{"id":13264,"date":"2017-08-11T01:00:49","date_gmt":"2017-08-10T15:00:49","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=13264"},"modified":"2017-08-11T01:00:49","modified_gmt":"2017-08-10T15:00:49","slug":"how-to-best-use-bridging-finance-where-cherie-barber-shops-for-bargains-what-will-impact-the-value-of-your-property","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/how-to-best-use-bridging-finance-where-cherie-barber-shops-for-bargains-what-will-impact-the-value-of-your-property\/","title":{"rendered":"How to best use bridging finance + Where Cherie Barber shops for bargains + What will impact the value of your property"},"content":{"rendered":"<p>&nbsp;<br \/>\n<b><i><span style=\"text-decoration: underline\">Highlights from this week:<\/span><\/i><\/b><\/p>\n<ul>\n<li>This week we go shopping with Cherie Barber.\u00a0 Cherie gives us the names of the websites she visits to buy the materials she uses in her renovations.\u00a0 Hear how she save thousands of dollars.<\/li>\n<li>We try to calm your nerves about bridging finance with some sound words of advice on how to use it to your advantage.\u00a0 Hear the lowdown on the \u2018rent-vesting\u2019 revolution and the facts about what is ahead for the Melbourne market.<\/li>\n<li>As a feature, we catch up with Kent Lardner from VIEW.\u00a0 Kent is the genius behind many of the desktop valuation models in Australia and he talks about how they can pick what will impact the price of your property.<\/li>\n<\/ul>\n<p>&nbsp;<br \/>\n<strong>Transcripts :\u00a0<\/strong><\/p>\n<h2>How to best use bridging finance &#8211; Andrew Mirams<\/h2>\n<p><b>Kevin:\u00a0 <\/b>We quite often talk about bridging finance, but I wonder how many people realize what\u2019s involved, what are the pitfalls, and really, is it all that expensive? Let\u2019s get a bit of an insight into this. Joining me now is Andrew Mirams from Intuitive Finance.<br \/>\nAndrew, welcome to the show once again. Thanks for your time.<br \/>\n<b>Andrew:\u00a0 <\/b>My pleasure, Kevin. How are you?<br \/>\n<b>Kevin:\u00a0 <\/b>Well, thank you, my friend. Is bridging finance expensive? Walk me through some of the more practical uses of bridging finance.<br \/>\n<b>Andrew:\u00a0 <\/b>It\u2019s a great question, because the first thing people often say is \u201cOh, I don\u2019t want to do bridging finance because I\u2019ve heard that\u2019s too expensive.\u201d It is and it isn\u2019t. It\u2019s a funny thing to say.<br \/>\nIf you think about what bridging finance is, firstly, generally it\u2019s when someone bought a property before they\u2019ve sold a property. Often, people want to do it when they just want to make one shift. They go out, they commit, they buy something at the auction on the weekend, 30 days later, they own that property, but now they have to exit their old property.<br \/>\nOften, they\u2019re upgrading. etc. That would be the most common use of bridging; very rarely on a downgrade because you should have enough money. But if there is a transition period, that\u2019s the bridging component. So, it\u2019s the bridging portion or the time in between a buy and a sale.<br \/>\nSo, when you say, \u201cIs it expensive?\u201d primarily, it\u2019s just because you\u2019re basically carrying two mortgages. That\u2019s the expensive portion, because you have the new mortgage that you\u2019ve taken on for the new property plus you still have to fund or look after your existing mortgage until that sells. So, that\u2019s probably where the main thing around the expense comes in \u2013 that you\u2019re really carrying two mortgages, Kevin.<br \/>\n<b>Kevin:\u00a0 <\/b>To describe it, its name really says what it is, doesn\u2019t it? It\u2019s a bridge between the old loan and the new loan. Is that right?<br \/>\n<b>Andrew:\u00a0 <\/b>Absolutely. And when you say expensive, it\u2019s a short-term loan so the banks don\u2019t actively compete for it because they\u2019re looking for the end debt; that\u2019s what they\u2019re most interested in. There\u2019s a whole range of ways the banks assess it. Will they assess on the peak debt \u2013 the total exposure \u2013 or the end debt, and is there a contract now in place for the sale or not, and how much time?<br \/>\nThere are a whole lot of variations that go in it, but the expense part, generally you\u2019re talking about a variable interest rate in and around the fours. So, it\u2019s not that expensive from natural interest rate. The expense is really just covering the two mortgages.<br \/>\n<b>Kevin:\u00a0 <\/b>Yes, it really depends how long that takes. I guess you should be factoring in anywhere from two to three \u2013 maybe even four \u2013 months of carrying the bridging loan.<br \/>\n<b>Andrew:\u00a0 <\/b>Yes. If you walked down the street to get the paper and you came back with a different bit of paper being a contract for sale because you bought something while you were out, you\u2019re probably not ready to sell your house. But then at the same time, most people who probably are entering a bridging loan and doing that were doing a little bit of preliminary work in advance, because the reality is that they\u2019re trying to get the house that they\u2019re in now ready for sale and in a position that they can sell it quickly because they don\u2019t want to carry those two mortgages in the long term.<br \/>\n<b>Kevin:\u00a0 <\/b>Yes. We\u2019ve quite often given the advice \u2013 haven\u2019t we \u2013 that it\u2019s best to sell before you buy so you don\u2019t find yourself in that situation. But practically speaking, that\u2019s not always possible, and you sometimes end up sacrificing the true value of the property that you currently own just to move to the new one.<br \/>\n<b>Andrew:\u00a0 <\/b>Absolutely. We\u2019ve talked about how to negotiate, modern negotiation tools, and having all those sorts of things in place. Well, all of a sudden if you hand the power over by being in a position where you\u2019ve sold and now you have to buy something, you have to make that settlement, it takes you out of the position of power and it means that you might be a little bit more at the whim of a selling agent or a vendor in that instance.<br \/>\n<b>Kevin:\u00a0 <\/b>When it comes down to thinking about how expensive it may or may not be, it\u2019s really just a matter of factoring in the cost of the bridging loan as part of that move. It\u2019s part of the cost of doing it.<br \/>\n<b>Andrew:\u00a0 <\/b>Absolutely. Yes, that\u2019s right. And like everything, Kevin, a little bit of planning and a bit of preparation, and just having your ducks in a row before you launch into these sorts of things, you can generally cover it off. And the smaller the bridge, the smaller the time gap, the less expensive it\u2019ll be for you.<br \/>\n<b>Kevin:\u00a0 <\/b>Always good talking to you. Andrew Mirams making a lot of sense from Intuitive Finance. And don\u2019t forget Andrew\u2019s channel, of course, on RET full of lots of great information and new videos we\u2019re putting up there as well all the time.<br \/>\nAndrew, thanks for your time.<br \/>\n<b>Andrew:\u00a0 <\/b>My pleasure, Kevin. Thank you<\/p>\n<h2><\/h2>\n<h2>The original rent-vestor &#8211; Brad Beer<\/h2>\n<p><b>Kevin:<\/b>\u00a0 We have spoken on the show about rentvesting in the past. I love talking to people who\u2019ve done it, because I am quite often asked \u201cDo you know of anyone who is rentvesting?\u201d Well, I know of someone who did, and that\u2019s Brad Beer, from BMT Tax Depreciation, who joins me.<br \/>\nGood day, Brad.<br \/>\n<b>Brad:<\/b>\u00a0 Hi, Kevin. How are you today?<br \/>\n<b>Kevin:<\/b>\u00a0 Yeah, good, mate. You\u2019re a rentvestor. Tell me about it. How did it work for you, and what did you see were the advantages?<br \/>\n<b>Brad:<\/b>\u00a0 I was a rentvestor until about the age of 40, which was a long time. I\u2019m only 41 now.<br \/>\n<b>Kevin:<\/b>\u00a0 That was, what, last year? Yeah, I was going to say.<br \/>\n<b>Brad:<\/b>\u00a0 Rentvesting to me, why did I do it, I think it depends on a few things. If you look at the current situation, where in areas properties become\u2026 Obviously, increasing prices and I don\u2019t know if the word \u201cunaffordable\u201d is the right word for it, but expensive to get into a property where you want to live. And that was the same in different places in the past.<br \/>\nI took an idea where I thought \u201cI\u2019ll rent a property in a place where I\u2019d like to be.\u201d The returns on higher-priced property are quite low, and what I did was went \u201cI can rent something here, and I can buy three or four different investment properties. My risk is reduced, and I\u2019ve still got money in the property market, so I\u2019m still able to take advantage of the growth.\u201d<br \/>\nI actually then just kept doing that over and over again for a long period of time and renting better properties, the rental return being pretty light on higher-priced property often as a percentage. I bought a lot of less-expensive properties, took advantage of the growth, and it was a good strategy with me, absolutely.<br \/>\nThere are some pros and cons with rentvesting. To me, I think some of the cons are things like you can get kicked out because of the lease when it finishes. But I think on that, you have to realize that maybe you\u2019re going to need to move on day and make an allowance for removal in the costs of these things, I suppose.<br \/>\nThe ability to change the property is a bit of a con, I suppose. You need to find a property you\u2019re happy with. And you just don\u2019t have some of the stability that you do when you own your own house.<br \/>\nThe fact that you also lose out on some of the potential\u2026 The family home is the one tax haven in the world that doesn\u2019t have a capital gains tax associated with it, and not being able to take advantage of that is obviously something that makes it a negative thing.<br \/>\nTo me, I spent a good 15 or 18 years of time where I rentvested. I was able to live where I wanted to be, rent out property that was fantastic, and still invest in multiple properties in multiple places and take advantage of growth.<br \/>\nAlso, obviously, I got to take advantage of the tax deductions that come along with investing in a property through the interest and things, the deduction, the income. But also, obviously, that depreciation \u2013 me being the depreciation guy \u2013 is not the reason to rentvest.<br \/>\nIt\u2019s one of those things where the cash flow, when you compare whether I rent a property and buy another property, the cash flow difference between the two \u2013 with that depreciation included \u2013 sometimes comes out very, very similar. So if you\u2019re still able to take advantage of the growth and live where you want to live but you may not be able to afford to buy, it\u2019s definitely a great approach towards achieving that.<br \/>\n<b>Kevin:<\/b>\u00a0 The two things you mentioned there about the cons of rentvesting \u2013 one was a lack of security, the other one was that you don\u2019t have the ability to do any work on the property yourself \u2013 they\u2019re pretty much balanced out by the fact that you are rentvesting.<br \/>\nYou have your own property, you can pour a bit of capital or a bit of your own personality into that, but also, you\u2019re building up your strength, aren\u2019t you? You\u2019re building up equity in the properties that you own, so it\u2019s really not dead money at all.<br \/>\n<b>Brad:<\/b>\u00a0 I don\u2019t see rent as dead money at all. Really, I have changed from rentvesting. My mentality 15 years ago was always \u201cWell, I make some capital gains out of those properties and therefore some money out of those properties, and to buy the one that I do want to buy one day, I\u2019ll have made the money to do it. So, I\u2019m not having to try and save it, because I\u2019m making it out of the growth of those properties.\u201d<br \/>\nYes, you still have opportunity to do those renovations, and I\u2019ve done a lot of renovations and small developing, as well, at the same time. Being able to have not a whole bunch of borrowing capacity tied up in a principle place of residence at a young age meant that I had the flexibility to invest in those properties, chop change, and make some money from them.<br \/>\n<b>Kevin:<\/b>\u00a0 Well, it was good talking to you. Brad Beer, from BMT Tax Depreciation. Thanks for your time, Brad.<br \/>\n<b>Brad:<\/b>\u00a0 Thanks, Kevin. Always glad to be here.<\/p>\n<h2><\/h2>\n<h2>We go shopping for bargains with Cherie Barber<\/h2>\n<p><b>Kevin:<\/b>\u00a0 Some great news for you today. The Powerhouses of Property Tour is on around Australia right now, and heading it up is Cherie Barber, who joins me as our guest, the Queen of Renovation.<br \/>\nGood day, Cherie. How are you doing?<br \/>\n<b>Cherie:<\/b>\u00a0 Really well. Thank you, Kevin.<br \/>\n<b>Kevin:<\/b>\u00a0 Good. Now, tell me about the tour: who can we see, and what can we expect to see there?<br \/>\n<b>Cherie:<\/b>\u00a0 Okay. Two speakers, myself teaching people how to do low-budget, quick cosmetic renovations, how to get in and spruce up a property and not spend too much money but massively uplift the value of the property.<br \/>\nI also tour with a lovely lady called Dominique Grubisa. Dominique is one of Australia\u2019s top asset protection and debt specialists, and what she\u2019s going to teach people is how to protect their property assets that they have in their personal name.<br \/>\nLet\u2019s face it; we live in an age where people can sue people. She\u2019s going to show people how to protect their assets moving forward without having to take those properties out and put them into other complex trust structures.<br \/>\n<b>Kevin:<\/b>\u00a0 Yes, it\u2019s an unfortunate part of what we\u2019re going through right now, but you have to really protect yourself, so that\u2019s some great advice.<br \/>\nHow can we get some detail about when and where it\u2019s all on, Cherie?<br \/>\n<b>Cherie:<\/b>\u00a0 For people who are interested in coming, it\u2019s a free master class, a one-day master class. I\u2019m on stage for about 2\u00bd hours, as is Dominique. All they have to do is jump on my website, RenovatingForProfit.com.au, and they can register for their free ticket.<br \/>\n<b>Kevin:<\/b> \u00a0Okay, so go ahead and do that.<br \/>\nHey, Cherie, just on another point, I saw you recently on Sky TV, their real estate show, talking about places to go to get cheaper or more affordable renovation material. Tell me about that.<br \/>\n<b>Cherie:<\/b>\u00a0 Okay, yes. It seems these days that everybody is renovating on a budget. Let\u2019s face it; most Australians don\u2019t have $50,000 sitting in their bank account, so more and more people are having to do budget renovations these days. It\u2019s just a fact of life.<br \/>\nThere\u2019s a heap of ways that you can get your renovation fixtures and fittings on the cheap. One of the strongest ways is traditionally not going into a retail store. When you go into a retail store, those companies have big overheads called rent, so a lot of people these days are jumping online. They\u2019re jumping online to sites like eBay.com.au, Gumtree. I buy an incredible amount of good-quality, secondhand materials on those sites for a fraction of the price.<br \/>\nThere are other sites where they have dedicated websites just for one type of product. For example, a great website at the moment is called SecondhandKitchens.com.au. Kevin, if you jump on that website, you can go get yourself a great secondhand kitchen that in some cases still looks brand new for $1000 to $2000.<br \/>\n<b>Kevin:<\/b>\u00a0 Wow. Yeah, I\u2019ve heard of a number of people doing that. It is amazing what some people will actually not have any use for anymore and are quite prepared to sell it at a very low price, Cherie.<br \/>\n<b>Cherie:<\/b>\u00a0 What happens is people buy a house and they move in, and they go, \u201cOh, I don\u2019t like that kitchen. I don\u2019t like the kitchen cabinet color. I don\u2019t like the benchtop.\u201d So, what they often do is actually rip it out, and more often than not, it ends up in a skip bin.<br \/>\nBut the smart people actually put those secondhand kitchens and other secondhand items\u2026 Things like doors, old shade pergola systems, lots of that sort of stuff can go online. Why pay retail price if you don\u2019t have to?<br \/>\n<b>Kevin:<\/b>\u00a0 Okay. Just quickly, run me through some of those websites again. I know Gumtree. There was another one you said. Was it SecondhandKitchens.com.au?<br \/>\n<b>Cherie:<\/b>\u00a0 eBay, you have Gumtree, you have a great website called Renovator Auctions. I buy floorboards on that website for $1 a lineal meter, for example. There are other websites, such as eGarageSales.com.au. It\u2019s like an online garage sale site, and again, people stick everything on there: renovation materials, secondhand furniture that you can easily trick up and repurpose.<br \/>\nThere\u2019s a stack of websites; renovationd.com.au is another great one. One of the ones I really love, believe it or not \u2013 I\u2019m sounding like a real cheapskate here, Kevin \u2013 Salvos.org.au. Particularly for TV renovations, I\u2019m always on a budget, and the first place I head to is the Salvos. You find incredible secondhand furniture that through a lick of specialty paint, you can trick up and make it look brand new for a sliver of the cost of retail.<br \/>\n<b>Kevin:<\/b>\u00a0 Yeah, and you\u2019re supporting a great organization too, the Salvo. There was another one mentioned. Was it SecondhandKitchens.com.au? Was that what it was called?<br \/>\n<b>Cherie:<\/b>\u00a0 SecondhandKitchens.com.au. There are a lot of auction sites, places like Sal\u2019s Auctions. What are some others?<br \/>\n<b>Kevin:<\/b>\u00a0 You could do a lot worse than actually going and Googling that too, couldn\u2019t you? You\u2019d probably have them all pop up then.<br \/>\n<b>Cherie:<\/b>\u00a0 Yeah. What you do is you just Google \u201ccheap reno fixtures and fittings,\u201d and a lot of those websites come up. You just have to know where to look. Unfortunately, most people just think \u201cI have to go to the shop.\u201d When you go and you walk into a retail store, you\u2019re going to be paying full retail price.<br \/>\n<b>Kevin:<\/b>\u00a0 Yes, absolutely. Some great advice there from Cherie Barber. Don\u2019t forget about The Powerhouses of Property Tour. Go to Cherie\u2019s website, which we\u2019ll have a link to in this transcript as well of this interview. Make sure you go and check that out for yourself.<br \/>\nCherie, great talking to you. Talk again soon.<br \/>\n<b>Cherie:<\/b>\u00a0 Thank you, Kevin.<\/p>\n<h2><\/h2>\n<h2>Getting the most when you sell &#8211; what impacts price &#8211; Kent Lardner<\/h2>\n<p><b>Kevin:<\/b>\u00a0 Just what influences price? What\u2019s going to impact the price of your property or even what should you be looking for when you\u2019re looking to buy a property? Kent Lardner is from View.com.au. It\u2019s a company you\u2019re going to hear a lot more about.<br \/>\nKent, thank you very much for your time. I\u2019m just keen to know from you \u2013 because I know you\u2019ve done a lot of modeling on this and you\u2019ve looked a lot at what creates value in a property \u2013 what are the key drivers that you see?<br \/>\n<b>Kent:\u00a0 <\/b>The most common valuation technique that\u2019s used out there is really matching three comparable sales. We\u2019re looking at properties that have sold recently in the local market of a similar size.<br \/>\nSome of the things that go into driving that price are those things we can measure \u2013 such as a bedroom count, a bathroom count, a car space, or whether they\u2019re on a main road or not \u2013 but then there\u2019s the stuff that we can\u2019t measure, which really comes down to quality. That\u2019s where the human comes into it and can match up comparable sales that are truly comparable, based on build quality and finish or things such as views.<br \/>\n<b>Kevin:<\/b>\u00a0 Some of those things that you mentioned there that add value can also detract value, a classic example being too close to a main road, being close to heavy transport, factories, and so on. Have you got a feeling for how much they impact negatively the price of a property?<br \/>\n<b>Kent:<\/b>\u00a0 A lot of these things can certainly be a double digit when you compare it properties that are further away. Typically, what we do is when we find something that\u2019s a little bit adverse nearby, you always look for comparables that are very close by or on the same street so that they\u2019re all sharing the same dimension.<br \/>\nA railway is a good example. Being right next to the railway line, overseeing the railway line, you look for other properties in that same location looking at the railway line. But then you go back one or two streets, you don\u2019t see the railway line but you have walking distance to the station, so it becomes the opposite of that and becomes an attribute, a positive feature, towards price.<br \/>\n<b>Kevin:<\/b>\u00a0 What are some of the other things that would drive price? We hear a lot of talk about pools, whether or not they add any value. What\u2019s your view?<br \/>\n<b>Kent:<\/b>\u00a0 I\u2019ve seen research that says one thing one week and another thing another week. Typically, what we find when we try and model and use pools, probably the first thing to call out is we don\u2019t have a robust data set that applies to every single property with a pool, but you can often find that it would influence anything up to $20,000 or $30,000 we\u2019ve found in some of the models. But more often than not, where we\u2019ve tried to test pool as a variable in our models, it\u2019s so hard for it to stand out and be what we call statistically significant.<br \/>\nIt\u2019s an unreliable measure from a statistical perspective, so what we often fall back to is the anecdotal piece, which is a lot of pools are attached to a renovated house or are part of a style of property or finish of property that its cohorts are also renovated and therefore, the prices are higher.<br \/>\n<b>Kevin:<\/b>\u00a0 What you\u2019re saying, I guess, is why would you put a pool in an unrenovated property, where it\u2019s not going to add much value? But you renovate the house and you probably double the value of the pool.<br \/>\n<b>Kent:<\/b>\u00a0 That\u2019s right. Then it becomes a different market or submarket. There are people out there who say, \u201cI want a renovated house and I want a pool, and I can afford both,\u201d so it creates an entirely different market. People are only looking or searching for that style of property.<br \/>\n<b>Kevin:<\/b>\u00a0 Talking about values, is there a standard value you can put on, say, a bedroom, the difference between a three- and four-bedroom home?<br \/>\n<b>Kent:<\/b>\u00a0 The interesting thing\u2026 We call this multiple-regression modeling. How we use this is we take all the sales that happen in a given location, we\u2019ll pick on a suburb, and then what we do is we bundle them all up and we look for how much the sale price varies on average for a one-unit change in something: a one-unit change in land size or a one-unit change in bedroom or a one-unit change in bathroom.<br \/>\nThe one that often stands out \u2013 and most people don\u2019t realize this \u2013 the bathroom, more often than not, is the big value item. When we do this, we do it entirely objectively. We let the numbers talk to us, obviously. We\u2019ll let the data speak, as the saying goes. The bathroom often would have, say, as an example, $100,000 coefficient value and the bedroom might only be $30,000, which is really interesting.<br \/>\nThe standout for me and the lesson learned here is if you\u2019re really comparing property A to property B, that tells me that you should always have the same bathroom count, because if the bathroom represents the biggest value, you want to make sure you\u2019re looking at apples with apples. You really want the same bathroom count.<br \/>\nThe other interesting thing \u2013 and this is just my hypothesis \u2013 is that a property with a one-bathroom count is often a very different style of property to a two bathroom. If I\u2019m renovating a house, I buy the old original house that\u2019s 60 or 100 years old, they\u2019re all one bathroom. So, suddenly, when I renovate it, I\u2019m not going to leave it as a one bathroom; I\u2019m going to add a second bathroom. The two- or three-bathroom house isn\u2019t just purely the bathroom count. It\u2019s also reflective of the fact that it\u2019s a renovated property, so that accounts for a lot of that variance in value.<br \/>\n<b>Kevin:<\/b>\u00a0 It\u2019s pretty similar to what you\u2019re saying about the pool, isn\u2019t it? It\u2019s what you expect in a property. I guess buyers generally expect a certain level of accommodation in a certain price range, Kent?<br \/>\n<b>Kent:<\/b>\u00a0 What people are doing when they\u2019re searching for properties is they\u2019re filtering. A lot of people say, \u201cI only want a two-bathroom house,\u201d so when they\u2019re looking for their properties online, they\u2019re actually ignoring anything \u2013 not even viewing a property \u2013 that\u2019s a one bathroom if they are looking for that larger property.<br \/>\nYou will get some people saying, \u201cI want this location. Therefore, I\u2019m willing to renovate. I\u2019m willing to extend. I\u2019m willing to put up with a one bathroom.\u201d But then you have a whole market out there, a whole bunch of buyers, who specifically say, \u201cI don\u2019t want to do any work. I\u2019m over the renovation thing. I just want to spend my money and move in.\u201d<br \/>\n<b>Kevin:<\/b>\u00a0 Fascinating conversation. Kent Lardner, from View.com.au. Check out their channel on RET, as well, because there\u2019s a lot of really great information in there, and Kent, of course, supplying some good data for us, as well.<br \/>\nKent, thank you very much. Look forward to catching up with you again real soon.<br \/>\n<b>Kent:<\/b>\u00a0 Thank you, Kevin.<\/p>\n<h2><\/h2>\n<h2>When Melbourne takes the torch from Sydney &#8211; Michael Yardney<\/h2>\n<p>When Melbourne takes the torch from Sydney &#8211; Michael Yardney<br \/>\n<b>Kevin:\u00a0 <\/b>I was interested to see that Sydney has just topped the 5 million people mark, which makes it a global city. I\u2019m just wondering, the conversations we\u2019ve had in the past about Melbourne and how it\u2019s growing so rapidly. Michael Yardney from Metropole Property Strategists joins me.<br \/>\nMichael, is it still in the cards that Melbourne is going to be Australia\u2019s largest city given what\u2019s just happened in Sydney?<br \/>\n<b>Michael:\u00a0 <\/b>Yes, it sort of went unnoticed that Sydney is now classed as a global city with a population of 5 million people, and it grew the last million people in about 16 years \u2013 really, really quickly. But according to forecasts by the Australian Bureau of Statistics, Melbourne is growing faster and will reach 5 million people itself in 2021, and quite likely by the early 2030s \u2013 and that\u2019s not that far away, Kevin \u2013 it\u2019s going to be bigger than Sydney.<br \/>\n<b>Kevin:\u00a0 <\/b>Why is that, Michael?<br \/>\n<b>Michael:\u00a0 <\/b>There are a couple of reasons. Currently, clearly, Melbourne is more affordable than Sydney, but it\u2019s really related to jobs growth in the last couple of years: more full-time and permanent jobs as opposed to part-time jobs have been created in Melbourne than anywhere else in Australia.<br \/>\nAnd people aren\u2019t coming for the weather. I\u2019m just looking out the window at the moment, and I can imagine it\u2019s nicer where you are in Queensland. They\u2019re coming because of the jobs and the amenity.<br \/>\nAnother big factor is education. A lot of foreigners are sending their children to Melbourne because of education, Kevin.<br \/>\n<b>Kevin:\u00a0 <\/b>Michael, let\u2019s look back a little bit. Tell us about the history of Melbourne\u2019s growth.<br \/>\n<b>Michael:\u00a0 <\/b>Interestingly, Melbourne was the last of the mainland capital cities to be settled, only in 1836. But because of the gold rush in the 1850s, Melbourne quickly became Australia\u2019s biggest city. So, we were once Australia\u2019s biggest city.<br \/>\nAnd at Federation, both Melbourne and Sydney had about the same population, about 500,000 people. But 100 years later, at the end of the 20<sup>th<\/sup> century, Sydney grew faster, quicker. It was the iconic city that the rest of the world knew with the Sydney Opera House, and tourists came there.<br \/>\nBut now, the trend is changing. In the last year, Melbourne\u2019s population grew by 108,000 residents. Kevin, just to put that in perspective, it\u2019s the highest growth Melbourne has ever experienced. They couldn\u2019t all fit into MCG, where we have our big football and cricket finals. Over the same period that Melbourne added 108,000 people, Sydney added 83,000.<br \/>\nBut if you put it in perspective, we\u2019re growing at 2.4% per annum. Kevin, what that means is in five years, Melbourne\u2019s population is going to increase by 10% at least. Where are we going to put them all?<br \/>\n<b>Kevin:\u00a0 <\/b>If Melbourne\u2019s population is going to grow that significantly, does it follow that property prices will grow equally?<br \/>\n<b>Michael:\u00a0 <\/b>No. And in fact, that\u2019s one of the mistakes investors make, because they chase population growth. Sydney is much more landlocked than Melbourne. Sydney has the water on one side and the Blue Mountains in the other direction and farmland and forest in the other directions. So, Sydney is more landlocked.<br \/>\nWhen you look at Queensland, you can build from Coolangatta at the south up to the Sunshine Coast in the north, so, it\u2019s not going to be as landlocked. And much the same as Melbourne, we have got the ability to spread out.<br \/>\nTherefore, one of the ways that houses will remain a bit more affordable than Melbourne than they were in Sydney is growth, and particularly growth into the western suburbs, which up until more recently have been the less favored suburbs. There\u2019s still lots of room to grow, keeping housing affordable in Melbourne. So, not all properties are going to increase in value \u2013 and definitely not increase in value equally, Kevin.<br \/>\n<b>Kevin:\u00a0 <\/b>It\u2019s good news \u2013 isn\u2019t it \u2013 for those inner and middle ring suburbs in Melbourne, as an example.<br \/>\n<b>Michael:\u00a0 <\/b>No question about it, because that\u2019s where the infrastructure is, and we know that as cities get to 5 million, they become unlivable, and public transport and infrastructure are important. Therefore in Melbourne, the tram system is very important, and that only goes to the middle ring suburbs. The buses and the trains are not as good public transport.<br \/>\nAnd proximity to any sort of public transport is going to become more important. People don\u2019t want to commute. The freeways and the highways are not going to be able to cope with that extra 10% population. Just imagine 10% more cars on the roads in Melbourne in five years\u2019 time. It\u2019s hard enough at the moment.<br \/>\n<b>Kevin:\u00a0 <\/b>It is indeed. Michael, thank you. Always makes a lot of sense.<br \/>\nThanks for your time, Michael.<br \/>\n<b>Michael:\u00a0 <\/b>My pleasure, Kevin.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>&nbsp; Highlights from this week: This week we go shopping with Cherie Barber.\u00a0 Cherie gives us the names of the websites she visits to buy the materials she uses in her renovations.\u00a0 Hear how she save thousands of dollars. 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