Three "Warren Buffett" Investments for 2024-2032?
Big Period Residential
Brighton
1758sqm
Storage Development
Hawthorn
2024sqm
Big Period Day Surgery
Richmond
1024sqm
Mal James
Buy Sell Agent
0408 107 988
mal@james.net.au
Navigating Melbourne’s Current Top-End Property Market.
Today’s market feels reminiscent of 2014. We’ve seen a period of stagnation, and now, people are becoming a little apprehensive, especially at the Top End. In times like these, price becomes the key focus—stronger than any brand or marketing effort.
Buyers are looking for a bargain, but the question remains: what exactly is a bargain?
If Warren Buffett were shopping for a Top End Melbourne home, his advice would be clear:
Rule #1: Don’t lose money.
Rule #2: Re-read Rule #1.
Here’s a breakdown of what that may mean in today’s market, couched in our PPPs and with apologies if I am putting words into Warren’s mouth:
1. Intrinsic Value - Price
Buffett would tell you to buy below intrinsic value. With Melbourne’s market cooling, some properties are temporarily undervalued due to broader economic factors. These could be your golden opportunity.
“Price is what you pay. Value is what you get.” W.B.
In real estate, this could mean identifying properties where the market price is temporarily below the long-term potential value, offering an opportunity to buy at a discount.
Intrinsic value refers to the true, underlying worth of an home, independent of its current market price. It is based on factors such as future PPPs (Price, Property and Position) – the asset’s fundamental qualities. Investors like Warren Buffett use intrinsic value to determine whether an asset is undervalued or overvalued relative to its market price.
2. Position Still Reigns Supreme
Buffett is a firm believer in location. Focus on Melbourne’s areas with enduring demand and growth potential. It’s the classic inner-suburb vs. fringe battle, and history has shown that inner areas like Toorak, Hawthorn, Brighton, and Albert Park are resilient.
When buying a property, always think long term. After a downturn, prime locations bounce back far stronger than fringe suburbs.
3. Long-Term Durability of Property
A quality home or Property will stand the test of time. Buffett, I think, would focus on properties with unique, lasting qualities—scarce land, historical charm, or architectural significance. These features give properties staying power in any market.
“Our favourite holding period is forever.” W.B.
You want a home with intrinsic durability, something that will appeal in any market, not just today’s.
4. Risk Management is also a Key
Buffett is known for his conservative approach to risk, and avoiding over-leverage is crucial in a falling market. Financing a top-end home might seem tempting, but keeping debt minimal reduces your exposure to market fluctuations is important.
“You only find out who is swimming naked when the tide goes out.” W.B.
So, what are the good criteria for buying a family home as a property investment?
When it comes to making money real estate, making money on your family home, I think of three foundational elements:
5. Capital Growth, Cash Flow, and Risk.
And for me, it’s all about land.
Land with growth potential reduces your risk while maximising your investment (and it’s fun for the children to run around on).
High Land-to-Price Ratio: The closer to a 100% land value, the better the investment. Apartments, for instance, typically have only 10% land value—the rest is tied to a building that depreciates, like a car losing value the moment you drive it off the lot. Some new homes on smaller land are not much better than apartments regarding investments with capital growth.
Heritage Properties: If the land value approaches 100%, even properties with a heritage overlay can be worthwhile. Large parcels of land are always in demand, especially in an upmarket, and heritage can sometimes mean a built-in discount if you know how to approach it.
Give me a big parcel of heritage land with a home I can live in without renovation over a heritage-free, smaller block of land with a “Balwyn faux special” or a brand-new home of average quality, and the heritage home wins every time for long term value.
Cash Flow and Risk
Residential properties rarely offer great cash flow, so capital growth is where you have to win. So, Warren may be critical of Melbourne’s residential cash flow opportunites.
Back to capital growth. Growth in my mind comes from two key inputs.
- The price you pay (discount or premium) against the long term trend of the PPPs you have chosen AND
- The long-term trend for your PPPs you have chosen
Substantial land parcels tend to be lower risk if your debt-to-price ratio is reasonable.
Show me a 10-year period (barring disaster) where land values have dropped in Australia. Melbourne’s migration-driven demand ensures this trend will continue.
Some Finishing Thoughts
In a market like Melbourne’s Top End, opportunities abound for those who understand value. Whether you’re buying for investment or for your family, the key is recognising intrinsic value, focusing on quality, and avoiding unnecessary risk.
Melbourne Market with what I imagine Warren Buffett would say
Focus on Long-Term Value, Not Market Timing:
Warren Buffett believes that trying to time the market is less important than identifying long-term value in an investment.
He advises buying undervalued assets during downturns and holding them for the long term, stressing that short-term volatility shouldn’t dictate investment decisions.
Buffett’s approach to real estate, in my mind, is clear: buy for value, not for price, and focus on properties that will appreciate over the long haul. If you apply this thinking to your next purchase, you won’t just be chasing a bargain—you’ll be making a smart investment.
Below are properties we bought and sold for clients from 2014 to 2022 and the gains they made. Below are three current opportunities on which we are conjunctional seller advocates that may fit your bill of great properties now and into the future. Will they be $20m+ in 8 years? I’m happy to show you anytime!
2014-2022
Brighton
2951sqm
Land. Heritage.Great Investment
Bought 2014 - $5m
Sold 2022 - $16m
Heritage didn’t affect this brilliant buy and sell. What made this home so successful was the people involved and the size of the rare land.
Toorak
1820sqm
Land. Location. Great Investment
Bought 2014 - $11m
Sold 2022 - $22m
We learnt so much off this couple on how to talk softly and act loudly. They were clinical in their PPP and timing decisions.
2024 - 2032
Brighton Home
1758sqm SOI $9,900,000 to $10,800,000
Brilliant PPPs
Andy Nasr 0422 029 324
Is this home undervalued now, against the long term?
Position: Brighton offers the prestige of Toorak, but without the traffic, noise, and competitive Asian-Australian bidding market. However, this is changing. Increasingly, this market segment is recognizing the appeal of Brighton’s private schools, the beach, less congestion, long term value and overall lifestyle.
Growth: At the turn of the millennium, Toorak and Brighton were both priced at $3,000 per square metre. Today, Toorak has surged to $10,000 per sqm, while Brighton stands at $6,000 per sqm. The Asian-Australian market in Bayside is expanding, driven by two key factors: schools and land prices.
Property: Concerned about heritage restrictions? Don’t be. This home is modern, complete, and stunning, featuring a spacious layout and a tennis court.
18 Asling has all the key attributes of an A-Grade property. Would Warren Buffett call it well below its long-term intrinsic value?
Footnote on Heritage: In our recent report on a Toorak home we sold this week, two Asian-Australian buyers fought it out before auction on a property with a Heritage Overlay, exceeding the quoted price on a land play.
Hawthorn Storage
2024sqm SOI $16,500,000
Big Land. No Land Tax to pay.Location. Great Investment
Matt Nichols 0418 186 488
Warren Buffett would certainly like the position of this investment – highly visible on the main road in a location where storage needs for wine and other things are growing as wealthy humans collect and hold more and more.
But what I think he would also like is the risk and cashflow. Tenanted by a public company with a strong lease of 5 years on circa $600,000 rent and LAND TAX paid by tenant.
Fundamentals – intrinsic value – rule no 1 don’t lose money, all stand out like beacons on this property. So why sell? The current owners are 3 families with children needing help into the property market and as this was given to them, they are carrying on the family tradition.
This feels like a rock-solid investment in any market, and Warren may be attracted to its intrinsic value, but unlike most high-end homes, it may also be attractive from a cash flow point of view.
Richmond Home or Hospital
1024sqm
Big Land. Epworth. Medical Permits. Develop.
Mal James 0408 107 988
I’m not so sure this would be Warren’s favourite of the three, as his principle is to “only buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.” (Warren Buffett)
In this case, I think the investment could not be run by an idiot and would need to rely more on his other fundamental rule of risk management:
“The first rule of an investment is don’t lose money. And the second rule is don’t forget the first rule.”
Buffett would likely avoid over-leveraging in a falling property market and focus on investments that minimise financial risk while preserving capital.
What does that mean here? This is a site with major potential, but with so many options, due diligence is for the thinking person.
BUT…
- This is one of Richmond’s larger land holdings—over 1000 sqm—with front and rear access and multi-level car parks (STCA).
- There are existing permits for four doctors’ offices, but with new health regulations near transport hubs, the potential could be much greater (STCA). Could it become a day hospital? Surgeon’s rooms?
- Just a few hundred meters from Epworth Hospital, ensuring demand is locked in for decades.
- Or could this be a magnificent home site? It’s in a residential zone with views of the city, MCG, and parklands that are unlikely to be obstructed. Yes, it’s heritage, but that adds to its value with its huge rooms, and it’s perfectly positioned on the southeast corner, allowing for major development at the back with north-facing light streaming in.
So, what would Warren think?
Buffett recognises the importance of investing in assets with long-term desirability, but I think another American sums up this Richmond real estate play best in a world of scams, half-truths, and missed opportunities:
“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is the safest investment in the world.” – Franklin D. Roosevelt.
