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INSIGHT: How we reacted to the Sydney downturn

21 FEB 2019 By Phillip Tarrant 5 min read Hotspots

The Sydney market right now is a very different market to what it was five years ago, and we have re-adjusted our strategy to stay ahead of the game. Here’s a look into the buying strategy of the Smart Property Investment portfolio as we move further into a softening price cycle.

sydney aerial skyline spi 1

Our strategy with our current portfolio has been all about identifying under-market value properties that also have the potential for equity or have some sort of long-term plan to jump on.

That environment’s gone now from Sydney, so we’ve held onto the same strategy, but moved to different markets with similar signs and opportunities.

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Put simply, we invest in properties with good capital growth potential, and aren't distracted by the trappings of trying to time the market. We let time run its course, and after the magic of an upswing has gone, we just stop and moved on to other markets.

When we sat down just recently to review our portfolio, there was a metric that we have on our spreadsheet that says ‘growth since purchase’. Some of our properties have at least 150 to 160 per cent growth, some of them are doubled in value and this is a product of timing the market well with the right acquisition of the right assets.

I'm very happy with how our portfolio performed in Sydney, despite what the doomsday headlines are suggesting right now. For example, compare Sydney to other markets. Have we been able to emulate that in the Brisbane market with the same size of capital growth? No. It's a very different market and different proposition and we're not looking to invest at the moment anymore into the Brisbane market. We have some great assets up there and over time they will be great performers.

Now, looking at cashflow, and I think a lot of people are thinking this right now is, ‘How can I ensure that I can ride out this particular level of market uncertainty?’ You only potentially make a loss in property if you are forced to sell your property, so the idea is to try and hold on to your property. You can hold on your property through effective mitigation of any cashflow pressures.

That’s a big focus of what we’re doing and we’ve done that work to lock in some fixed rates. Putting that aside, the cashflow component of it and our capacity and ability to hold that portfolio is also something we can do. It’s not an issue, it just costs us a few bucks.

On the other side of things is that we're not going to do anything right now, we're keeping our powder dry and if we wait until those markets really unveil what they’re going to look like within the next six to 12 months; If we're there, we're ready, and we have the capacity to borrow, we have our finance in order so we can secure finance.

Imagine that’s where your head space is with your own portfolio – that’s where I really feel our Smart Property Investment portfolio is as well.

We will be reactive to the market. Because we have such a good, strong stable footprint in the city market with this portfolio, when we do get back into Sydney market, we’re going to be looking at some pretty interesting stuff.

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