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The Truth About Property Cycles: Why Timing Matters More Than You Think · The Follio Property Podcast

• 0:00
  I believe you did time the top of the commercial cycle. Do you want to talk us through that and the importance of how cycles interrelate with property? Yeah, look, I could talk forever on it. It's a passionate subject because I think some people, sorry to jump in, but I think some people are naive to the fact that real estate and property, whether that residential, commercial, industrial, it all operates in a cycle. And some people, and probably our Sydney listeners who have been in a market now of 14 years of growth,
• 0:29
  probably think that's bullshit. And they're listening to this saying, you're going to call that out? Because I've never seen a dull year. Being in Perth, you know, locally at the moment, we have been through cycles. We've had the hard times. We've seen the uptimes. Talk to us through that just nationally, your view on property markets and cycles and how they sort of play out.
• 0:44
  Yeah, look, the interesting thing is that I came across this accidentally, right? So my old man was a property fanatic and was never sell, like just never sell. It always goes up. I know, I know. And I was like, look, brilliant. If you've got a forever timeline, why not? Okay, because as we said, like since the origin of the American dollar, property's done pretty well.
• 1:06
  But if you take a smaller view and a smaller view, you can see that during 100 years, there's a few dips along there. And you go, well, if you could time your entry and your exit to that dip,
• 1:16
  that you can make X factor returns rather than just good returns. So, and look, multitude of things can impact that from interest rates to Trump to cryptocurrencies, like it can all impact it. But what I think is true is that it all depends on your lens and your lens on how long you wanna be invested in the market. So my old man,
• 1:43
  he was looking at buying property for generational wealth. So I was like, I'll buy it now, I won't sell it, and I'll give it to my kids. Fantastic. Great for you. Yeah, fantastic for me and my six siblings. But if you look at a syndicate, which I accidentally started in 2012, our syndicate game, investors want their money back at some point.
• 1:59
  And it was like this view of, oh, we'll never sell was good until such time as it wasn't. And you're like, oh, God, now we're underwater. Like, do we wait another five years to get back above water? Or how do we manage investor expectations because they need to get their money back? And that's what got us looking at. There is actually, when you look back in time, you go, wow, if you were buying industrial property then and selling it then,
• 2:23
  that four year period was worth 12, sometimes 15 years before it. So you could have made the same growth in 15 years as four, you know, or you pick your residential timing into the Perth market or into the Sydney market. You go, yeah, cool, like it might run for six, but is there a four year period or a two year period or a five year period where 80% of that gain was made. So you would be, you would then have a lens to try and time your entry.
• 2:52
  Because the opportunity cost then, right? Totally. And I think what becomes the next step to that is it's not just timing the entry, but timing the entry and buying what? Like, what are you going to buy? So if you can buy an absolutely solid A-grade, triple rated, triple net lease, or an absolutely core precinct, core suburb, house that is going to be in incredible demand, no matter what economic state we're in, and then if you can time that,
• 3:20
  with your market. So the underlying asset's solid, but your timing's right, that's when you go. That's when you get your extra returns. That's when you get extra returns. So I mean, you and I were buying property in 2020 in Perth and everyone was looking at us thinking we're crazy. Like I went and bought my house when there were home opens and no one was coming to home opens because it was coronavirus.
• 3:38
  So that's an example of timing an entry into a market. And now it's about, okay, how do I time the exit of that market? Because if we hold it for 10 years, it'd be good. If we hold it for 50, it'll be good. If we hold it for 100, I have no doubt it'll be good. But if I'm only going to hold it for less than 10, there's got to be a place there that makes the most sense.
• 3:57
  Yep. And if you look, like you said, and for those listening, that period of time, if we just took 2010 as a snapshot to 2025, that's 15 years. If you look at Perth, Adelaide and Brisbane, we can really bundle them up. And if you were to invest in those three markets from 2010 until now, you're up somewhere between 120, 130%, of which 90% of that growth has occurred in the last six to seven years of that cycle. Yep.
• 4:24
  So you're right, albeit if you take a long-term approach, you're probably going to be okay, but you've just shortened your horizon from 15 years to five. Yeah, totally. And you mentioned it before, but the opportunity cost of your capital invested
• 4:40
  if you're not looking at that, then you're really not a true investor. Like investors by nature have to, or sorry, they cannot be loyal to any one asset class. You have to look at what is the opportunity cost of this money. So if you're sitting in the residential market for 15 years to make 120% growth, well, what could you have made in bonds during that time for no risk? Do you see what I mean? So it's all relative, right? And true investors have to be looking at
• 5:09
  any particular investment only relative to others. It definitely feels like a generational comment as far as the buy and hold. I know you mentioned your father, that was his strategy. I was brought up with that strategy. We love the comments. A lot of the comments we get in YouTube when we talk about trading strategies and hold strategies, a lot of the older generation is quite firm on holding. And I think it sounds like there wasn't a lot of education out there now, obviously,
• 5:37
  social media and you've got a lot of buyers agents out there and people like yourself with the syndicates, people are now starting to see that as the right strategy to have in terms of trying to grow a portfolio.
• 5:48
  Yeah. Well, I mean, there's, I think that's the benefit of being on the earth longer is you have this gorgeous amount of experience. And data and research, right? And certainly getting better. That's true. And you also, I don't think, like, there's no way of getting 70 years experience rather that you just got to be around for 70 years. So, you know, it was a 36-year-old whippersnapper, like, I can't come and say, no, those guys are wrong. It's the opposite. You got to listen to the people that have been in the game the longest. Yeah.
• 6:15
  I just think that what you said earlier, like the data's here now probably more available than it's ever been. And then we're able to interrogate that data in ways that we've never been able to. And look, you know, there's markets within markets. We've always said that. So you can then start to take a little lens at, well, what did that particular suburb do in that particular region, in that particular state, in that particular country? Like, and you can get that granular. Whereas, you know, 50 years ago, like you had to read newspaper headlines.
• 6:44
  Drive around the suburbs, I guess, yourself and do a bit of groundwork.