Lessons from Lianna: Key Insights from a Top Property Investor

At Australian Property Update, we report on the trends and factors affecting the residential property market.

Most of the time we turn to economists, researchers, and property professionals for their take and considered analysis on the state of the market.

Less often do we hear from the people who are actually providing the homes for the one-third of Australians who rent - property investors.

If you are talking about successful property investors, it’s hard to go past Lianna Pan.

Over the last 15 years, Lianna has built up a multi-million dollar portfolio of at least 28 properties across Australia.

A qualified actuary and data scientist, Lianna perfected her skills in property analysis, after helping to predict accurate outcomes for several major insurance companies. 

Lianna is the Co-founder and the Director of Research at Freedom Property Investors and my business partner.

In 2015, she pioneered her renowned Four Pillars of Prediction model that allows her to pinpoint specific areas and regions around Australia that are set for exponential growth. 

This has been the secret to Freedom’s success, which has seen us become the largest and fastest-growing property investment community in Australia.

I sat down with Lianna to get her take on the current state of the property market, growth areas to watch, and her advice for would-be property investors.

Q: What did you make of the property market in 2023?

A: 2023 was an interesting year. Certainly, there was no big collapse of any property market. And there were the predictable, resilient markets, which were the Perth and Adelaide markets. They actually suddenly came out to be the best performers, and that was no surprise. We predicted it. We have significantly exposed our members to those two markets, and they have done very well.

Q: Were you surprised all those predictions of doom and gloom at the start of the year didn't materialise? 

A: Not at all. I'm just amused. There's always been doomsayers, and maybe the media thinks that bad news sells, so they keep quoting those people. The biggest driver of property prices, or prices of anything, to be honest, is just the underlying fundamental laws of supply and demand. And in Australia, we've never really solved that problem of getting supply up to the rate that will sustain demand. 

Q: Do you have any thoughts on when and how the Reserve Bank may move on interest rates this year?

A: You're definitely not going to see the kind of interest rate moves like 13 interest rate rises in a space of 18 months. It comes down to inflation, what inflation is doing. Overall, I expect it to be trending down as compared to last year. I think probably at the end of this year, we’ll be in a range of 2.5 to 3.5% inflation, which is certainly getting very close to the range that we want to be in. I expect that if there's going to be any downward movement in interest rates, it's probably going to be well into the second half of this year or 2025.

Q: What surprised many people in 2023 was the way the property market just shrugged off five more rate increases from the Reserve Bank. Have we basically seen the end in Australia of what used to be a really strong correlation between property prices and movements in interest rates?

A: The correlation between property prices and movements in interest rates is probably not as strong as what people think it should be. If we look historically, looking at ten-year windows and tracking interest rates versus property price growth, even during the window where interest rates went up to about 17-18%, there was no collapse in property prices.  It again does not address the underlying balance between supply and demand. The fact that we are in an extremely critical, probably the worst period ever of undersupply in our housing history, is overriding the fact that there have been increasing interest rates.

Q: What's your overall feeling about 2024?

A: What was good about 2023 is there was overall a very rapid increase - I guess from an investor perspective, not so much if you are renting - a rapid increase in rents. And that is making investment a bit more attractive now because the yields are recovering. So I think because of that, it's going to draw investors back into the market. The stronger performing markets will continue to pick up their pace. Certainly true for the Perth market, certainly true to a certain extent for the Adelaide market as well. I think Queensland is also going to be back growing as well. I think Melbourne and Sydney probably are going to do okay, probably in the single digits.

Q: What do you think are going to be the main drivers of growth in 2024?

A: Probably the biggest constraint will be a trade shortage, I'd say. And just the ever-growing gap between the rate of construction, versus the rate of population growth. It's a growing gap. And it doesn't help that the government is putting through more legislation and regulations on housing. 

Q: Are we going to see some states and capital cities grow faster than others? 

A: Every state, every property market has its own cycle and they're just at different phases of their cycle. The Perth market, and the Adelaide market, for example…their fundamentals are extremely undervalued compared to other cities. They have to catch up. So they'll have faster growth than other cities in the short-term.

Q: We've seen a trend over the past 18 months where quite a few investors pulled out of the property market, citing things like state taxes, increase in tenant rights, and being spooked by talk of a rental freeze. What would you say to them?

A: All investments involve risk. But when you're an investor, you have to be very much aware that you have got to focus on the big picture. What is the big picture? What is the biggest driver? Things like taxes and changes in tax laws - they were minor, they're not huge. If your property price is going to grow 10%-15% - it's got the potential because of the underlying severe shortage of housing - it's not going to be affected by a small percentage change in land tax. Increases in tenant rights? Well, everybody has to live somewhere, and we have a massive, massive shortage in housing. So there's probably a need for protection for tenants. But fundamentally, you cannot really stop market mechanisms. 

You have got to focus on the bigger picture, which is, “Is this an investment property market with the fundamentals to go up or not - is it going to perform or not?” And if the answer is “Yes”, these are small things that are not going to cause a major change to your overall outcome.