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Transcript

Spring Property Market Outlook: What to Expect · The Money Puzzle

0:10
Speaker 1: Hello and welcome to the Australian's Money Puzzle podcast. I'm
0:14
Speaker 1: Stuart Weems and I'm sitting in for our usual host,
0:17
Speaker 1: James Kirby, whilst he's taking a well-earned break. Now, James
0:21
Speaker 1: would normally introduce me as a property-friendly financial advisor, and
0:26
Speaker 1: I'm also the host of my own podcast, Investopoly. And
0:30
Speaker 1: I'm absolutely thrilled to be hosting today's episode. Last week,
0:34
Speaker 1: James interviewed Louis Christopher from SQM Research, and they took
0:39
Speaker 1: a deep dive into the Australian property market from a
0:43
Speaker 1: high-level perspective. It was a really fascinating episode, and the
0:48
Speaker 1: key highlights were that Adelaide, Perth and Brisbane are experiencing
0:53
Speaker 1: very impressive annual growth, running at double digits. Sydney is
0:57
Speaker 1: a pretty balanced market at around 5% growth, and Melbourne's
1:02
Speaker 1: the outlier in slightly in decline in terms of property prices.
1:07
Speaker 1: Since last week's episode went to air, the Real Estate
1:10
Speaker 1: Institute of Australia announced that housing affordability has declined to
1:14
Speaker 1: its lowest point on record since it started monitoring this
1:19
Speaker 1: in 1996. The average loan repayment now accounts for 48%
1:24
Speaker 1: of median family income, obviously thanks to higher property prices
1:29
Speaker 1: and higher interest rates. So back to last week's show,
1:33
Speaker 1: Louis touched on a couple of other observations. Firstly, he
1:38
Speaker 1: said that units are starting to outperform houses, and he
1:42
Speaker 1: actually made the comment that that tends to happen in
1:44
Speaker 1: slower markets. Another very interesting point, which I'll ask my
1:49
Speaker 1: guest about today, was that vacancy rates, rental vacancy rates
1:54
Speaker 1: in the regions are starting to decrease again. Obviously, during COVID,
1:59
Speaker 1: we had a very tight rental market and vacancy rates
2:03
Speaker 1: were very, very low. Of course, then post-lockdown, they tended
2:07
Speaker 1: to normalize. Well, they're trending downwards again, which is a
2:10
Speaker 1: bit of a surprise, to be honest. Anyway, if you
2:13
Speaker 1: missed the episode last week, it's certainly worth listening into.
2:16
Speaker 1: But today, what I wanted to do is build on
2:19
Speaker 1: the information that we talked about last week. And I
2:22
Speaker 1: want to focus in particular on the spring property market,
2:26
Speaker 1: which kicked off this month. It's the peak property season,
2:29
Speaker 1: if you like. I want to talk to my guest
2:32
Speaker 1: about what that means for sellers, what it means if
2:36
Speaker 1: you're a buyer, particularly noting that markets are at different
2:39
Speaker 1: points of the cycle. And I have a perfect guest
2:43
Speaker 1: today to help us do that. He's a friend of
2:45
Speaker 1: the show. He's been on before. He's a very experienced
2:48
Speaker 1: buyer's agent and owner of Wakeland Property Advisory. Gerard McCabe,
2:53
Speaker 1: welcome to the show.
2:54
Speaker 2: Thanks very much for having me, Stuart.
2:56
Speaker 1: My pleasure. So I'd like to start with what does
2:59
Speaker 1: the spring property market mean for us? Is it just
3:02
Speaker 1: an increase in property listings? And why spring? Why is
3:05
Speaker 1: that the peak period in the property.
3:07
Speaker 2: Market, Jared? Yeah, it's a good question. Look, I mean,
3:10
Speaker 2: the spring market's always, in terms of supplies, where things
3:13
Speaker 2: really start to ramp up. And I think that goes
3:15
Speaker 2: back to people feel their properties probably, particularly family homes,
3:19
Speaker 2: look best during spring. The garden starts to really come
3:22
Speaker 2: into bloom and a lot of flowers out, that sort
3:24
Speaker 2: of thing. But also we're coming out of colder, wetter,
3:27
Speaker 2: more miserable months, particularly for us down in the southern states.
3:31
Speaker 2: And so the property just presents well. People feel better
3:33
Speaker 2: about themselves at this time of year as well. So
3:35
Speaker 2: it tends to build from there. We also find that
3:38
Speaker 2: from a seller's perspective, there's a bit more competition. Because
3:43
Speaker 2: there's been a fair amount of pent-up demand during the
3:45
Speaker 2: winter months where there hasn't been as much choice around,
3:48
Speaker 2: it can start to bring a few more buyers out
3:50
Speaker 2: into the marketplace as well. So You can quite often
3:52
Speaker 2: see a bit of a spike in values coming out
3:55
Speaker 2: of that winter period, sort of late August and into September.
3:58
Speaker 2: And as the year builds or the spring market builds,
4:00
Speaker 2: there's more and more choice available as well.
4:02
Speaker 1: Yeah. And of course, as I touched on in the introduction,
4:04
Speaker 1: we've got different markets at different stages of the cycle
4:08
Speaker 1: around Australia. Some are very hard markets, particularly Perth, for instance,
4:12
Speaker 1: where days on market is very contracted. If you've got
4:15
Speaker 1: a property to sell, it'll sell very quickly. And the
4:19
Speaker 1: other end of the scale is Melbourne, of course, that's
4:21
Speaker 1: a little bit of a softer market. So how do
4:24
Speaker 1: those different markets kind of react to that uptick in supply?
4:27
Speaker 2: Yeah, look, I mean, in some ways there's similarities to it. Obviously,
4:32
Speaker 2: an increase in supply can quite often lead to either
4:35
Speaker 2: markets starting to flatten if they've been on the increase.
4:38
Speaker 2: But if there's a depth of demand that can eat
4:40
Speaker 2: up that increase in supply, then it can sometimes just
4:42
Speaker 2: fan the flames and it can make it kick on
4:45
Speaker 2: because it just gives a buyers more and more confidence
4:47
Speaker 2: that there is a depth of demand. And if they
4:49
Speaker 2: don't do something sooner or later, then they're going to
4:52
Speaker 2: get left behind and going to be playing catch up,
4:55
Speaker 2: which is not a good thing to be doing in
4:56
Speaker 2: the property sense when the market is moving. But when
4:59
Speaker 2: it's starting to decline, it can also be self-fulfilling in
5:03
Speaker 2: that regard that people are seeing it go down. And
5:05
Speaker 2: then if there's an increase in supply and typically in
5:07
Speaker 2: a softening market, the main issue is that the demand
5:10
Speaker 2: isn't there. And so with the lack of demand and
5:13
Speaker 2: increasing supply, it just continues to push things further and
5:16
Speaker 2: further down. So it's a really interesting time of the year.
5:20
Speaker 2: We do always see supply pick up. And if there's
5:23
Speaker 2: not a depth to the demand, then it can see
5:26
Speaker 2: some significant changes. Yeah.
5:28
Speaker 1: And so what are you seeing around the country and
5:30
Speaker 1: obviously particularly in Melbourne where you operate in terms of
5:33
Speaker 1: those listing numbers? Does it look like there's a lot
5:36
Speaker 1: of stock coming online?
5:37
Speaker 2: Yeah, it does. I mean, not necessarily right across the board,
5:41
Speaker 2: but I mean, I looked at recently, supply numbers this
5:45
Speaker 2: year for Victoria, particularly compared to last year. And we're
5:47
Speaker 2: certainly up on what we were this time last year.
5:51
Speaker 2: And I think if you look at the clearance rate
5:53
Speaker 2: in Victoria at the moment, it's hovering around the early
5:56
Speaker 2: to mid 60% mark. Now, if that's the case at
5:58
Speaker 2: the start of spring, when typically there is a bit
6:01
Speaker 2: more demand around, by the time you get to the
6:03
Speaker 2: end of the spring market, where a lot of buyers
6:06
Speaker 2: have left because they've purchased, but many of those buyers
6:09
Speaker 2: then need to sell. So the supply is still quite
6:11
Speaker 2: often quite good through November and into December. With a
6:15
Speaker 2: lack of demand, I'd expect to see that clearance rate
6:18
Speaker 2: come back. And I think it will probably be in
6:21
Speaker 2: the early to mid 50s by the end of the year,
6:23
Speaker 2: which is certainly a buyer's market. Now, you look at,
6:26
Speaker 2: as you said, the other capital cities, sort of Adelaide
6:29
Speaker 2: and Perth, particularly in Brisbane as well, I would expect
6:32
Speaker 2: them to keep kicking as the market goes because there
6:34
Speaker 2: is still depth to the demand in those areas. So
6:37
Speaker 2: even with the supply picking up, I think that there'll
6:40
Speaker 2: still be strong interest there Sydney's a bit more interesting.
6:44
Speaker 2: I think that they're probably more in a level-ish type market.
6:47
Speaker 2: You mentioned 5% growth this year, but if it's more
6:50
Speaker 2: of a plateau there and a level, then they could
6:52
Speaker 2: start to come off a little bit. I don't think
6:53
Speaker 2: to the same extent as Melbourne, but it certainly could
6:56
Speaker 2: start to come off a little bit.
6:58
Speaker 1: I was talking to a buyer's agent yesterday from Perth,
7:01
Speaker 1: and he was saying that the listings are really tight,
7:03
Speaker 1: not necessarily reflecting in volume. His observation was that volume
7:08
Speaker 1: is pretty healthy. It's just that selling so quickly that
7:11
Speaker 1: the available stock is pretty tight. So if we're thinking
7:15
Speaker 1: about then getting into the property market during this sort
7:17
Speaker 1: of spring period, what advice would you have for buyers
7:21
Speaker 1: with respect to that? And I guess there's probably maybe
7:25
Speaker 1: sort of two different markets we want to think about.
7:27
Speaker 1: The market that's really hot and challenging and buoyant versus
7:31
Speaker 1: a market that may be softening with more supply than
7:35
Speaker 1: there is buyer demand.
7:37
Speaker 2: Being prepared and doing your due diligence, no matter whether
7:39
Speaker 2: you're in a competitive market or a soft market, is
7:42
Speaker 2: always going to be the most important thing. And I
7:44
Speaker 2: think you need to make sure that you're ready. In
7:46
Speaker 2: a hot market, you need to be ready to react
7:48
Speaker 2: because as you said, Perth being the example, things are
7:50
Speaker 2: moving really quickly. If you're not ready, you'll get left
7:52
Speaker 2: behind and you'll keep missing out on properties. But in
7:56
Speaker 2: a soft market as well, you still need to be
7:57
Speaker 2: ready to take advantage of something that might be perceived
8:00
Speaker 2: as being good value. So if you leave it for
8:02
Speaker 2: too long, there'll still be other buyers around that might
8:05
Speaker 2: take advantage of that. So I think no matter what,
8:07
Speaker 2: being prepared and having yourself organized, whether it's solicitors, financial advice,
8:12
Speaker 2: building inspectors, all that sort of thing, being prepared and
8:14
Speaker 2: ready to move is really important. I think understanding technical
8:19
Speaker 2: value versus market sentiment when assessing property values is a
8:22
Speaker 2: really important thing, both from a growth market, but also
8:26
Speaker 2: from a softening market. Because when you're in the growth market,
8:29
Speaker 2: understanding market sentiment and being prepared to take a step
8:32
Speaker 2: in front of it is really important. If you're relying
8:34
Speaker 2: on sales that have occurred sort of even a month
8:37
Speaker 2: or two ago, and not taking into account the market's
8:40
Speaker 2: kicking week on week, you won't get in and you'll
8:43
Speaker 2: get left behind, or you'll get caught buying something that's
8:46
Speaker 2: of a secondary nature and isn't going to work longer term.
8:51
Speaker 2: And that can be a really difficult thing for buyers
8:54
Speaker 2: to get their head around in terms of setting a
8:56
Speaker 2: new benchmark and being prepared to pay that mark, or
8:59
Speaker 2: otherwise you just won't get into the market. And I
9:02
Speaker 2: think from a a buying perspective in a softening market,
9:05
Speaker 2: I think making sure that you're still buying a high
9:08
Speaker 2: quality asset is really important and not getting caught up
9:11
Speaker 2: on being too cute. Sometimes in a softening market, people
9:15
Speaker 2: can be a little bit too smart by half and
9:18
Speaker 2: then end up missing out on things only to look
9:20
Speaker 2: back and think, I really should have taken advantage of that.
9:23
Speaker 2: So there's different mindsets when going into that sort of market.
9:26
Speaker 2: And I think it's really important to understand what you
9:29
Speaker 2: need to do. Yeah.
9:30
Speaker 1: So if you're in a really soft market looking for
9:33
Speaker 1: a bargain property, something that's selling for well below what
9:37
Speaker 1: you think it's technical or intrinsic value, are you saying
9:40
Speaker 1: if you're going to take that approach that maybe you'll
9:43
Speaker 1: be too cute for yourself and you'll miss out on
9:45
Speaker 1: some opportunities?
9:46
Speaker 2: Not necessarily. You can still take advantage of that, but
9:49
Speaker 2: you just don't want to be too cute. So if
9:51
Speaker 2: you leave it there too long and you try and
9:53
Speaker 2: get it for too much of a bargain, if it's
9:55
Speaker 2: the right property for the right reasons, obviously no one
9:57
Speaker 2: wants to overpay and we all want to buy it
9:59
Speaker 2: for as little as possible. But sometimes you can be
10:03
Speaker 2: talking $ 5, 000 or $ 10, 000 in the scheme of buying a
10:06
Speaker 2: property worth in excess of a million dollars. Don't be
10:08
Speaker 2: too smart and not be prepared to pay that because
10:11
Speaker 2: if you take a step back and you look at
10:12
Speaker 2: it in five, 10 years time and that property is worth, well,
10:16
Speaker 2: hopefully a double if it's over 10 years, paying that
10:19
Speaker 2: extra $ 10, 000, $ 15, 000, $ 20, 000, you're not going to look at
10:22
Speaker 2: that and be too concerned.
10:24
Speaker 1: Yeah. And I want to ask you about the reverse,
10:27
Speaker 1: I guess, how you behave in a much stronger market.
10:31
Speaker 1: But before we do that, in a soft market like
10:33
Speaker 1: Melbourne in this spring that you expect, do you think
10:36
Speaker 1: there'll be a lot of bargains out there?
10:37
Speaker 2: I think there'll be some good opportunities. Yeah, I do.
10:40
Speaker 2: I think because there's a lot of supply hitting the market.
10:42
Speaker 2: So I think from a buyer's perspective at the moment,
10:44
Speaker 2: if you are out and about in the softening Victorian
10:47
Speaker 2: market that there could be some really good opportunities to
10:49
Speaker 2: be had. Yeah, okay.
10:51
Speaker 1: So for those people listening today that really are contemplating
10:55
Speaker 1: getting into one of those hotter markets like Brisbane, Adelaide
10:58
Speaker 1: and Perth, in such a fast-moving market, how do you
11:02
Speaker 1: assess whether you're overpaying? Of course, prices are moving so quickly.
11:07
Speaker 1: That's the risk, right? No one wants to pay more
11:09
Speaker 1: than we really need to or should. How do we
11:12
Speaker 1: sort of navigate a market like that?
11:14
Speaker 2: So I think it's important to look at it from
11:16
Speaker 2: a historical perspective. And when I say historical, I don't
11:18
Speaker 2: mean going back years and years. I more mean looking
11:20
Speaker 2: at the last three to six months and getting a
11:22
Speaker 2: clear understanding as to what similar properties have been doing
11:25
Speaker 2: and sort of monitoring and tracking that. So if you
11:27
Speaker 2: look back six months and you can see that a
11:29
Speaker 2: property sold for X dollars and then within three months,
11:32
Speaker 2: it's selling for X plus two, and then you get
11:34
Speaker 2: it and you can see a bit of a trend developing.
11:36
Speaker 2: By the time you get to seeing the property that
11:38
Speaker 2: you're looking at, okay, it's been moving month by this
11:42
Speaker 2: amount of money. I've got to expect that it could
11:44
Speaker 2: at least do that now compared to the sales that
11:47
Speaker 2: I'm considering, but might even have to go a little
11:50
Speaker 2: bit further than that. And if you're confident, and particularly
11:52
Speaker 2: in those markets that they are still got further to
11:55
Speaker 2: go in terms of their growth, then having the confidence
11:59
Speaker 2: to take that, what we call the step in front
12:01
Speaker 2: of the market, rather than taking a giant leap out
12:03
Speaker 2: in front of the market, will get you in and
12:05
Speaker 2: then you get the market to work for you rather
12:07
Speaker 2: than work against you.
12:10
Speaker 1: I'm putting you on the spot here, Jared, of course,
12:12
Speaker 1: but do you think that there's any, just from a
12:15
Speaker 1: median value level, do you think any of those markets
12:18
Speaker 1: are getting close to being fully valued?
12:20
Speaker 2: I mean, I don't know them as intimately as what
12:22
Speaker 2: others will, but I certainly think they're starting to get
12:24
Speaker 2: closer to. But again, I think in a lot of circumstances,
12:28
Speaker 2: that'll be getting to a point where they'll then start
12:30
Speaker 2: to plateau. There's a lot of good fundamentals around all
12:33
Speaker 2: of those. I mean, we're always wary to a certain
12:36
Speaker 2: extent with Perth because it is so reliant on the
12:38
Speaker 2: mining sector. So it can be a little bit more volatile,
12:41
Speaker 2: but I think Brisbane certainly got some really good fundamentals
12:44
Speaker 2: to it. So I think even if it does get
12:46
Speaker 2: to a point where it might be at its premium
12:48
Speaker 2: for the moment, it's more likely to then just level off.
12:51
Speaker 2: It might come back a little bit, but then at
12:53
Speaker 2: some stage over the coming years, it's going to kick again. Yeah. Okay.
12:58
Speaker 1: Let's talk about it in terms of the spring market
13:00
Speaker 1: from a seller's perspective. So for those people listening that
13:03
Speaker 1: are contemplating selling a property this spring, I mean, I
13:07
Speaker 1: If they're doing so, they've probably already started that process.
13:10
Speaker 1: But what advice do you have? Obviously, if you're going
13:13
Speaker 1: to sort of term Melbourne as a buyer's market, then
13:17
Speaker 1: of course the implication is it's not a seller's market.
13:19
Speaker 2: Is that right? Yeah, that's exactly right. So there's very
13:22
Speaker 2: much opportunities there at the moment from a buying perspective.
13:25
Speaker 2: So if you're looking to sell in that type of market,
13:28
Speaker 2: it's really important that you make your property stand out.
13:31
Speaker 2: I think from a seller's perspective, the big thing is
13:33
Speaker 2: to understand who you're going to be pitching your property to.
13:36
Speaker 2: And therefore, what do they expect? So if you're looking
13:38
Speaker 2: at it from a first home buyer or perhaps a downsize,
13:41
Speaker 2: that sort of thing, most of the time people are
13:43
Speaker 2: going to be looking for something that's ready to move in.
13:45
Speaker 2: Turnkey is the typical phrase. So we want something that is,
13:49
Speaker 2: and that's what we're seeing at the moment is probably
13:51
Speaker 2: the strongest sector of the market in a softer area
13:54
Speaker 2: like Victoria and Melbourne, is that there's concerns and wariness
13:58
Speaker 2: around dealing with trades and the cost of doing renovations.
14:03
Speaker 2: So having something that people can move straight into is
14:05
Speaker 2: definitely what the market's looking for. So if you're pitching
14:08
Speaker 2: towards that type of market, getting the property in that
14:11
Speaker 2: state so that it's ready to do that and spending
14:14
Speaker 2: a bit of money from a presentation perspective is really important.
14:18
Speaker 2: On the flip side of that, if you've got a
14:19
Speaker 2: property that's likely to be a development site or is
14:22
Speaker 2: likely to have the dwelling demolished and having a new
14:25
Speaker 2: building of some sort put on, spending much money on
14:28
Speaker 2: the improvements is going to probably be a waste because
14:32
Speaker 2: you're not necessarily most people are going to look at
14:34
Speaker 2: that and say, well, I don't need that. And if
14:35
Speaker 2: you go too far, they may look at it and say, well,
14:38
Speaker 2: now the improvements are adding too much value. So I
14:40
Speaker 2: don't want to be pitching towards that. So I think
14:43
Speaker 2: understanding your market is really important. I think understanding, particularly
14:47
Speaker 2: in a softening market and in certain areas, what's the
14:50
Speaker 2: best method of sale is really important too, because it's
14:53
Speaker 2: not going to be, and Melbourne obviously as the example
14:56
Speaker 2: in the soft market at the moment is typically known
14:58
Speaker 2: as the auction capital of the country. But that's not
15:01
Speaker 2: going to be across the board in a softening market.
15:03
Speaker 2: So in areas whereby it's possibly a bit more of
15:07
Speaker 2: a sometimes we auction, sometimes we don't. In the softening market,
15:10
Speaker 2: when you're out on some of the outer suburbs where
15:13
Speaker 2: the depth of demand may not be as strong, you
15:16
Speaker 2: may be better off considering a private sale or an
15:18
Speaker 2: expression of interest. And depending upon the need for sell,
15:21
Speaker 2: is there a market for an off-market strategy? And that
15:24
Speaker 2: might be something to consider as well. So method of
15:26
Speaker 2: sale is really important in that scenario. And so selection
15:30
Speaker 2: of agent, because you need to make sure you've got
15:32
Speaker 2: someone that knows and has got a good market share.
15:34
Speaker 2: And so they can tap into that and work for
15:38
Speaker 2: you in the best way possible.
15:40
Speaker 1: And so for those that own property in markets that
15:43
Speaker 1: are running quite hot, of course, logic would tell us
15:47
Speaker 1: no point selling now if the market's going to continue
15:50
Speaker 1: to run. But How do you know? Is there any
15:53
Speaker 1: sort of signs? Or if you hold a property in
15:55
Speaker 1: a Brisbane or an Adelaide or a Perth, when do
15:58
Speaker 1: you know when is the right time to sell in
16:00
Speaker 1: terms of to maximise value?
16:01
Speaker 2: Well, your personal motivation needs to be taken into account
16:04
Speaker 2: there as to what's the reason. So is it because
16:06
Speaker 2: you're looking to upsize and upgrade a home or downsize,
16:09
Speaker 2: downgrade a home? Or is it an investment property that
16:11
Speaker 2: is at that point where you no longer require it?
16:14
Speaker 2: So I guess your first things first is what's the
16:17
Speaker 2: personal motivation? And is there a strong need or want
16:19
Speaker 2: to sell? And therefore, if there is, then, okay, let's
16:22
Speaker 2: look at when does that need to be immediate or
16:25
Speaker 2: does it need to be at some stage in the
16:27
Speaker 2: next three to six to 12 months? And therefore, you
16:29
Speaker 2: can set up the timing around that. I think the
16:32
Speaker 2: most important thing, once you've determined the need to sell
16:35
Speaker 2: and when, is to then look at getting it the
16:38
Speaker 2: most exposure as possible. So for instance, we talked before
16:42
Speaker 2: about method of sale. Well, selling off market, I think
16:45
Speaker 2: in a really strong market is a real risk because
16:47
Speaker 2: you run the risk of not necessarily, there's new buyers
16:50
Speaker 2: coming into the market all the time. And if you
16:53
Speaker 2: sell off market, it doesn't matter what agent you've got,
16:56
Speaker 2: they could have the strongest market share. If they're not
17:00
Speaker 2: dealing with every single new buyer that comes into the market,
17:02
Speaker 2: they don't know everyone and you risk leaving money on
17:06
Speaker 2: the table. So I think making sure you expose the
17:10
Speaker 2: property as much as possible. That doesn't mean going overboard with, say,
17:13
Speaker 2: a two-bedroom apartment in print advertising where you're not really
17:16
Speaker 2: going to get new buyers coming in, but it's understanding
17:19
Speaker 2: where your buyers are going to be looking and making
17:21
Speaker 2: sure you get as much exposure as possible, making sure
17:24
Speaker 2: it stands out because sometimes in a stronger market, the
17:28
Speaker 2: supply can start to lift and so there'll be more competition.
17:32
Speaker 2: So you need to have a bit more of an
17:33
Speaker 2: understanding as to how best to make your property stand
17:37
Speaker 2: out in the marketplace. And I think that's really important
17:40
Speaker 2: as well.
17:41
Speaker 1: Yeah, that's really good advice, Jared, for both property buyers
17:45
Speaker 1: and sellers. And I'd like to reiterate your first bit
17:48
Speaker 1: of advice is being prepared, whether you're in a soft
17:51
Speaker 1: market or a very buoyant market. We helped a client
17:55
Speaker 1: just recently buy a property in Brisbane. They're in a
17:58
Speaker 1: position then to sign an unconditional contract with a 30-day settlement.
18:02
Speaker 1: and because they were able to act very quickly and
18:06
Speaker 1: offer that short settlement they were successful in buying the
18:09
Speaker 1: property so it's always good to then think about what
18:11
Speaker 1: are the levers you can pull other than price in
18:15
Speaker 1: order to get a deal done which is really good.
18:17
Speaker 1: Okay that's very interesting we're going to take a short
18:20
Speaker 1: break and we'll be back with you I'm going to
18:21
Speaker 1: ask Jared when we return about regional markets and really
18:25
Speaker 1: what else his team's been working on so we'll be
18:28
Speaker 1: back with you in a moment. Hello, welcome back to
18:46
Speaker 1: the Australian's Money Puzzle podcast. I'm Stuart Weems and I'm
18:49
Speaker 1: talking to Jared McKay, buyer's agent and owner of Wakeland
18:52
Speaker 1: Property Advisory. So at the start of the show, we
18:55
Speaker 1: talked about how capital cities are faring differently and Jared
18:59
Speaker 1: gave us some great advice to both buyers and sellers
19:03
Speaker 1: that want to operate in the spring market. Jared, I
19:06
Speaker 1: just want to change speeds now and really leverage off
19:09
Speaker 1: what Louis Christopher was saying last week. his observation were
19:13
Speaker 1: that rental vacancy rates were on the decline in the regions.
19:17
Speaker 1: And that actually really surprised me. So how are you
19:20
Speaker 1: seeing regions behave or perform compared to capital city markets?
19:25
Speaker 2: Yeah, I agree, Stuart. That surprised me as well. I
19:28
Speaker 2: would have, particularly with the way the capital markets are
19:30
Speaker 2: working in some of the regions at the moment, I
19:32
Speaker 2: was trying to, after hearing that, I was trying to
19:34
Speaker 2: think of what may have been driving that, whether or
19:37
Speaker 2: not it's because of the tight vacancy rates in a
19:39
Speaker 2: lot of the capital cities and people looking for affordable
19:42
Speaker 2: alternatives and perhaps considering some of the regional areas. I'm
19:45
Speaker 2: not sure, but I was really surprised to see that.
19:48
Speaker 2: I think from a capital value perspective, in a lot
19:50
Speaker 2: of the regional areas, we're starting to see, well, we're
19:54
Speaker 2: certainly seeing a lot more supply in those sorts of
19:56
Speaker 2: markets now. There's been a bit of a change of tact.
20:00
Speaker 2: And when you go back to pandemic times, as I
20:02
Speaker 2: think you said earlier, and It was hard to even
20:05
Speaker 2: find anything to rent or buy in a lot of
20:07
Speaker 2: the regional markets at the time. The supply was that
20:09
Speaker 2: tight and people were just looking to get out of
20:11
Speaker 2: capital cities into those sorts of areas. Whereas you move
20:14
Speaker 2: into a lot of those locations now and there's a
20:16
Speaker 2: lot more choice and there's a lot more flexibility. So
20:19
Speaker 2: for buyers that are looking to enter those markets, they
20:22
Speaker 2: are in a much stronger position than perhaps what they
20:24
Speaker 2: were a couple of years ago.
20:27
Speaker 1: Yeah, I mean, there could be a couple of different
20:29
Speaker 1: explanations for it, of course, because prices have risen so
20:32
Speaker 1: much over the last four or five years in those regions.
20:35
Speaker 1: Maybe it pushes a lot of potential buyers out into
20:38
Speaker 1: that rental market and therefore there's a greater demand from renters.
20:43
Speaker 1: I think in Victoria, like if I was to take
20:45
Speaker 1: a guess, the land tax and the additional property taxes
20:50
Speaker 1: probably mean more investors have sold their properties in those
20:54
Speaker 1: regions and so the supply of rental property in that
20:57
Speaker 1: in those locations may be decreasing. You gave some really
21:01
Speaker 1: great advice again to buyers and sellers in the spring
21:04
Speaker 1: property market when we sort of focused on capital cities.
21:07
Speaker 1: Does your approach change at all in regional markets, either
21:11
Speaker 1: as a buyer or seller?
21:13
Speaker 2: You're probably in a stronger position as a buyer in
21:16
Speaker 2: a lot of the regional markets. Typically, you find that
21:19
Speaker 2: supply is stronger than demand in most of those areas.
21:22
Speaker 2: And it's typically why In a lot of regional areas,
21:24
Speaker 2: the most common method of sale is private sale as
21:27
Speaker 2: opposed to auction. The auction method works best when demand
21:30
Speaker 2: outstrips supply. You also find from a buyer's perspective, it's
21:34
Speaker 2: far more common to be making conditional offers, whether that's
21:38
Speaker 2: in relation to finance or building inspections, or even in
21:40
Speaker 2: some circumstances, conditional upon the sale of another property is
21:44
Speaker 2: more common as well. So as a buyer, it's a
21:47
Speaker 2: bit like you mentioned before, Stuart, there's more levers that
21:51
Speaker 2: you can pull and you can use to your So
21:53
Speaker 2: you work things a bit harder. Again, I think you've
21:56
Speaker 2: still got to be a little bit careful of being
21:58
Speaker 2: too cute in some areas and making sure that you're
22:00
Speaker 2: not pushing too hard, but you've certainly got options available
22:04
Speaker 2: to you.
22:06
Speaker 1: I think as property people interested in property, of course,
22:09
Speaker 1: that's the listener base for this podcast and property owners,
22:13
Speaker 1: we can kind of learn a little bit from what
22:15
Speaker 1: happens in a softer market, particularly for those wanting to
22:19
Speaker 1: get into those other markets that are running quite hot.
22:23
Speaker 1: So are there any sort of property types or sort
22:26
Speaker 1: of geographical locations that are performing better in this softer
22:31
Speaker 1: market in Melbourne than others? And And what I'm thinking is,
22:34
Speaker 1: can we sort of take those learnings and apply them
22:37
Speaker 1: in other markets?
22:40
Speaker 2: What we're noticing at the moment goes back to probably
22:42
Speaker 2: what I said earlier about the stronger properties at the
22:45
Speaker 2: moment are those that are turnkey, that are ready for
22:48
Speaker 2: people to move straight into. So we're still seeing a
22:51
Speaker 2: reasonable amount of people or the buyers that are in
22:54
Speaker 2: the market are either first home buyers or they're looking
22:56
Speaker 2: to upgrade or downsize. And there's a real want for
23:00
Speaker 2: those that are upgrading that they've possibly considered doing a
23:03
Speaker 2: renovation or extension on an existing home, but the uncertainty
23:07
Speaker 2: around the building sector and things just doesn't lend itself
23:10
Speaker 2: to that being the preferred option. And as a result
23:14
Speaker 2: of that, people don't, they want to buy the property
23:16
Speaker 2: that's already renovated and ready to go. So we're seeing
23:19
Speaker 2: a lot more of that. Now that's not necessarily across
23:22
Speaker 2: the board all the time, but that is in a
23:24
Speaker 2: softer market. You're finding that, and at the moment with
23:26
Speaker 2: the concerns, that's probably where things are a bit stronger.
23:31
Speaker 1: I guess if you're in a really strong market, that
23:33
Speaker 1: could be one way to kind of mitigate risk. Well,
23:35
Speaker 1: I mean, it's a question rather than a statement. That is,
23:38
Speaker 1: buy a property that needs a bit of capital improvement, kitchen, bathroom,
23:42
Speaker 1: so forth. By doing that, not only do you get
23:45
Speaker 1: the depreciation benefits, maybe a bit of an uplift in
23:47
Speaker 1: capital value, hopefully, and then improvement in rental yield. Is
23:52
Speaker 1: that the approach you might take in a stronger market, Gerard?
23:55
Speaker 2: Particularly if you've got the appetite for it. I mean,
23:57
Speaker 2: we've got, and I'm sure you've had two clients that
23:59
Speaker 2: just do not want to have to even consider dealing
24:02
Speaker 2: with that space. But those that are even remotely open
24:04
Speaker 2: to doing cosmetic works, those sorts of things, I think
24:07
Speaker 2: that there's absolutely opportunities to take advantage of that at
24:09
Speaker 2: the moment because there's a lot of buyers that don't
24:12
Speaker 2: want to. And even more so if you've got a
24:14
Speaker 2: skill set to be able to add to that, whether
24:16
Speaker 2: it's because you're a trade or you've got a family
24:18
Speaker 2: member or a friend who is. and can do things
24:21
Speaker 2: on an ad hoc basis and help out, then I
24:23
Speaker 2: think that's certainly an opportunity at the moment. And also,
24:26
Speaker 2: as you and I have spoken about plenty of times,
24:28
Speaker 2: it means that your purchase price is going to have
24:31
Speaker 2: a much higher land to value ratio as well, because
24:34
Speaker 2: the improvements are going to be adding less to that
24:36
Speaker 2: title component. So the more land component or land value
24:39
Speaker 2: you can have in that purchase, if you're buying the
24:42
Speaker 2: right property, the growth is going to be stronger. And
24:44
Speaker 2: so then you can add value from an improvements perspective,
24:47
Speaker 2: as you said, improve the rental, and then it works
24:49
Speaker 2: well for you going forward.
24:51
Speaker 1: And I'm really interested to know the rise of work
24:54
Speaker 1: from home, and I think it's really here to stay.
24:56
Speaker 1: Maybe not to the same extent that it was so
25:01
Speaker 1: prevalent during the lockdowns, of course, but I think most
25:05
Speaker 1: large corporates are getting to mandating three to four days
25:09
Speaker 1: in the office, but they're still maybe one day at
25:11
Speaker 1: least at home working from home. Does that impact us
25:15
Speaker 1: as investors in terms of the types of property we
25:18
Speaker 1: might want to invest in?
25:19
Speaker 2: Do you think, Gerard? I think it's probably less from
25:22
Speaker 2: a geographic sense. I think the geographical side of things
25:25
Speaker 2: is probably more finding a level and people are sort
25:28
Speaker 2: of getting an understanding as to what is possible and not.
25:32
Speaker 2: But I think from an accommodation point of view, I
25:35
Speaker 2: think that certainly starts to play in. And I mean,
25:38
Speaker 2: it's as simple as I helped a client sell a
25:40
Speaker 2: one-bedroom apartment in recently. And it was something that he'd
25:45
Speaker 2: held for a long period of time. He'd had it
25:47
Speaker 2: as a home initially. And there was a little alcove
25:51
Speaker 2: in one corner of the entry hall. And just to
25:54
Speaker 2: be able to, and it wasn't set up that way,
25:56
Speaker 2: but we were able to set up a little desk
25:58
Speaker 2: to put in the corner to create a work from
26:00
Speaker 2: home environment. And that was the purchaser. That was one
26:04
Speaker 2: of the keys for them was the fact that it
26:05
Speaker 2: had a not a massive one bedroom itself, but the
26:08
Speaker 2: living space was really good at a nice balcony. But
26:11
Speaker 2: that little alcove gave them the feel of, okay, well,
26:14
Speaker 2: I've got my own work from home space that I
26:16
Speaker 2: can work with. And that's really going to give me
26:19
Speaker 2: what I need, even though it is only a one
26:21
Speaker 2: bedroom apartment. So I do think that specific accommodation to
26:25
Speaker 2: have that, whether it's a proper study, whether it's a
26:27
Speaker 2: studio out the back, I think having that dedicated space
26:31
Speaker 2: is certainly becoming more and more sought after.
26:34
Speaker 1: And unfortunately, we're running a bit short of time, but
26:36
Speaker 1: I really did want to ask you, if we split
26:39
Speaker 1: up your time period between pre and post-COVID, how has
26:43
Speaker 1: it changed your business, Jared? Because I think this gives
26:46
Speaker 1: listeners a really good sense of what's happening on the
26:49
Speaker 1: ground at the coalface in terms of the activity in
26:52
Speaker 1: the market. Now, I know you obviously operate in Melbourne,
26:56
Speaker 1: but has your business changed? And I guess I'm thinking
26:58
Speaker 1: in terms of investors versus owner-occupiers and purchases versus sales?
27:04
Speaker 1: How has it changed over time?
27:07
Speaker 2: Yeah, it's a really good question. I'd go back probably
27:09
Speaker 2: even further than the pandemic to probably the Royal Commission.
27:12
Speaker 2: And I'd say that's probably when it started to switch
27:15
Speaker 2: in terms of the percentage of investors that we've been
27:17
Speaker 2: dealing with versus owner-occupiers. That's from an acquisition point of view.
27:20
Speaker 2: And that's certainly, we noticed a change from then, went
27:22
Speaker 2: further during the pandemic in Victoria, particularly at the moment.
27:25
Speaker 2: We don't need to go into too much detail, but
27:27
Speaker 2: there's certainly not a lot of encouragement for investors down
27:30
Speaker 2: this way at the moment. And I think that's leading
27:33
Speaker 2: to a lot of sales at present. And so there's
27:35
Speaker 2: a lot of investors leaving the market. I think it'll
27:38
Speaker 2: change eventually. As I said before, I legitimately do think
27:41
Speaker 2: there's some really good opportunities to be had down in
27:43
Speaker 2: Victoria at the moment from a buying point of view,
27:45
Speaker 2: but there's not a lot of incentives to own investment property.
27:47
Speaker 2: So We've seen that from an owner-occupier to investor. In
27:51
Speaker 2: terms of vendor advisory versus buying services, even in the
27:55
Speaker 2: last 12 months, Stuart, I've noticed we had, I would
27:58
Speaker 2: say that probably of our work, 70% to 30% was
28:02
Speaker 2: buy to sell this time last year. I'd say it's
28:04
Speaker 2: almost the reverse of that at the moment in terms
28:07
Speaker 2: of what we're doing. There's a lot more vendor advisory work.
28:10
Speaker 2: And that's not just investors. There are a few, but
28:12
Speaker 2: there's a lot of others that are just upgrading and
28:14
Speaker 2: downsizing homes as well. So I'm not suggesting that it's predominantly,
28:19
Speaker 2: but we are seeing investors that are considering their position. Absolutely.
28:23
Speaker 1: Yeah.
28:23
Speaker 2: Okay.
28:24
Speaker 1: That's really interesting. Okay. We're going to take another short break.
28:27
Speaker 1: And when we return, I'm going to ask Jared a
28:30
Speaker 1: question from a listener about buying commercial property. So we'll
28:34
Speaker 1: be back with you in a moment. Hello and welcome
28:45
Speaker 1: back to the Australian's Money Puzzle podcast. I'm Stuart Weems
28:48
Speaker 1: talking to Gerard McKay, buyer's agent and owner of Wakeland
28:51
Speaker 1: Property Advisory. If I can be a little cheeky, Gerard,
28:55
Speaker 1: before we get into a listener question from James, I'd
28:58
Speaker 1: like to ask you one final question. If you could
29:01
Speaker 1: meet yourself 14 years ago when you started buying property
29:05
Speaker 1: as a buyer's agent, what are the two to three
29:08
Speaker 1: most important lessons you would tell yourself about buying property?
29:12
Speaker 2: I would probably say, and Richard Wakeland and Paul Nugent
29:15
Speaker 2: drilled this into me from the very start, the importance
29:18
Speaker 2: of asset selection, which everyone knows that buying the right property,
29:22
Speaker 2: everyone wants to do that, but sometimes the emotion can
29:25
Speaker 2: get the better of people when buying property. So the
29:28
Speaker 2: importance of taking a step back and understanding why you're
29:32
Speaker 2: buying it, what's the purpose of buying it, and then
29:34
Speaker 2: making sure you buy the right property first and foremost.
29:36
Speaker 2: I think that was probably the first thing. I think
29:39
Speaker 2: something that's probably... come to light a bit more in
29:41
Speaker 2: recent times, and again, it's something that Richard always has said,
29:44
Speaker 2: but is that the things that you can't predict can
29:48
Speaker 2: quite often have the greatest impact. So things like the GFC,
29:53
Speaker 2: you couldn't see that coming. Now, again, there was the
29:55
Speaker 2: movie about the short selling things that some will claim
29:58
Speaker 2: that they did. the Royal Commission, the pandemic, some of
30:01
Speaker 2: these sorts of things have had the biggest influence on
30:03
Speaker 2: the market as opposed to some of the smaller things
30:07
Speaker 2: that we can get quite worked up about around negative
30:09
Speaker 2: gearing and how that was going to be the biggest
30:12
Speaker 2: risk to everything. I mean, going back further, I know
30:15
Speaker 2: from my valuation days that the GST was going to
30:18
Speaker 2: be the end of it. So there's all these little
30:20
Speaker 2: things that people get worked up about, but I've typically
30:24
Speaker 2: noticed that it's the bigger things that cause the biggest
30:26
Speaker 2: issues and you most likely can't predict them.
30:29
Speaker 1: Yeah, yeah. I mean, it's the same in stock markets.
30:32
Speaker 1: The thing that's going to create the next stock market
30:34
Speaker 1: crash is by definition unexpected. Otherwise, the market would price it.
30:38
Speaker 1: I think that's really good. Okay, we're going to take
30:41
Speaker 1: a question from a listener now. It's from James. I'll
30:44
Speaker 1: read it out, Jared, and then I'll give you the
30:46
Speaker 1: difficult task of answering it. So James writes, I love
30:49
Speaker 1: the podcast and just had a quick question. I recently
30:52
Speaker 1: looked at buying some commercial property in my local area.
30:55
Speaker 1: a standard 100 to 220 square meter concrete block type
31:00
Speaker 1: property popping up everywhere, nothing fancy about them. I'm assuming
31:04
Speaker 1: James is referring to sort of an industrial style shed property. Anyway,
31:09
Speaker 1: James writes, the price was around $ 645, 000, but the bank
31:11
Speaker 1: valued it $ 450, 000, which I agree with the bank. How
31:19
Speaker 1: do developers get away? We're still trying to charge above
31:22
Speaker 1: bank market rates if they're not valued at that, especially
31:26
Speaker 1: when we can physically see they're not being sold.
31:30
Speaker 2: It's a really good question, James. And it's something that
31:32
Speaker 2: we discuss a lot. And it's not actually really probably
31:34
Speaker 2: just a commercial industrial. It's really an off the plan
31:37
Speaker 2: type question. So the same thing applies with residential property
31:41
Speaker 2: in the sense of apartments, townhouses, that sort of thing.
31:44
Speaker 2: And it's really the developer's premium that gets put in
31:46
Speaker 2: on top in order for them to make their profits.
31:49
Speaker 2: The best analogy I can give you is the buying
31:52
Speaker 2: of a brand new car and you drive it out
31:53
Speaker 2: of the door, out of the lot, and all of
31:55
Speaker 2: a sudden it depreciates in value because if someone wants
31:58
Speaker 2: something similar, they can go and buy the brand new
32:00
Speaker 2: version themselves. So the value is dropping straight away. The
32:04
Speaker 2: bank's valuation is really interesting too. Again, my background before
32:07
Speaker 2: getting into buying services was as a valuer and the
32:11
Speaker 2: valuation assessments were won't take into account off the planned sales.
32:15
Speaker 2: They will want to see resales of similar type properties
32:18
Speaker 2: in and around the area. So it's reflecting market forces
32:22
Speaker 2: as opposed to reflecting the developer's premium being paid. So
32:27
Speaker 2: because there's always someone that wants the brand new, wants
32:31
Speaker 2: that type of property or car, there's always going to
32:34
Speaker 2: be a market for that and they'll pay the premium
32:36
Speaker 2: for it. But those that are smart take that off
32:40
Speaker 2: and don't necessarily need to have that, particularly when you're
32:43
Speaker 2: looking at it from a long-term perspective. You're better off
32:46
Speaker 2: getting the property that's on the resale a year or
32:49
Speaker 2: two later, getting the same benefits that the other one
32:52
Speaker 2: offers and not having to pay for it in the meantime.
32:57
Speaker 1: Yeah. The analogy I would use, Joe, because a lot
32:59
Speaker 1: of our listeners are invested in both property and shares,
33:02
Speaker 1: the analogy I would use is the off-the-planned property sale
33:06
Speaker 1: is like buying an unlisted company. Whereas when you buy
33:09
Speaker 1: a listed company, it's got that price discovery, it's regularly traded,
33:12
Speaker 1: so you know what the market thinks it's worth. Whether
33:15
Speaker 1: it's worth that can be a completely different question. But
33:19
Speaker 1: something that's never traded before, like an off-the-plan property, it's
33:23
Speaker 1: more difficult, I guess, to ascertain value. Well, that's been
33:26
Speaker 1: a really great conversation, Jared. Thanks so much for sharing
33:30
Speaker 1: your years and years of experience with our listeners. I'm
33:33
Speaker 1: sure they've enjoyed it. And just a reminder, folks, if
33:36
Speaker 1: you have any question or feedback, we'd love to hear
33:39
Speaker 1: from you. The email address is themoneypuzzle at theaustralian.com.au. Keep
33:45
Speaker 1: the questions coming. We've got James Gerrard filling in for
33:49
Speaker 1: James Kirby on Thursday. And I'll be back with you
33:52
Speaker 1: next Tuesday. We have another very interesting discussion lined up.
33:56
Speaker 1: I'll be talking about the state of the investor market
33:59
Speaker 1: around Australia. I mean, Jared and I already sort of
34:01
Speaker 1: touched on this. But surprisingly, the Australian Bureau of Statistics
34:06
Speaker 1: reported that investor loan volume is up over 35% over
34:10
Speaker 1: the past year, which is pretty surprising given the backdrop
34:14
Speaker 1: of higher interest rates, higher property taxes and more stringent
34:18
Speaker 1: tenancy rules. So we'll be exploring that. I really hope
34:21
Speaker 1: you've enjoyed today's episode. And if you have, please share it.
34:25
Speaker 1: I've been Stuart Weems. And until next week, bye for now.
34:33
Speaker 1: Thank you.