The PROPERTY DOCTORS, Sydney Australia Novak Properties
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The PROPERTY DOCTORS, Sydney Australia Novak Properties
NOVAK NEWS - WHICH TYPE OF PROPERTY MARKET IS PERFORMING THE BEST IN 2025 | COMMERCIAL vs RESIDENTIAL
Unlock the secrets to thriving in the 2025 property market with our insightful episode, where we promise to guide you through the evolving dynamics of residential and commercial real estate. Join us, Harry and Bidhan, as we embark on a journey through the northern beaches suburb of Dee Why, revealing why houses have outshone units over the past decade. You'll gain valuable insights into current trends, understanding the driving forces behind capital growth and how proximity to both the city and the beach lifestyle is impacting demand. We highlight the increased interest in both residential and commercial investments, providing keen strategies on where investors might channel their resources for optimal returns.
Switching gears to Brookvale, we explore how zoning changes are reshaping the area into a vibrant blend of commercial and residential spaces. Discover the pros and cons of freehold versus strata properties, and how interest rates are influencing the shift towards more affordable strata options. Alongside Flavio’s expert insights, we emphasize the importance of strategic planning and diversification in property investment. Learn how combining commercial and residential properties can help mitigate risks and maximize returns, tailored to your financial needs. Whether you're a seasoned investor or just starting out, this episode offers a wealth of knowledge to enhance your investment strategies.
All right, and we are live Monday night Novak news. It's Badan and Harry, yes doing it yes, we're talking about which type of property market is performing the best in 2025 commercial or residential? Yep, stay tuned and we will be right with you. All right, guys, welcome. How's the day been, harry? Been good, oh, busy.
Speaker 2:Busy right, Probably one of the busiest days of my career today. Oh interesting, yeah, man. Probably one of the busiest days of my career today. Oh interesting, yeah, man. It's all happening today.
Speaker 1:Yes, I think everyone's back, slowly getting back to business. We are seeing lots of activities happening. Lots of properties are coming on. Yeah, like things are happening and heated up. We normally wait until 26th of Jan, not surely a day before you know things start to kind of get on going.
Speaker 2:Yeah, property markets definitely starting to settle and starting to hit up in 2025, so early doors be done early.
Speaker 1:So I thought we'll, you know, take this chance and talk about it before it actually happens.
Speaker 2:Yeah, uh, we'll talk about what's already happened. Exactly only what a couple weeks into the new year?
Speaker 1:yeah, so much has gone on, definitely, definitely.
Speaker 2:So we're talking about the performance of property types, because they're like a zillion types, yeah, but we'll narrow it down to residential and commercial and subdivide them into, I think, a strata and freehold and dan, you'll cover more of the commercial today I'll cover more of the residential and we'll talk about you know the two in depth and which one's been performing better in recent years and going into 2025 exactly because if you have some like, let's say, a million dollars of cash, where do you want to invest?
Speaker 1:do you want to go residential commercial? They want to have a shop with you know, a really long-term tenant. They want a residential. Then you're retiring later, yeah right, do you want?
Speaker 2:strata do you want a unit, do you want?
Speaker 1:a house, so let's talk about it. So I'll let you kick off harry with some residential stuff yeah.
Speaker 2:So let's talk a bit, a little bit about um residential and, in particular, units and houses. Um, in the last 10 years, guys, houses have been outperforming units substantially. So you've got, if you take into consideration the capital growth of houses, um, if you look at 2015, um, it's actually the capital growth's gone up by about about 130 percent, which is a massive, massive jump. Whereas if you were to buy a unit um back in 2015 for a million dollars, let's say, that would have increased by 60% in today's market. So a million-dollar unit in today's market on average, in DY in particular, would be worth approximately $1.6 million on average.
Speaker 1:So this is just you're talking about in.
Speaker 2:DY in general.
Speaker 1:Correct. So this is more in DY.
Speaker 2:So we're just going to zone in on DY, because DY is a big suburb in the northern beaches. We're situated at DY. So yeah, and with housing again, million dollar property, million dollar house in DY back in 2015 in today's market would be about 2.3 million on average. So really really, really big capital growth there, really really good performance in the last 10 years and even still going into 2025, now it's only two or three weeks into the new year and we're still seeing a lot of high demand and it's a really really tight rental market.
Speaker 2:There's not too much stock on the market and there's lots and lots of demand, mainly, in particular, like you'll look at, the main suburbs, like manly, avalon, dy, in the northern beaches, um, they'll always, always have really, really strong demand because they're close to the city, they're close to transport and they're close to the water everyone loves the beach. Yeah, everyone loves the beach in here.
Speaker 1:I think people pay, uh, some absurd amount of money just to get to see that water, which I don't blame them for. Having a good view of the water beach is kind of always relaxing.
Speaker 2:People love the lifestyle. Yeah, exactly, they love the lifestyle. That's why they move to the northern beaches.
Speaker 1:Exactly. You drive by on a weekend you'll see people walking the dog with their kids, just having a sip of coffee, walking through the beach, and the most popular walks are along here, like in a coastal walks. They're very, very famous for it, so people are just moving here for convenience and lifestyle basically. So that was a bit of a crazy commercial. Pretty much the same thing Like if you have a very premium business, you would want it in a very premium server, right? You want to target that right market. You don't want to be selling. Let's say what would be the best example if it's in a full of industrial area, like it's better to have like a, like a footwear for commercial grade yeah, you know, like safety boots and like safety high-vis shops, rather than having a very, very fancy in a brand in there.
Speaker 1:So basically, demand versus supply, it's a very, very fancy brand in there. So basically, demand versus supply. It's a very old formula and everyone knows about it and jokes about it, but if you actually think about it it can change anything. Literally, the supply versus demand. And what actually causes the capital growth of a property doesn't matter residential or commercial is the supply and demand. That's it. So we did a bit of numbers with dy in particular again, because dy is the best server. Uh, so do you want to talk about the units in dy, how many units they were and how much they were building?
Speaker 2:uh, yeah, so units in dy, so sorry. So give me, give me the straight question, all right easy.
Speaker 1:So how many units were there?
Speaker 2:uh, in dy, let's say five, six years ago so yeah, so at the moment with units, we've got about 203 um. We'll talk about rentals um got about 203 rentals um in today's market as of today um, if you go to realestatecom, um, but even like five, six years ago, um numbers stock, um in in the northern beaches. It's always it's always been low. It's always been a really really tight market um, really tight supply um and really really strong demand. That's the thing about supply and demand. It's either ones ones sort of overriding the other and it's sort of you're never really finding like a balance between the two. It's always you're either having really really low supply and high demand or it's the other way around.
Speaker 1:Exactly and the thing is it's not. There's less apartments in dy. Dy has almost 10 000 apartments in total and there's 200 available for rent in whole northern bj. So that's, that's that number, the proportion of those very, very, you know, scarce.
Speaker 1:So that means the demand is very high and the supply is low and if you have a property there, I think that would give you the best capital capital growth and, uh, you have a good rental yield as well. Yeah, so if you talk about commercial, on the other hand, very same thing. Uh, brookville, which is a neighboring suburb of the DUI, is very known for its industrial area. If you have a freehold building there, let's say a thousand square meter land with a big factory and a bit of a frontage, that will be like a gold mine in Brookville, because Brookville being industrial, you can have multiple buildings there at some point. You'll have a very good capital growth. Industrial, you can have a multiple buildings there. At some point. You'll have a very good capital growth in terms of rental yield.
Speaker 1:You might struggle a little in terms of a freehold property in brook bell, because while selling you get high value. So because it has development potential, uh, your rental yield might be roughly around three to four percent. Yeah, but let's say you have a shop front, uh, in an apartment complex in dy. So let's say, if you look at our office, it's like a shop front in an apartment complex in DY. So let's say, if you look at our office it's like a shop front. So this will have a much better rental yield. You'll get at least 5% to 6% rental yield. But in terms of capital growth, the freehold in Brookvale will have a much better capital growth in, let's say, a 5 to 10 years period, I think. How about Rezi? Do you think they're the same?
Speaker 2:Well, look in Rezi again, if you look in the last 10 years, what's interesting is that houses and units, the actual yield. If you look in 2015, the average yield for a house was about 3.84% gross, which is what you'd get, and that's again around the DY sort of area Again we're using, you know, the same sort of suburbs just for discussion 3.84% in DY and that's actually come down quite a bit because at the moment we're sort of sitting at about the 2.7 mark yield. So we definitely have come down. And again, that's mainly due to that large capital growth that's occurred in the last last 10 years. And that's sort of the similar principle with with units. They've come down in the last 10 years, which is quite interesting. So it's either one's just overriding the other. You can't really get the most of both worlds. Um, too often, um, but yeah, it's the capital growth.
Speaker 1:That's just phenomenal yeah, exactly, so people often ask me the question. I kind of deal both with resi and commercials. So I was having a chat with this gentleman the other day like if I'm buying investment property, would I rather buy a residential unit or by commercial shop.
Speaker 2:Or does investment?
Speaker 1:So I smiled a little because that's a it's a bit a bit of controversial topic. Just because you have the money, it's investment anyway. But which one would you pick, resi or commercial? So I gave him the most simple answer what do you want out of the property?
Speaker 2:That's a good one. Do you want capital growth, or do you want?
Speaker 1:out of the property. That's a good one. I like that Right. Do you want capital growth or do you want a good rental return? Do you want cash right now?
Speaker 2:Yeah.
Speaker 1:Or do you want big cash a bit later?
Speaker 2:Yeah and Bidan. I just want to ask a question on that what sort of is there an influence on the demographic? And what I mean by that is do you see more elderly people going towards, you know, the commercial properties because they want, you know they're pushing past 50, 60, they, you know they're looking to retire comfortably and they just want more cash on hand, which is what they get from the, from the rent, definitely. Or is it more of the lower, the younger sort of generation like what's what's? What sort of demographics choose to buy residential and commercial?
Speaker 1:that's very smart, that's very smart. So, going on that, yes, so people who have been missing for a while, they're kind of on few properties. Yeah, I think at the end of retirement, that was starting planning. Yeah, there's this term called as piecemeal. Oh sir, what? What they do is they want something that will give them constant yeah, constant rental income so when they retire they don't have to keep worrying about, oh, what's going to happen. Now they have some investment properties that will give them good rental yield. And I say piecemeal because every two to five years they can sell one of them.
Speaker 1:So they still have a few more but they can sell that one and enjoy a bit of capital growth. But they have a very good rental yield. So people in a bit closer to retirement I've seen them investing in commercial properties or residential properties that have very good rental yield. They look for that yield because they need that cash.
Speaker 2:And I think another reason just to add to that point, vedant, is that I think when you're pushing 50, 60 and you're looking to retire and you're in that stage where you're slowly starting to live off your superannuation, I think it's a lot more easier to live when you're living off rent coming from your commercial investment property, as opposed to buying a residential unit, which may have a much higher capital growth. But in order to go and buy your, your bait, your groceries from coals, you can't actually sell the equity exactly. So you need that instant income, the instant um, the rent that you get exactly a week every fortnight.
Speaker 1:So at the end of the day, it's the question again what do you want out of that property?
Speaker 1:because if you're owning a property, you'll always have to see long-term because nothing happened in two years it will grow, but the return won't be the same because it will be paying extra fees as well. So if you look at a 10 year timeline, what do you want in the 10th year? Do you want a big capital growth, like you have some good chunk of money? These are the two things that you have to ask yourself what do you want out of that property? And once your want meets, then you have to look for that again supply-demand equation Like you want to go where everyone wants to go, and that's a very common human nature.
Speaker 1:You want to go where there is very less stock, so D1 in particular. I don't think there will be a big change in zoning at some point. If you see most of the D1 apartments, they're still the red brick ones.
Speaker 2:Yeah, they're still like the old ones from the 80s, 90s.
Speaker 1:And the commercial ones. They're all. They're freestanding commercial ones, but they're all one level, so not a big complex full of shops. Yeah Right, so there are very few of them, so I think dy would be one of the good ones as well. To invest like. Even if you want capital growth like it does 10 almost every year, and we working here been very busy with 10 000 apartments in hand it will keep us on ground. Yeah, we have a good questions here in facebook.
Speaker 1:Uh, there's also a speculation that brovale is going to do a genification over there. Yes, it's been going on a lot. So Brookvale is most of like it's been, always commercial. But in the last five years the zoning have changed a little. So a few of them if they're close to the town centre they're changing a lot. So Brookvale is now coming more of a commercial, probably 70 commercial, 30 res resi so the zoning's kind of changed every five years and just because there's shortage of housing.
Speaker 1:So they started the government's starting to focus, okay, what can we do better? Because they can't just bring out new land out of the blue. So they will have to modify things, uh and and they current one. So I think brookville will go through some good changes. We're seeing a lot of development having in brookbell. So if you are investor, buying a freehold commercial property right now in brookville might be a very good idea, because after five to six years, uh, there will be a big zoning change what's?
Speaker 2:what's a freehold um commercial property without? If you don't want to be asking?
Speaker 1:yeah, for sure. So commercial. So freehold will be anything that it's the strata is not involved you own the whole land okay so if you're driving by, you see a big, let's say a Toyota dealership, by itself.
Speaker 1:so that's a freehold property you own. The wrong, okay, a commercial, not commercial, sorry. A strata would be something as a shopping center right in our office. It's an Estrada, it's in a big building. There are multiple, multiple businesses in there, but a freehold would be I'm using this photo a lot so the petrol station at the back, so every petrol station you see, is a freehold, commercial property. So in freehold you can do whatever you want, like in future, if it's, if the zonings all right. So in that patrol room right behind us, it's in Pitwater Road, so you can build a eight story high apartment there at some point. You're allowed to.
Speaker 1:So those are the things, but if it's strata, even if you have to put a wall inside, you have to ask-.
Speaker 2:You gotta go through 50 different. You gotta go through the body corporate, the whole committee.
Speaker 1:So there's pluses and minus of both. Look at strata versus freehold. With freehold I think you'll get a much better capital gains at the end because of land values increasing yeah the rental deal is much better on strata.
Speaker 1:Yeah, because it's costing less and the rental deal is going up. And also, with this new economy, I think with the affordability uh, two percent interest rate versus six percent people are going more towards the uh, you know units which is strata, because that's what they can afford. Because back in the days when the two percent interest rate no matter what, people are buying houses- yeah because you know land, land makes you money.
Speaker 1:But now, with the six percent and seven percent interest rate, people are getting a bit tight like you know what? What are we doing now? What happens next? So they are, I think, being a bit more careful with the money they're spending and going more towards strut, like in apartments that are 600, 700, 800 and even as an investment they will give, like a two bedroom unit here would cost 800 grand, will at least bring 750 yeah, around that right and that's five, five to six percent mental yield right there.
Speaker 1:Houses, on the other hand, your median house prices are around 1.9 to 2 mil and a two bedroom house will bring 1,300 in rent.
Speaker 2:Yeah about that 1,300, 1,400. We leased one recently for 1,150, so, depending on the area, depending on how close it is to the beach, yeah, exactly, but in the future.
Speaker 1:If your closest is to the beach, yeah, facilities, yeah, exactly. But in the future, if your house is in the right, right spot let's say it's within 400 meters from the town center, has more than 600 square meters of land. You can build a duplex in there. So dual occupancy, so having that you have more potential for development. So depends what you're after, so what you want from the property. Do you want big chunk of money at the end of the 10 year or do you want Constant income coming through throughout the year. Yes, sir.
Speaker 1:I think that's the best difference between Strata and freehold, but none.
Speaker 2:What's your verdict? What's the verdict? Which one's the trance performed better? It's a tricky question is a trick because it is right now, right now now they're actually very, very similar if they commercial and raises are going through a very, very. If you look at the numbers, you look at the stats, um on rp data they've over the last 10 years, the numbers are very, very similar with each other. Yeah, like in terms of capital growth, rental yields, median price, everything. The numbers are very, very similar, very much yeah I going to go resi Resi.
Speaker 2:I'm in resi Resi, Okay interesting.
Speaker 1:I find both better, because I've seen some like depends which one you pick. Yeah, depends who you are as well. Yeah, exactly, I've seen some commercial property that are in strata perform very well, like I've sold properties that made people 50 to 60% growth in three years in a commercial property. Wow Right, but it's same people at the same time might have bought something else in a different location and they didn't make much.
Speaker 2:We've got some comments here, flavio.
Speaker 1:Flavio, hey, flavio.
Speaker 2:Hi Flavio. Diversification is key mix of commercial and residential.
Speaker 1:Everyone says, don't do all the S Diversification is key.
Speaker 2:That's actually a very good point, Depending on your financial circumstance, if you're in a position where you can have a large property portfolio. I could not agree more. I would definitely recommend diversifying commercial residential. You're getting the best of both worlds You're getting your rental yield on one side and then you're getting your you know capital, capital on one secure point. Right, but your short term, long term benefits, which is really good like in the same goes.
Speaker 1:Don't keep all the eggs in the same basket. Yeah, thank you, you know always, always time yeah exactly so I think Mark was saying like no matter what happens with as time goes on the old fundamental sum change yeah.
Speaker 1:It's always the same the property market in the last hundred years will always increase and the property market in the next hundred years will increase as well, definitely, and at the end of the day, properties prices are always going up, it's always a good time to buy and it's always a good time to buy and it's always a good time to sell. So it's all about what you want out of, out of that property, and I think flavia mentioned a good point here. So with commercial and residential, in terms of tenancy, you know which added earlier. So with commercial, I've seen some properties get astronomical rental returns. Why? Because it takes a while to find a commercial tenant, but when they're in there they're locked in. Like you see, shops at a spot for like 5, 10, 15 years and commercial property have a fixed growth every year. So it's in the tenancy. So let's say a property is paying 50 grand a year. Next year, if it's 5% in an increase, it's gonna be 52.
Speaker 2:So over the 10 year period.
Speaker 1:The compounding is gonna be crazy. So by the end of a five year lease they might be paying a much higher rent. But with res yields like it's, the tenant can move it every year, tenant can move it every year and it all listens to the market, whatever the market's doing. Like you might have a tenant that might stay there for five, six years or they might change, because you know, life change. People are single, get married, have kids, the circumstances change, different job yeah sir.
Speaker 1:But with commercial, if it's a shop or an office, they have to pay for the fit out. So they invested themselves. Like if you see a cafe, the coffee machines, the bars, the grease traps, you know it's a lot of investment. So they're locked in for four to five years. So once you have a commercial property, you have that rent coming in for sure. Yeah, it's again what do you want out of that property?
Speaker 2:what is your end goal.
Speaker 1:I think we've covered everything we definitely matched it up. Yeah, don't want to take a long time, but, at the end of the day, uh always keep diverse, take a lot of solutions from different people and we're always here to help. Like if you want to give us a call and say, hey, this is what I want out of a property, do you have anything in mind? What's the best way?
Speaker 2:uh, singing yeah, yeah, and if you are unsure, guys, um, look at the numbers. Look at what the numbers have done um in commercial and resis in houses in units. Look at what the numbers have done in commercial and resis in houses in units. Look at what the numbers have done in the last 10 years. In today's market, in 2025, we're three weeks into the new year and that will help you make a better decision. If you are looking to invest or buy your first property, or whether it's one to add to the collection, it's really, really, really useful to look at the numbers, look at the stats, see how the property market's been performing the last one year, three years, 10 years, 50 years.
Speaker 1:All right, last question before we end it you have $1.5 million. Oh, here we go. All right, all right what are you buying and why? Which suburb and why?
Speaker 2:um, I'm buying in dy I saw that coming buying in there um, I'm gonna probably buy a two better, I'm buying it too. Better, probably rent it out beautifully for 800 850 a week and uh, even though the yield won't be too high on that, um, and then just uh, sit back on my chair, relax and enjoy my capital growth. That's great, that's great, simple answer.
Speaker 1:Simple answer, all right, that's. Uh, that was a great time and have a good night, everyone.
Speaker 2:Thanks for tuning in thank you everyone and yeah, we'll see you next one night. See you later, guys. Enjoy.