I'm Jeremy Sheepard. >> And I'm Daniel. >> We use data to expose deceitful property experts and their marketing BS. >> This is the expert busting series. >> This is part four of our expert busting series. We're uncovering amenities and why it's nonsense for picking superior growth.
Let's dive in. Jez. >> Yeah. So you may think that buying a property that's close to favorable amenities like schools, shops, uh transport nodes is going to give you better capital growth, but it actually doesn't have any impact, especially over the long term. Now, if it does have any impact, it doesn't last. Uh this is expert bus number four, amenities.
>> All righty. So, is it amenities or amenities? We had this debate earlier. >> Use both. I'm going to use both. >> So, what have we got here, Jez?
>> All right. So uh the amenities that are usually uh referred to are schools, shops, uh transport nodes like train stations or bus stops, parks, uh you might find waterways in the list, um large bodies of water like uh rivers and beaches, gyms, shopping complexes, places of worship, and there's probably more. But there's a a fundamental flaw to all of this. And the best way to explain this flaw is the apples and oranges analogy. >> Yep. And before we do, and you hear this a lot in the industry, don't you?
That, you know, I want to um I want to buy near a train station or I want to be near the beach or it needs to be close to a a school of some sort. So, it's I'm looking forward to this. >> Or far away from something like busy roads or a skate park or a busy shopping center or something. Yeah. So, uh, the apples and oranges analogy works like this. Let's say 100 years ago, you walk into a fruit shop, there's a crate of apples, 1 cent each, uh, and then there's a crate of oranges for 2 cents each.
Now, if apples grew at 4% peranom, >> and oranges grew at 8% peranom, 100 years later, an apple would cost 50 cents and an orange would cost $44. Now, picture yourself walking into that fruit shop and you're going to pick some fruit. It would be a very keen orange enthusiast that would pay 44 bucks for an orange. >> Uh yeah. So long before that absurd price difference became a reality. Buyers would walk into the fruit shop, they'd think, gee, oranges are a bit expensive.
I'm going to look for an alternative. That uh attitude would knock demand from the sale of oranges and increase demand for the sale of apples. So there would be an accelerated rate of growth for apples compared to oranges until they picked up. And so what you'd probably find is that after 100 years, maybe an apple costs a dollar and an orange costs two or an apple cost 50 cents and an orange costs one. So the price difference would remain the same because it's still just an apple, still just an orange. Nothing uh dramatic has changed there.
And uh we've got a another episode uh in this series uh on that very topic, apples and oranges. Uh I think it's episode number uh there's actually a few. There's an apples and oranges episode that you should look for and then there's another one on holding for the long term episodes 12 and 13. Anyway, um we'll we'll flick up something on the screen to show you. All right. So that's apples and oranges which gives you the basis for why this whole thing of uh buying near amenities doesn't work.
Uh okay. So this this this analogy this apples and oranges analogy suggests that properties near schools shops transport nodes and parks cannot continue to outperform. So if those schools, shops, parks, etc. have always been there uh since as long as you can remember, the benefit of them has already been factored into the price of properties and that's why superior growth does not last. So properties close to amenities, they may command a higher price tag. Uh but if those amenities have always been there, those properties have always been that bit more expensive than those that are further away from the amenities.
So as investors, we're not interested in price, we're interested in growth. >> So if I think about it, just an example would be let's say a property, you know, 50 years ago was 100,000. It's near the on the beach side or closer to the beach where maybe if it's a couple kilometers um in land, that property is maybe only worth 50,000. That's already been factored in like that land value has already been factored in at that time. Um, and I'm sure you'll go through it, but if they both grow, that suburb grows at 8%, you would get the growth that that have different starting points. >> That's right.
Yeah. Unless the beach moves >> Unless the beach moves. >> Yeah, that's right. Yeah. Uh, so if you have an introduction of a new amenity like um, you know, let's say it's a train station, that um that high growth rate, it won't last forever. So each year the price gap between the properties that have the amenity close by versus the have nots that would uh potentially widen.
You'd assume if this uh concept of being close to an amenity had any merit. But eventually uh buyers consider that price difference too great. They they can't justify paying more. And at that point the benefit of the amenity has become fully factored into the price of property. So the above average growth reverts to normal growth. Okay.
So there are some reports that you may have seen uh that mention properties closer to certain schools attract a higher price tag like um they might say uh within the catchment zone properties are typically 10% more expensive than other properties in the same suburb or 20% or whatever that figure is. And the the implication from those reports is that you'll be better off buying in the catchment zone rather than out. But that 10% 20% whatever that difference is. That's the current price difference. It's not the change in future growth. It's not a growth rate.
It's a difference in price. Uh that difference in value may have already been factored into the price for for many years now. So in this example, you can see here assume property A is 10% more expensive than property B. Uh that's because A is closer to the train station. if 20 years pass by, A uh has not moved any closer to the train station, assuming that's the case, uh and B hasn't moved it any further away from the train station, then why would we expect that 10% difference to have increased? It it doesn't.
It's nonsense. >> So, in the example there, after 20 years, we're factoring in that both suburbs had the obviously same amount of growth. Both the properties have this have had the same amount of growth because it's within the same suburb. It's just that one's a kilometer away and the other one's 2 km away. >> Yeah. Unless they have moved closer or further away, that price difference in percentage terms shouldn't have changed.
So, they have the same growth. Yeah. So, a 10% difference in current prices doesn't mean there'll be a difference in future growth rates. Just because one property or or one suburb is twice as expensive as another one, it doesn't mean it has had twice the growth. Suburbs don't all start at the same price, like that example you gave of properties on the beach versus further away. Uh, so >> how about a buyer's agent who says, "I can pick that property that's going to outperform within that suburb." >> Great, great question.
And I've got a slide right towards the end on that exact topic. Yeah. Uh, and by the way, uh, superior historical growth does not mean superior future growth. And for more on that topic, we've got another episode. Check out episode number 10 in this series. It's on I think it's titled uh high high pass growth is a red flag or something like that.
>> I guess viewers that are you know when we release this 10 won't be available but once all the episodes are out. >> Yeah'll make sure you uh put in your calendar check out episode number 10. >> All right. So this all sounds uh very logical. Um if you can just forward to the next slide there D. Uh but the truth is of course determined by what the data has to say.
Uh now it was 2018 when I last looked into the influence of amenities on future growth. It's now 2024. So time for an update. And here is a list of the amenities uh that I analyzed. So, we've got train stations, schools, beaches, large shopping centers, and airports. Now, that might not be the ideal set of amenities, uh, but it's enough to see if they are of any importance to investors.
Okay, so I'm starting off with train stations. Here's a map of uh Sydney's rail network. This is thanks to Daniel Eckleshaw. Uh there are a lot of suburbs within with that do have train stations in Sydney, well over 150 that you can see there and I think there have been a few more since this was published. Uh we're not interested in those uh because to see if having a train station improves capital growth over the long term. We only want to examine the growth rates of suburbs that have already had a train station well before the growth period uh that we're looking at started.
So uh yeah, the growth period that I've examined in these in this case uh dates back to 1980. So it's 2024 now. It's the end of 2024. It's been about 45 years. Uh so if there is any long-term benefit to growth for suburbs with train stations, uh then we should see a stark contrast in the growth compared to uh the growth of other suburbs in Sydney. uh four and a half decades is more than enough time to make that difference really obvious.
And the next chart shows what happens. All right. So I've created a chart comparing the growth of Sydney suburbs that have train stations against the growth of Sydney suburbs without train stations. Uh bit of a complicated chart here. So let me just uh break it down and explain all the details. So uh start off with something easier.
uh the horizontal x-axis along the bottom uh shows the period covered from December 1980 to December 2024 a period of 44 years. Now the left vertical yaxis shows the median value in dollars and you'll see a turquoise line that plots the growth of the median value of Sydney suburbs without train stations. >> Okay. And it starts off in 1980. It's around about, you can't see on the scale there, it's about $68,000. The purple curve, >> uh, that plots the growth of the median of Sydney suburbs that do have train stations and it starts off in 1980, a little bit lower at around it's 62,000.
You have to take my word for it. You can't see cuz it's a bit too small there. Now over on the right side of the chart, >> their house prices, Jez, >> that's right. Yeah. Yeah. And this is just house prices.
>> Mhm. >> Uh you'll see on the right there's this vertical yaxis. Again, it's a secondary axis. And that's measuring the percentage gap between those two lines. Uh very small gap uh between them on the bottom left, but it's measured as a percentage. So you'll see that um that shaded teal section hanging down from the top of the chart.
that's meant to show the discount that a buyer would pay for a property in a suburb with this amenity with a train station. So it turns out that you know uh suburbs with train stations are actually cheaper than those without. >> So you look at for example what 1982 for example. So 1982 there's about what let's say what a 17% >> difference. Is that right? >> That's right.
So that means that a 17% gap in prices between a station versus a non-station. So a property that is within a non-station like a property in a non-station um suburb is outperforming. >> Uh it's really just a case of the difference in price. uh the performance, it's just >> it's it's dearer to be in a suburb that does not have a train station. So, for whatever reason, >> train stations in in Sydney, yeah, it might be quiet. So, >> uh you would expect an amenity like a train station uh is considered a benefit uh because you can, you know, walk to the train station and hop on and you don't need a car.
But there can be some disadvantages and uh in this particular case it just works out that Sydney suburbs have been a little bit more expensive if they do not have a train station compared to those that do. So that's why that shaded section is dropping from the top of the chart down and it's showing that the gap is is a negative figure. Meaning you pay a discount >> uh for buying in a train station suburb >> maybe because it's easier maybe with the buses with the um potentially trams if you like in a city Sydney or people just park their cars at train stations. A lot of the time there's parking available. So >> yeah, I I think that the reason why it's cheaper might be that there are exclusive suburbs in Sydney that are just so much more expensive that do not have a train station. You think of trying to catch a train to the beach, for example, in Sydney, >> uh that's not easy to do.
>> Yeah. So uh for whatever reason, it doesn't really matter. All we're doing here is measuring that price gap. Uh now you will see that the two curves do diverge over time in dollar terms. In other words, that that gap widens in dollars >> uh and the percentage gap widens too, but then it shrinks again. So throughout the decades, there is change, but overall the percentage price gap finishes up pretty close to where it started.
It started at - 9% and it finished at -4%. >> Where's that - 9% that you're looking at? Uh so over the right hand side is the percentage gap but on the very uh left hand side in the top leftand corner you'll see the shaded teal section is towards the top left in 1980 >> at December 1980 and that that is actually around about 9%. >> Oh so it's starting a little bit higher over here 9%. It's hard to see. >> Yeah, it is difficult to see.
But I can tell you, I mean, you can run your eye along that shaded shaded section and see that hasn't what we're what we would expect if an amenity has an influence on capital growth. >> There's a suburb that has the amenity and there's one that doesn't. Over time, because of the compound nature of capital growth, you would see that gap go exponential. >> This is it would be massive. It's fantastic to see because it I guess um you say debunks the myth of I I need to buy near a train station for example. >> Yeah.
Well certainly in Sydney looking at all the station uh suburbs with train stations over the last 44 years there's nothing in this chart to suggest there's been a benefit or a disadvantage in buying in a suburb that has uh or doesn't have a train station. >> All righty. >> Yeah. So, >> Melbourne's next up. >> Let's have a look at Melbourne train stations. You can see here uh that the uh suburbs with train stations have outperformed those without.
In other words, the percentage gap has widened over the 44 years. So, back in 1980, suburbs in Melbourne that had train stations were fractionally cheaper than those without. Uh the percentage price gap in 1980 was around about minus 10%. that's in the bottom leftand corner of that chart. >> Uh by the end of 2024 that percentage price gap had widened to positive 6%. So the total change was 16% from minus 10 to + 6 but that is over 44 years.
>> That's less than 0.4% per year which is hardly noticeable. uh what we should have seen if the amenity is influential to capital growth a much larger gap that would have been exponential but it's barely changed. It looks like it's changed a lot but that's just the scale on the chart. It's it's barely changed. >> Um >> but that's a like looking at the chart though that seems like a big gap doesn't it? Like from over what minus 5% to >> uh finishes >> to to minus to positive 10%.
So, it's about a 15% change, 16% to be precise, but that's over 44 years. >> And I guess it's not the the growth, it's the the typical value difference. So, this tells me that houses nearest or near the station have performed. >> They have performed better >> at about 0.4% per >> That's a lot though, isn't it? you take it over a 40-year period, >> you you've got to wait 44 years for that 16% difference to be I mean we are talking about something like over 2,000% capital growth over this period of time and we're arguing about 16% the difference. >> It's interesting to see because Sydney was the opposite.
So is it maybe because Sydney is a bit more built out do we think? >> Uh well it could be due to congestion. Uh perhaps there's increased slightly more congestion in Melbourne, but um there's certainly nothing in this to to think, oh, you've got to buy near a train station in Melbourne. It's just you have to wait half your life for practically no no benefit. And I'd also like to point out that there are periods of time where that uh shaded teal chart, it goes up, it goes down. Right now, it's going down.
You don't know if it's going to go down even further. It could come right back to where it started from. >> What would be interesting, so let's say you know a train station is coming into a suburb in 30 years time. There's plans, it's proposed. >> Uhhuh. It's proposed.
>> And there are um individuals out there that will say a train station's going in or Baji Creek airport that's coming in or um maybe if we look at maybe the Kellyville Kellyville train station. So it'd be interesting to know did that have a big injection in capital growth when the station came in? >> Well, that's a good question and I've got a slide coming up when we look at airports >> and even the I think there's discussions about the fast trains up central coastway. >> Oh yeah. Yeah. the plans for a uh yeah fast train >> because for example if you look at the south coast of New South Wales let's just say we go past Wongong Shell Harour even further down a lot of people do commute via train cuz it's easy but maybe there's not many as many trains that go through but if you had a high speed train go through um those areas are getting busy now and there's limited stock there but injecting a fast speed train be interesting to see what that would do because it really cuts that commute time.
So you've got that lifestyle of sort of being near the beach, not as expensive as Sydney. >> Um so it feels like you're on holidays a lot of the time, but then if you want to go to Sydney, it's quick and you miss all the traffic. >> Yeah. Well, it'll be interesting to see how it affects prices, but uh according to the research that I'm about to show, and it's it's not long lived that that accelerated capital growth only lasts for a short time. There's a great study that Queensland University of Technology did which I'll go through uh in another slide. But just to finish off train stations, I thought I'd look at uh Brisbane as well.
So I've plotted the same kind of chart for Brisbane. Uh the two growth curves uh you can see there have been neck and neck for all almost all of those 44 years. So suburbs without train stations are no worse off than those with train stations. And uh the percentage gap over 44 years uh has once again not really changed significantly. There's no sign of an exponential widening of that gap. Uh and importantly the chart shows that the two curves have crossed over.
I think I counted 10 times. >> So one curve gets in front only to be caught up and passed by the other. So the leader changes every few years. And that's classic apples and oranges time leveling out uh growth. It it proves that there's this tendency for all properties or suburbs or cities to grow at the same rate over uh the long term. So there's no real benefit having this uh amenity.
>> But back to that higher speed train, just thinking about it out loud, Jez. So, let's say um you know, Newcastle or Central Coast, there's plans approved and it could take how many years to get done, but there's a high-speed rail going in. A lot of buyers, agents or investors go, I'm going to buy there because this you'd have to see some sort of increased demand in those pockets. But we know stock market's very tight in these areas anyway, especially around New South Wales. So, I wonder I guess we'll only know when it actually happens, wouldn't we? Then we can analyze the data to go okay this actually happened because but when do you time it when it's proposed because if you know it's already coming in 20 years or 30 years or whenever it might be it's going to sort of get smoothed out but a lot of buyers agent said buy here because of this but the yield will drop prices will be too high and they'll look elsewhere then wouldn't you?
Well, I think that the um it's the home buyers that dominate the capital growth because they outnumber investors two to one in most places. So, they want to see that the amenity is there already. So, the proposal that might be getting in before the capital growth. You might think, oh, before the demand increases. Uh but these these sorts of projects, the bigger the project is, the longer the delays can be. And a delay of just a couple of years for for a uh any sort of infrastructure project is is uh for a billion dollar infrastructure project, it's easy to see, but that can be the difference of say 0% growth and 20% growth, which for half a million dollar property is worth a couple hundred,000.
>> I was reading something the other day about I think the north of Melbourne, they're looking at proposed trains in their um and it's like 252 year. I'm like, "Okay, so that's going to it's play to your head." I'm like, "Okay, but that doesn't >> I don't look at that going, I need to invest because of that." Like, that's not the prime reason. I'm paying for a property cuz that's the market value for that asset. And it's all factored in. >> Yeah. There's a there's a lot of things that buyers consider.
It's not just, oh, is there a train station? It's um peace and quiet. It's crime. It's lifestyle. It's close to work or family and friends. Yeah.
So a single infrastructure project really doesn't have the big impact >> and in Australia we are very reliant on our cars aren't we >> a lot of times. So and if you move over to now we got Sydney Melbourne Brisbane as a combination with stations versus without. >> Yeah. So uh this one's a little different this one um because instead of so previously I've just been looking at growth uh this one's about cash flow. So some uh professionals might argue that yields are better closer to favorable amenities. So they might accept that okay the capital growth isn't going to be that different but what about the yield Jeremy?
So I uh again analyzed historical data to compare yields of suburbs with stations versus those without. So this time you notice because of the heading I've combined train stations of Sydney, Melbourne and Brisbane all together. And uh on this new chart, the horizontal x-axis, you'll notice along the bottom, it only runs from January 2010, not all the way back to 1980. And that's because this is the earliest record I've got of yields. U so and also uh the left vertical yaxis, that's not dollars anymore. That's yield.
Mhm. >> Uh and you'll see the percentage gap, that is the difference in yields of suburbs with versus those without train stations, it doesn't vary much over over that period. Uh and it certainly doesn't show any signs of exponential growth that we would expect if train stations had any influence on uh on yield over the long term. So in other words, uh completely inconsequential to an investor's bottom line. >> And this is for houses, correct? again.
>> Yes, houses combined for Sydney, Melbourne, and Brisbane. >> Cuz I would think maybe it'd be interesting if you, again, that's most probably for another time, but like units are predominantly, I'd say, located closer to these, especially in Sydney, like around um these train stations, there's a lot of units that go up. So, I wonder if there's a big difference there, but I'm assuming that they're almost probably going to be the same if stock or market's tight everywhere. But what would you classify as a station suburb? So for example, you might have Krona, okay, in Krona in South Sydney and you've got a train station there, but is it within a kilometer or are we talking 3 kilometers out? Like how do you define a station suburb?
>> Yeah. So in this analysis all I did was if the suburb has a station in it then okay >> then it gets included. So it doesn't consider the growth of properties that might be beyond walking distance of the of the train station >> because you might have a suburb that's only you know a kilometer long for example radius or square meterage but then you might have another one that's 5 or 10 km a bigger suburb. So okay great that's good to understand. >> Yeah. So moving on from train stations, uh I then went into looking at schools.
So Melbourne is well known for its uh school focused suburbs. >> Uh some suburbs that's it's all about the school. So properties within those suburbs usually command a premium price tag. Uh but a chart like this comparing the growth since 1980 to the end of 2024 shows there's no real value for investors. The percentage gap between suburbs with good schools and those without has not materially changed over the last 44 years. So in 1980 the price gap that's on the left there was around 20%.
So you have to run your eye across to the right and see it's about level with 20%. Uh and by the end of 2024 that gap was about the same. >> 20%. Okay. So there hasn't been Yeah, it's pretty much saying because we're not seeing the the difference. >> Yeah.
So if there were was some kind of influence uh capital growth wise over the long term, you would see that that shaded teal that jagged um shaded area. You would see that grow exponentially up to the top right off off the top of the off the top of the chart. >> So that what's median non-good schools mean? So, just a a suburb that doesn't have one of these good schools in it. >> What's classified as a good school? >> Uh, yeah, that's a good question.
I did make an assumption that schools that are graded well now uh have always had those sort of good grades. So if you've got a a classic sort of historically well-known school, uh that gets in the list and perhaps newer schools, they wouldn't be considered here because uh we've got to look over a very long period of time. >> Okay. So you have your system in place to to work that out. >> Yeah, I I did have to make an assumption that um well-graded schools now have always been uh well-g graded. So >> I think the key thing is the gap though.
There's no gap. >> Yeah, that's right. It's the same in percentage terms. It's the same. So if good school suburbs are such a draw card for growth, then we should have seen the gap grow exponentially. Uh but instead uh you know it should have been hundreds of percent difference.
Uh because over 44 years we are talking about a couple of thousand% growth. I think the the key thing that this shows me, I guess, as an um like if you're investor, it doesn't really matter, does it shows like if I've got a certain budget, like you go into a suburb maybe with a typical value of let's say 800,000, but let's say my budget or my borrowing capacity, I'm capped at let's say 720. you might be able to buy within that suburb, but it might potentially just be that maybe if it's in a train station suburb, it might be a little bit further out. So, that's where the compromise is typically within the suburb because not every property is worth the same or it could be a compromise on the block size or the quality of the property. Um, but yeah, that's the way. >> Yeah.
Yeah. So, anyway, that was um Melbourne and schools. I just restricted the analysis of schools to Melbourne. Uh Sydney, >> Sydney beaches >> well known for its beaches even internationally. Um so properties in beachside suburbs are much more expensive than the rest of Sydney. But a chart that uh compares the growth of beachside suburbs versus nonbe suburbs, it shows very little outperformance.
So for that 44 year period since uh the end of 1980 the percentage difference it has widened but the superior growth should be measured in the hundreds of percent uh given such a long time frame. Instead the gap has only widened from about 25% back in 1980 to 50% now. Um, and in that period of time, Sydney prices in general, they grew 2,400%. And we are comparing a widening of that gap of only 25% to 50%. And you can see there are eras where it outperforms pretty quickly and then it uh contracts again and then outperforms and then contracts again. So uh there's nothing in it.
There's really no benefit in buying close to the beach in Sydney, >> even with that gap difference. >> Yeah, it's it's uh over 44 years that that little difference is virtually inconsequential compared to 2,400% growth total. >> Wouldn't that be a big difference? What's the starting point there? Do you know what that number is? Uh yeah, I didn't actually write it down, but uh it might be something like uh 70,000 versus >> 70,000.
So if I bought back in 19 or if my parents bought back in 1980, your parents >> Yeah. that that property would now be worth, let's say it wasn't near a beach, we just uh pick a suburb. Uh pick a suburb Jez. >> Uh that's not near a beach. >> Yes. >> Penri.
>> Penri. So Penri, that property worth about a million dollars now. But if they bought in um >> well it this is what the price gap is measuring. What you're trying to calculate now just using your eye that's what the price gap is measuring. So the gap at the start of 19 well the end of 1980 it's December 1980 that gap gap >> how much better off would I have been? I would have been better off by what another if I bought near that beach.
Sorry about what by 1.2 million. >> 25% according to the the >> it's a lot of money. Well, you have to wait like 45 years. >> All right. Waiting. >> It's like less than 1% peranom.
A lot less than 1% peranom. >> I'd take that in a Sydney suburb. >> Okay. All right. Well, uh, >> but I can't afford it now, but back then, even back then, >> well, back then, you wouldn't have been able to afford it. This is the whole point.
Why would you go to the trouble of uh putting more dollars at risk when you're not going to get any significant outperformance? And it's possible that right now we're at one of these other peaks and that over the next few years it's going to drop back down to where it started. >> It's already had that big like this is most probably the slide that it clearly shows it it's had a massive run hasn't it like these sort of even though it doesn't look that like for you're saying percentage gap isn't that significant but um good luck trying to afford something over $2 million. >> Yeah. Well have a look at say 2013 2014. >> Yes.
Okay. That's right. >> Yeah. So, how do you know we're not about to have another one of those? >> Correct. >> The the whole point with whenever I've plotted a chart with two curves on it, a growth chart, >> uh what you see again and again is the curves diverge and then converge, diverge and converge >> in these.
I guess Sydney's very popular for it and there's a lot of commentary around it that it's like rent in Sydney because the typical values are so much higher and invest in other locations. The challenge is is if you rent and then you spend all your money on lifestyle, that's where people get unstuck. >> Yeah. >> It's like make sure your money is constantly invested. >> Yeah. >> All right.
That's good. Really good graph. >> Okay. So, uh the next one was >> suburbs near shopping centers. >> Yeah. So, shops are an off quoted amenity to be near.
So looking at them, uh I did this countrywide now. Uh so the Yeah. Go on. >> You was about to say something, weren't you? I It's funny. Um when we did a while ago, I called up the Townsville Council and um I talked to the lady and she goes, "Oh, all these guys are calling up these buyers agents and this and that." And a lot of them can't speak very good English, but they're asking about infrastructure.
Are these shops going in? And I'm like, why would they ask that for? >> Yeah. Yeah. So, it's a lot of people have been misled on this this topic. >> What's a selling point, is it?
I hear it all the time. It's near a shopping center or it's near a train station. It's just over and over. So, it's great to see a presentation where >> Yeah. So, a favorable amenity may command a higher price tag, but does it have high capital growth? And uh no.
So, you have a look at this one. You can see that the price gap has ranged from about 25% on the far left >> to uh well it actually got up to as high as 55% um back in when's that 2020. >> It's come back. >> Yeah. And now it's of course it's come back. Uh so as with most long-term charts, there are eras of above average growth where one market diverges from the other, but then that's usually followed by eras where the poor cousin catches up.
This is Australia wide. Sorry Jez. >> Australia, wide. >> So that's Australia wide and what's classified as a big shopping center like a a Westfield. >> Yeah. Yeah.
That's a good example. So a big shopping center like that. Yeah. And again, this just confirms the comparison of apples and oranges. It's it's that story playing out again. You get the peaks and the troughs.
Uh you get the widening of the gap and then you get the narrowing of the gap. So over such a long period of time, if the proximity of shops was an influencer on on price growth, then we should have seen the gap stretch exponentially by hundreds of percent. But uh yeah, it's not even a couple of dozen. >> Okay. >> All right. So that's shopping centers.
There's one more to go. >> This is a good one. Airports. >> Yeah. So airports. Uh this analysis is only uh for Sydney and Melbourne.
So the price gap you can see there has changed quite a lot over the history. Uh but there's no obvious trend. So the price difference in 1980 was around about 35%. Uh it got down to under 10% at one point and over 40%. Just before the turn of the century and currently it's back to where it started at about 33%. So again very little we can read into this.
like the others over the long term there's no significant benefit or disadvantage for this amenity. Well, there's less data or less would you say less data points like you're looking at median airports where it's like what maybe the Sydney >> very very mascot and then you've got in Melbourne Telmarine there and then the other airport out um can't think off the top of my head um >> but yeah the other one near Jalong >> Avalon Avalon >> you uh you brought up an interesting point about the um new Badgeries Creek airport and what impact it's going to have and we'd only know after the event, what impact it had. Uh there was a study performed by the Queensland University of Technology and actually it's on the next slide. >> Okay, let's go. >> Yeah. So, it's the uh Qout and the the Air Transport Innovation Center.
Now, this study was conducted around 2016 and it examined how the opening of Brisbane's international airport back in 1988 affected property prices. Now, this is under the flight path. So, they were concerned what would happen with Badger's Creek or another airport or somewhere else when you introduce uh say a new runway or a new airport altogether. So being under the flight path is obviously quite noisy. So it's this is a negative amenity for for some Brisbane suburbs. It was quite negative.
But what their report found was that price growth suffered for only about four years. That's the four years immediately after the opening. But from then on, for the next 20 plus years, the growth of affected suburbs caught up with suburbs that were not affected by aircraft noise. So in other words, the amenities introduction only affected growth rates for a short time. Uh long-term, no difference. No difference in growth rates compared with other suburbs that were not affected by aircraft noise.
>> Is this only for the Brisbane airport? Did you say >> just for that? That's >> so small sample. >> That's right. Yeah. Well, it's a lot of suburbs in Brisbane and there would be a fair few under the flight path.
Uh and they did some some comprehensive analysis, but it is just one case. But you can see that the introduction of an amenity is going to affect growth rates, but only for a short period of time. Once prices have factored in the presence or absence of that amenity, whether it be good or bad, after that it's business as usual. >> I guess it depends to where the airport is. Is that area already built out or not? Is there a lot of supply coming into that within that pocket?
So, it's yeah, it's um interesting. >> So, um now all of these amenities that I have been examining so far have been in isolation. So, schools in isolation of shopping centers and airports and and train stations. What about a whole bunch of smaller amenities like a bus stop, a cafe, a gym, uh a place of worship, a skate parks? There's a metric called the walk score uh which is published by walk and you can see it on walkscore.com.au. This uh score takes into consideration an enormous number of amenities and it comes up with this overall score out of 100 for the walkability of a suburb.
Uh the score reflects how easy it is to get to common amenities like cafes, the schools, uh the shops on foot. That's why they call it the walk score. Now, if a suburb has a high walk score, then it must have a large number of diverse amenities that are well spread out across the suburb. Uh so rather than measuring an isolated individual uh amenity looking for some vague correlation to capital growth, what I've done is I've analyzed the success of the walk score. Uh, and I've also noticed there are reports about walk score, similar to school catchments. Oh, these properties have a high walk score and they're 20% more expensive than those properties that have a low walk score.
So, walk score does influence price, but once again, we're not interested in price. We're interested in growth. So, does it have an impact on growth? And that's what I analyzed in the next Well, we're coming up to a chart. So, oh yeah, that's right. I just need to point out something about this.
Um, okay. So, in the process of analyzing, uh, walk score data, uh, I have to point out there's not a lot of it because walk scores are a relatively new thing. So, we only have walk scores dating back to December 2014. So, it's only a decade. So, you're barely going to see sort of the exponential growth in that sort of period of time. Uh so I can't properly review its potential as a long-term growth predictor, but I made another assumption like I did with school.
So if you go to uh the next slide, have a quick scan of this list of suburbs just in Sydney and Melbourne for now. Uh these were the top scoring suburbs by Walk Score back in December 2014. You uh might be familiar with some of these suburbs. Perhaps you know where they are. Uh what I'm going to do is compare this list of top suburbs to a decade later. So this is from 2014, but just have a guess where you think the top scoring walk score suburbs are now.
If you go to the next slide, >> I think I'm just going to have a crack here, but I think they're similar. >> Spot on. So, as you can see, they are all still pretty much the same suburbs, the same areas, the same type of suburbs. So, here's the assumption that I'm that I've made in order to guess at the performance of a high walk score suburb versus a low walk score suburb. I'm going to assume the suburbs that rank highly by walk scores now were ranked highly by walk scores >> back in 1980. Uh so I'm assuming suburbs like Hey Market Alultimo Chippendale Carton Fitzroy, Melbourne, they've always been ranked highly by walk score even before there was a walk score back in 1980.
I'm sure that buyers agents or property experts out there put this walk score in their reports. My question would be why? >> Yeah. Well, it is difficult to do this sort of analysis. Uh it's a lot easier to just have a theory and run with it. >> Well, you wouldn't go, okay, a suburb's got a walk score of 20, so I'm not investing in there.
Like, are there >> Well, do you want to see? >> Okay, I do. >> Okay. So based on that assumption that I clarified there, I split all the suburbs of the country up into 10 evenlysized buckets based on their walk score rankings. So >> 10% of Australia's suburbs are in the first bucket, which is on the left there. Uh that's the set of suburbs with a walk score ranging between 0 and 12.
And you can see the walk score range is along the bottom left there, 0 to 12. So on the far right, the 10th bucket that also contains 10% of Australia's suburbs, but these are the top 10% as ranked by walk score. So these suburbs have a walk score between 82 and 100. So these are these are jam-packed full of amenities. Then I calculated the median growth rate from 1980 to 2024 for each of these 10 buckets. >> So a 44 year period.
>> That's right. and I plotted a line of best fit which is that white dotted line at the top. >> So peranom growth that's roughly about between 7 to 8% consistently but they're pretty much all the same aren't they? >> Yeah. So the gradient or slope of that white dotted line reflects the relationship between walk score and long-term growth. And because it's flat, it means there isn't one.
So there is no benefit in suburbs. I mean you look at the two polar opposites there a the walk score top decile 82 to 100 versus 0 to 12 there's virtually no difference in in capital growth. >> So why look at a walk score? >> Yeah it is not a predictor of of capital growth. I guess yeah, I'm trying to think what are the reasons maybe because you can just jump on Google maps a lot of the time, but I guess there's some good information on walk score to if you want to flush out a suburb quickly, but you can also go on Google Maps. >> Well, one benefit to it is you can use it to uh help estimate what price you're going to pay for properties because properties with good walk scores will command a premium compared to properties where you got to drive everywhere.
So, so it it serves some purpose. Uh, it can give you an idea of you got to pay extra. This is in walking distance, schools, shops, blah blah blah, but it's not going to give you any better capital growth over the long term. I'm sure there's suburbs out there where there might be for example like a house or or let's say a unit as an example that's maybe has a very low walk score that sees maybe outperforms these areas that have a very high walk score for the fact that maybe there's a limited amount of supply further out. Maybe it's already built out. Maybe there's no big highrises.
I'm not sure because you think around these train stations or look we look at Chippendale as an example in in Sydney. um units everywhere. >> Yeah, that's right. I mean, what you were saying before about the introduction of a new amenity boosting the rate of growth. >> Uh picture um one of those uh top top walk score ranked suburbs, say Hay Market in Sydney. >> Is it going to get a high-speed train station?
Is it going to get another shopping center, another cafe, another bar or a boutique restaurant or But you compare that to a suburb right now that has a very low walk score, it has far more potential for all of those amenities to come along. >> Very smart, Shepherd. Very smart. All right. So, um the next slide, uh all I've been doing so far is looking at data at the suburb level. But there are some professionals in the industry who would claim that uh whatever growth the median for a suburb has had, the specific properties that they have picked out for their clients have outperformed that that median.
Uh so they will refute this this research saying there are individual properties that outperform the medium for the suburb the suburb as a whole and they refer to these sort of properties as Agrade properties and they may say that the Agrade properties have a a better design or in a better street or on a better shape blocks with better views some of those features that you see listed there. Whatever the reasons are they are wrong. There is no such thing as an A-grade property that outperforms over the long term. That is so historical data disproves the concept of A-grade properties espec and and C-grade properties too. And it's especially over the long term that it disproves this. Now there's another episode that we've got on this very topic.
Uh we haven't published it yet, but uh keep your eye open for episode number 27, >> EBS, expert busting series. Busting series episode number 27. Now uh if you move forward to the next slide, this chart shows the variability in price that you're likely to see in a typical Australian suburb over the last 40 years. So it's measured as the deviation from the average as a percentage. That's a bit of a mouthful, I realize. Uh okay.
So you'll have some properties that are more expensive than the average, some that are cheaper. How much do the expensive ones differ from the average? And that's what this curve is trying to show. Uh so it's measured as a percentage. Typically back in the 80s, you would see prices vary by plus or minus 40 to 50%. So that's towards the top left there.
That's typically. Now, not always, just typically as measured using the standard deviation from the average. Now, if there were properties in a suburb that are agrade, then we should see an ever widening percentage gap between the Agrades and the rest of the suburb. But as you can see instead of the deviation increasing over time as a properties separate themselves from the rest instead the deviation has narrowed and that deviation should have increased exponentially up into the right top corner of that chart. Instead it is actually slowly decreased. >> So just back to that point.
So that's a percentage um standard deviation of the average property. Is that what you're saying? >> Yeah. So look at all the sales of properties in a particular suburb. >> Uh how much higher is are they they are the the more expensive ones? How much lower are the cheaper ones compared to the average?
That's the standard deviation. Then measure that as a percentage of the average has it increased. >> What is standard deviation? uh it is a mathematical term but just in layman's terms it's just the the variety of sale prices that you'll get in a in a suburb. So is it is it uh if you have a high standard deviation there's tremendous variety of prices. If it's a low standard deviation they're quite tight.
>> So explain to me at the start there we've got 40% standard deviation as a percentage of the average. Can you give an example of that? So let's say property is worth >> 500,000. We'll go a million. >> All right. A million.
Make make the numbers easier. So 40% means that you will have typically properties in the same sub. So you'll have the average in the suburb at a million >> million. >> And then you might have uh some properties quite a few selling within say a million to 1.4 even some higher than that. But typically the more expensive ones will be 1.4 mil and then uh the cheaper ones might be say 600,000. So >> that's a big standard deviate.
That's a big difference in the median. >> That's right. But uh nowadays it's much tighter. So if you have this concept of an A-grade property, it will just continue to outperform the average >> and that gap will widen and widen and widen exponentially over a long period of time. But instead what we see here in the data is that it's narrowed >> the narrow. Okay.
So or if you look at all the sales of houses in the area in that suburb, it's sort of getting a bit more tighter now. And that would make sense because of there's been such large price increases over the years. You would think that that percentage would sort of tighten up a little or there'll be less variation. So we've gone from a variation of 40% down to what maybe 2530. >> Yeah. Yeah.
Around 30 now. And I think that it might have something to do with just uh online data. We might be able to do desktop valuations. Uh so you're not going to come up with um you know the low ball offers aren't going to be as successful nowadays because everyone has access to uh decent data to make uh well-informed comparable market analysis and uh yeah so it's it's narrowed and and I think back to the point it depends on like a agrade property for me would be depends on your budget and it depends like if you're outsourcing to a buyer agent you need to find where their value ad is. But I think from the purchasing property perspective, you don't want any headaches, do you? But you have to be careful you're not overpaying one for someone else's renovation because you're paying a premium for that, but then you're also paying the extra stamp duty on that actual property also.
So, it's like depends on how hands-on you want to be. You want to try and find that nice middle ground with a property, don't you? Something that's not going to cause you too many headaches, but you can get a tenant straight in there. >> Yeah. Yeah. So I guess uh yeah not a dog box but uh not recently renovated.
Uh yeah so more on this topic the next chart. So this is a different way of looking at the same concept of these so-called A-grade properties. So in this chart I compare the highest sale price in the suburb to the median sale price to see how much higher it is and that's indicated by the purple line. So you can see that in the 80s the typical Australian suburbs highest sale price was about 80% higher than the median sale price. So the median is the middle one. >> Okay.
So let's have a look. So we got the max above median that purple >> purple line. That's that's oh lilac. Is it >> purple lilac? >> Don't know. And then we've got the turquoise down the bottom.
>> Okay. So yeah, the turquoise line is the lowest sale price as a percentage of the median. So, uh, again, in the 80s, the cheapest sale price was typically 50% lower than the median sale price. So, that >> So, sorry. So, you're grabbing all the suburbs in Australia here, all house suburbs. >> I did limit it to I think it was uh suburbs within significant urban areas.
I'd have to check, but it is a very large sample size. >> And what's a significant urban area for our listeners that don't know? Uh the Australian Bureau of Statistics uh define a significant urban area. It's usually like a city like Sydney is the largest. Sydney and Melbourne, they're the two largest significant urban areas. Uh they have to have a population of at least 10,000 people.
So you have some regional areas. Some of them are like uh uh G Coast Tweed Heads. So it actually crosses uh yeah Wingong's one of them. Newcastle Mland Cessnok that's another one. Great. >> Central Coast Jalong.
So what this is so maybe let's start again like with an example of a property. So let's say we look at early on we've got a million dollar property that's the difference in okay so the the two lines are measuring two different things. So one line is measuring the difference between the median and the top sale the most expensive property that sold. Okay. And the other one is measuring the difference between the median and the cheapest property. So, how much cheaper than the median is the cheap one?
It's around about 40% 45 nearly 50% back in the 80s. How much more expensive is the most expensive property compared to the median? Well, back in the 80s it was around about was that 75%. Uh if you look at the the line of best fit there, that's the dotted line. >> So, okay. So, that line that top line there is saying above.
So if a property was uh let's say the typical value was a million dollars and if it got up to let's say 80% then that higher above average would be 1.8. >> Yeah. >> But the lower though if it was 40% below it would be what? 600,000. >> That's right. >> So that's like a big gap.
Like we're looking at the difference between 80% and 40%. So it stretches out. >> Yeah. So the fact that the purple curve is above the turquoise curve means that more expensive properties properties are higher above the median than they are lower below the median. And it's very interesting to see and this is where a lot of again uh property professionals out there would say I can buy your property under market value or so it's just it's very interesting but if you have a look at that gap is definitely shrinking isn't it over time. >> Yeah that's right that's the story of this chart.
Uh so if the AST of Agrade properties in a suburb continued to outperform the others and if the cest of the C-grade properties continue to underperform then we should see both those lines getting higher and higher. Uh not only do they get lower but they get closer and that means that the variation from the most expensive property to the least expensive properties has actually narrowed over the last four decades. So if there was such a thing as an A-grade property, that purple line should have exploded up towards the top of the chart and gone way over the edge before we even got to say the turn of the century, which is near the middle of the chart. But instead, uh there's been a gradual decline. So disproving the concept of agrade properties. >> Nice one.
>> So yeah, there is a benefit of buying closer to certain amenities which makes your property, you know, an Agrade or your suburb an Agrade. Well, um it's not seen in the data. All right. So, uh data shows there's no reason to buy uh near near amenities or far from them if they're if they're an eyes saw. Uh it doesn't give you a growth booster. Uh they're not a bad thing, but they just don't they don't help.
So, uh yeah, hope that helps investors make more informed uh investment decisions. You don't need to avoid main roads. You don't need to avoid skate parks. you don't need to buy near schools and shops. It It just doesn't really help. That's over the long term.
>> Just stay within your budgets and um yeah, I think good episode, Jeremy. So, >> yeah, if if this was uh informative to you and you know someone who's banging on about agrade uh properties, you might like to use the share link and uh send them this. Uh it'd be good to hear also from those objectors. What uh what data sets have you looked at? Uh what factchecking have you done? So yeah, there's a like uh button there to to let us know if this is the sort of thing you're interested in and uh leave your comments too.
>> I think that's an important point. If you if viewers see a difference in data, they've done their own analysis, send it through. We'll have a look. Maybe we've missed something. >> So it's just good to >> happy to happy to research uh other data. Not so happy to just hear another opinion.
>> All righty. So thanks for tuning into expert busting series 4. And next time we'll explore why proximity to CBD is so overrated. See you then. Take care.