Good Schools and Amenities DON’T Create Capital Growth! SHOCKING RESULT!

https://www.youtube.com/watch?v=XSrDuSuILAs We are so often told that if we want the best capital growth our property needs to be close to amenities. Good school, train stations and shopping centers or other public transport are often touted as key indicators of future growth. But what does the data actually say about the affect of amenities on the capital growth of a suburb? The results from this one are extremely surprising. Read this article: Select Residential Property DSR Data 0:00 - Introduction1:40 - Key idea: Price has already factored in existing amenities, which does NOT lead to more growth4:00 - How expansion of Brisbane airport affected prices short and long term4:45 - Do train stations affect capital growth7:55 - Be careful of starting and ending points of statistics8:30 - Do school affect capital growth11:00 - How do beaches affect capital growth12:55 - How does proximity to shops affect capital growth13:58 - How does walkscore affect capital growth?21:24 - What do we do with this data?26:04 - Price variability over time Recommended Videos: Property Data Dive Series Transcription Ryan 0:00We're often told that when you're buying a property to get the best capital growth, the best return on investment, you want to look for properties that are close to amenities close to really good schools, close to shops and shopping centers, close to public transport. How many times have you heard people say, you know, this is a great suburb because it's got all of these factors in it. But as an investor, what we care about is the return on our investment, how much is that property going to grow? How is it going to perform? And so is this actually important? And today, I've got with me, Jeremy Shepherd from select residential property to actually dive through the data on this one, yes, it makes logical sense that we want these amenities there. But does the data actually back up this idea that this is going to lead to higher than average capital growth? So I'm excited for this on Hey, Jeremy, how I Jeremy 0:50can hire Ryan, Manuel, how are you? Ryan 0:52Yes, very good. I'm looking to buy a property in the very near future. And this is obviously something that I'm thinking about and considering when looking at suburbs is to say, okay, what's the suburb? Like? What are the schools like in the suburbs? have close to the shops have close to the transport, basically, trying to get an idea of, you know, why would people want to live here? And will they want to live here in the future? And does it have those desirable things, but I'm thinking you're going to tell me something different given? You've done the data analysis, and there's an article on this? Jeremy 1:26Yeah, good, good guess. Yeah, look, it's not a complete waste of time researching this sort of stuff. But there's, there's a very clear caveat to it. It's not automatic, that if you're buying in a suburb with good schools, shops, transport, all those amenities, that you're going to get above average capital growth. The key is whether that amenity is new or old. So the whole principle here is that if the suburb has all these great amenities, then it should be that properties in that suburb are very expensive, because this is a desirable place to live. But the price has already factored in the benefit of those amenities being there. Let's say for example, you get a new train station that comes into the suburb, what's going to happen is the suburb is now more desirable, people start paying more to have that, that benefit of being within say, walking distances, TradeStation. But after a few years, once it's factored into the price of properties in that suburb From then on, it's just it's business as usual, the capital growth carries on pretty much the same as any other suburb. So it's always a short term thing. And I did some research to look into some of these, these things like, like transport? Well, let's Ryan 2:49have a look. Let's type people through the data and see what the data says from from what I'm hearing about, what you're saying is that, like we talked about in a previous video on public housing, is that if something negative comes into us other, like you mentioned, a sewage treatment plant, or if a new airport gets built, and there's planes flying over, then that's other can be reduced in value, or the growth can be slowed over the next multiple years, maybe three years, maybe five years. But then you're saying what happens is eventually, that eyesore or that issue is factored into the pricing. And then that suburb is just going to grow in line with basically the surrounding area. And I guess what you're saying here is that the opposite is true is that if you've got a suburb that doesn't have amenities, if you add those amenities, making the suburb more desirable that lifts the price in the short term, you know, maybe three to five year mark, I'm not sure. But then once that's lifted, that's because those amenities are factored in. And then yeah, so that is just kind of business as usual, the suburb would likely grow in line with kind of surrounding suburbs Jeremy 3:55and the region. Yeah, exactly. And that one, you mentioned with the airport there, I think you're referring to the study that Queensland University of Technology did on the expansion of the Brisbane Airport to become an international airport in the 80s. And they wanted to see how the new flight path would affect the growth in properties of suburbs affected that is sitting under that flight path. And they found that that had deteriorated capital growth over a period of about four years. And from then on, it was it was business as usual. In fact, they actually caught up to many of the other surrounding suburbs in Brisbane. So it showed that a negative amenity influenced capital growth, but only for a short time. Yeah. And what I've done here is I've had a look at train stations in Sydney and I wanted to see a suburbs that are on the train line within walking distance over the train station. Excuse me. Are they have they outperformed over the long term is simply being near a train station. A good deal? Yeah. This chart shows the green line is the performance of suburbs that are not near a train station non non train station suburbs. And you can see that they have been pretty much neck and neck with station suburbs over the last 30 years from 1990. Now I did this analysis towards the end of 2018. So that's why it chops off there. But you can see there's there's nothing in that that's a very significant period of time, if there was to be a performance benefit of being near TradeStation, you would see something significantly different than what we're looking at, right here. Ryan 5:39Well, that there was a performance difference over the long term, you would see these lines start to separate and diverged from each other over time, and you would expect the station line to be higher than the non station suburbs. And so you know, what we're seeing is they're tracking very closely together, sometimes they're touching each other, sometimes the non station is above, then they touch each other again. So it's very neck and neck right up to, you know, 2018 over there. What's that a 30 year period, nearly Jeremy 6:0820 years, 30 years here, roughly 30 years. And I did the same thing with Melbourne. And there is actually that divergence that you're talking about here. But it's it's not a huge divergence, for starters. But this, this chart would tend to suggest that there might be something in it because of that divergence. So So what we've got at this stage is we've looked at two cities, two largest cities. And in one case, it does look like there's nothing in it. And then the next case, it looks like there might be something small in it over 30 years to have a gap of around about I think that's $200,000. That's, that's not really significant. But there is an argument there Ryan 6:46is a decent gap. If you're investing in something for the long term, you'd rather be $200,000 richer. That's wrong. Oh, yeah. But I can see so someone just looked at this Melbourne statistic, they would just say, Okay, yeah, being your train station means you got a better chance of getting a return. Jeremy 7:02Yeah, so I thought it's, it's one for one again, so I'll look at Brisbane. And although it looks like there's a divergence there, what's actually happening and and people get confused about this, when they're looking at these sort of compound growth type charts, particularly over a long period, like 30 years, you'll notice that throughout the history, they were they were neck and neck. And there were times when station suburbs would get ahead of non station suburbs. But then there'd be a catch up. And I suspect that there's another catch up probably probably just here at the right hand side of the chart. So I don't right that that gap there is meaning anything. So at this stage, there's nothing really conclusive about train stations outperforming Ryan 7:51the cutoff period is super important. And this is something that I've learned for you is that you can prove any point in property that this creates more growth than this, if you choose the right starting point and the right kind of point. And then you can make them look amazing and prove your point. But if you choose a different point, you know, you can make the opposite to be true with the graph as well, if you just choose different starting points and different ending points. So that's something people really need to consider when looking at statistics like this. Yeah, so Jeremy 8:21at this stage, I would say that it's inconclusive. But But let's keep going. The next thing I looked at was schools. So try size is just one amenity. Melbourne is known for its its fine schools. So this is a similar sort of plot.