I'm Jeremy Shepherd. >> And I'm Damian. >> We use data to expose deceitful property experts and their marketing BS. >> This is the Expert Busting Series. >> Welcome to episode 17 of the Expert Busting Series Public Housing the brutal truth. Does it harm capital growth?
Take it away, Jeremy. >> Yes, a lot of experts in the property investment industry will tell investors to stay clear of public housing. They say that it hurts capital growth, hurts cash flow, hurts your peace of mind, hurts everything. But these are and it sounds like a reasonable opinion, does it doesn't it? But it is just that, it's just an opinion. So I thought a few years ago that I would conduct some research.
This is an update of that research to find out what the data says about state housing. So first of all, just got to go through some synonyms. They these all mean the same thing. So sometimes it's called state housing, sometimes it's called government housing, sometimes it's called public housing. I'll just refer to it as as public housing to make it make it clear. And what is it?
Well, the state government provides heavily discounted rental accommodation to members of the public who have income difficulties or are unable to meet the the market rent for the area they're living in. And it might be due to disabilities or family violence. There's some criteria that you need to meet in order to get approved, get accepted. And there's a priority there towards those most in need. But that's that's public housing. Now the data that I'm going to go through here, which is the percentage of public housing, this comes from the Australian Bureau of Statistics.
Now, every 5 years they conduct a census and one of the questions on the census is whether the property you are in is being rented and if so, from who. Uh one of the options is government housing authority. And this data dates back to 2006. Uh that I believe is the first time that it appeared as a question in the census. Uh now, given we're recording this in late 2025, there's no data yet for the 2026 census. Uh so, we've got 2006, 2011, 2016, and 2021, four censuses.
Uh covering yeah, that that that 15-year period. So, it's usually held the census is usually held in the middle of the year, around August. Uh and depending on the data, it can take the ABS an extra year after the census is conducted to actually publish that data. Uh anyway, the following slide shows some examples of uh public housing numbers. Uh so, got some examples, some of them from the bottom 10% by public housing and from the top 10%. Now, these numbers have been averaged over the four census years.
That's 2006, 2011, 2016, and 2021. So, they're not the latest numbers. They are a reflection of the long-term percentage of public housing that these areas have had over the last uh what, 15 years. So, it's 15 years. I know there are four censuses and they're 5 years apart, but there's three five-year gaps, so it is actually 15 years, not not 20 years. Now, a decile is uh I just need to clarify what a decile is.
Yeah, it's it's a group of 10%. So, I picked um three suburbs from each decile. Decile one, which have the lowest percentage of state housing in the country, and I picked three suburbs from decile 10, which have the highest percentage of state housing. And there are some suburbs in Sydney with absurdly high percentages, but most of the extreme cases are in the 20s, uh 20% around the 20% mark. Now, I did this I picked a range from around the country's uh five biggest state capitals in the hope that uh someone would find a suburb that they're familiar with, um and they can get the general idea of what what typifies the sort of property market with high and low public housing. All right, so using this data, we can now see the impact of public housing uh on capital growth over the last 15 years.
>> So, just to talk through the lower deciles, you've got like in Sydney Tamarama, Point Piper, uh Double Bay, all 0% public housing. In Melbourne, Eaglemont Toorak Belgrave, um that's just an example of Melbourne and Sydney. And then, for example, on the higher end of Melbourne, you've got Heidelberg West at 27.5% government housing, Flemington, which is interesting, 22.6, and then Collingwood also at 17%. percent. You would maybe classify what some of those markets as blue chip as people would maybe call them like um Collingwood, for example, potentially. >> Yeah, maybe.
Yeah. >> But >> And yet they have a high high percentage. Yeah. >> of public housing. All right, let's move forward. So, we've got uh what have we got here?
We've got a >> Yeah, so this this chart shows the relationship between uh government housing and long-term capital growth. So, here's what I did to get this chart. Firstly, I calculated the percentage of public housing for every suburb in Australia. And I had to eliminate any suburb in which there were uh too few respondents to the census. So, I just set the cut-off at 500. Um and that's to ensure we get an accurate measure for the percentage of public housing.
So, this would eliminate many of those remote suburbs in the middle of nowhere um with practically no real estate transactions taking place. So, they'd be irrelevant to property investors anyway. Now, because there were four censuses, I averaged the percentage of public housing for each suburb over those four censuses. Later on, I'll analyze change in percentage of public housing, but for now, I'm looking at the long-term high and low public housing markets. Uh so, then based on each suburb's percentage of public housing, I grouped them into 10 evenly sized buckets called deciles. So, each decile contains 10% of the suburbs around the country.
Decile one, that's the one on the far left, it is full of suburbs with zero public housing. Or, it might not be zero, it might be very small like 0.1%. And decile 10, on the far right, that's the group of suburbs with the highest concentrations of public housing. So, these suburbs are in the top 10% by public housing percentage. Now, that purple line you see, that shows the percentage of public housing. And for decile one, you can see it's zero.
And the scale for percentage of public housing is up the right vertical Y axis. And it ranges from zero right up to almost 14%. And now, there are some individual suburbs with much higher percentages, you remember from that previous slide, uh but the median percentage for this group was 14%. Okay, then for each suburb in each group, I calculated its capital growth rate from 2006 to now. Now is the end of 2025. As a and each bar in this chart, the height of that bar is a reflection of how fast that group of suburbs grew over the last 15 years.
And the scale for capital growth is up the left vertical Y axis. Um also note that that's a per annum amount. So over 15 years, those would be pretty low growth. That's percent per annum over 15 years. And as you can see, actually it's sorry, it's more than 15 years. Um it's 20 years because we're going up to the end of 2025.
So it's almost uh 20 years. 2006 to 2025, the end of 2025. All right. And as you can see, very little difference in the growth rates for each decile. That dotted line at the top is the line of best fit through the tops of those bars. And that line of best fit shows the general relationship between state housing and capital growth.
And because it's flat, it means there is no relationship. In other words, it doesn't matter if there is low or high concentration of public housing, it does not affect growth over the long term. >> So for example, decile one, just to be clear, that's pretty much like what the lowest 10% of public housing nationwide. So the markets that have with 0% cap public housing, 1% public housing, like very small minority. But at the back end, you've got a big batch of the highest 10% of public housing markets in Australia. So they're batched in 10% quartiles, correct?
So 10 0 to 10% 10 to 20% deciles. >> That's right. Yeah. So 10% in each each of these buckets. So the list that we showed before with example suburb names on the left column were taken from the left uh the decile number one on the left of that chart. And the ones the big ones you mentioned Flemington had 22% uh that would have been in decile 10.
So, the the suburbs could be anywhere in Australia. They don't even have have to be side by side, but they just have a high percentage of uh public housing. They're in decile 10. And >> Yeah, but it notices on that like decile 10 it's actually got the what the best capital growth. So, the higher Is that what how I'm reading this information? >> correct.
The height of those turquoise bars represents the capital growth over that 20-year period from 2006 to nearly 2026. So, it's nearly a 20-year period. >> And maybe over that period it could be due to affordability potentially. So, if you're looking at those higher price point suburbs and there's a little public housing pocket or something potentially um or maybe it's like that ripple effect. You've got the main suburbs, but near it they've got high public housing suburbs and due to the price point investors choose to go there getting in at a lower price point and you're also getting potentially a also better rental yield behind it. If you can put the whole public housing stigma aside cuz I can see a lot of people you know I guess if you're utilizing for example like a buyer's agent, you could you'd be know straight away because it could potentially be more headaches, right?
It's easy to find maybe the suburb to invest in and potentially the property, but it's like that public housing stigma. Could be tenant complaints. It could be issues and a lot of investors don't want that. They just want to rent it out and forget about it. >> Yeah, well actually I've just thought of another possible reason why the capital growth might be slightly higher in these high um high percentage public housing. It could be that investors steer clear because there is a a with between where investors buy and lower capital growth.
It's usually the owner occupies that push up prices faster than investors. But actually the next slide is Yeah why? So, nobody can know the real reason why public housing has no impact on long-term growth, but we all we can know is there is a correlation or there really there is no correlation. As you saw the the trend line was flat there. But uh you know, as humans, we all like to know the reasons why things are the way they are and uh it's a lot easier to accept what the data is saying if we can find a way in which it makes sense. So, you came up with some good ones there off the cuff.
Um I've got a theory uh and it is just a theory. Uh I don't know the precise reason. I'm just speculating here to help with the acceptance of what the data is trying to tell us. So, one reason why the data might show no correlation is that public housing percentages are fairly stable. So, I looked at that list of suburbs. I'm sure a whole bunch of people would look at that example suburbs and thought, "Yeah, it's always been like that." Um if there's um a high public housing area now, it probably has been for quite some time.
And that means that buyers have already fact factored this into their pricing. So, they're only prepared to buy in in those sort of areas if the price is much cheaper. And vice versa, they're they're going to they're prepared to pay more if the area is more expensive. So, although you may have higher priced housing where there's a a no government housing, um that's not growth. That's just the house price. So, growth is a change in pricing.
It's not a high or low price. It's a change in price over time. So, if a feature has already been considered by the market buyers and sellers uh in coming up with a price then that feature has to change to alter the rate of growth and so change is what I analyze next and that's the next chart. >> Another example could be let's say might be in a quiet pocket and then all of a sudden there's a an extension to a highway or something's been built out that's like a change a negative change right? >> Yeah if the highway brings a lot of noise. >> Brings a lot of noise.
>> Yeah that might decrease the rate of capital growth until that's now factored into the price of property there and from then on it's business as usual. All right so this next chart shows the relationship between change in state housing over 15 year period versus capital growth so just to be clear the previous chart was long-term state housing versus long-term growth. This chart is the change in public housing versus capital growth. So those dissols along the bottom are not based on the percentage of public housing but the change in public housing percentage. And that change in public housing was measured from 2006 which is the first census for which um this data is available. It's the change from 2006 up to 2021 which is the most recent census at the time we're recording this.
And the purple scale up the right vertical Y axis that shows the change in public housing percentage. And that's why some of the numbers are negative in fact most of the scale is negative. A negative number means the suburb had a reduction in the percentage of public housing and that can happen if the state government sells off some of those houses or if the suburb population grew but the government didn't keep up with the same percentage of of For example if a city fringe suburb like it's a say it's a green field estate, it opens up, there's a whole bunch of um first home buyers that buy there, but if the government doesn't buy there, then you you might see uh a decrease in the percentage of public housing. There might have been say 1% there, uh the size of the suburb doubled, but none of those new houses were bought by the state, so uh the percentage can decrease. Or it could be they just sell it off. >> Another example would be maybe let's just say like the Collingwood an example there.
You might have public housing within the units, and then let's just say there's all these brand new units that are popping up everywhere, but they're going to like owner occupies and maybe investors. So, in that area there's population growth or a dwelling change. Okay? And then let's say the public housing numbers stay the same, but because you've got all this new population coming in, that's going to be potentially or it is a percentage drop in public housing in that pocket. That's where you'd mostly see most of the change, similar to maybe like areas like what maybe Redfern too, similar with units popping up. Um, so that's where I think and it's interesting over that what 15-year period like across the board there's just been a reduction in public housing overall.
>> Mhm, yeah. State governments around the country have not been able to keep up. They have become more dependent on property investors providing rental property. >> Or is it like maybe also is there less demand on public housing, do you think or not really? There's always that strong demand for it. >> Yeah, I don't know.
>> Yeah. >> Don't know, yeah. Good good question. But yeah, that purple line that scale up the right, it shows that um so the majority of suburbs not much change. >> Yeah, if we go to I guess the decile one, so for example, the area that had like let's say uh minus a 3 and 1/2% drop in public housing over that 15-year period, is it per annum or that >> Uh it's over overall, over the total 15 years. So, it's a very small change.
>> It's very small, but let's say 3 and 1/2% drop on average and had the most capital growth. So, that reduction, is that right? The reduction in capital um public housing had the best capital growth. >> Uh well, okay. So, yes, yes, that's right. So, the um that example you're giving is the bottom left-hand corner.
Yeah, so if you look at the purple line, go over to the purple axis. That's minus 3 and 1/2%. So, for example, let's say the uh percentage of public housing in 2006 was 5%. Over the next 15 years, it came down by minus 3.5%. So, now it's at um 1.5%. So, it's gone from 5% down to 1.5%.
That reflects a minus 3.5% um you know, a change in public housing. And that had the best capital growth. >> But, there's a fair few outliers. It seems like it's through all the deciles. It's all up and down, especially if you look at that highest decile where there was slight increase in public housing over that 15-year period, it still had pretty good capital growth, like better than a lot of those other markets. >> Yeah, well, um you're right.
It is a bit higgledy-piggledy, but the general trend there is that dotted line again, which is sloping down into the right. And because it has a slope, it suggests there is a relationship between 15-year change in public housing and 3-year capital growth. So, I didn't mention the growth was measured over the next 3 years. So, I can't measure growth over 20 years cuz it hasn't happened yet. So, the end of this period, the end of this 15-year period is 2021. Here we are at the end of 2025.
So, the only growth that you can measure is over a 3-year period. So, so that um uh per annum growth is is over a 3-year period. Um Now, if you were to assume because of this sloping trend line that uh a decreasing public housing percentage is a good thing, you would fall into one of the traps that most inexperienced analysts of this sort of thing fall into. So, and it's something I had to learn the hard way. Uh the problem is we're only looking at a single time frame. And property markets have cycles, and some of those cycles go over 20 years.
So, if you're looking at something that's only 15 years, uh you could come unstuck. So, if we only look at a single time frame, we can be fooled into believing that this works all the time when the fact is it only worked this time. So, to see if change of public housing really does influence capital growth, we need to measure the change over a number of time frames and see if the growth is consistent. See if that pattern, that sloping trend line is consistent. And this next chart is the change over 10 years. So, again, it's change in percentage public housing, but instead of a 15-year change, it's 10-year change.
And for consistency of comparison, I'm still measuring the impact on capital growth over a 3-year period. And over that 3-year period, growth was well, pretty poor across Australia, uh which explains why the bars uh so short. And as you can see, the trend line has uh flattened out a fair bit. It does have some slope to it, but it is pretty much flat. Um from one extreme to the other, that is from decile one on the left to decile 10 on the right, there's about a 0.5% per annum growth rate difference. Uh so, over 3 years, that totals only 1.5% not much.
Uh I just want to point out there were two time frames now uh used in this data. Both are over a 10-year period, but the first is from 2006 to 2016. And then I measured 3-year capital growth from 2016 to 2019. And the second 10-year period is from 2011 to 2021. And then I measured the 3-year growth period from 21 to 25. So, sorry, from 21 to 24.
So, now that there's some diversity in the eras, we can see if we have a perennial rule, always works kind of rule. And as you can see now, not really. It's still too few time frames to be confident, but um so far there's there's nothing to base to hang our hats on. So, let's look at the next chart. And this one has three three periods. So, this is now 5-year change in state housing versus 3-year capital growth.
And there are three eras in which we could measure this, from 2006 to 2011, from 2011 to 2016, and from 2016 to 2021. And the dotted trend line is still relatively flat, but it has switched to a slightly upwards sloping trend, which contradicts the prior charts. And you'll notice how the bars are a bit sporadic. The fourth and the seventh deciles, they look like they're too high, and the sixth decile looks like it's too low. And that sporadic nature of this trend places doubt on the validity of the trend. And all of this means there is no relationship between 5-year growth and well, 3-year capital growth that followed.
So, looking at change in public housing does not help us find high growth markets. Why do you think that is, Demo? >> Why? >> Next slide, please. >> I know the answer, but I know you've got the points on the next slide. >> Yeah, so nobody knows.
Nobody knows the cause. All we know is the correlation, so these are just my theories, uh which is why I would start with something like, "Well, I wonder if uh many of these kind of areas may have stigmas that last longer than the public housing does. So, home buyers are not looking at data like we are >> Mhm. >> as investors, and they may have this lingering stigma that we uh know is unjustified by a lower lower percentage. Or, perhaps changing housing public housing percentage is simply too small to really shift buyer behavior. Uh you can't have a big improvement in state housing if it's already zero.
Uh the biggest changes can only happen from high to low. Also, owner occupies, they're the big drivers of capital growth, and they outnumber investors 2:1 in in the typical Australian suburb. So, in a high public housing suburb, you may have 60% of owner occupiers, say 30% of investors, and 10% government housing. Now, if government housing halves from 10% to 5%, that is still only a small portion of the residents that are changing the nature of the residents. So, is that enough to radically change the character of the suburb? So, one theory I have is that size of the public housing cohort is simply too small to shift the needle, even if there's a dramatic reduction in their numbers, even if they all move out, it's still too small to change.
And lastly, my last theory, uh Uh, what if we all have an unfair opinion of uh, public housing residents? What if only a small minority of them are the uncivil kind that we tarnish the entire cohort with the same brush? Uh, what if the majority don't harm the feel of the area at all? They're just living out their lives, um, doing what they can, living peacefully, um, harmoniously with their neighbors, and they don't actually, uh, affect the feel of the the suburb at all. So, anyway, I don't know. Just to be clear again, these are just my suggestions.
I don't know the real reason, and I don't care, either. There's enough, uh, data here, uh, for me to be uh, happy accepting what it's what it's trying to say. >> I think it's also most probably a little bit of compromise, right? So, like let's say you're short-listing markets, and your budget is, let's just say, 700,000 as an example. So, you're short-listing all these, um, markets at a higher price point. Let's say up to 750, 800, um, but then you know that for public housing properties, or properties, um, near power lines, or maybe on a main road, their typical value is going to be lower, right?
Because it's already factored into the price. You can go into these markets that have that higher typical value, but you're obviously getting in a little bit cheaper due to maybe like the public housing, as an example. So, again, it's just a matter of like, um, you can get in cheaper into these markets that have higher typical values if you target public housing because of that stigma. >> potentially. And there's also an opportunity for change, right? Um, like look at areas, I know years ago, um, my parents spoke about like Redfern, like not many people wanted to live in Redfern and Marrickville and all those areas.
Now, um, multi-million dollar suburbs. That's right. Trendy, things are changing. So, >> Yeah, so, I think the point you were trying to make there is that affordability as a result of public housing and the the rest of the nation being so expensive might push people towards cheaper alternatives. This is all we can afford, so we just have to take what we can get. Uh and that that might drive more demand for those areas.
Yeah. But either way, it's um yeah, there's nothing in the data to suggest uh that it's a problem for capital growth. >> That's interesting cuz I thought it the change in and one there wasn't a massive change in the public housing numbers. I thought there'd be a big shift >> Yeah, very very small. >> So, I thought there'd be a big shift and that would have a maybe potentially huge impact, but I see it's very minor changes in which makes sort of sense, right? Because all these markets are already established, right?
>> Mhm. >> So >> And and this is over a long period of time. Like the first chart was over 15 years. And the the they're still single-digit percentages, of course, so >> In the data, did you see any suburbs that had huge amount of like from a percentage increase public housing or not really? >> Uh high increase, I didn't actually look for a high increase. >> Yeah.
>> Um I just grouped them all together. So, I wasn't looking for what was the maximum What was the >> them all together, which is the way that you do it. >> Yeah, yeah. All right. So, uh although growth trumps cash flow, I know there are some investors out there who are going to wonder about whether these sorts of areas impact cash flow, as well. Fair enough, capital growth, no, but what about cash flow?
So, this chart shows the relationship between the percentage of public housing and gross rental yield. And that dotted line that is the trend line, it shows that uh gross rental yield is actually higher in suburbs with higher percentages of public housing. Uh remember that the high deciles have more state housing, they're the ones on the right. And that tr- um scale up the left axis is the uh gross rental yield. So, yeah, there's another thing, it's gross rental yield, not net yield. >> Mhm.
>> Um But what about vacancy rates? They may be higher in these high public areas, so the next chart >> So, rent is before we move on to the next slide, the public housing areas that have higher public housing have better yield, rental yield. >> That's right. Yeah. >> We know a lot of investors love cash flow. >> Yeah.
Yeah, but some might think, "Oh, yeah, but they're kicking holes in walls. They do a fly-by-night. There's a" >> That's a good point. Yeah. Maintenance is a problem. >> Yeah.
So, that the next chart uh shows the relationship between public housing and vacancy rate. Uh so, this is not the vacancy of the state houses. This is the vacancy of the uh private landlord owned uh houses in the same suburb. And as you can see, uh the higher the percentage of public housing, the lower the vacancy rate. And I got to admit that was a bit of a surprise to me. And look how consistent that trend is, too.
It's remarkable. >> I wonder why that would be. >> Well, next slide, I uh I had to struggle to come up with some theories uh as to why this might be the case. Don't have many good ones, but um what if once you're on a good wicket, you're in this, you know, public state state uh provided house, um you're likely to stay there. You when you're on a good wicket, you stay there. So, there's less turnover, and that's why maybe the vacancy rates are uh reduced.
That's one theory. >> So, you're saying that yeah, because your surplus cash flow is so good, >> well, you're you're you've contacted the government to say, "Hey, I can't survive. Can you provide me with discounted accommodation?" They do, and you go, "This is fantastic. I'm not moving. I'm going to behave myself. I'm going to" >> Okay.
>> Yeah. That's one theory. Or, maybe the people in state housing are in state housing for life. Uh whereas renters in the expensive areas with low state housing, mhm, they're more aspirational, and so eventually they they move out, and that creates more turnover, increases vacancy rate. I I don't know, I'm just guessing. Uh and my third one is what if the government is more relaxed about a problem tenant.
Uh we know that private landlords, you have any trouble, if they're late on rent, um they damage the property, you issue an eviction notice and off they go. But state government might be a bit more relaxed and so they um allow a lot more. They, you know, turn a blind eye to a lot more and so that results in lower turnover, lower vacancy. I again, I don't know. Um but yeah, do you have any theories? >> No.
>> Yeah, it's it's it's strange, isn't it? But anyway, um is it a complete waste of time then looking at public housing? Uh >> The back on that point so with the vacancy rate though, before so you're saying this is um like I've got a property in a the public housing pocket. So for example, let's say I had a an investment property in public housing that's all 10. Is that how you're looking at that or not? >> Yeah.
Are you looking at the actual public Yeah. >> Not not the >> Not the state's houses, the private renters. >> Private renters. So it's like I invest in an area that's got maybe 30% public housing and I've got an investment property there. >> Yeah. >> Yes.
>> Yeah. >> Yeah. >> it's there's less turnover. Maybe Yeah, actually it's a good >> I think affordability would be would be one of the big ones because it's like the yield's better cuz the typical value is lower. >> Right. >> In an area.
So if you're targeting an area with a 4% let's say 5% rental yield, your public housing might get 5.5 or 5.4. Like you're going to get that little bit more cuz that typical value is potentially a little bit lower, but you will get that little bit less rent. So it's a case-by-case basis, but I think I wouldn't turn my nose up to it because again, it's been priced into the asset and instead of paying let's say $700,000 in a neighboring suburb, you might be getting in for 450 or 500 for example cuz of that stigma. So I actually see this as maybe potentially a bit of opportunity there. >> Yeah. Yeah, especially if you're in one of those hot markets that uh a few investors have targeted.
Um they probably will turn their nose up at the areas with high percentage of public housing. So yeah, presents an opportunity. >> But there might be challenges too. I get it like there's um there could be potential issues. So I think getting the right tenant in there and the property manager is most probably the big one, right? >> Got a card coming up a slide coming up for that.
Um yeah, so is it a complete waste of time looking into public housing? No, because it does determine price. >> Mhm. >> Uh and prices are generally higher in low uh state housing areas. So it's not important to me as a capital growth seeker, but it is important to our buyers agent who's trying to estimate a good price uh to offer on behalf of our clients. So the last chart is that relationship uh between um public housing and sorry, the typical value.
>> Yeah, that >> Yeah, so not on growth. This is not about growth. It's not the relationship with growth. It's it's price. Sorry, you were going to say? >> I was just going to say like um as an investor like I know there might be investors out there that have held a property that's done nothing and it might have a really low public housing, but then you got all these other markets that have a high public housing that have had great capital growth.
So it's really fine-tuning in the pocket of suburbs that you're going to invest in. Like at the end of the day, you should be judged on your two to three let's say three-year performance, three to five-year performance on your asset in the suburb that you've invested in, right? So if I bought a property today, has it outperformed the national average is really what you'd like or even hit the national average, but even beat the national average. >> Yeah, well eeny meeny miny moe matches the national average, so you want to do better than that. >> to do better, that's right. Utilizing data.
>> Yeah, now just a word of caution about this one. I did not partition this data by city. Uh so, I wouldn't base any pricing estimates on this chart. Um it will it will vary dramatically across the city. Uh what I mean by that is like a a moderate to high percentage of public housing in Sydney might might uh be a suburb with a price tag of 1.5 million. But in Hobart, 1.5 million might be zero uh percentage of state housing.
Uh so, each city kind of needs its own chart like this to to help estimate with pricing. Um but, you know, that whole estimate of price, I doesn't really concern me. That's that's more um my buyer's agent's job. Mhm. How much uh should I be offering for this property? Because they factor in all sorts of things like the public housing.
I mean, what if what if the public housing is brand new or old? What if it's um if if there's really nasty people there or just, you know, normal nice nice people there. So, that's something that someone who's on the ground all the time, the real estate agents in the area, they know that. They price properties accordingly. Um so, I yeah, I leave pricing alone. I stay in my lane.
But uh what's important to me is capital growth and cash flow and of course risk. Yeah, so each each city needs its own chart like that. >> But back to the typical value there. So, this is representing that the higher public housing as you sort of get higher and higher public housing across all the suburbs, the typical value reduces over time pretty much. >> It's lower, yes. It It doesn't have less capital growth.
It's just cheap You will find cheaper property. Yeah. As a general rule, yeah. Yeah. Okay, so uh you touched on this um earlier. So a couple of tips while on the topic of potentially problematic tenants.
Firstly, you want to invest in areas with a low vacancy rate. Tenants know in that sort of market that they cannot stuff up because it makes things so much harder for them in the future. If a problem appears on their rental history. And number two, get landlord's insurance as a catch all safety net. Thirdly, make sure you vet your property manager carefully. Let them know that you're concerned about this area and getting a problem tenant.
How would you address this? What are your plans? That sort of thing. And lastly, a good plan to uh counter that's not to be greedy. When you're asking for rent, don't be greedy. So if the property manager estimates you can get say 500 a week for this property, advertise it for 480.
You'll get more people turn up the open inspection. You'll get more applicants and from those applicants, you can choose the one that has a great solid rental history. Now, you cut yourself short by 20 bucks a week, which over a year is a thousand bucks. But if you have a fly-by-night tenant, it's going to cost you a lot more than a thousand bucks to rectify the damage and pay for lost rent and so on. Yeah, so aim low for rent. Don't be too too aggressive.
And that's how you address those those issues. >> And target the other one be target high demand supply areas. Yeah. >> Yeah. Yeah, definitely tight vacancy rates, high demand, low supply. So tenants have no option but to behave.
>> Conclusion. >> Okay, so yeah, looking at historical data, there's enough evidence to support the conclusion that public housing does not hurt capital growth. It doesn't hurt yields either or vacancy rates. So there's no harm for an investor to buy in a suburb with a higher concentration of state housing. And most of the remarks that you will hear from experts in the industry biased, inflated, and probably not based on any research like the kind you've seen here. >> And the only other point is maybe for buyers agents and investors like I guess they just don't want any headaches.
I think that's where that stigma is with public housing. Like they don't want to get the call from the property manager and say this has been damaged or there's been issues. So that would be my only thing from an emotional point of view. I can see why people would stay clear but with the data it shows it really doesn't matter if you target those key points like lower rent, good property manager, all those points you're pretty safe cuz at the end of the day 3 years have you outperformed? And then if it is causing you stress you can offload it in 3 years after you get your growth or 5 years. >> Yeah, when someone talks to me about that they say I just don't want the headache.
I say can you put a dollar figure on that headache per annum? What is it going to be? And usually it's it's less than a thousand bucks. But you put half a million dollars into the right location, you know, capital growth it just trumps >> [music] >> everything. It just makes thousand dollars just look insignificant. >> the challenge is cuz the gain capital gain maybe isn't realized so you might hear people going oh I [music] had to spend two or three thousand on my property the maintenance it's horrible.
It's like oh how much capital growth have you had? Let's say [music] 250 300. Oh okay. >> Yeah, quarter of a million dollars you know. >> But they don't think about it but if you actually saw the cash there it's like spending these days it's all in our car but if we had cash there we spent it. It's like the hit is a lot more real.
So it's just funny that when >> [music] >> you have those losses it's just like what's the capital gain been like? >> That's the big thing. And also I would put the pressure back on the property manager and just say look this is up to you to resolve. I'm trusting you to find an appropriate tenant. So um, yeah, I I it's just a small problem. But anyway, in conclusion, yeah, public housing doesn't harm property values.
>> All right. So, in our next episode of the Expert Busting Series, EBS 18, buying under [music] the medium, cheap advice about cheap property. Thanks for watching.