Beyond Perth's Boom: Matthew Hughes On What Softens First

In this episode, we sit down with Matthew Hughes of Perth-based Capital Property Advisory. We'll get an on-the-ground update on the state of the Perth market. Is the property boom over? And if not, how much steam is left in it?

Are East Coast investors still piling in or are local buyers having an easier time of it? Are there any cracks appearing? And where might investors be vulnerable when the tide inevitably turns?

welcome to the elephant in the room this is the podcast where we love to talk about the big things in property that never usually get talked about i'm veronica morgan real estate agent buyer's agent and buyer's agent mentor co-host of foxtel's location location location australia author of auction ready and co-host of your first home buyer guide

Hi, I'm Chris Bates, mortgage broker, currently ranked number three in the MPA Top 100 Mortgage Broker Awards. Before we get started, everything we talk about today is not personal advice, and we recommend you engage the services of a licensed and experienced professional.

Our guest today is Matthew Hughes, Managing Director of Capital Property Advisory and a leading voice in WA's property space. With a career spanning buyers advocacy, finance, broking and residential development, Matthew brings a rare 360 degree perspective on what makes a smart investment and how to avoid getting burned.

He's not afraid to call out the conflicts of interest and bad advice hurting buyers and we're eager to get his take on the potential winners and losers of Perth's property boom. Great to see you, Matthews. Good to have you on the podcast.

Thank you very much for having me on, guys.

Matthew, I don't know where to start, to be honest. I think the Perth has just been such a big conversation and Adelaide too over the last few years. And, you know, we're watching from the East Coast over here and we've seen a lot of the investment side of it.

But can you give us a bit of an idea of where is Perth sitting, you know, middle of 2025? Are you still seeing the frenzy of, you know, interstate buyers agents and how are the locals feeling about everything?

It's a bit more nuanced than it was over the last few years. As everyone knows, we had explosive growth over the last sort of three, four years, but of a very low base.

So whilst we've had roughly 80% growth over the last five years post COVID, like some other cities like Adelaide and Brisbane that you mentioned, we came off a much lower base and are still relatively affordable.

So I don't think we're near an affordability ceiling, especially when you factor in our incomes are higher than most other capital cities and states. So I don't think that's going to be an issue for us.

I think there's still steam left in this engine here, and I think it's going to keep running from a growth perspective, albeit at a moderating pace, as we've already seen. And I think it's going to be a little bit different across the different pricing sectors.

We've seen massive growth in the bottom quartile, and that's been driving the medium price across Perth.

and less so in the middle and less so again in the luxury end but now that we're seeing rate cuts and serviceability opening up you've got a lot of homeowners sitting on lots of equity and i think you're going to see those people starting to look to upgrade their home into their aspirational suburb or home or both and they'll have the serviceability to be able to do that so um what we're going to see is an activation of upgraders in that middle pricing sector sort of 800 to a mil maybe up to about 2 million and i think that will transition up through the market to the luxury end

Are you seeing a bit of steam run out with the investors? Like you said, at usually the lower end, right? Even our borrowing capacity has been really stretched or tight over the last couple of years. And the investors' interest rates have been higher, right?

So investors have been wanting to spend less, even if they had bigger budgets, right? Are you seeing that frenzy? You know, after growth, they kind of moved on to their next hotspot and they're going to Darwin now. And you're not seeing that sort of frenzy down there.

And I guess the more value for where typically markets grow on the medium and the higher end, that's where you see the growth coming back?

Absolutely. Yeah. Look, we've seen that FOMO level of demand drop off. A lot of the interstate buyers, agents, and these big national firms have all pivoted elsewhere. And rightly so. I think the affordability end, as I said, has run its race to a degree in this cycle.

I think there's still growth to be had if you buy something at $650,000. It's not something I'd probably buy with my own money right now. So we're talking to clients with those sorts of budgets about other locations.

That's part of the reason why we expanded nationally, so that we didn't have to keep telling people to buy in Perth because it was the only thing that we do.

But if you've got a budget of $800,000, $900,000 plus, and you're not overly yield sensitive at that sort of price point or above, then I think Perth still represents good short to medium term growth potential, albeit you've missed a big chunk of it. And then long-term, we're very bullish on Perth too.

But it really just comes down to the client and their desired outcomes. And we have seen a big drop-off generally with investors in Perth, partly through our own doing because we're pivoting them elsewhere. And partly just that demand has dropped off organically.

So when you, as a local buyer's agent, you're dealing with investors who are purchasing through interstate buyer's agents who aren't coming along and inspecting properties and then are competing with you. What is that like? Being based in Sydney, I've never had to face that.

So I really would be keen to understand, as someone who's based there, knows what a quality property is, knows what the pricing should be, knows the areas that represent good fundamental investment criteria, et cetera, et cetera.

Tell us about that experience and how that's impacted, I guess, your ability to service your own clients at similar price points up until this point.

Yeah, look, initially when the market started to turn, because we had a pretty long added downturn from 2014 to 2019, and then the market started to improve and then COVID hit. So the long awaited market rebound was delayed and then it obviously kicked into gear.

And then Perth became the hotspot, if you like, of the country. And all of these new Perth experts appeared on the East Coast and started buying as borderless buyers agents and, and, doing it in a different way to what we do, which I'll explain soon.

But it did make things very difficult in terms of securing properties. And it was a massive mindset shift for me because I pride myself on my negotiation ability and I like to win. And so we'd been running around stealing properties for a really long time and winning every negotiation, so to speak.

But when the time came where we had to start to pitch ourselves on different value propositions, it's no longer about getting a property well below market value. It's about being able to secure a really good asset and not overpay for it. And so that was a big mindset shift.

And it probably took us a good few months to actually wrap our heads around that. And we missed out on a lot of properties by not being aggressive enough. But then when we did pivot, we started analyzing data and understanding, okay, well, the market's moving very quickly. buyer demand is through the roof.

We were looking at what the agent had appraised the property at. We would then appraise it and look at the appraisal range. And then we were trying to figure out in different areas that we were targeting what sort of percentage over and above the appraised range were properties selling for.

So we knew where we needed to be in order to secure a property without overpaying, obviously, but also without missing out for the sake of a few grand.

Under those sort of conditions, though, every property gets competitive, right? So you've got A, B, C, D, D grade property even getting competitive, people fighting over everything. So I guess how do you cut through that? Because there's a general frenzy and you can't be paying a premium for everything.

I made a decision probably about a year into the upswing when things got really heated to not scale the business like I probably could have. We didn't add suburbs. We added a few suburbs to our approved list, but not many.

We refused to buy in all of these so-called hotspots that the East Coast pundits had identified. A lot of them became hotspots as a self-fulfilling prophecy because they all piled in and artificially inflated the market. And a lot of people who got in early did very well.

We saw too much downside risk in some of these areas, your Rockinghams, your Mandras, your Armidales, the ones that everyone's been talking about on the podcast over the last few years. Look, if you bought early, you did well.

If you came in halfway through, I think the downside risk is too great because when you've got an area like Rockingham, which I think at the last census was 37% renters.

And then that level of investment activity piles in and could push it to 50%. What happens when that market starts to plateau and they shift their attention elsewhere like they are now, it's going to soften first. It's going to soften harder rental-wise and value-wise.

And our research and our investment philosophies are designed around long-term outperformance, as I've heard you talk about, Veronica. And so that's not our approach. And unfortunately for me as the business owner, throttling the business set...

During this long-awaited boom that we'd been waiting for was a little bit depressing, but it's kept our reputation intact and our clients are all very happy. And now that we have expanded nationally, we have more stock to choose from in Victoria where we're buying quite a bit now.

And so we can start to slowly scale to a point through that methodology. But we don't have plans on sort of building to the super high levels in the buyer's agency. I've scaled the group through finance, property management, development, other things.

Because I think if you get to that level where you're buying 30, 40, 50 properties a month, You have to start sacrificing the integrity of your advice and you have to start adding suburbs that I maybe wouldn't put my own money into.

And that's sort of the litmus test for us is if I wouldn't buy it, I'm not going to ask you to buy it.

I mean, I think it's interesting you say that, right, because that was my major concern, right, is that, like you said, it was a self-fulfilling prophecy. You saw a lot of, and then what Veronica was saying as well, not only are they buying in these areas sight unseen, they don't know the areas.

They're buying the Cs and Ds in that suburb. They're paying a premium for it because they're buying in a hot market. And at some point, the investors stop buying. And then the locals say, well, this has just jumped so much further than what I can afford.

And I can get much better value for money if I'm a home buyer closer to the city or in a more premium spot because that hasn't grown as much. Are you finding that as well?

So, like, it's just not good value for money for a lot of home buyers in the market in Perth now. And they'd much rather... buying something that was maybe closer to the city or maybe closer to other lifestyle benefits.

Yeah, I think through affordability issues, Perth is not an apartment-centric city historically. We've never been forced to be. So density has never been high demand. But there was a period for about the last 18 months of this massive upswing where units started to perform very well because of a lack of options.

There were so few houses on the market that buyers agents and home buyers alike started to pile into units. And you had a lot of East Coast-based buyers agents who were really just looking to clip the ticket and buy any old thing.

Some of the stuff that I've seen, some of these so-called big names around the country, looking at what they're buying or have bought over the last few years in WA, it's a far cry from what I would expect someone like us or yourself, Veronica, to be putting people into.

And it's a bit of a shame that they're paying someone to do that for them and not really getting the optimum outcome that you should be getting when you're paying a professional to do the job for you.

Well, I guess the real problem is a sugar hit of immediate and, in inverted commas, instant equity uplift or immediate capital growth. It masks a whole series of fundamental errors, doesn't it?

And really, people won't know for some time until the market does significantly soften or even until they go to sell it or if they're tracking the market even after their purchase because people don't always do that. they won't necessarily know what's happening to values.

I guess I'd be keen to, if you've got some anecdotes for us, some of the common mistakes you've actually seen these East Coast investors. And I know some are doing it under their own steam. They've gone and done investor courses and following a methodology.

But the problem is, I guess this is one of those fundamental problems with data-driven property decisions, is that if everyone's got the same data and it's fundamentally interrogated in the same way and the same conclusions that come to, then everyone's going to be following.

When you democratize that data and make it widely available to people, then you've got more people that have access to it, more people to go and follow the same set of instructions.

So I'd be keen to know some examples, if you like, of what you've seen that makes your hair curl if you had hair.

If I had hair. There's a couple of points there. I think that data in a silo is dangerous.

And so when you're on the East Coast and you don't have local knowledge of Perth or wherever it is that you might be buying and you're just looking at data, you end up in some pretty peculiar places. And we've seen that from over the last few years here.

people buying out on the fringes, not looking at potential for future local supply, not looking at state housing density within a suburb, all of these checks, the basic checks that we do before we even consider showing a property to a client.

And then the other thing is that, and with our expansion over east, the way that we did it, it took us a fair bit longer and we spent more money doing it, but Veronica and I are very aligned on this from the conversations that we've had recently. We're not borderless buyers agents.

I don't like the idea of that. I don't like the idea of sending a property manager or anything below that level in terms of expertise through the property to view it for you.

I think you mentioned on a video the other day, Veronica, about selling agents doing a video walkthrough and then buyers or buyers agents buying on the back of that. Do you think that selling agents are really trying to identify problems with that house for you? It's really not a good approach.

So when we went into Victoria, we put resources on the ground. We've got a state manager there with 20 years experience in the industry.

And we have a licensed buyer's agent who will inspect the property for you and do that via walkthrough with the commentary in conjunction with all the other DD that we do every single time. So it's a very different approach.

It costs more, it's less profitable, but we weren't gonna do it any other way. And people that do, Look, if you've built a very successful business and you're doing well for yourself, good for you.

I'm not trying to knock anybody, but I don't think it's the right approach to be a massive volume agency or advisory because the client outcomes are going to suffer, unfortunately.

So can we talk more about what you've observed with those client outcomes? Because this is the thing, you know, I know I talk to agents across the country, not just buyers agents, but selling agents.

I've had examples sent to me of the types of properties that people have been buying sight unseen, often through these types of buyers agents. And

you know, they talk a good talk. And a lot of these buyers agents too, they actually are very entrepreneurial. So they're great at building a business, great at marketing. They actually haven't been in the property game very, very long. Um, and whether it's ignorance or they don't care, it's hard to know.

And they think that they've really successful. They are because they're buying 50, 50 properties a month. Some of them, you know, I've heard of even more than that. Um, But you must see some examples of the outcomes for people that are really shocking.

And it's just good to put some stories behind it so people can grasp, I guess, the seriousness of what they're doing when they're choosing a buyer's agent, a local specialist versus someone who's going to buy from a desk. Yeah.

Yeah, look, I think a lot of those stories are in the next couple of years in terms of recent performance because obviously we're still a very robust market here. We're still massively undersupplied. Buyer demand is still very high. It's just shifting from investors more to owner-occupiers, getting up through the price points. Yep.

So those sorts of stories that I've been predicting with those markets we spoke about, those hotspots, I think it's still coming. And I think the people that bought early are not going to be negatively impacted because we've got 100% growth already. Yep. And your yield's looking very good.

But if you came in six months ago and bought in Rockingham or Mandurah, and you want to sell that property at some point in the next year or two, it might be like trying to catch a falling knife.

If the market overall in Perth softens, say 10%, when we eventually plateau and start to retract, I think those areas could do 20, 25 or more.

Because to Chris's point earlier, the locals can't afford to live in their own suburb anymore. And these are not high socioeconomic suburbs. So we know what's going to happen. And I've said this publicly many times before and had pushback from people. And we'll see what happens.

But prior to that, back to your question. When we sit down with clients and they come to us with a bit of a history in property investment, often they come to us and they bought something like a house and land package from a spruiker masquerading as an advisor.

They bought an apartment either under their own volition or they've done it through someone else who's pushed that on them as a good investment and pitched them on the tax depreciation benefits, which shouldn't be a driver for any investment decision. And we've...

Because the Perth market was so soft for so long and I've been doing this through that whole period, I would sit with some people who had 250 grand negative equity on one unit, a two by two unit.

They bought it for 650 and now it's worth 400 and they probably couldn't even sell it for that. So we've seen quite a few stories like that where people have either timed their purchase

poorly or they've obviously chosen the wrong asset type um and we've never bought a unit for investment purposes certainly not in perth i know there's exceptions to every rule and there's probably merit to buying units in certain parts of sydney probably not melbourne with a history of oversupply and probably that coming again but i would suggest that um when you look at a

I think that those sorts of stories are good for me to obviously sit with these clients, figure out how we can unravel it, figure out what the opportunity cost is of holding an asset like that, even if you do have to take a loss on the asset to move forward and hope that they haven't been completely jaded by the experience and they think the property investment doesn't work, which is an outcome that you see quite often with people who

got some advice at a barbecue, bought the wrong thing, lost 100 grand. Oh, this doesn't work. I'm not going to do it anymore. It does work. You just need to understand what you're doing or get some help if you don't.

Yeah, I think what I can sort of envision happening is that, you're right, like the investors all stopped going there. And I think from my understanding, they're not buying in these locations. They're out, right? That's what they're publicizing. And so then you've got no new investors there.

And so then you've got this mindset, if you're not buying there, maybe I should be selling there. Because a lot of it was the greater fool theory, right? Get in, get out. So then you'll see this undersupplied to maybe some more listings, right?

And then buyers are like, well, there's a bit of choice on the market. So maybe there's no pressure for me to buy. Then you start to see more and more people listing because prices are coming down, more investors come on. And then you start to see this oversupply of properties, right?

And then home buyers are like, well, I'll sit back. And they might get protected because a lot of investors will say, well, I've sort of missed the boat. I could have sold it a year ago for $650. Now it's only $550. I'm going to hang on.

But what they end up getting is they're basically holding on to poor assets and they're waiting. And so then they've made some money in the short term, maybe not as much as they thought they made because they didn't sell.

And then they get stuck with holding something that they could have used their borrowing capacity and their equity of just buying something that had great, much better, longer fundamentals. And I think that'll be the pain. It's like...

the ones who don't get out are basically just holding duds, really, because they got swept up in the hype and they didn't play the strategy right. It's actually a greater fool strategy. You just play the momentum, you get in, get out, and then you go to the next location.

Is that sort of your similar view of how it's going to play out?

Yeah, look, there's a lot of different approaches to this and different strategies around the country and different companies that spruik this strategy versus that strategy. We're pretty much, our research is built around long-term hold and long-term outperformance. We're not hotspotters. There's nothing wrong with that.

I don't think it's the safest or far, assess holistically risk versus outcomes. I don't think it's the best approach for most people. Um, but I had this conversation with someone the other day talking about my own personal experience and I'm not a buy and hold investor yet. We do that for our clients.

And so they'll say, well, if, if, why are you not doing it? If that's what you're recommending, because everyone has a different risk profile, different capital to deploy different skills, right? of time I can apply to this.

I don't love the idea of hotspotting the people piling into Darwin at the moment, which is a capital city, but pretty much behaves like a regional town. I have no issue with that.

If you get in early, you have to time your entry into those sorts of markets really well to capture a full upswing. And then you probably don't want to hang on to it beyond the peak or near peak of those sorts of markets.

And that same sort of general approach applies to other regional markets around the country as well. People that are still buying in regional Queensland at the moment, for example, when you've missed 20, 25% growth already, again, downside risk for me, far too great. But they're blinded by yields. The properties are cheap.

So the big organizations love them because they're looking for affordable assets. They can put clients in to clip the ticket on their fee. And if it's got a great yield, then they can service another property relatively quickly.

But as I've heard Veronica again talking about on that video the other day, that short-term sugar hit of growth sounds great, but you never hear from anyone beyond that too.

No one talks about the 100K they lost when the market softened or you talk about the Northwest of WA, those regional towns, single economic drivers. where they were a million bucks and then they were 250. Like there's some big downside risk in some of these areas.

So we tend to stay fairly inside the box with our advice when I'm spending client money. My money is a little bit different, but for clients, we're pretty vanilla.

It's interesting, actually, as you're talking, Matthew, because I've quizzed a number of these sort of buyers agents that hotspot over the years.

And my question is often, right, so you're very proud of being able to identify the next place to take off and you've got all your clients buying into that area and you continue to run that business.

for as long as – until the point that you decide that, you know, you've got to pivot and go somewhere else.

And then do you then advise your clients at which point to get out?

And so there's two questions. Do you advise them when to get out? So you only let them get in when you know they're early and you never let them even get to midway because you've gone on somewhere else. But too often it's like –

It's like the gravy train and they can't let go of it. I've seen, I've judged awards. I've judged awards where people actually say that they do advise, one particular company was saying that that's their strategy. They advise people when to get out.

But at the same time, I looked at their most, they had March 2025 reports encouraging people to buy a ceiling to Perth and Brisbane. And it's like, well, Perth and Brisbane are definitely more than halfway through their boom. You know what I mean?

And so, like, you say you do this, but you clearly don't do that, you know. And it's too tempting. You know, when you've got people coming and knocking on your door saying, I want to buy there because, of course, they've heard all the reports.

They've seen all your social posts about instant equity uplift. They want a piece of the action. And then they're going back to their existing clients, like you say, with good yield and say, right, you've had this equity. Let's dip in and see if you can go again. Yeah.

I wonder, do you think we will actually see a change where we will see some of the more cynical buyers agents actually do start to say, no, get out now and then come back with us and we'll buy you a next hot spot. They're trying to surf the wave.

Do you expect that they're going to have the smarts and the ability to do that?

I've seen that already. There's one of the big national firms, so I won't name obviously, but they buy a lot of property and they piled into Perth and those areas I was talking about quite heavily. And they do have a sell tag against it at a certain point.

And I'm less concerned about that in those sort of decent population residential sort of markets like metro type markets. But if you're talking about a small country town or a regional town, those companies can move the needle now.

This is a new phenomenon and we factor it through our research and avoid because they are going to create the market and they can also decimate the market if they do put a tail tag on it. And then how do you do that with your clients?

Do you tell them all at the same time and then you flood the market with things? Look, if you're a hotspotter and that's your approach and it works for you, that's great. There's many ways you can skin this cat and our way is not the one and only or the best way.

I don't like the idea with the high transactional costs of property, the high entry costs, the high exit costs, and then triggering a tax event over a short period of time.

I think it's a step forward and then a step sideways or backwards as opposed to just being patient, ignoring all the sexy stuff that you see about these different strategies on social media and focusing on the long-term fundamentals and just sit and forget. Yeah.

Get a good quality asset, get a good quality tenant, get a good property manager and forget about it. And then wait until you're comfortably able to within your own risk profile, cash flow profile to go and buy something else.

You don't do that. So because back to Chris's question, you don't do that yourself. Why do you have a high risk profile or maybe not why do you have one?

What is it that you're looking at and why do you approach things or how do you approach it for yourself personally if you don't mind sharing? I'm curious to know. You know the other way is a much less risky way of investing in property. Yeah. What do you do?

Last five years, I've been focused on residential development. Next level. And look, it's been the bane of my existence post-COVID. We started a project just prior to COVID. It took me four and a half years to complete four townhouses. Luckily, there was, and we're paying private rates on that as well.

So the cost of the money over that period was exorbitant. But because we built a good product and when we took it to market, the prices escalated so much, we still made about 50% margin on equity even though it took four and a half years. So you take the good with the bad.

I've only got one project left at the moment. I'm edging out of that space. As I get older, as you should, my risk profile is starting to –

drop a little bit and um and it's becoming a little bit more about sort of protection and and and making sure i'm looking after existing aspects as opposed to just sort of biting off everything i can chew which was probably my approach five seven years ago yeah um have i have actually thought about going back into that buy and hold approach once i finish off this development um i've got i just bought an asset a character home in leadable in perth just recently that i'm going to renovate

And that could be investments or I could sell it or I might move into it. We'll see how the renovation starts out.

So I'm still doing some stuff in that space, but it's been predominantly luxury townhouses in premium suburbs that we've focused on over the last five years and done pretty well across most of them, despite the challenges post COVID in the construction space.

But I definitely can't wait to get out of that space completely. It's still prices and timeframes are blowing out again over here with the appetite for construction starting to kick back up and the workforce just can't handle it. or the other way around.

You can connect with me and access all of the tools that I've created to help you make better property decisions at veronicamorgan.com.au. And there you will find resources for first home buyers, details about my buyer's agent mentoring program.

You can connect with my Sydney based property management and buyer's agency teams, Australia wide vendor advocacy, or ask me for introduction to the small group of buyer's agents that I would personally recommend across the country. That's veronicamorgan.com.au.

If you're looking to buy your first home, thinking of upgrading to a new one or purchasing investment property anywhere in Australia, we would love to carefully guide you through this journey and importantly, get the finance right. Reach out via my website, alcove.com.au. So let's fast forward back.

Let's fast forward back. Fast rewind. Fast rewind. So 2019, right? And I actually went over there. It was probably then. I went for a Fred's wedding and actually went around to a bit of a tour with a different buyer's agent and said, teach me about Perth.

Show me where to buy. And I'm a buy and hold character. Nice looking home on a good street. Something that's... You know, you come back in 30, 40 years' time, it's still a sanctuary, it's still a great asset.

So let's say out of budget, say circa a mil, you know, where would you have sort of, even if it was 900 or 1.2, it doesn't really matter, but like instead of buying, say, two properties, you know, and some people went, because when they were in this multi-property strategy, right, they weren't just buying one, they were buying two or three, right?

So a lot of them had the same borrowing capacity, but they were convinced that the benefit was to buy three properties often because the buyer's agent clips to get three times and they're sold on this quantity strategy, whereas they could have just bought one, right?

Now, if, where would you roughly have bought one and how has that performed? And then how would that look different now versus say, you know, a Rockingham when you think about over the next five or 10 years, like, can you sort of,

put that mat because I think that's the real challenge here is where people have maybe got two properties they need to get out of and yes they may have made more growth but what you pay buy cost sell cost capital gains tax versus something they could just hold

Yeah, look, we've had this discussion many times with clients over the years in terms of I've got $1.2 million to spend and do I buy two or do I buy one? And the answer is always client-dependent. If you're yield-sensitive and you don't...

I'm trying to buy a long-term investment. I've got my home sold. I just want a hold, make some money off to the side and I can afford it.

Is back in 2019. Is that what you're asking? Yeah.

Yeah.

Yeah. Look, we bought a lot in 2019 in the Northern coastal corridor of Perth. We saw better schools, better public schools there. We saw better demographics. The income of the population growth that was coming into those areas was better.

And in the southern coastal corridor, some of those suburbs were not yet completely built out. They're newer suburbs, so there was potential for supply risk. So we concentrated a lot of our efforts in that northern coastal corridor.

In Perth, the capital growth drivers, say with Melbourne versus Perth, are similar in terms of the list, but they're in a different order.

And so in Melbourne, for example, in Sydney probably as well, our proximity to the CBD and transport and ability to get into the CBD is higher on the list than in Perth. It's much less of a driver here.

So proximity to the coast with our weather, having a larger block, possibly a pool, those sorts of things appeal to renters and other occupiers. And so when we buy into any suburb, we're looking at...

of the biggest metrics that we weight very heavily is owner-occupier percentage, and then looking at the demographics of those owner-occupiers, because when a market softens, they're not going anywhere. And some of the suburbs we were buying in were 90% owner-occupier compared to, say, 50% in a Rockingham LGA.

So that's always been our approach.

And I think buying that more premium property, there's merit to it, but you also need to understand that if you spend a million, 1.2 on a property and it's rented at 1500 a week or whatever it may be, the market for that in terms of tenancy is quite small.

And so in a softer economy, the yield might be really good right now. But when the market softens, those more premium properties from a rental perspective tend to have more vacancy and tend to soften in terms of that rental figure a little bit more. So that's something that we have to factor in.

But if you're not overly yield sensitive, that might be okay for you. Whereas the properties in the affordability belt tend to hold up a little bit better if you've chosen the right suburb and the right asset. So I don't know that I've answered your question in terms of- No, no, no.

I'm just like, maybe when you said Northern Corridor, you think if it's like- Like Scarborough, for example. I mean, I've just brought it up on domain. I mean, just take these things that are grain of salt. But, you know, back in 2021, you could buy a four bed house for $850.

I mean, the median price now is $1.56. You know what I mean? Is this sort of the type of place you're talking about?

We were buying probably north of Scarborough, um, quite a bit. And, and right through, we were buying triple X blocks in Hillary's for 550 grand and now worth 1.2.

So, um, all of those, and back then we could afford to put clients into a pure coastal suburb, like the first suburb on the coast.

Whereas over time, as the prices started to grow, we had to move into the next suburb over and not always just choosing the next suburb, obviously analyzing it quite closely. But, um, We were pretty much as close to the beach as possible through that whole sort of Guamian, Sorrento, Hillary's area.

We did buy some in Scarborough, mostly development sites. The demographic back then and some of the social issues that we saw along the beach kind of deterred us a little bit. So if you were developing and then holding that product long term, I think Scarborough could be our Bondi one day.

But back then, we had less comfort with it than we do today. A bit further north. Demographic and crime.

Yeah, because I think there's a big conception that you wouldn't have made money if you bought, you know, just a really great fundamental long-term houses in Perth over the last five years.

And when you look at it, you know, comparing those, you know, two houses that, you know, like, for example, here in Hillary's, right? Let's just say one house is $921 and now it's worth $1.4. You know, two houses in...

rockingham would have been 450 and now they're you know maybe worth you know 700 you know what i mean so it hasn't been like there's dramatically more growth at the bottom end but it has and that hasn't come without risk right um and now you've got these people who are potentially going well i don't know if i really want to hold this long term i might need to get out and there's this danger of holding danger with maintenance you've got to pay a couple of gains tax you're gonna go buy another suburb whereas if you have a house in hillary's you could probably just hold it long term right like is that sort of what your investors are doing there a lot of them

Yeah, we've never encouraged anyone to sell a property. Clients will come to us sometimes and say, hey, I'm thinking about selling and we'll try and figure out why.

And if it's a personal circumstances thing or if it's another opportunity they want to pursue and they're redeploying that capital into something, then I'm all for it if it makes sense for them. But we're buying stuff that clients would hold ideally for two full upswings.

So that's really our approach, minimum one and a half. But ideally, a lot of these houses we buy in Perth are double brick and tile houses. The maintenance, even though we're buying predominantly land value, and spending maybe 70 or 80% of the money on the land, the house is still very structurally sound.

It might need a little bit of a cosmetic makeover at some point, but we're not talking about stuff that is going to require a huge amount of upkeep or maintenance.

And then buying in those suburbs where they are very owner-occupier driven, they're aspirational suburbs, in a good market or bad, it's going to perform well from a rental and a value perspective.

Whereas areas that have got that high level of investor activity, I think are not going to perform just quite as well when our market eventually softens over here, which is still some time away, I think. But obviously it's going to happen at some point.

Since we were in fast rewind a moment ago, Chris taking us all back to the time capsule of 2019. Can we go to further back in the time capsule? You know, Perth spent a good decade in the doldrums, some pretty horrible times. negative growth, if you want to call it that.

But I do know that if you sort of peer in and really dissect the market, you would find areas that had actually had some value growth or increases in prices over that period of time.

And there are always aspirational suburbs and areas and types of properties that people will lean towards when they can, when the opportunity arises for them.

At the same time, I know that they were very modest growth, very, very modest, particularly when you compare to the rest of the country at the time. But what were those areas?

What were the areas that showed that even during that prolonged downturn, there were always going to be buyers that would go there?

Yeah, look, it's the areas that are driven by owner-occupied demand predominantly and areas that are aspirational and there's always high demand for areas that have tight supply. So, Corrine, for example, in the northern coastal corridor, no real rezoning for the suburb.

So, it's mostly full blocks unless it's a corner block and they can be chopped in half all of the time. So there's not a lot of infill product. It's all full blocks. It's very in demand from families for that reason. And it's also got one of the best public school zones in WA.

So those sorts of areas, when the Perth market from 2014 to 2019 dropped roughly 17%, I'm making this figure up, but I'd imagine it's relatively close to what would have happened. I reckon Corrine might have dropped 5% or 7%. And so that's what we're looking for is outperformance in good times and bad.

So that if you do have to sell a property because of some unforeseen circumstances, it's dropped that five or seven, not the 17 or more. We saw post-GFC areas like Mandurah because there's a lot of lifestyle properties and second properties there. In a tough economy, that's the first thing to go, right?

You're selling the boat, you're selling the second house. And so they dropped, I think Mandra dropped about 40% through that period. And so that's the risk of buying in these areas that are driven by anything other than owner-occupiers.

Yeah. So, I mean, you're obviously on the finance side and so is Chris. How does the lending advice, I guess, play, well, what role does lending advice play in shaping a long-term investment strategy?

And, you know, did you start off from the finance with a finance hat on or did you start off as a buyer's agent and then decide to add that string to your bow and what made you decide to integrate those two?

I never actually wrote loans. I did the qualification so I can give better holistic advice, but I've always relied on someone like Chris to actually fulfill and execute that.

It allows me to sit with clients and have those holistic conversations and know which questions to ask, but I'm not an expert on finance like Chris would be. I'm not even close. But I've got that in-house.

So we've got a broker here with 20 years experience and another 20 in banking who's been working with multiple property owners for all that time. So we have that expertise in-house.

I have an element of that and that helps me when I'm devising a strategy, but I always lean on all of these, whether it's our in-house broker or an external tax accountant.

I know enough about all of these things to ask the right questions and to know when we need to go and get some professional advice, whether it's a tax accountant, lawyer or a broker. And then we start pulling the pieces together once we have the advice.

And my ability is to sort of analyze the client and their design outcomes and put a draft strategy together and run it by all of those other professionals and then bring it back together.

That's sort of my role is sort of the glue that sort of pulls it all together to make sure that we've got a strategy that is working across all facets, not just property or property and finance.

Matthew, there's a lot of people who got burnt in that downturn that Veronica's talking about. And they would come to us and they would say, I'll talk to you about their properties. And all of a sudden, there's this random one over in Perth.

And maybe they live there or maybe they got done by a spruiker or there's sometimes a story there. And there might be a house on land package on the fringe or it might be an apartment, etc., etc.

Do you feel like a lot of them have, because, you know, there was, it was no easy options. They sold, they crystallized a debt, a big loss. Often they have that, where would that money come from?

They have to, you know, come onto their home or they wouldn't have the equity to do it. And, you know, a lot of them just had to hold it. You know, there wasn't making any money. The negative cashflow there was used with renting it.

Do you feel like a lot of that's washed through and those, you know, that pain sort of gone and a lot of them bailed when they could?

Yeah, look, I think if you're talking about that sort of elongated downturn period where people probably sold properties and left, either took a loss or left potential profit on the table, it was quite a long time. I mean, the actual downturn was from 2014 to 2019.

But when we got back to 2019, prices were pretty much where they were 10 years ago, to Veronica's point earlier. So frustrating time for homeowners and obviously definitely for investors. But if you had the right approach, that long-term view, we were running around literally stealing properties.

We were writing contracts with two pages of special conditions with DD clauses for 10 days on standard residential properties. Then we'd go back and renegotiate nine days later and Um, we had all the leverage for a long time.

And so whilst you may have bought a property that was say appraised at 500 K, we probably bought it for you at 425. So even though the market hadn't moved, you've got an initial sort of bump of growth built in because you bought.

Oh yeah, for sure.

And so coming in ahead of that curve is always a good thing. And that's what we encourage our buyers to do in Victoria. Unfortunately, that window closed much quicker than I anticipated it would. And we're seeing a lot of competition over there now.

I hope we have a bit more of a honeymoon period in terms of a fair bit of stock and fewer buyers. But back in Perth back then, you couldn't give a house away. And there was also not a lot of

knowledge in terms of selling agents and there wasn't a lot of buyers agents around. So there was a lot of planning policies that we knew a lot about that others didn't.

And we were buying corner sites, for example, that were subdividable and the selling agent didn't even know because it was an unwritten policy that the WAPC had now subdividing corners. So we bought dozens of those and those clients who did that

made an absolute fortune by just coming out of the curve, ideally not too far out of the curve where you're sitting around waiting years for any sort of growth.

But if you do have the patience and you hold and you wait for the eventual upswing, because it is coming always, obviously, then they've done exceptionally well, just it's taken a little bit longer to get there.

That sort of leads into a question I got for you, because I know you've been really vocal about the risks of buying unqualified buyer's agents or inexperienced buyer's agents entering the industry.

But also when you've got borderless buyer's agents that buy in different jurisdictions, the legislation is different in every state and territory in this country. The buying process is different.

You were talking then about in a soft market, it's a buyer's market, so therefore an informed buyer can use that to their advantage, two pages of special conditions and all that sort of stuff.

Flip side to during the boom, and I was hearing about people, I think there's a term in Perth is buying as is or something similar to that. You can clarify that in a moment.

But the ability to do due diligence and obviously the pendulum swung right to the sellers and they basically say, you buy it as it is, you pay me whatever I want or more and you can't have any terms at all.

So you've gone from one extreme to the other and there seems to be very little involvement of lawyers checking contracts before you commit in person. So people are going in buying, like actually...

scares the pants off me because the concept of buying without having the opportunity to do due diligence is outrageous in my view. So it's the ultimate in buyer beware. But you must see that as well.

You must see that there's people, whether they've got a buyer's agent or not, buying property without any safeguards.

And so can you talk a little bit about that, I guess, the buying process in Perth and how it is very different to, well, you know, Victoria's is almost the complete antithesis of that.

Yeah, it is. And we've experienced that recently and had to adapt our processes to suit because we're not going to go and buy a property without mitigating as much of that risk as we can. We just have to do it in a different way in Victoria.

But in WA, it's typically in a normal-ish market. It's a more consumer-friendly process. Finance clauses are very commonplace. There's no other cash offers until the market really got to that FOMO level of demand. And then people were taking on additional risk out of frustration or lack of knowledge or both.

And buyer's agents were buying stuff almost sight unseen without a building and pest clause and really putting their client's neck in the noose in my view. When the market heated up to the point where things were moving very, very quickly, we had a couple of choices.

We could sort of do what others do, which is probably just do less due diligence and take on more risk for the client. Instead, we invested in different technology. We figured out ways to do our job more quickly and more efficiently. And we actually expanded our due diligence process throughout that period.

So it can be done well in any market and we've proven that, but we wouldn't put a client, unless you're knocking it down sometime in the near future as a developer or just redeveloping into another single residential home, we're not going to put a client into anything unless we've had our building and pest inspectors go through it.

Ideally, we get a good working order clause in there as well. We send a plumber, electrician, we get all of those checks done. But when the market heats up and you lose that leverage, you have to figure out what level of risk are we comfortable taking on?

And so maybe the good working order clause has to go, but the building and pest is never going anywhere for us. It's always going to be done. It's always going to be walked through by me or one of my licensed buyers agents.

And we're always going to produce detailed reports for the clients regardless of how fast the market's moving.

But that's only one aspect of due diligence though. I mean, you've also got, for example, something a lawyer might check or caveats and easements and things like that.

And if you've got no idea where the sewer line is or you've got no idea whether there are any easements or caveats on the property, you're just buying it, hoping that the boundaries are where you think they're going to be. You know, there's a hell of a lot of unknown.

You're sort of just taking a stab, hoping the agent's advertising is correct. And that's...

That alarms – that certainly alarms me as a buyer's agent to think that even – I know when I was filming the show and we went in every state and territory, you know, we didn't buy in every state and territory, but we covered the gamut. And I was –

really uncomfortable not knowing the process in every state and territory because New South Wales is very robust, but even that's not enough. There's a high degree of internal disclosure here, but there's still a bunch of stuff that is not mandatory to disclose and needs to be uncovered.

I know that that is not the case in WA. Obviously, when the market heats up, like you say, people have to choose what they're going to not worry about and or take the risk on. I think that's something that people need to be very much aware of when they're buying interstate.

Yeah, that applies everywhere in the country, but it's different at every state. So I've had to spend a lot of time learning the contract process and the different legislation in Victoria, but I've got people that have that expertise. So that was much easier for me.

So we've got someone over there and luckily my national acquisitions manager who's been with me in Perth for about four years now, lived in Victoria and worked in the industry for 10 years over there. So we've been lucky that Victoria was the first place we went into from that perspective. But

We, the, um, the contract process in WA, like it's, it is different. I think it is in 90% of the time you can get a building and pest clause in there. And a lot of the time you can also do finance as well.

So it is a little bit less risky than say a Victoria where we're coming across a lot of auctions, a lot of cash offers, building and pests. We're having to preload and do it prior to actually bidding at auction or going, uh, or trying to secure the property via private treaty. Um,

And then we might actually not secure the property. And then you're spending two or three times that amount on building and pest inspections. So it's the nature of the beast. We just work hard to try and find the best way to keep the wheels greased and keep mitigating as much risk as possible.

And the DD checks that we do, we've got a preliminary round that we do before we present a property to a client. And then we've got the full balance of those checks, which is about 128 checks in total. And it covers all those things you mentioned. So we're looking at,

With our experience in developments, we're looking at easements, we're looking at anything tricky that might be on the title or the contract.

And we're not relying at all on sellers or selling agents to disclose what they should legally disclose, which is any material facts, because sometimes they don't purposely or sometimes they just don't know. So it's on us and our buyers to make sure that we're ticking all those boxes.

Matthew, I want to leave a bit of time for a few property numbers. I'm hoping you've got a couple at least. I'm sure you've got a few in your little kitty there for us. Can you share one with us?

I'll share one about yours truly first. I'll be the dumb one. Awesome. Love it. I bought my first place when I was 19, which sounds great. And obviously starting young is key.

But I didn't grow up with any sort of – obviously schools are lacking massively in terms of financial education, and that's still today. I think it needs to be something that needs to be addressed. But I didn't get that in school. I didn't really get it at home.

But I knew I wanted to – not live any sort of the lower socioeconomic sort of life that I was brought up in. So I took that step early days. The property went up about 35% in the first 12 months, thought I was a genius and sold it.

So that was my first big mistake in property. And look, if I'd probably be retired right now and not sitting here with you, had I

had a better strategy in place, or if I had a, uh, a parent or an uncle or someone who could have guided me and told me to hang on to that property was $95,000. I think the mortgage was $700 a month. Um, so it's not like I couldn't hang on to it.

Um, so I'm the Dumbo in that scenario. And it's a story I talk to clients about because the, the loss in terms of what I could have done through that period, especially, um, yeah, I think, uh, the Big mistake on my part and something that I absolutely regret.

But the mistakes, I've unfortunately had to learn the hard way through a lot of my career as an investor and as a business owner because I haven't had the mentors around me. And that's something I encourage people to seek out or obviously pay someone for professional advice.

God, that's a good one. Any others? I love it.

I've got another really good one, actually. Go.

So we bought a property. It's a suburb called Eden Hill. So just past Bass and Dean, east of the city. And the seller, we got there and there was a clear driveway down the side of the property. The existing dwelling was on the front.

They cleared what looked like it was a driveway and they cleared the whole back lot and they'd actually already fenced it off.

And I was looking at it and thinking it was quite peculiar because I knew that you couldn't actually do a house behind a house subdivision based on the local policies in the Pasadena local government area. So they'd also half renovated the house and it was basically being fire sale.

So we picked it up very cheap and you can actually subdivide it, but you just can't keep the existing home. You have to knock it down and build two new homes. Wow. to improve the streetscape.

So it's a bit of an odd policy, but he'd gone, obviously either got no advice or bad advice, and had half completed a subdivision, half completed a renovation, and then just bailed on it. And we bought it at a very good price. And I'm sure it was out of frustration on his part.

So that's one of the worst ones I've seen in terms of having invested a fair bit of time and money into something that I could have told you in a two minute phone call, you just can't do. Yeah. Do you reckon he got a stop work order or something?

Like, you know, did the council jump in and say, mate, you can't be doing this? Well, I guess he can, if he wants to put a fence up and clear his backyard, he's allowed to do that. He's just not going to get a title for it.

I mean, I guess he's wasted a bit of money on a fence and then maybe butchered his front. And partial reno. Yeah, partial reno, which just, yeah. Okay. What did you do with it? Just take the fence down and then just finish the reno?

Yeah, took the fence down. I think the client eventually just re-landscaped the backyard and turned it back into a family home, a family block, because he would have devalued the existing property by getting rid of that backyard.

Obviously, you can do that if you're going to get some uplift from the subdivision or development. So we just sort of rectified it and got it back to its original state. And it was just a long-term hold, but it does have development potential.

It did have a big frontage, so you could eventually chop it down the middle and build a couple of probably four by two type homes on there. and probably do quite well, especially given we bought that, I'd say, seven years ago or so. So it's had a massive upswing.

It's not a bad strategy, though. It's like if you know that the buyers are just a bit oblivious, it's a FOMO market. And, you know, you've got a block that you think you can subdivide and the council won't let you do it. You just say, look, it's ready to go.

You can just put a fence up and try to sell it as a block that someone could build two houses on. Yeah. All of a sudden, the buyer buys it and they're like, oh, hang on a sec, that fence is just, you can't do that.

So maybe the idea behind it was actually quite ingenious at first, but it kind of backfired on me because I was like, hang on a sec, no one really wants this half block at the back of the house with a flat block. That's hilarious. So it's trying to get too smart.

All right, cool. Nice one, Matt.

Look, I bought my house, the one I'm in, I renovated it, but before I bought it a year earlier, there's a couple of young guys that bought it thinking that they were going to be able to knock it down and turn it into a pair of duplexes.

And it's a conservation area. It's a no-brainer. You're never going to be able to do that. They went to architects. They got the whole thing drawn up. They went to council. They get knocked back, knocked back, knocked back. I don't think they ended up going to court. There wasn't quite enough time.

But they realized, ultimately, after spending more – bought the property and spent money on consultants to discover what they could have found out before they bought it. And – I bought it and I turned it into a lovely home. So it's just a crack up.

All right, Matthew, it's been an interesting chat and sort of quite at Perth with a different angle than what we've talked about before as well, really sort of getting more into the nitty gritty of, you know, how you buy in Perth, what you buy in Perth. And so appreciate that. It's been great.

Absolute pleasure, guys. I really appreciate you having me on. And Veronica, keep being loud about the things you're talking about in our industry, because it's good that you're doing it louder than me. So I'm not the only guy that's getting sideways glances at industry events. But it's really important.

And WA, actually, before we finish up, we spoke about this earlier, they've just dropped the compulsory professional development requirement for agents here. Oh, dropped it. They've just halved it.

So we do need to speak up about these things in our industry because there are too many people running around out there either masquerading as or thinking they are actually advisors and they don't have the knowledge or experience or the right intent. So keep doing that good work.

Oh, thank you. And that's scary. Yeah. Sorry to hear that.

Yeah.

All right.

Thanks.

We're just not relying on our regulators to solve this problem. We have to educate consumers so the consumers can make better decisions because the regulators ain't going to do it for us.

It'd be helpful if the regulators helped us a little bit, but yeah, I think it's going to be up to our organizations like BIPA that we sit on the board on together and REBA and others that they're going to have to do the heavy lifting, unfortunately.

Yeah, interesting. All right, thanks, Matthew.

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