'm just gonna get the next one.' And that is just due to a sense of frustration. But if you have found the deal that works out well, and you just give it time and you wait, it will come. It's just a matter of maybe building out the knowledge and patience.
Even the Pros Need Reminders Sometimes
[00:03:17] And I've just re-learnt that lesson today. In fact, this morning. I'm looking to buy— I don't mind telling you— in Bendigo in Victoria, which I think is a market with a lot of potential right now and in the future. And the property that we were targeting has just being sort of snaffled from under our noses by another buyer. And I've just applied the same attitude.
[00:03:33] That property was ideal for what we were looking for. But another one as good or probably better will pop up next week, probably, I'm sure. And so I'm totally unfazed by that. There was a time when I would have been devastated to have missed what appeared to be the perfect answer to my current criteria. But experience is a very valuable thing in real estate investment.
Moving from the worst investing moments to the best, Ryder shares the moment where everything clicked for him.
[00:04:29] I think the aha moment was understanding that it's not about buying and selling. It's not about trading real estate. That's actually a very foolish way to go about it. Your selling and buying costs eat up so much of your capital gain that you've achieved. The aha moment was realising that it's about accumulation of good assets.
[00:04:53] It might have been something that I read from Warren Buffett, I mean, he's one of the smartest people on the planet in terms of investing. He invested in share market type investments, not real estate so much. But a lot of his philosophy applies equally to real estate. And I remember him saying that he applies a strategy whereby it doesn't matter if they close the share market for the next five years, he's happy because he buys assets that are fundamentally long term in value. He doesn't buy them with a view to selling them. He buys them because they're good assets. And he plans to keep them for the duration. And I think that's very true in real estate as well. It's about accumulating good assets and keeping them.
[00:06:07] More recently, I think the aha moment, at some point in the recent past was that it's no longer about passive investment, as you might call it, where you buy something that's rentable and has the potential for capital growth, and you wait for it to grow. Increasingly, investors, including myself, are looking for something to accelerate the process. So we're looking for all of that, but also something where you can add value, whether it's through renovation, extension, building a granny flat, or subdividing or redeveloping the future.
[00:06:43] I think it's about finding property that has the zoning and the land size, and the potential to do something extra with. And what I'm currently looking for very much fits that general category, it's something that's immediately rentable, but you can subdivide or build a second dwelling, or perhaps redevelop with townhouses in the future.
[00:07:32] A lot of properties already have the zoning in place, already have the what's required to do extra with it. Quite often the seller doesn't understand the potential themselves.
He reflects on his early days in property writing and how that has influenced the characteristics he looks for in the property market now.
[00:08:47] Going back more than a dozen years, when I was planning to create this business, I started out by doing a series of articles for Money magazine, where each of the series dealt with a different aspect that my research showed created hotspots. It might be the ripple effect. It might have been proximity to jobs. I focused on each topic individually in a series of articles that were published in Money Magazine. I was doing the research, not only for doing some money as a freelance writer at the time, but to create the research basis for the hot spotting business.
[00:09:36] We're looking for certain characteristics and events. And probably the single most important one, if I distil it all down to one word, the word is infrastructure. And a good location to buy in will have good existing infrastructure but more particularly, the game changer will be planned new infrastructure.
[00:09:58] Now, I'm in the Sunshine Coast hinterland, the Sunshine Coast is a great case study. Five or six years ago, we included the Sunshine Coast in our no go zones report because it was a poorly performing market, as essentially its economy was about tourism, which is a very fickle and volatile industry. Very, very prone to downturn. And so real estate didn't perform very well. Noosa hadn't shown any growth for most of the last 10 years, for example, despite its iconic reputation, but something fundamentally changed.
[00:10:35] And it was through infrastructure spending. There's $20 billion were happening in the Sunshine Coast. There's a medical precinct being created that wasn't there before. It's created a whole new industry for the Sunshine Coast and it's brought a lot of new people to live there, many of them very well paid people. And that's really put a turbo charge on the property market. They're spending half a million on the airport, they're spending a billion dollars right now on the motorway. There's a new CBD being created in Maroochydore, the biggest shopping centre on the Sunshine Coast has been expanded by $400 million, all these things are happening. Youi Insurance has set up its national headquarters on the Sunshine Coast— that wouldn't have happened five years ago.
[00:11:18] So those are the sort of game changing things that we're looking for. And it all centres around infrastructure. And I believe that the biggest single factor for Sydney's boom in the last five years until recently was the infrastructure spend. There was tens and tens of billions of dollars being spent on rail links and motorway upgrades and universities and hospitals. And that generates economic activity, it creates jobs. And out of that comes demand for real estate. The wealth it's created, or helped to create, has made the Sydney New South Wales economy fundamentally the strongest economy in Australia. And that's generated a property boom. A lot of wealth has come out of that for Sydney.
[00:12:32] Did they create the demand, is that how it came about? That's why they decide, 'Okay, this is going to be good to pool in our infrastructure and spend those billions of dollars to create all those things?’
[00:12:42] I think the demand was there, it's the action of government that's been lagging. So the Sunshine Coast region was a growing region because it was, in terms of lifestyle, a good place to live. But medical services were falling behind and there was a need for a new hospital. So they build a $2 billion one, after much lobbying from local people. And then once that was established, someone decided, 'Well, we're going to build a private hospital next to the public hospital,' and then specialist medical buildings were building. So suddenly, this precinct evolved. So one thing led to another.
[00:13:25] But in the case of Sydney, there was a huge need for the infrastructure that they've been building over the last, say, five years. Just the previous government was just not spending anything on infrastructure, it was so ridden by internal division and corruption and all sorts of distracting things that governance wasn't happening and spending on necessary infrastructure got way behind. More recently, they've caught up and it's generated a strong economy. It's not the only factor, but it's been a big factor.
From Blue Collar to the Blue Mile
[00:14:01] Similar with the Sunshine Coast. There are other places. Geelong is a great example of that particular economy, just outside of Melbourne, it's absolutely thriving. And a lot of it's been generated by infrastructure spending. A feature I think that's underrated and a lot of people wouldn't even think to look for is the importance of a proactive local council. A lot of the rising areas in terms of real estate have very strong proactive councils that go out there and actually encourage people to come and live, encourage people to come and invest and set up businesses.
[00:14:40] The Sunshine Coast definitely has that, Geelong definitely has that. These are economies in transition. Wollongong's another one, it used to be a smokestack economy and now it's more about health and education and IT services. Geelong's very similar. It's evolved from the old blue collar industries to modern industries, and that's been facilitated by ambitious local councils and also state governments to some extent.
The processes to discover and provide the right information are long and involved, but well worth the time and effort.
[00:15:59] It starts with an idea, and then it becomes a proposal, and then there's some research, and then there's some debate. And eventually it will happen. But it's quite a long drawn out process. So we're gathering it all together and taking a punt, sometimes, that something will happen.
[00:16:18] A game changer for the Redcliffe Peninsula in the north of Brisbane was the new rail link. It was promised for 50 years before they actually decided to do it and actually deliver it. But one of the interesting things about infrastructures is there's sort of three phases of growth. One is when they announce it, and then the second is when they actually start building it, and the third and biggest one is when they have finished it, and people can touch it and feel it and see the benefits.
[00:16:48] So you stand the potential to gain the most as an investor if you buy when the announcement is made. But you're taking the risk that the political announcement will be delivered on, because quite often promises aren't kept. Probably the safest time to invest is when they actually start building it, because you're pretty sure it's going to go ahead and be finished. And the benefits will be felt.
Don’t Follow the Herd
[00:17:11] But most investors are essentially herd animals. So most people will wait until it's finished and then say, 'Oh, that's an influence, maybe it'd be good to buy there.' Where the smart people will have bought, say two years earlier, and we'll be getting the most benefit. And that's one of the fundamental truths in investment. Most people don't get fantastic results because they're herd animals. They follow the herd and by the time they buy, the boom's already well underway. The people who do best are the ones who buy ahead of the big upsurge. But they're relatively few people who have the wisdom and the foresight and the courage to actually run in the opposite direction to the pack.
[00:17:52] So smart people will be buying right now in Perth, but most people will wait until they read that the Perth market's rising before they even think of it. The rise is inevitable. But most people aren't sufficiently well researched, and sufficiently independent in their thinking to act upon that.
[00:18:11] I also think people are going to be amazed and surprised about Adelaide, when the word finally gets out. We've been trying to convince people that Adelaide's a looming hotspot for all sorts of reasons that are happening in its local economy. People are very hard to convince about Adelaide. My next purchase will be there because I really believe in what's happening. And it's going to be very exciting. But as I say, most people pack animals, they'll follow the herd when they read that there's a boom happening.
[00:19:22] What do you think have been the key indicators for both Perth and Adelaide that's been a great hot spot to look at?
[00:19:29] Perth's been going sort of slowly, gradually backwards through the period that Sydney and Melbourne have been booming. Perth has kind of been in retreat, fundamentally because of its links with the resources sector and the end of the previous resource's investment boom. So prices are down. So great opportunity to buy as long as you believe that it's not going to go down any further, and I don't think it will. The indicator's now that actually prices are rising.
[00:19:59] One of the problems is that people use media as their research medium, which is a huge mistake. One of the things media does is they generalise. So they'll produce one figure saying that Perth prices are down 2% in the last 12 months. If you do it suburb by suburb as we do, you know that there are pockets within Perth that are already rising strongly, particularly the top end. And that's often the beginning of a cycle. Most cycles start with the top end. Not always, but mostly. And we're actually seeing strong price growth in Adelaide and Perth in the million dollar suburbs, but not across the board. So that's an indicator that something's happening.
[00:20:44] The reduction in vacancy rates is another indicator. Quite often rents and vacancies are a precursor to price movements. That actually happened in Sydney, prior to Sydney's getting on its growth path about 2013, there were a couple of years where rents rose a lot. But prices didn't. And that was an indicator for the smart people that it was a good time to buy in Sydney.
[00:21:07] So we've seen vacancies drop in Perth, to the point where they're now about 3% and falling, we're starting to see evidence of rental growth again. And we're seeing movement in the top end of the market. And we're also, in our quarterly research of demand figures, sales activity, we're seeing a big uplift in sales activity in Perth. So all of those things are telling us that Perth is ready to roll.
[00:21:35] And it's not going to fall any further. The underlying state economy's improved a lot, the resources sector is revitalising, jobs are being created again. So pretty confident about that Perth being a growth market moving forward. But now's the time to be looking there. And the mentoring client I mentioned earlier who was frustrated because various attempts to purchase had been ported for various reasons, he's just now secured a property at a very good price in a good area in Perth. And I think it's going to turn out to be a very good investment for him.
As for Adelaide, it may not be the city that comes to mind when you think of innovative high tech, but it will be soon.
[00:22:49] I do believe that real estate markets are rise out of the local economies. And I'm excited about what's happening in the South Australian economy. It's got a reputation for being a low growth state on population and income but it's changing a lot. And in our daily collection of information, it just keeps coming through that Deloitte Access Economics, the BIS Oxford economics, those sorts of people that do there, and the CommSec State of the States Report. Their quarterly reports are noting, for example, that the rise in business confidence is higher in Adelaide than anywhere else in Australia. And many of these organisations are predicting South Australia to lead on economic growth in the next few years.
[00:23:36] One of the things that I don't think people understand is that Adelaide is the high tech innovation capital of Australia. We're constantly reading in our research that major businesses, many of them are global businesses, are moving their headquarters to Adelaide for that reason. But it seems to be flying under the radar screen of Australian media and Australian investors.
[00:23:57] Technicolor, I'm sure everybody's familiar with Technicolor for the part they play in movies. They're a business based in France, but they're setting up their Australian headquarters right now in Adelaide, creating hundreds of jobs. And they're going there because they recognise this is where it's happening for high tech innovation in Australia. Australia's new space agency has been set up in Adelaide. Elon Musk with his battery technology, he set up his Australian operation in Adelaide. There are dozens of examples like that. And it's really building a momentum. The world is increasingly about technological innovation and where is it happening in Australia? It's happening in Adelaide.
[00:24:41] And in addition to that, you've got the contracts for building vessels for the Navy. $90 billion worth, and it's starting right now. And that's going to be massive for a city the size of Adelaide. For a city of any size. For Sydney it'd be massive but for Adelaide, it's moreso. So all of that's happening.
[00:25:02] Adelaide is also a strong resources state. And it's the national leader for alternative energy development. Wind farms, solar farms, various hybrid, renewable energy things. It's happening fundamentally in South Australia. So those are the reasons why I'm really excited about it. And I'm looking in Bendigo, as I mentioned, but the other place I'm looking for my next purchase is certain parts of the Adelaide market.
Look to the Regions
Ryder still writes for Money magazine, compiling the Top 50 Property Hotspots Report each February.
[00:26:15] Part of that is we review how do our tips for last year go. And so that's part of the exercise each year when we write that feature. We looked at what we tipped last year, we actually did very well. Some of the locations that we suggested. Because we look at the factors that we know drive real estate markets. And right now there's plenty of pumping places in Australia that the media is overlooking, because they tend to focus on the big cities.
[00:26:44] Regional Australia is where it's happening at the moment. That's where most of the growth markets right now. Regional Victoria is going ballistic, regional Tasmania, parts of regional New South Wales and increasingly, regional Queensland's starting to deliver growth markets. Mackay is leading the comeback in central Queensland. The research that we do actually identifies these places, but you're not going to find out about it in the media because all they want to write about is the downtown in Sydney.
While he doesn’t have any specific resources or mentors, he uses a general philosophy of reading as much as he can, which has served him well over the years.
[00:28:12] There's been a lot of real estate books written over the years. Not all of them are great. And also some of the books to be read are not specifically real estate books. I'm just actually looking at my bookshelf in my office here. There's one I found great recently called The Answer, written by Ellen and Barbara Pease. They're the people who wrote the original book on body language, they invented that concept that people might be familiar with. Very good book called The Answer on how to go ahead with your goals and objectives on life.
[00:28:52] There's another one I'm looking at called Winners and How They Succeed by Alastair Campbell, who was the speechwriter for Tony Blair when he was Prime Minister of Great Britain. I think developing a reading habit, reading those kinds of books avidly is a key to success in any sphere, but certainly in real estate, because you'll learn so much in any good book that you read. So, yes, I've had mentors, it's the authors of some of those books and I've adopted some of those strategies to be more successful in business and in life generally.
Similar to his mentors, the best advice he’s received has been through things he’s read as opposed to talking with people directly.
[00:30:16] I mentioned Warren Buffett, I quite often quote him and in my reports on real estate, because his philosophy is so relevant to real estate. Fundamentally taking a long term view, accumulation of good assets and keeping them, that's very much his philosophy.
[00:30:32] But probably the number one philosophy from Warren Buffett is that you do the opposite to the herd. You buy when others are selling and you sell when others are buying. And that's where I think real estate investors get it wrong the most. As I mentioned earlier, they just follow the herd and they read there's a boom on and they pile in. Whereas the Warren Buffett philosophy is you're doing the opposite to what the herd's doing. And I think that's fundamentally a very good philosophy.
[00:31:00] So that's where I think you get the best advice, by reading books by interesting people and successful people and understanding what they did. Or the people that are writing them. The book Winners by Alastair Campbell, he's interviewed people who are renowned in business, in entertainment, in sport, all sorts of different spheres of life. But they're the kind of commonality or philosophy that permeates all those different fields of endeavour that make them winners, hence the title of the book. So that's where I think you get the best advice on how to proceed.
The Importance of Accumulation
[00:31:59] Terry, if you met yourself 10 years ago, what do you think you would have said to him?
[00:32:06] I would have sent them to get busier with investments. And to understand the importance of accumulation, rather than trading. Certainly those things. Back your judgement. Probably a mistake I've made has been being very good at making other people wealthy. People who have followed my advice, particularly on location, have done well. And sometimes I think I'm too hesitant to follow my own advice. Although it's probably more too busy running a business and doing other things to put the time in. So if I went back 10 years, that would be, I think, a change that I would make.
[00:32:50] I love it, hindsight, we always learn something from it, don't we?
[00:32:54] Absolutely. But it's never too late. No matter what stage of life you're at, you can make a beginning. But I think the best advice to people out there is to start as early as you can, even in a very, very small way. Just get yourself on the path. You don't have to be in a hurry. You don't have to take big risks, but start as early as you can. And just so by the time you get to 40 and 50, you're well down the path.
[00:33:24] A lot of people suddenly wake up one day and saying, 'Oh, my God, I'm going to be retiring in 10 years, I better do something.' And it's just so much better and easier if you got started when you're in your 20s. Even if it means you've got to make some sacrifices, maybe you can't go out with your mates to the nightclubs as often as you'd like. But it's worth making a few compromises and sacrifices to get going. You'll benefit in the long run.
Over the next five years he plans to sit back and become less involved than he is now, but don’t worry, there are no retirement plans in sight!
[00:34:25] I want to be the David Attenborough of real estate research. I think he's out there at the age of 91 still doing what he loves as enthusiastically as he was when he was in his 30s. I intend to be the same. But I'd like to be able to have the option to be a little less involved. Because I've got things set up exactly the way I want them. My real estate portfolio’s humming along and allowing me to write more books and travel as often as I'd like to.
[00:34:59] That's awesome. Well, looking forward to hearing more about that as well. And last question, Terry, is how much do you think your success is due to skill, intelligence and hard work? And how much of it is because of luck?
[00:35:14] I think it's probably 75% skill and hard work, and 25% luck. Luck always plays a part. But I really think that there's very few people who succeed the way they wish to succeed in life. And that's not all measured in terms of monetary gains, all sorts of ways of measuring success. But I think luck is a relatively minor component of any successful life. I'm reading, as I've indicated, about success stories all the time. And they all have elements of tragedy and hard work and reversals and believing they're never going to make it. But persistence and hard work is the common denominator of all people who have got to where they want to go. So luck's a component, but it's not a big one.
Thank you to Terry Ryder, our guest on this episode of Property Investory.