Does Public Housing Negatively Affect Capital Growth? (Property Data Dive)

https://www.youtube.com/watch?v=rk0Kl026uTU&ab_channel=OnProperty We are often told that if we are going to invest in property we want to find a suburb or street with low government housing. But is this actually true and does the data support this idea? Or can you invest in an area with high public housing and still get great growth in that area? Public Housing in a Suburb is No Big Deal Select Residential Property 0:00 - Introduction1:20 - Why this idea might be false5:08 - What does the data say?10:00 - Yield is not factored in11:25 - Something where there is a clearer trend13:30 - How to use data to build an investment strategy and predict where is likely to be good15:25 - Change in Gov housing vs capital growth Recommended Videos: How To Find Public Housing Hotspots In An Area Why Population Growth Does NOT Predict Capital Growth (Data Dive) Transcription Ryan 0:00We're often told that if we're going to invest in property, we want to find a suburb, we want to find a street with low public housing or low government housing, the idea being that if people own the properties that they're going to invest in them and renovate them, and the suburbs going to go up at a faster rate than other suburbs where that public housing in them are a higher percentage of public housing. But isn't this actually true? When we look at the data? Is this the trend that we say, Oh, can you actually invest in an area with public housing and still get great performance out of your property? So today, I have with me, Jeremy Sheffield, from select residential property to talk about this, to actually dive into the data I'm gonna answer once and for all, as to whether or not this has a big effect on future capital growth or not. So hey, Jeremy, thanks for coming on today. Jeremy 0:50Thanks very much, Ron. And thanks for giving me the opportunity to talk about this topic. Ryan 0:56This is something that has been talked a lot about in the community, there's a lot of experts out there who say to avoid public housing, and honestly, I can understand the reasoning behind it, avoiding you know, issues that can come with that lower socio demographic area, as well as the idea behind, okay, people own the mall owner occupiers, they're going to spend money painting their house and renovating it. And that could live the suburb as a whole. So what does the data actually say? Jeremy 1:25Well, the data suggests that there, it depends, is it there isn't really much in it. So it comes down to how long the social housing has been there. Let's say let's say a suburb is to host the new cities, sewerage treatment works, you can imagine that capital growth in that area is going to be diminished over over the following years. But eventually, that lack of capital growth, while the rest of the city suburbs are growing, eventually be factored into prices. And this is the thing over a long period of time, just about any sort of amenity or eyesore or advantage gets factored into the price of property. And from then on, it's it's business as usual. Queensland University of Technology did an interesting study about Brisbane Airport in in 1980, there was an expansion of Brisbane Airport, there was going to be a new flight path that was going to affect suburbs under that flight path. And for about four years, those suburbs had reduced capital growth. But then after that, it was it was business as usual. So it took four years for that negative amenity, to have an impact on prices, bring them back in balance. And from then on, it was his business as usual. So if your public housing has been there for decades, it is well and truly already factored into the price of property and is having no impact on capital growth. Ryan 2:57So what you're saying here is let's say we have an area that has a very low percentage of public housing, the government decides, okay, we're going to move a lot of public housing into this area increase the percentage that could have a negative impact over a short period of time, because that's now less desirable, because of you know, the socio demographics of that area. But what's going to happen over the next couple of years, okay, maybe that's how it doesn't grow or goes backwards while the rest of the city grows, eventually, that's just gets known as you know, the price and the value that it's at, relative to everything else. Now that it's reached kind of its equilibrium, as the city continues to grow, it's probably going to keep pace with it. Jeremy 3:39That's right. Yeah. And when you think about it, let's say there was something very negative, like an enormous amount of public housing that comes to a suburb and it has negative growth, if that negative growth is going to continue, because it's got social housing, do you eventually get to a point in the future where property prices a negative, like people actually paying you to buy them? Obviously, there's got to be you use the word equilibrium, there's got to be some sort of balancing out. And that that is the price eventually it's factored into the price of property. So yeah, it's it's it's not such a big deal. And I Ryan 4:13actually something the opposite could be true if you have any oil with high public housing, but where the government is actively moving people out of the area, then you could get a boost in capital growth right in that area, which is something that I saw on the Gold Coast, I think it was Palm Beach, there was a lot of government housing in that area. And there were it was becoming a more affluent area. And so the government was wanting to move shift people West away from the beach to cheaper areas. And so you started to see this gentrification of this area, and it becoming more and more popular as there's less and less public housing in the area. It could have grown extra because of the change in that so yeah, Jeremy 4:51yes, it's all about change. Ryan 4:54I guess we're saying Yeah, changing public housing might affect future capital growth, but public housing percentages if they're stable, might not. So do we have any look at today, Jeremy 5:04or let me see what I've got here. Okay, so this is how we figure out whether it is social housing or not. This is from the an image from the census. Alright, so this is a scatterplot, every red dot, you see there is a suburb around Australia. And this is the capital growth from 2016 to 2017. So, the last census was conducted in 2016. So this is just looking at one year capital growth. What you can see on the horizontal x axis is the amount of social housing there is in a particular suburb. So at the extreme end, and I think, see that there the screen resolution is sufficient. But you can see a very high amount of social housing in this suburb here. And the vast majority of suburbs are along this line here, which means they have zero government housing. Yeah. Now, up this axis is the capital growth over the next year from 2016 to 2017. So, there's the zero point. So we had some negative growth in these suburbs here, and we have positive growth in the southern tier. Now. Right? pick out a trend there. Ryan 6:21No, I can't pick out a trend that's so hard, because you've only got one year of data as well, right. And especially with 2017, was an interesting year for Sydney and Melbourne as well. Jeremy 6:32Okay, here's where I'm pointing out, just like if we had very high, the right hand side of the chart is very high social housing, the bottom of the chart is very low capital growth. So you expect to see a lot of points in here, but there are none. Ryan 6:50That's if we if if it was true that more charging meant less capital growth, this is what we'd expect to see. And as you can see, Jeremy 6:58there's no dots there. And similarly, at the other end, you'd see, well, there are dots there, but it's not most of the dots. Most of the dots are sort of just scattered. This blue dotted line is the trend line. But like you said, it's only one year. So let me I think I've got more charts for longer years. So here's from 2012, to 2014. So the reason I'm picking these is based on when we had census data, you can see that it that it's narrowed, so the capital growth over the long term tends to narrow. And that's why we're not seeing the extremes because it's over a longer period of time. But again, we've got a pretty flat trend line there, which is saying there is no relationship between government housing and future capital growth. Ryan 7:44So that same there's a slight relationship like it looks like. Jeremy 7:50I mean, this is what you would say is statistically insignificant. So yes, there is a slight downward trend there. But it's it's so flat, that you couldn't really rely on it. That could just be an anomaly in the in the data and the calculations of capital growth. Ryan 8:05And as well, because when we're investing, we're investing in one house in one suburb, you know, we're going to be one of these red dots on the line. On this graph, we're not going to be the the entirety of the graph. Jeremy 8:18Yeah, and you can just see that the dots just aren't stretched out along either side of the line there. They're pretty much just random. So that's, that's suggesting straightaway that there isn't a relationship. That's over three years, from 2012 to 2015. This is over five years from 2012 to 2017. And this still isn't really much of a relationship. Ryan 8:43Now, even if you scroll back up or even looking at the date. Yeah, this one you look at the lowest performing suburb is actually quite low in government housing. Jeremy 8:52Yeah, that one, Will those Ryan 8:54last ones down there quite low in government housing, compared to you know, the ones that are extremely high? Jeremy 9:01Hmm. So if if there was a relationship between highest social housing and lower capital growth, we would, we would say, a line going from the top left,