Major Property Risk in 2024: Buyer’s Agents & 'Data-Driven' Herd Mentality

What happens when everyone starts copying each other?

There's been a noticeable shift in the structure of property investing markets in the past decade or so.

The success of 'data' driven buyers agents investors has created SCALE in the number of people investing with the same approaches at exactly the same time. The success has been well earned, many thousands of Aussies have done really well and the general education level of property investing has improved dramatically.

What was previously FORWARD THINKING, is now very much the norm.

This success presents an opportunity now for forward thinking investors buy before the stampede of investors. The approach they take is entirely predictable, will be repeated, and is now large enough to matter in some markets.

In 2014, investor based buyers agents are fairly new, data based investing is fairly small, not very well understood.

These buyers agents account for 20-100 transactions per month.

Ten years later, in 2024:

• The size of these type of investors is 10x higher AT LEAST, more likely 20x. That is, for every one person using this approach in 2016, there is now 20.

• Large data driven investor based buyers agents now buy 50+ properties per month. There's a group of them, adding to 1000+ transactions a month with the same strategies. They are buying in similar locations, and only buy in a handful of data driven locations at the same time.

• Data driven general property investors also make up a much larger % of the market too.

• They are ALL using the same data techniques, with slight variations on what they place importance on. These data techniques are very easy to understand now with great tools out there.They all rely on basic economic principles of finding areas where demand outstrips supply.They are buying in decent yield areas, with 4-5%+ yields generally one control factor.They are generally all buying houses with decent land contents.They all have the exact same approach.

• New data tools can do most of this analysis for you in 15 minutes: HtAG is great, DSR+ ratios. What was once complex, is now very easy to do and digestible.

• Those data metrics are spitting out the same locations. We've had 8 contracts in northern QLD in the last 60 days (we'd seen maybe 5 in 10 years prior). Some of these locations only transact a couple thousand properties a year...so this type of scale coming in will lead to aggressive price movements.

• For the first time in a long time, we've seen valuations fall short (half dozen times) for very simple buy and hold properties. I don't have specific data, but 99%+ valuations do not fall short for purchase contracts. Some valuation reports specifically note 'a rush of interstate investors' are over-paying. This includes large buyers agents deals targeting off markets.

• There are some controls used (% of investors, limited recent price growth, etc), which are again, entirely predictable, which makes it all a bit easier to know where they will go.

How this can change markets:

• In regional areas that will exhibit strong data factors, a much larger size of investors will now NOTICE you. Townsville/Mackay is going through this now, but there's no reason why other markets won't see the same.
• In some locations, the change in price movements will be more aggressive.

Steps to take advantage of this new trend:

• Taking a bit of risk by looking at early adopter markets can pay off. Particularly those with smaller markets - as the stampede will make up a much larger share of the market.
• Flipping, by buying in the areas before the stampede, and selling to them, becomes attractive. You can buy what they want, sell it to them when it's hot, and then get out.
• All of these data metrics change when an economy begins to perform well. That is the starting point of change. It means more jobs, higher incomes, more housing demand, and generally supply limits. This triggers the wave of strong 'demand and supply' data, which then triggers the wave of investors.

Areas to watch:

• One data metric these approaches use is 'areas with LOW recent price growth'. Melbourne is an obvious market, and its surrounding regional cities. When the economic tides turn here, there could be a wave in certain markets (outer Melbourne), particularly those that don't have strong incoming supply.

Note I'm not trying to say this property investing approach is bad, I think it's very very good for the majority of investors. I'm sharing the 'scale' component that is new, and my thoughts on the opportunities associated with it! You will need a data driven approach to work out where the data herd are going next. I'll get a few of whizzes who use these approaches on shortly and ask them what they think too!