Residential property is the only asset class we live in, it is where we raise our family's, and it is our most expensive investment, yet property advice remains unregulated. Our objective is to educate time-poor professionals through deep insights from our experts who have provided thousands of Australians with personalised advice and education spanning two decades. In a climate where we are overloaded with information and one size fits all recommendations from the media, well-meaning friends and family and so-called advisers, we will distill the raw truth from the ill-informed.
So join the Property Planner, David Johnston, The Property Buyer, Cate Bakos and the Property Professor, Peter Koulizos as they take you on a journey of discovery through the maze of property, mortgage, and money decisions to empower you to create your ideal lifestyle!
#84: Australia China relations - what is the risk to the Australian housing market?
In this week's Ep#84, Dave, Cate and Pete take you through an episode dedicated to this question posed from one of our listeners:
"Australia's economy is highly dependent on China, do you see immediate risk in the housing market should China reduce dependency on Australia's supply chain?"
Housing market consumer sentiment moves into negative territory
For the first time in a year, the Westpac Melbourne Institute Consumer Sentiment index on whether now is a good 'Time to buy a dwelling' has dropped below 100 and is now in pessimistic territory. This is the fifth monthly decline in a row, dropping 7.1% from May to June and the index is now 27% below its November high of 132. The shift in sentiment is mainly caused by rapid price rises over the last 6-9 months, supported by fringe factors including: increased fixed rates from lenders, with speculation of more increases to come and various government incentives coming to an end. This index generally is a forward indicator of markets, however it could be 3 to 6 months before we see any impact on the housing market, if not longer. The hope is that this signals the possibility of more sanguine value growth without the requirement of intervention from APRA placing extra limitations on borrowers. The property buyer isn't upset at the prospect of slightly relaxed competition levels either.
Australia & China relations
1. Update from the G7 summit
The Property Planner takes you through some of the communiques and resolutions formed in the 47th G7 summit, held on 11-13 June. The G7 is a meeting of the 7 largest Western democratic economies, including Canada, France, Germany, Italy, Japan, UK and the US. Australia and three other nations of Japan, South Korea and South Africa were invited to attend. The G7 pledged to tackle China's market-distorting economic practices which are currently affecting Australia's exports, as well as authoritarian actions in relation to Hong Kong.
2. Foreign investment and Australian property
Australia is the fourth most popular residential property market after the US, UK and Singapore with ultra-high net worth Asian cross-border property investors. The Property Buyer shares key data showing that the overall market share of foreign buyers fell to 4% in the fourth quarter of 2020 in relation to new property. This is the lowest result since NAB started tracking the data in 2010. Harsh taxes were introduced in 2015-2017 for foreign investors, and for some local markets, this had a severe impact on asset prices. However, the taxes haven't had the devastating impact that many people feared would happen.
3. Why is Australian residential property so attractive to foreign investors?
The Property Professor shares key insights from a special dissertation written by one of his students on the appeal of Australian property for Chinese investors, who sheds light on some of the key aspirational, social and financial motivations held by Chinese buyers.
4. Cultural based dwelling preferences
The trio discuss how current dwelling preferences have been shaped by Australia's European heritage and discuss the expected changes from the current and future generation of Asian migrants to Australia. The Property Buyer shares some of the key preferences from Asian buyers, some of the positive influences on Australian housing design and layouts to modern day, and offers a hot tip on how you can gain an edge if you're finding that you're missing out at auction.
5. Iron ore - mutual dependence on trade between China and Australia
Whilst the political environment betwee...
#83: Is the market at the top of the cycle, should you invest today, where are interest rates headed and should you fix, what should a first timers strategy be? - Listener questions answered #3
1. Regulation on the horizon as the property market continues to surge
New data shows that property buyers are stretching towards their maximum borrowing capacity to compete in this hot market. Investors have been quiet in this market so far, but they are making a come-back, as first home buyer numbers start to taper. As we expect annualised growth to hit 15% for some of our capitals and regions in the coming months, the jungle drums will beat louder for regulator intervention to slow down the velocity of the growth.
2. Australia's AAA credit rating
Australia is now one of only 9 economies to have a pristine AAA balance sheet recognised by all three of the world's largest credit rating agencies. This is great news for us, as it keeps our interest rates slightly lower, which we do enjoy as a capital importing nation. The AAA rating means that our interest rates are 0.15% lower than they otherwise would have been.
Listener questions answered
1. The market seems to be at the top of its cycle. Is it a good time to invest in property or should we be waiting for the demand to subside or the chance that govt regulators will step in to curb prices?
Whilst prices are undeniably on the rise, the trio firmly believe that we are certainly not yet at the top of the market. Any regulation introduced will be carefully planned so as not to de-stablise the market or cause a downturn, but simply to slow the acceleration of property price growth. The focus for regulators is optimising GDP and bringing unemployment down. The government will be loathe to introduce any measures that could hamper our economic recovery, particularly before the election.
2. What are the implications of waiting it out?
If you would like to purchase property and are waiting for demand to subside or property prices to stop rising, it's likely that the market will move further away from you. There is great fear in purchasing at the top of a market cycle, however this only poses an issue if you crystalise losses by selling or if you have purchased a poor-quality asset in the first place. If your strategy is to purchase and hold for the long term, you will most likely be able to ride through any downturns.
3. Is now a good time to refinance? If so, why?
The trio discuss the current conditions for refinance, which are fantastic. Property prices have gone up, so it's likely that property owners have more equity that can be tapped into and interest rates are the lowest they've ever been. This environment provides great opportunity to get on to a sharper rate and release some equity to protect and/or build your wealth.
4. What's your opinion on where interest rates will go over the next 12-18 months? Should I be fixing some of my debt now while fixed rates are low?
The trio discuss the outlook for variable rates, which are linked to the RBA cash rate, while fixed rates which are connected to bond yields. Fixed rates are expected to rise, and even since recording, one major bank has increased their fixed rates by 0.25% and 0.45% for two of their fixed rate terms. This is likely to be the trend in the coming months as the $200B term funding facility that the Government has provided to banks is coming to an end in June. For reasons relating to our economic recovery, the variable rate is expected to remain nailed to the floor for some time to come, as consistently communicated by the RBA.
5. Considerations for fixing some of your debt
The Property Planner explains why it's almost always a good idea to have some...
Market update #22: The Property boom continues, median values, rental demand and RBA minutes
In this week's market update #22 of the Property Planner, Buyer and Professor Podcast, Dave, Cate and Pete take you through:
1. Impact of lockdown #4 in Melbourne
Whilst there may be a small lull, we expect activities to pick up where they left off after this small blip. Many auctions have been brought forward or held over zoom. We're seeing a bit of vendor discomfort in response to the COVID lockdown, but no buyer panic. If anything, buyers seem even more spurred on to compete hard for property.
2. Internal migrations
The bigger picture is that internal migration to Melbourne could be impacted as there is now stigma around the ability to manage Covid and future outbreaks. This will have a lag effect for a period of time, but will most likely dissipate in the next 1 to 3 years. Development of quarantine facilities outside of the CBD is on the cards and this could have some positive implications for the Melbourne market.
3. The return of international students
SA and NSW are making efforts to return back to normal, as international education is in the top 3 exports for every Australian state. We hope to see education get back up and running, watch this space.
4. May property Index results are out!
May has returned the 8th consecutive month of growth for national housing values, reaching 2.2% in May and a stronger result than April's 1.8%. The Property Planner explains expectations of reaching 15% annual growth in all capitals in the next few months. The poorer months of June, July and August 2020 are still included in the annual growth rate, which are weighting it down even though the market has been booming for the last 6-9 months. Once these levels are reached, there will likely be greater noise in the media and political pressure for intervention against run-away house prices.
5. Capital cities are up on regionals for the month and the quarter
We've had over a year of regional cities outperforming capital cities, due to the pandemic induced sea and tree change. For the second month this year, capital cities have outstripped the regions in monthly growth and as predicted, the tide is starting to turn towards capital cities. Regional areas are still exhibiting strong results, but the capital cities will catch up.
6. Taking a critical eye to median values
The Property Professor takes you through some data analysis of the 'Turquiose coast' in SA, pointing out that median values can be unreliable when looking at the suburb or lower level, because of the smaller number of sales that the data is based on. Incentives can also skew data, such as concessions that have a cap on the value of the property that can be bought.
7. Upper and lower quartile analysis
When markets are bullish, the upper quartile (the top 25%) tends to outperform, which is what we're currently seeing. This is because the people who have more money, spend at a greater level on higher priced properties. Conversely, when there is a downturn, the upper quartile tends to drop the furthest, because there are less buyers as a total proportion of all buyers who are circling the top quartile properties (based on affordability). In particular, at this price level people are more concerned about their level of wealth and hold on to their money. We're seeing this play out across the combined capitals, where the upper quartile increased by 9.2% over the quarter and the lowest quartile rose 4.2%.
8. Rentals - supply is dwindling and demand is increasing
With the return of expats to Australia and an increased number of home buyers converting...
#82: Conveyancing 101 - why you need a great solicitor or conveyancer in your corner
In this week's Ep#82 of the Property Planner, Buyer and Professor Podcast, Dave, Cate and Pete take you through:
1. The number of vendors lifting their asking price mid-campaign has dropped
New data from Domain reveals that the percentage of vendors who increase their asking price mid-campaign has lowered from March to April for Sydney, Melbourne, Brisbane and Canberra, which covers around 2 out of 3 property sales. This is likely occurring for a combination of reasons. Values are going up but not as fast as they were earlier this year, agents are more conscious of being busted for under-quoting, and vendor price expectations have risen since the rebound began in earnest. The locations with the highest proportion of vendors lifting their asking price is dominated by Sydney and Melbourne.
2. What are the clear signals that an agent is underquoting?
This will normally be easy to spot if you've done your homework, know your market and are armed with your comparable sales. If an agent is saying that there are limited comparable sales or where sales provided are not actually comparable, they are probably trying to pull the wool over your eyes.
Another factor for the lower quote could be because there is an issue with the property that the agent has factored in that you are not aware of! The important thing to remember is that you're highly unlikely to get lucky with an under-market purchase price on a good quality property.
1. What do conveyancers do?
Conveyancing is the legal process of moving land or property from one owner to another and conducting the pre-purchase contract review and associated due diligence. The trio discuss the ins and outs of the conveyancing process, what are they responsible for and how you can engage either a solicitor or a licenced conveyancer to do the job.
2. What is the difference between a conveyancer and a solicitor?
Either are sufficiently equipped to manage a property transfer and in the end, the most important factor is the quality of the service provider, not their official title. However, there are some key differences in the breadth of their advice that you should know before making your selection.
3. Can your conveyancing representative work Australia-wide?
Property law and the conveyancing process differs state by state, which means a conveyancer must obtain a licence from the state in which they operate and cannot operate in states in which they are not licenced. This can be a huge positive, as you want your property conveyancing representative to be an absolute expert in the law relating to your property transaction. Having to be across one set of property laws and processes is hard enough, let alone seven. A solicitor on the other hand can work across all jurisdictions, although we would recommend working with local experts.
4. What are the limitations of your legal representatives due diligence?
The trio discuss the elements of the property purchasing process that your conveyancer or solicitor will not do, which you must be on the look-out for!
5. What can go wrong?
The Property Buyer takes you through the legal elements and deal-breakers that conveyancers can uncover during the conveyancing process, that buyers often miss. Tune in for the Property Planner's real-life examples where legal handy work has picked up illegal cladding, a vendor trying to slip through old body corporate minutes and incorrect fence lines, highlighting why it pays to have a great solicitor or conveyancer in your...
#81: How to determine property market values by using comparable sales
In this week's Ep#81 of the Property Planner, Buyer and Professor Podcast, Dave, Cate and Pete take you through:
1. Stamp duty and the VIC budget
For Victoria, a new premium for stamp duty was announced for property transactions above $2million, increasing the duty payable for contracts entered into from 1 July 2021. The trio share their thoughts on this 'lazy taxation grab' from the government and the potential impact on both residential and commercial property investment in Victoria.
2. Sydney prices taking flight
Latest figures from CoreLogic see growth in Sydney housing values reaching 9.21% in the last quarter. Annualised, that is 40% when compounded. The Sydney market is very hot indeed, but we do expect the heat to dissipate? Taking the lead from the other capital cities may not be an accurate gauge.
1. Valuation methods
The Property Professor takes you through 3 of the most common methods of evaluating the price of a property: comparable sales, summation and income/capitalisation. Tune in to our show notes for a visual presentation.
2. Finding comparable sales
The main attributes that buyers should itemise to compare the subject property to are: similar location, land size, building size, building condition and the recency of sale. The trio discuss the ins and outs of what to be looking for in order to determine whether a sale is 'comparable'.
3. Additional property attributes that can impact value
Other factors that could impact demand for a property (and therefore competition) include: topography, environmental factors, accessibility, utility services, town planning, zoning, other restrictions, improvements to the property, the potential for alternate use (commercial for example), views, orientation and shared ownership of common areas.
4. How to value a property
Each component of a property can be boiled down to dollars and cents to arrive at an end figure - EG what you are willing to spend! The trio take you through how to attribute monetary value to the various components of the property and which factors are most important. The Property Buyer shares a hot tip when it comes to properties on main roads vs quiet streets. Don't forget, finding the similarities between properties is easy, the tricky part is identifying the differences and placing a value on those.
5. Case study....be sure to watch the video to get the most out of this educational experience
In true lecturer style, the Property Professor takes you through a real-life example of finding comparable sales for a property going to auction on Saturday 22nd of May. Cate and Pete value the property and the expected result on auction day, with the disclaimer that there may be additional factors identified after walking through the property.
6. When is comparable sales methodology a challenge or impossible?
The trio discuss the circumstances that may cause some obstacles for comparable sales analysis. The Property Planner issues an important reminder that comparable sales cannot be taken as gospel.
7. How to deal with anomaly sales results
When you come across a sale that has a surprising result, it is important to understand the reasons behind it and the circumstances of the sale. What bank valuers often don't take into account is real estate agents with excellent digital marketing skills, irrational bidders...
Market update #21 - Australian budget 2021, interest rates, non bank lending and more
In this week's market update #21 of the Property Planner, Buyer and Professor Podcast, Dave, Cate and Pete take you through:
1. Heat in the market is dissipating
Anecdotally, we're seeing some behaviours such as vendors holding out for better prices that are not always being achieved, supporting the fact that the heat is coming out of the market to some degree. As touched on during recent Podcasts, we don't expect prices to be growing at quite the same rate of knots as the first four months of this year across most part of Australia.
2. Smaller capital cities have been the outperformers of the last 12 months.
The latest property index results for April from CoreLogic reveal that Adelaide, Hobart, Darwin and Canberra have outperformed Sydney, Melbourne and Brisbane over the last year. We know that the larger capital cities took the biggest hit during the covid-downturn due to lockdowns and halting of international travel. It's worth noting that while Darwin and Perth are doing well, they are still behind their peak medians reached in 2014 and still have far to go. And many of the regions around our nation have also outperformed the two biggest cities, but Sydney in particular is making up ground rapidly and we expect these numbers to evolve over the next three to six months.
3. What tales are the vacancy rates telling?
Looking at the vacancy rates for Melbourne and Sydney, you'd think that they are in dire straits. What's increasingly evident is that the markets of the largest capitals are operating at two speeds and there is a large disparity between vacancies for houses versus units. Much of the higher vacancy rate will be due to medium to high density apartments and student accommodation. This is another example of why you need to dig beneath the data, as it can't always be taken at face value, and generalising data can hide important detail.
4. The swinging pendulum - investors vs home buyers
Investor mortgage numbers have recorded an increase, suggesting that the pendulum could be swinging back towards an investor market. First home buyers are starting to reduce, as prices get more unaffordable for new entrants to the property market. This latter point is one of the drivers for government initiatives that have been announced in our most recent federal budget.
5. Property incentives from the budget announcement
The trio talk through the 4 key property market incentives and schemes announced in the federal budget, including their merits, insights gleaned and likely impact on the property market. They include:
· New Home Guarantee (increase demand and price) - additional 10,000 places allowing first home buyers to build a new home or buy a newly built home on as little as 5% deposit, with the government acting as guarantor on the loan, freeing the buyer from lender's mortgage insurance.
· First Home Super Saver Scheme (increase demand and prices): first home buyers will be able to release up to $50,000 as part of voluntary contributions under this scheme (increased from $30,000).
· Family Home Guarantee (increase demand and prices) - a scheme allowing for 10,000 single parents over the next 4 years to purchase a home with a deposit of just 2%, with the government providing a guarantee of 18%.
· Downsizer Super Scheme (Increase supply) - allowing those age 60 and above to contribute $300,000 into super when selling the family home. This will not only bolster retirement savings, but also free up critical housing stock.
6. RBA reiterates its commitment to maintaining a low cash rate
The RBA have consistently communicated since mid 2020 that ra...
so much practical information
Practical and Helpful
I’ve listened to a lot of different property podcasts and they all have their strengths but I do personally think that this one has been my favourite because they keep things simple and very practical. Really appreciate the work you all do! Can I request an episode on where to get data, I’ve listened to the abs data episode which was fantastic but I have a thirst for more! Keep it up team!
Fun question for a great experts!
Love the pod!
Fun question for all successful property investors and experts!
- There has been a tear in the space time continuum.
- You wake up in June 2020 with the body, nominal wage and savings of your 25 year old self!
- But you do not own any property
- Luckily you have all the knowledge you gained from the past 25 years
Median prices in Sydney and Melbs went up about 5x over the past 25 years, experts like you probably did even better!
Starting from scratch with your 25 year old body, income and savings but with all your current experience, how confident are you that from 2020 to 2045 you would outperform your 1995-2020 returns?