Latest / The Money Puzzle / Why investor zones will be worst hit in the property downturn

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Why investor zones will be worst hit in the property downturn · The Money Puzzle

0:10
Speaker 1: Hello, and welcome to the Australians Money Positive podcast.
0:13
Speaker 2: I'm James Kirby. Welcome aboard.
0:15
Speaker 1: You know, new taxes combined with high interest rates have
0:20
Speaker 1: suddenly created a cooling in the housing market.
0:24
Speaker 2: We see it in the clearance rates.
0:26
Speaker 1: With the first signal, we are starting to see prices
0:29
Speaker 1: soften now. But I think what's quite interesting is the
0:34
Speaker 1: major banks A and Z now talking about a eleven
0:38
Speaker 1: percent drop nation right. That's the highest I've seen, by
0:40
Speaker 1: the way, and it's from a big four bank. Okay,
0:42
Speaker 1: it's not from an international bank or someone you've never
0:45
Speaker 1: heard of. It's from the bank and they know because
0:48
Speaker 1: that's their business. They are effectively mortgage banks. But I'm
0:52
Speaker 1: looking today at an issue I want to put on
0:56
Speaker 1: the table, which is a lot of investors.
1:00
Speaker 2: Are overreacting.
1:02
Speaker 1: They are rushing and there are two areas where people
1:05
Speaker 1: are rushing towards. They are rushing towards negatively gearing in
1:10
Speaker 1: new properties which they would never have gone near previously.
1:13
Speaker 1: But they say to themselves, well, I can do it
1:16
Speaker 1: for a new property, so let's do that. There's issues there,
1:20
Speaker 1: particular issues. People are also looking at commercial property and
1:23
Speaker 1: we've looked at that, but I didn't expect to see
1:26
Speaker 1: such promotion and sort of social media hype basically about
1:30
Speaker 1: commercial property.
1:31
Speaker 2: It hasn't changed.
1:32
Speaker 1: It is what it is, and it's a very different
1:34
Speaker 1: business to residential property. Look, there's going to be opportunities
1:39
Speaker 1: in this market. There's going to be hotspots and black spots,
1:41
Speaker 1: and the question is how you play it. My guest
1:44
Speaker 1: today is Rasty Vibev of the get Rare Group. He
1:47
Speaker 1: has been on before. A very articulate investor who has
1:52
Speaker 1: worked at both institutional and retail level, which is what
1:54
Speaker 1: I find very interesting about him.
1:56
Speaker 3: How are you, Rasty, Well, thank you, thank you for
1:58
Speaker 3: having me.
2:00
Speaker 2: Delighted to have you on the show this morning.
2:01
Speaker 1: It's the interesting we're talking that we've I have just
2:04
Speaker 1: been monitoring, obviously the bank results all week, that is,
2:06
Speaker 1: the trading updates from the big banks and Commonwealth Bank
2:09
Speaker 1: in particular, had their annual results. The resultso all looked
2:12
Speaker 1: very good. The problem was the forecast or the outdooks
2:15
Speaker 1: and literally, as the head of CommBank, Matt Commune was
2:19
Speaker 1: sort of making noises to the effect that it's all
2:23
Speaker 1: a bit overdone, the hay and said bank came out
2:26
Speaker 1: and had a forecast.
2:26
Speaker 2: It was the most severe we've seen so far.
2:29
Speaker 1: And inside that forecast of an eleven percent drop nationwide,
2:34
Speaker 1: they're talking about a fifteen percent drop in Sydney, a
2:37
Speaker 1: thirteen percent drop in Melbourne. This is Melbourne, whare prices
2:40
Speaker 1: have been going nowhere anyway for some time. So I
2:42
Speaker 1: wanted to talk to you. But first of all, let's
2:44
Speaker 1: just talk about that issue of knee jerk reaction here,
2:48
Speaker 1: which people seem to be some people are, particularly across
2:51
Speaker 1: property promoters, folks. The property promoters are desperate. They know
2:55
Speaker 1: the housing is going to stall, they know their volumes
2:57
Speaker 1: are going to drop, and they're coming up with new
2:59
Speaker 1: things for you to chase.
3:00
Speaker 2: What do you think rasty.
3:03
Speaker 3: Now look suddenly like?
3:05
Speaker 4: To your point, housing trust, of all, is a very
3:07
Speaker 4: social element. It's a fabric for everyone talking about in
3:10
Speaker 4: the barbecue, and so it's really a lot driven by
3:13
Speaker 4: the sentiment, a lot driven by the sentiment. But we
3:17
Speaker 4: have to really be mindful that we are talking about
3:19
Speaker 4: the fundamentals here. You're talking about multi year maybe intergenerational.
3:23
Speaker 4: For some people hold properties for ten twenty five years, with.
3:27
Speaker 3: The average hole of about seven seven and a half years.
3:29
Speaker 4: So it's really interesting to me, James, that when we
3:33
Speaker 4: are talking about a long term investment, but then we
3:35
Speaker 4: look at just the short term. I guess the news
3:39
Speaker 4: media and what's really happening on the social channel, and
3:44
Speaker 4: I think I'll probably take a step back and think about, hey,
3:47
Speaker 4: who we are, what we're trying to do, what you're
3:48
Speaker 4: trying to achieve, what our goals are, and then what's
3:51
Speaker 4: the right thing for the family to do, rather than
3:54
Speaker 4: what really getting into the market.
3:57
Speaker 3: I guess the communtries around there.
3:58
Speaker 4: So yes, the forecast has been not really so good
4:02
Speaker 4: for anyone, But at the same time, I'll probably you
4:06
Speaker 4: know what is important for me, what's the discapdet for me,
4:09
Speaker 4: and have a look at from their point of view.
4:11
Speaker 1: James, we're talking before the show about something fascinating which
4:15
Speaker 1: you point out. We look at these forecasts and there'll
4:19
Speaker 1: be more folks and they may get worse. I mean,
4:21
Speaker 1: if there's further interest rate lifts, they will get worse.
4:26
Speaker 1: But you're at the point that these forecasts, even if
4:29
Speaker 1: they came to pass, the way it actually hits the
4:34
Speaker 1: street is quite different. And unfortunately you've observed that the
4:40
Speaker 1: house priced jobs that we're going to see coming down
4:43
Speaker 1: the line, they're going to be at their lightest, most
4:47
Speaker 1: benign in owner occupied suburbs, and they're going to be
4:50
Speaker 1: at their worst in the investor clusters.
4:53
Speaker 2: Tell us about that and why you think that's the case.
4:57
Speaker 4: Yeah, so the way, So, first of all, there has
5:00
Speaker 4: been some changes happened right like we saw the budget
5:03
Speaker 4: on twelfth of May, and there has been some changes
5:05
Speaker 4: around capital gain texts and the negative getting. So all
5:08
Speaker 4: the changes actually impact the investors side of the I
5:13
Speaker 4: guess the buyers, right, and people are calling either the
5:15
Speaker 4: homeown or occupiers or the investors. Now, all the changes
5:18
Speaker 4: we are talking about the budget typically or not typically,
5:22
Speaker 4: they are actually affecting the investor segment of the holders.
5:27
Speaker 2: They hit the investor.
5:28
Speaker 4: Yeah, yeah, because the whole idea of the intent of
5:31
Speaker 4: the budget is to really cut down the investors investing
5:34
Speaker 4: in and making the price go up for the home buyers.
5:37
Speaker 4: And really the whole intent is to really make it
5:40
Speaker 4: affordable for the first on buyers. Right now, because of
5:44
Speaker 4: all the changes, and we can talk about them one
5:46
Speaker 4: at a time, but really it has impected the investor
5:50
Speaker 4: and also it has changed the way the banks are
5:53
Speaker 4: looking at their serviceability. So for us save the investor,
5:59
Speaker 4: they are still keen to go and buy properties, and
6:02
Speaker 4: we can talk about the fundaments are still very strong sentiments.
6:04
Speaker 4: Super Low is very much a buyer's market right now
6:08
Speaker 4: if people can understand, I guess look through the prism
6:11
Speaker 4: of the fundamentals. Now with all the changes, having the
6:14
Speaker 4: investoral level, the boarding capacity also getting impacted. It is
6:18
Speaker 4: impacting that particular segment. Whereas the first home buyer with
6:22
Speaker 4: all that grants coming in, people still need roof on
6:25
Speaker 4: their head. There are a lot of firstom grant services
6:28
Speaker 4: like the guarantees, the first home benefits coming up. They
6:32
Speaker 4: are still making it affordable for the household person if
6:36
Speaker 4: they really want to go and buy it.
6:38
Speaker 1: Are you saying the banks actually know this? Of course,
6:40
Speaker 1: and they're comfortable with the home buyers because the home
6:43
Speaker 1: buyers obviously are buying to buy homes. They're assisted by
6:46
Speaker 1: the government. But have the banks changed their attitude to
6:50
Speaker 1: be right towards the investment property borrower?
6:53
Speaker 3: Yes, big time.
6:54
Speaker 4: So so of course as we know that they were
6:57
Speaker 4: putting serviceability buffer on top of what the indust rates
7:00
Speaker 4: are and now because of the negative getting changes, they
7:04
Speaker 4: are also impacted like they're also taking into account the
7:08
Speaker 4: lack of negative getting benefit for the current investor, so effectively,
7:13
Speaker 4: that ratio they were looking at as a DTI as
7:15
Speaker 4: a two income.
7:16
Speaker 3: Ratio of about six earlier.
7:18
Speaker 4: But if you talk to any broker they're really talking
7:20
Speaker 4: about now, it's probably close to five as a ratio.
7:23
Speaker 1: So and so then that entire rusty translates to the
7:28
Speaker 1: investment zones if you been the ones that are harder hit,
7:33
Speaker 1: so that we might have turned down. They say, if
7:35
Speaker 1: it was ten percent, but it might be worse than
7:37
Speaker 1: ten percent in an investor zone and not as bad
7:40
Speaker 1: as ten percent in an owner occupier re zone exactly right.
7:44
Speaker 4: So that is the thing, like if you understand the segment,
7:46
Speaker 4: because all this foecasts talk about the national market or
7:49
Speaker 4: the city market, but their markets within the markets.
7:52
Speaker 2: Yeah, there is no national market. I mean, it's it's
7:54
Speaker 2: all property is local. Yeah, I get you. Okay, So
7:58
Speaker 2: there's that then, But for the investor, I.
8:00
Speaker 1: Mean, is the message keep away from all the investors,
8:04
Speaker 1: is the message to invest in the owner occupier zone.
8:11
Speaker 4: And that is really what our conclusion as a pass
8:13
Speaker 4: agency is that let's look at the homeowner occupiers zone
8:18
Speaker 4: as the way you said it, because that is the market.
8:21
Speaker 3: They're still doing well actually.
8:24
Speaker 4: And so things like like the employment zone, the school zone,
8:29
Speaker 4: people that would like to hang out to rather than
8:31
Speaker 4: buying problems in the fringes.
8:33
Speaker 3: They really want to be cent relocated.
8:35
Speaker 4: So even if you want to go as an investor,
8:38
Speaker 4: but go with the mindset of like a local.
8:42
Speaker 3: Owner in that location. So books on the ground.
8:45
Speaker 4: Is really more meaningful now because until two three years ago,
8:48
Speaker 4: you can buy anything wherever. It still makes sense, but
8:51
Speaker 4: not more important to have the right research behind it first.
8:55
Speaker 2: That's really interesting. And just to flick it over.
8:57
Speaker 1: Then if that's where to buy, where I'm assume if
9:00
Speaker 1: we're not to buy then obviously is investor clusters, But
9:03
Speaker 1: investment customers would be I assuming inner city apartment heavily
9:09
Speaker 1: heavy apartment zones in the inner city. I'm assuming, but
9:12
Speaker 1: you tell me.
9:14
Speaker 4: Yeah, So, so it's more around like where they would
9:17
Speaker 4: like to hang up, like in the sense that what
9:19
Speaker 4: are the neighborhoods that they would like to focus on.
9:22
Speaker 4: And the biggest element that we have found is that
9:24
Speaker 4: just look at the ratio from the data that how
9:27
Speaker 4: much is the owner occupied versus how much is the
9:29
Speaker 4: investor driven market. So nationally we have about thirty thirty
9:33
Speaker 4: one percent of investors, whereas the rest of them homeowner occupiers.
9:38
Speaker 4: And we have seen very categorically if any investor ratio
9:43
Speaker 4: is more than thirty five forty, it tends to become
9:46
Speaker 4: more of an industed driven and if it was invested
9:49
Speaker 4: in that market, and if socially or like in economically,
9:53
Speaker 4: if I have to sell one property where that's so
9:55
Speaker 4: for example, if I hold two properties, one as an investor,
9:57
Speaker 4: like in my investment property, and one is my occupier,
10:01
Speaker 4: if I get in financial trouble, James, I'm not going
10:03
Speaker 4: to sell my own home.
10:04
Speaker 3: I'll be selling my industrial property.
10:07
Speaker 4: So for that reason, if I'm thinking like that and
10:12
Speaker 4: it's economic pressure, then every other person loss was selling it.
10:15
Speaker 4: So it really becomes a market when nobody's buying it,
10:19
Speaker 4: and that they have many sellers. So it's really a
10:21
Speaker 4: supply demand equation, but specifically at the segment level.
10:25
Speaker 1: Okay, very interesting, We're going to take a short break.
10:28
Speaker 1: We'll be back in a moment. This is a very
10:30
Speaker 1: interesting conversation and it's extremely timely because as I said,
10:36
Speaker 1: I think it was only a fortnight ago.
10:38
Speaker 2: We were talking about how.
10:39
Speaker 1: The larger banks weren't predicting these folds of ten percent plus.
10:44
Speaker 1: It was foreign banks Morgan, Stanley, et cetera. But here
10:46
Speaker 1: we have a big four bank doing it this week.
10:48
Speaker 1: Back in a moment, Hello, Welcome back to The Australian's
11:03
Speaker 1: Money Plus the podcast. I'm James Kirby and I'm talking
11:05
Speaker 1: to Rasty Vibev of the get Rare Buyers Group. He's
11:10
Speaker 1: a probably buyer, is very familiar with the retail market.
11:12
Speaker 1: He's also ex institutional property and had been with AMP
11:15
Speaker 1: and other groups, so he knows the market I suppose
11:18
Speaker 1: from I was going to say top down, bottom up,
11:21
Speaker 1: but he certainly knows the market from all angles and
11:24
Speaker 1: that's a very interesting way to look at it. It's
11:26
Speaker 1: a very financial way to look at it. We were
11:29
Speaker 1: talking about how the budget changes to store to the
11:33
Speaker 1: market and in a way have accelerated a softness that
11:37
Speaker 1: was in there anyway with higher rates, and we mentioned
11:40
Speaker 1: we should just go back into that issue of where
11:42
Speaker 1: investors are going and to be careful, we mentioned negative
11:46
Speaker 1: gearing in the outer suburbs. Yes, you can still negatively
11:50
Speaker 1: gear new property, but the crucial point is that when
11:54
Speaker 1: that property comes up for sale, when you go to
11:56
Speaker 1: sell it, it's no longer new the person who's buying
11:59
Speaker 1: it off. You can't get the negative gearing. That's a
12:01
Speaker 1: big negative, and I hope it's been understood. We've mentioned
12:04
Speaker 1: it on the show several times. Commercial property is another area,
12:07
Speaker 1: and again we had a show on commercial property. Look,
12:11
Speaker 1: if you're in business and you're familiar with property, and
12:13
Speaker 1: maybe you have your own property, or at least you
12:17
Speaker 1: have the potential to use a property in your business,
12:21
Speaker 1: and you put the property of your business into yourself
12:23
Speaker 1: and its super fun, beautiful. That's how it was always
12:25
Speaker 1: supposed to work. But if you don't, if you're wandering
12:28
Speaker 1: into commercial property as a no change to residents, what
12:31
Speaker 1: do you think, rastal, I mean, would you say never
12:34
Speaker 1: or what would you say?
12:36
Speaker 3: Look?
12:36
Speaker 4: My simple answer is it really comes down to the buyer,
12:40
Speaker 4: what they're looking for and whether the.
12:43
Speaker 3: Asset class actually suits them.
12:44
Speaker 4: So all of this all of a sudden, you know,
12:47
Speaker 4: because of this negative getting change and the budget changes,
12:49
Speaker 4: and now recently what we have saw is the essence
12:51
Speaker 4: of ban on what we call it as a residential property.
12:54
Speaker 3: It is probably even not the right way of putting.
12:56
Speaker 4: It, it's actually the usage of the property that really
12:59
Speaker 4: is trea mental rather than just by putting it COMMI
13:03
Speaker 4: as a residential. But the point is that because there's
13:05
Speaker 4: so much of I guess again the social high social
13:08
Speaker 4: media hype that one because residential has come down. So
13:12
Speaker 4: for that reason, commercial has become attractive. I'll probably said
13:15
Speaker 4: this is the wrong premises altogether. Residential is good for
13:18
Speaker 4: a particular type of category of investors. Commercial has always
13:21
Speaker 4: been good for another set of category of the investors.
13:26
Speaker 4: Not Just because residential has not become too attractive doesn't
13:29
Speaker 4: mean that has become more attractive now.
13:32
Speaker 3: So any deal has to be seen at its own merit.
13:35
Speaker 4: But before that you have to step back and think
13:38
Speaker 4: about is that crazy versus commercial? REZI has not becoming
13:42
Speaker 4: more of a favor recently doesn't mean commercial becomes favorable.
13:45
Speaker 2: Yeah, I would say.
13:48
Speaker 1: As a proad generalization, you need deep poppets for commercial.
13:52
Speaker 1: I mean, I could see it as useful in a
13:55
Speaker 1: diversified portfolio, but for people who don't have much experience,
13:59
Speaker 1: I think it could be is very broadly because of
14:02
Speaker 1: the rental risk. Would you say that the rental risk
14:05
Speaker 1: the risk of having vacant property is higher and commercial
14:07
Speaker 1: than residential.
14:09
Speaker 4: Now totally totally, so you know, like in resilutional property,
14:12
Speaker 4: if there's a vacancy, we're talking about a couple of
14:14
Speaker 4: weeks or maybe the rent drop, but if it comes
14:17
Speaker 4: to commercially, it could be actually a few quarters even
14:19
Speaker 4: a year of vacancy over there.
14:21
Speaker 1: I mean, folks, you only have to open your eyes
14:24
Speaker 1: to that one. There's a house on your street that's
14:27
Speaker 1: for rent, it's always rented.
14:29
Speaker 2: There's a one percent vacancy rate.
14:31
Speaker 1: The there is no risk if you own residential property
14:33
Speaker 1: in Australia, whatever the prices do, there is no risk
14:36
Speaker 1: of rental vacancy, virtually no risk because it's a one
14:39
Speaker 1: percent vacancy rate. If you own a commercial property, think
14:41
Speaker 1: about the shops that you pass that are sitting empty
14:44
Speaker 1: for a long time, or a factory that's empty for
14:46
Speaker 1: a night time.
14:47
Speaker 2: It's a long time gain.
14:48
Speaker 1: I'd be very cautious moving into that, just on the
14:51
Speaker 1: negative gearing risks of rushing towards new property when you
14:55
Speaker 1: could buy existing property that's much better. Have you seen
14:59
Speaker 1: some high in that area too, But suggesting to people
15:01
Speaker 1: they should move to the.
15:02
Speaker 2: New property and how do you read that?
15:05
Speaker 4: Yeah, so James, what are you're really seeing from lots
15:08
Speaker 4: of segments in the market, whether it's a commercial property
15:11
Speaker 4: or spoken of a new build. Austraally is about like
15:14
Speaker 4: challenging the element of the holding power, right, Like if
15:17
Speaker 4: it's people have some for example, somebody has two hundred
15:20
Speaker 4: k to invest in, they can go and buy a property.
15:22
Speaker 4: But now they're told that, hey, you need to put
15:25
Speaker 4: on the fifteen twenty k every year to hold it.
15:28
Speaker 4: And because of the negativegatting benefit. It was actually not
15:31
Speaker 4: too bad earlier, but has become all of a sudden
15:34
Speaker 4: too impractical for you to hold with that negative cash flow.
15:38
Speaker 4: For that reason, let's go and minimize you're holding costs
15:41
Speaker 4: around it. So solution is, let's go and chase that
15:44
Speaker 4: text deputition benefit in the new build or buy commercial
15:48
Speaker 4: property because it seems to be having good yield.
15:51
Speaker 3: So all of a sudden they become more popular now,
15:54
Speaker 3: but for the wrong reasons.
15:55
Speaker 2: Right right, Yeah, Okay.
15:58
Speaker 1: One thing I wanted to talk to you also was
16:00
Speaker 1: about the self managed super fund. It's over now, right,
16:05
Speaker 1: it's done. The deadline was August ten, and from now
16:09
Speaker 1: on no one can borrow to buy residential property with
16:13
Speaker 1: their self managed super fund have you. How do you
16:17
Speaker 1: think the market is responding to that? How do you
16:19
Speaker 1: think that's going to play out?
16:21
Speaker 4: Look, first of all, James, we had a huge rush
16:23
Speaker 4: of people buying the property before the deadline, trying to
16:27
Speaker 4: exchange the contract and they were like, hey, I don't
16:30
Speaker 4: lose on the opportuity, or rather go and talk to
16:32
Speaker 4: my account and establish it, you know.
16:35
Speaker 3: So that's what's one element. But of course lots of
16:37
Speaker 3: people actually.
16:38
Speaker 4: Have been hanging out there that in the sense they
16:41
Speaker 4: couldn't really can exchange contract in time, so now they
16:44
Speaker 4: are saying, hey, let's go and buy something. So commercial
16:47
Speaker 4: property is the solution by sounds of it for their situation.
16:51
Speaker 4: And that's really again putting a bit of a I
16:54
Speaker 4: guess pressure on the prising because there are more people
16:57
Speaker 4: chasing the same set of deals. So what we are
17:01
Speaker 4: you saying is that it's not really the demand and
17:03
Speaker 4: commercial property suddenly has gone up recently and probably will
17:06
Speaker 4: continue to go from here, but that's not given by
17:08
Speaker 4: the tenants in the market. It's not the economic pressure
17:11
Speaker 4: on the commercial properties, but more of a policy change
17:14
Speaker 4: that is putting pressure there.
17:16
Speaker 2: Okay, So folks. It's amazing the regulatory risk.
17:20
Speaker 1: We've been talking this morning about residential property and the
17:24
Speaker 1: dangers of going into new property that you might never
17:29
Speaker 1: have bought as an investor for the sole reason that
17:31
Speaker 1: you can still negatively gear it.
17:32
Speaker 2: And that's actually all to do with regulatory risk and
17:35
Speaker 2: change in the taxes.
17:36
Speaker 1: We've talked about the self managed superfund ban and that rush,
17:39
Speaker 1: that crazy rush to get in before all this time,
17:41
Speaker 1: which is now over again, that.
17:43
Speaker 2: Was a regulatory risk issue.
17:45
Speaker 1: This market has become terribly distorted by the budget because
17:49
Speaker 1: we've had this extraordinary spectrum of tax changes and it
17:54
Speaker 1: will never be the same, as we said in a
17:55
Speaker 1: recent episode, But as an investor, there's always opportunities. We'll
17:59
Speaker 1: to talk about those opportunities in a moment.
18:01
Speaker 2: Back in the next segment.
18:12
Speaker 1: Hello, Welcome back to The Australian's Money Positive podcast. I'm
18:15
Speaker 1: James Kirby. I'm talking to Rasty Vibev. We're talking property.
18:19
Speaker 1: We're talking investment property. It's going to be tough for
18:22
Speaker 1: a while, that's for sure, but of course that's when
18:24
Speaker 1: opportunities arise.
18:27
Speaker 2: Rasty.
18:27
Speaker 1: Every time there's a property downturn, and the last two
18:31
Speaker 1: peaked a trough. Property fell by eight percent roughly two
18:35
Speaker 1: seventeen and two twenty two. This timearound is different. The
18:38
Speaker 1: forecasts are more severe, and maybe we're falling from a
18:42
Speaker 1: high or high. Every time this happens, people say there
18:46
Speaker 1: will be opportunities in distress property, the people will be
18:50
Speaker 1: negatively geared. I'm sorry, people will be in negative equity.
18:54
Speaker 1: And folks, if you don't know what that means, you're
18:57
Speaker 1: fortunate because in some countries people are very familiar with it.
19:00
Speaker 1: But naked electively happens when the price of the property
19:03
Speaker 1: you own is less than the mortgage you have. That's
19:06
Speaker 1: entirely possible at the moment, particularly with the five percent
19:08
Speaker 1: deposit people who've gone into new homes. Also distressed property
19:13
Speaker 1: where people are selling because they must and vastly mentioned
19:16
Speaker 1: how someone if they did have an investment property in
19:19
Speaker 1: a home, they're gonna stain the investment property.
19:21
Speaker 3: Right.
19:22
Speaker 1: So do we think if this scenario plays out as
19:25
Speaker 1: badly as the banks are suggesting, and they are the banks,
19:28
Speaker 1: the big banks will take very seriously, will this emerge again?
19:32
Speaker 1: And how do you read that situation?
19:34
Speaker 3: Yeah?
19:35
Speaker 4: Look, first of all, I like to push back on
19:37
Speaker 4: that element of distress. Of course, in the past, whenever
19:40
Speaker 4: we have seen like whether it's a GFC or twenty seventeen,
19:43
Speaker 4: you do like whenever this happens, it's really because people
19:47
Speaker 4: have actually bought the wrong properly at the wrong time,
19:49
Speaker 4: in the wrong pricing, and it's really more of a
19:52
Speaker 4: play of the time which is very short when we
19:55
Speaker 4: are comparing it. But if you're talking about someone who
19:57
Speaker 4: actually bought it right, and even you have been holding
20:00
Speaker 4: for a quite some time, it's not really too bad
20:03
Speaker 4: what we've already seeing, Like in the previous segment we
20:05
Speaker 4: were talking about you know, the focus of drop of
20:08
Speaker 4: fourteen and a half or fifteen if you think put
20:12
Speaker 4: in context, that actually giving back the gains of last
20:15
Speaker 4: two three years effectively, so effected in three years or
20:19
Speaker 4: you know, four years, it's actually Sydney market has not
20:21
Speaker 4: done anything as an example, So anyone was bought before, yes,
20:26
Speaker 4: it has been a bit of a roller coast.
20:27
Speaker 3: I went up, it's coming down even.
20:30
Speaker 4: If that focus plays out, so discounting those people who
20:33
Speaker 4: have just bought recently only, which has very small segment
20:37
Speaker 4: relative to the whole market hold length. If you look
20:40
Speaker 4: at the data we are really seeing less than one
20:42
Speaker 4: percent of adegative getting scenarios as reported by Australian Fundancial
20:48
Speaker 4: So I think you.
20:49
Speaker 1: Made the same mistake as me. One percent of negative
20:52
Speaker 1: equity scenarios. That's right, one percent of negative equity. Let's
20:56
Speaker 1: take us one percent of negative equity folks, So only
20:59
Speaker 1: one percent of housing stuck out there are the people
21:02
Speaker 1: who own their homes holding a mortgage as bigger than
21:05
Speaker 1: the price of their home. And then you have to
21:07
Speaker 1: assume what percentage of that one percent on a panic
21:10
Speaker 1: and says, so you're talking basically, you're saying it's tiny,
21:14
Speaker 1: it's a.
21:15
Speaker 4: Very tiny And b even if I'm sitting at a loss, James,
21:18
Speaker 4: unless I go and sell the property, I'm not really
21:23
Speaker 4: utilizing it. So now the key thing is whether I
21:28
Speaker 4: see that distress sales happening in the market or not,
21:30
Speaker 4: is really a function of the buyer segment or the
21:33
Speaker 4: whole people who actually hold the property. Are they actually
21:36
Speaker 4: under any undue pressure of holding that property? So, and
21:41
Speaker 4: the key thing we need to look at the economics
21:43
Speaker 4: around it. So for example, if you look at an
21:45
Speaker 4: employment rate, yes it has ticked one point one percent
21:48
Speaker 4: from four point three percent. To four point four percent.
21:51
Speaker 4: It's actually a very strong economy. Yes, market moves up,
21:54
Speaker 4: up and down. People in the right mind have bought
21:56
Speaker 4: properties for the next few years. Even that equality segment
22:02
Speaker 4: is not really too distressed, if at all. It's a
22:05
Speaker 4: first n buyer. The budget for the intention was to
22:09
Speaker 4: help them. It's really under the delinquencies that we are seeing.
22:15
Speaker 1: So and that's what's it's because they had ninety five
22:17
Speaker 1: percent mortgages.
22:18
Speaker 2: Eh, exactly what I never saw before. But this was
22:21
Speaker 2: never a thing.
22:22
Speaker 1: I mean, eighty percent mortgages were the standard, and certainly
22:25
Speaker 1: people had ninety five percent mortgages and guess what if
22:28
Speaker 1: property falls?
22:29
Speaker 2: Yeah, they're in trouble.
22:30
Speaker 1: But as you say, it's a very it's a segment.
22:33
Speaker 1: It's not the economy, it's not the GFC. The underlying
22:37
Speaker 1: fundamentals are pretty good. Okay, just to wrap on on
22:41
Speaker 1: all these issues. As an investor today, Let's say I
22:45
Speaker 1: was last year, I was thinking of buying investment properly,
22:48
Speaker 1: my first one or and I was looking at a
22:50
Speaker 1: very different market.
22:53
Speaker 2: How do you think.
22:54
Speaker 1: Active property investors should view the market now? I mean,
23:00
Speaker 1: obviously things are cheaper, so that's good, right, You're paying
23:02
Speaker 1: less than you were.
23:03
Speaker 2: But how do you read it? How far out it fall?
23:07
Speaker 4: Yeah, look, I don't like to read how far it
23:10
Speaker 4: will fall because, as you said that the markets within
23:12
Speaker 4: the markets. So I as a buyer really just care
23:15
Speaker 4: about the segment of the property in the city that
23:18
Speaker 4: I'm buying the property and what happens to that and
23:20
Speaker 4: really comes down to James, to the supply and demand
23:23
Speaker 4: of that particular neighborhood or the property in that I
23:27
Speaker 4: guess area.
23:28
Speaker 3: So if I go as.
23:29
Speaker 4: An investor or as even as a home buyer, I
23:31
Speaker 4: should be really focusing on an occupied appeal whether it
23:35
Speaker 4: actually is attractive or not. Would I be competing with
23:38
Speaker 4: other first home buyers. And that's the case. Actually we
23:41
Speaker 4: are already seeing in the market that yes, sentiment is down.
23:45
Speaker 4: It's actually the consumer sentiment as reported by the Westpac
23:48
Speaker 4: Mortgage Institute. It's actually it has slightly rose recently, but
23:54
Speaker 4: still one of the bottom you know, in the bottom
23:58
Speaker 4: decile if you talk about it. So that's really a
24:00
Speaker 4: good opportunately for someone who's really you know, sitting in
24:03
Speaker 4: the deep pockets, understand the risk around it, and then
24:06
Speaker 4: bite well and of occupied appeal market.
24:10
Speaker 2: Okay, So there's there you go. Folks. We've been told
24:15
Speaker 2: keep away from other investors.
24:16
Speaker 1: Ironically, in other words, the zones that are full of
24:20
Speaker 1: investors are the zones that are going to be particularly
24:23
Speaker 1: full of trouble. But the areas, and they are quite
24:26
Speaker 1: distinct obviously where they're not investment clusters are actually the
24:33
Speaker 1: hunting grounds, it seems for the year ahead.
24:36
Speaker 2: Terrific.
24:36
Speaker 1: Hey, Rusty, thank you very much for being on the show.
24:39
Speaker 1: Lovely to have you again. Like Ques, thank you, thank you.
24:43
Speaker 1: That was Rasty Vibab of the get Rare group. He's
24:46
Speaker 1: been on the show before, Terrific on all things property,
24:49
Speaker 1: particularly investment property, and just has that capacity to put
24:53
Speaker 1: it in the wider market, which I think we as
24:55
Speaker 1: active investors, in versified investors, you need to have. Okay, folks,
25:01
Speaker 1: keep the questions rolling. I haven't done questions for a
25:04
Speaker 1: few days. I've been building them up. I've got to
25:06
Speaker 1: get back to them straight away. We have Hugh robertson
25:10
Speaker 1: a Financial Advisor coming up later in the week, so
25:13
Speaker 1: let's have some questions the money Puzzle at the Australian
25:17
Speaker 1: dot com dot Au.
25:18
Speaker 2: Talk to you soon.