FAQ

For an investment apartment, my answer may surprise you: I don't believe the suburb is nearly as important as the individual apartment and the deal itself.

That's very different from buying a home to live in. An owner-occupier may have a particular suburb they love and be quite happy to buy there, even if it contains thousands of similar high-rise apartments. That same location may not necessarily be one I would recommend to an investor.

Investors can spend an enormous amount of time trying to identify the next "hot suburb". Of course, some suburbs will perform better than others, and I certainly have locations and pockets of inner Melbourne that I prefer.

Research and data are important. Among other things, they can help me identify locations where future apartment supply may become excessive, or where other factors could affect future investment performance. That helps narrow down where I want to look — and where I don't.

Brisbane is a good example. Years ago there were endless debates about whether investors should buy in Brisbane City, Moreton Bay, Logan or Ipswich. There were very strong opinions about which areas would perform and which supposedly wouldn't.

Then came the inevitable strong upturn. Values rose across much of the market and, over the period, apartments mostly outperformed houses.

I believe Melbourne apartments today are in a very similar position to where Brisbane apartments were around a decade ago. That's one of the fundamental reasons I'm so positive about their longer-term potential.

That's why, once I've identified a suburb, location or pocket that I believe has good investment potential, I become much more interested in the individual apartment and the deal itself.

Is it a good apartment? Is there something scarce or difficult to replicate about it? What is the quality and age of the building? Are there construction or maintenance issues requiring further due diligence? How does its price compare with recent sales? What is the rental return? Is there an opportunity to add value? And, importantly, is there a motivated seller or some other reason we may be able to buy particularly well?

For me, that's where the real opportunity is. I'd rather buy an excellent apartment at an excellent price in a good suburb than an average apartment at an inflated price simply because somebody's data says it's the next "hotspot".

So I don't start with, "Which suburb is going to go up the most?" I look at the Melbourne apartment market first, narrow that down to the suburbs, locations, pockets and even individual streets that make sense, and then spend the time finding the best individual apartment opportunity I can within them.

There is a very common view in property investment: "Always buy houses. It's the land that appreciates, not the building."

There is certainly logic behind that. Over the very long term, land is generally the appreciating component of property, and houses normally provide substantially more land content than apartments.

But I think the conclusion that follows — "therefore never buy an apartment" — is far too simplistic.

Often, when people warn against apartments, they are thinking about thousands of small, virtually identical apartments in massive high-rise towers, sometimes with questionable construction quality and very little scarcity. I wouldn't necessarily recommend those apartments either.

But that is very different from a well-selected apartment in a tightly held building, in a good inner-Melbourne location, with strong owner-occupier appeal, good natural light, a sensible floor plan and characteristics that are difficult to replicate. Building and construction quality matter enormously too, as does avoiding locations where excessive apartment supply — either existing or proposed — could affect future performance.

The other factor is price and the property cycle. Houses don't become better value simply because they have more land. There are times when house prices have already risen substantially and the price gap between houses and apartments becomes exceptionally wide.

Eventually affordability matters. Buyers who can no longer afford the house they want start looking at townhouses and apartments, and investors start recognising the relative value as well.

We've seen this happen before. Brisbane and Perth are excellent examples. Apartments were dismissed for years, yet as those markets moved through their cycles, apartment values subsequently increased very strongly.

The data is also quite revealing. My analysis of SQM Research data shows that apartments have outperformed houses over different periods in a number of Australia's major capital cities. At other times and in other cities, houses have performed better.

That's really the point: there isn't a permanent winner.

For an investor, I am looking for relative value, scarcity, building quality, location, rental demand and where that particular market sits in its cycle.

And sometimes the most interesting opportunity is the asset class everybody else has spent the last few years telling you not to buy.

Apartments are not always the poor cousin of houses. The key is buying the right apartment, in the right location, at the right price.

For investment, my preference is generally a well-selected existing apartment rather than a brand-new off-the-plan house-and-land package.

One of my concerns with new house-and-land packages is how many layers can sit between the original land purchase and the final investor. There may be the land developer, builder, sales company, marketer and sometimes other intermediaries — all of whom need to make a profit along the way.

By the time the finished investment reaches you, a lot of that value may already have been extracted.

With an existing apartment, I'm buying in an established market. I can compare it with actual recent sales, assess the building and location, look at the rental history and owners corporation information, and get a much clearer picture of what I'm actually buying.

I also quite like the occasional "ugly duckling". It might have tired paint, an outdated kitchen or bathroom, poor presentation or simply have been badly marketed. Those are problems that can sometimes be solved — and solving problems can create value.

Land content is also important. A new house-and-land package may technically be a house, but that doesn't automatically make it a better investment. Many new estates achieve affordability by putting houses onto relatively small blocks, often a considerable distance from established employment, transport and lifestyle infrastructure.

By comparison, an apartment may have less direct land content, but it can give an investor access to an established inner-Melbourne location where the underlying land is extremely valuable and difficult to replicate.

There are also risks with buying before something has been built. Construction costs, delays, builder risk, changes to the finished product and valuation at settlement all need to be considered. With an established apartment, I can physically inspect what I'm buying and undertake due diligence on the actual building.

That doesn't mean I would never recommend something brand new. Every investment should be assessed on its individual merits. But I don't start with the assumption that a new house must be a better investment than an established apartment simply because it comes with its own block of land.

For me, the question is always the same: where is the best value and future potential for the money you're investing?

Yes, I believe it does. But that doesn't mean every property is a good investment, or that the strategies that worked even one or five years ago should simply be repeated today.

I've watched property markets change over decades. Interest rates, lending policies, taxation, government regulation and investor sentiment all change — sometimes dramatically. Successful investors need to recognise those changes and adapt rather than simply keep doing what worked in the past.

The recent changes to negative gearing are a very good example. Cash flow and rental return have suddenly become much more important considerations for investors. In parts of the apartment market today, I'm seeing potential gross rental yields of 7%, 8% and occasionally even approaching 9% at current prices — levels I can't recall seeing in almost 40 years in the property industry.

But underneath all of these changes, some very basic fundamentals remain. People need somewhere to live, Australia's population continues to grow, construction costs are high, and producing new housing in established inner-city locations is increasingly expensive and difficult.

That doesn't mean prices move upwards in a straight line. They don't. Property markets move in cycles, and there will always be periods when prices stagnate or fall and investors lose confidence.

The problem is that everybody wants to know exactly when the market has reached the bottom. I don't believe anybody can consistently do that. You normally only recognise the bottom of a property cycle after you've passed it.

I've seen this repeatedly over many years. When sentiment is poor, buyers sit on the sidelines waiting for certainty. Then sentiment changes, confidence returns and suddenly those same buyers are competing with everybody else.

By then, some of the opportunity has already disappeared.

That's why I don't try to predict precisely what property prices will do next month or next year. I'm much more interested in whether I can buy an excellent property at a price that makes sense today, with good underlying fundamentals and a sensible long-term outlook.

I also think investors need to be more selective than ever. Cash flow matters. Building quality matters. Owners corporation costs matter. Supply matters. Taxation matters. And buying the wrong apartment simply because it appears cheap can be an expensive mistake.

So yes, property investing still works — but property selection matters enormously. My approach is not to buy simply because "property always goes up". It is to find opportunities where the fundamentals, the property and the price all stack up.

I believe in keeping my fees simple, transparent and agreed upfront.

My full buyers' agent service starts from $4,000 and is capped at a maximum of $9,500 for purchases up to $2 million. The fee shown is the total amount payable to me for my service.

Purchase Budget:

The first step is simply to arrange a complimentary, no-obligation phone, WhatsApp or Zoom discussion.

We'll talk about:

• Your goals and budget
• The type of apartment you're looking for
• The suburbs you're considering
• What you've been considering/looking at
• Whether you are open to off-market properties
• Your concerns and how we will handle them - Whether it is construction defects, Body Corporate fees, oversupply, due diligence, bank valuation, capital growth prospects or anything else!
• Whether a buyers' agent is likely to add value in your particular situation
• How my service works, and answer any questions you may have

If we both feel we're a good fit, we can then discuss working together. If not, you'll still leave the call with a clearer understanding of your buying options and the apartment market.