Post Election Property Chat: How Will This Affect The Market?

The 2019 federal election has come and gone with some surprising results for some. What are our thoughts on this result and how it may affect the property market moving forward.

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0:00 – Liberal are in
1:11 – This is a plus overall for the property market
2:30 – This doesn’t mean boom times, it is still a turbulent market
5:10 – APRA are making changes to lending
8:20 – Just because interest rates are low doesn’t mean you should over leverage
9:12 – Interest rates are likely to drop but by how much is unsure
10:44 – Nothing major is happening, but these are small positive changes
12:24 – At the ground level there are some suburbs with really strong demand
14:35 – Not the time to rush in, but it could be the time for a strategic asset
16:02 – The biggest thing is we just aren’t seeing the bad news

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Transcription:

The 2019 federal election has come and gone with some surprising results for some people. I guess we were talking previously and you kind of thought liberal would get in. I wasn’t sick to shore, but obviously this changes things in terms of the property market in terms of um, some of the things that are happening. So I wanted to sit down with Ben Everingham buyer’s agent here at pumped on property just to have a bit of a postelection property chat and see how this may affect the market and some of the changes that we’re seeing at the moment. So, Hey Ben, thanks. Finally, it’s been about five months, but I’m back up on the sunshine coast and this should be happening every month or so now. So we should have more quality educational content coming your way that went, rely on Skype and connections or severe now I’m really excited about it and I was shocked actually.

I remember getting up Saturday morning after the election, expecting lie. Honestly thought Labor was going to get in, but I was hoping it would be liberal as an investor in business person and getting up to do my morning yoga and your scan, what the hell. And then I listened to the acceptance sort of speech and I was just like, yes, like this is awesome. Yeah. I think latest that last weekend. Um, so obviously Labor had some things that they wanted to do which would likely negatively impacted the property market at the biggest one being reducing or removing negative gearing and being able to claim your negative gearing against your income as well as reducing the capital gains discount. So obviously that would have a negative impact on property. So seeing liberal get in and that not being abolished is obviously going to be a plus for the property market.

Um, as well as I think liberal had the idea of they’re trying to help first home buyers get in with by allowing them to invest with a 5% deposit. So I’m not so sure about whether that’s a good idea or not. Um, it is only to, I think about 10,000 people or something. Look, it reminds me of when I was first buying in 2011 to be honest with you. Like I think what I’m beginning to see is the start of them beginning to set up the economy that away in a couple of years from now, it’ll start a ticking again. And um, you know, there are grants going to first timers, there are things happening with monetary policy. There’s things happening with our interest rates and what we’re going to pay as investors and homeowners in the future. So it’s kind of one of those times where the coach just starting to turn, which will take a few years to trickle down to everyone feeling better again, but you know, they’re the wheels in motion, I’m starting to say.

And I think we’re both in the position where we don’t think this means that okay, it’s going to be boom time now in property that we’re going to see massive growth like we saw in Sydney in 2015 and 2016. Um, the start of 2017 I don’t like, we’re not saying that. Definitely not still, definitely turbulent times ahead and we’re not sure where the market’s going to go. And we always talk about investing in a low risk way and doing all of your due diligence and investing in a way where you have multiple ways make money, but then that’s obviously going to reduce your risk in multiple ways as well because if the market does go down but you can manufacture growth and you can make up for that. If you’ve got positive cashflow, you can afford to hold the property. So all the stuff that we talk about still stands I think. And um, but yeah, it’s been, I guess a positive thing for us being in the property industry and a positive thing for investors out there to say liberal in government versus Labor.

Yeah. Cause I think what we need, I have seen if Labour had gone in his, you know, I, I believe they’ll still be a fair bit of a blade in Sydney and Melbourne predominantly this year. Probably Darwin as well. And as Ryan said, the rest of Australia will probably on average feet pretty subdued if not flat, slightly declining. Yeah. And we might even say that three part of next year, maybe all of next year, like who knows. But what I do see as well as, you know, that blade that might last six months to 18 months with liberal being back in, if Labour had come in, you know, a lot of the analysts were sort of saying that, that, that Blake could last for two, maybe even up to three years. Yeah. And you know, I’m just, I’m grateful that the market’s resetting, setting rock, we’ve been talking about for a long time now because it kind of had to, um, but you know, did it have to reset by 30 or 40%, which was some of the predictions if Labor had a gun in possibly not.

Yeah. And well we still don’t know where it’s going to go and if it’s going to reset to that point, we’re not economists and we don’t pretend to be. And even the economists that we do follow often. And so Austin are so opinionated and they know exactly what’s going to happen and then when you follow them for years it doesn’t happen exactly how they plan it out. And so we’ll probably do another video in the future about how important it is to get opinions from multiple different sources because so many people are opinionated in one direction and know exactly what’s going to happen in one direction and have all the data and everything to back it up. And then so many people are opinionated in the other direction and they have all the data to back it up as well. So it can be really confusing to actually understand what’s going to happen.

And I think none of us have a crystal ball on what’s going to happen in the future. And that’s not what this video is about. It’s more about just talking about it like you would if, if you were sitting here with us just having a chat about how things are changing. So we’re also seeing some changes are with Acura and the way that they are allowing banks to assess people for loans. So previously in the past, obviously we have historically low interest rates at the moment. I think the, the lowest they’ve been since the 1960 [inaudible] or something like that, but opera have told banks and Linda is that they must assess people at a 7% interest rate, which is more in line with the historical average of interest rates when getting lines. So I know that you’ve spoken to a lot of people that have just, they’ve been able to get loans but not quite enough of a loan in order to purchase an investment.

Yeah. So people, you know, and this is sort of our news, like it’s been really difficult for about two and a half, almost three years now. Like that was pretty, the handbrake that started to pull the Sydney and Melbourne markets back. So it’s been difficult for some people, particularly those with small deposits or um, those people in business for themselves or those people with more than two investment properties like their home plus an investment to borrow money. But with the press release from [inaudible] on the 21st, I think it was of May, um, they’re sort of suggesting that, you know, we’re still gonna maintain those sensible lending conditions so that Australia doesn’t get itself into a big problem long term. But we’re also looking at a marketplace where some of that might be starting to soften and we’ve, you know, just going to have to wait a couple of weeks for that to come through the wash.

And so they’re changing. I think they’re going to change the rules if they haven’t already on how loans are assessed and the Italian banks that I guess giving banks more control over how they assess people, but still they’re adding a buffer in there. So you’re not, I think you’re going to get assessed on like 4% interest rates or three and a half percent interest rates and still go yet. It’s still going to be much higher than that. And I think that healthy and realistic because if interest rates do go up then people need to be able to afford to service those loans. Otherwise you’re going to get that cascading effect of the market goes down and you know, people are foreclosing and all of that sort of stuff, which of course we don’t want to see. You know, the big thing here is um, in the last three years there’s been the majors that have had to sort of comply with the APA guidelines in Dane.

Really, really sensitive I suppose to Lenny. But there’s all these non, you know, major lenders that have been lending people money that, you know, the majors have been pushing away. And that’s important to recognize because at the moment those non major lenders are sort of giving out money at five and a half to 7% rate. So it’s been from those people. When you can go get interest rates at 4% you know who a lot of people that could get money from. Those non major lenders have been sort of sitting out there in the wash. You know some of them getting lines, but a lot of them not. What’s exciting is that we might begin to start saying some of the majors and the second tier lenders reducing their rates. I’ve got clients and I’ve also got a couple of mortgage brokers that reckon by the end of this year we’ll be able to get investor rates for my property portfolio below three and a half percent and that’s just, that’s low man like that and so changes my cashflow position from my current rates to where they’ll be at the end of the year by about 20 grand a year in interest.

And that’s the thing smart investors can use that drop in interest rate to save money, improve their cashflow, reduce their risks in this turbulent market. There’s also going to be silly investors out there who are going three and a half percent interest rate. I’m going to leverage to the hilt because interest rates are so low and you can manage it now, but then if we have a growth in interest rates than those people will be screwed. So we definitely don’t want to see you out there doing that and getting yourself in this position. But obviously this is an opportunity with low interest rates if you manage it correctly, to actually lower your risk when investing in property, getting a good

cashflow position, build up those buffers in your portfolio so that if you do lose a tenant, yeah.

Or if you do get a property vandalized like you did a couple of years ago, then

you’ve got that there. So that’s um, really exciting as well. In terms of interest rate drops, I hear different things about what’s going to happen. Obviously there’s a lot of people out there saying that the RBA are likely to drop interest rates this year. Then there’s other people that are saying that, okay, well the economy is not great but it’s not terrible and we don’t actually have that many interest rate drops left before we hit 0% or go into negative interest rates. And so some people are saying that they may hold off dropping interest rates until we’re actually in a recession so that the had that like by keep those ships in the bank so they can play them when they absolutely need them. So it’s, yeah.

My, my thought process from talking to, again, some clients of ours that are in corporate banking is that the future’s markets are already pricing in the job and they got a lot smarter. People, you know, they get to focus on this stuff all day. But again, who knows, I, I personally reckon there’ll be a rate cut at least one this year, possibly two. Um, but that’s been pretty clear since, you know, early 2018 for people that followed the right information. Like, it’s, it’s, you know, people are saying that the Reserve Bank should have actually cut them three months ago when, you know, the worst of the news was starting to come out. I think they just wanted to get through the election to see, you know, how, how severely they had to act. Yeah.

So I guess we’ll wait and see how that plays out. Obviously it dropping interest rates can help in terms of serviceability and people being able to purchase properties. But again, because you’ve got the lenders scrutinizing how much money people are spending, um, you know, in their lives and it can be harder to get loans for that. It’s like how much positive impact will that have

official. And I think it’s more of a, you know, when I look at liberal getting in, when I look at, after his conversation, when I look at the lending, you know, Reserve Bank of Australia, when I look at the grants relating to first time buyers that may or may not be coming into the market. I don’t see anything major happening. They’re like, cause you know a half a percent rate cut is about 90 to a hundred bucks a month. Like it’s not going to change anyone’s life here. You know what I mean? But what it does start doing his thoughts, what they’re trying to do now isn’t necessarily taking us back to where things where it’s slowly building in a foundation that in a couple of years time allows confidence is that trickling through the market. And that’s, that’s really what all of these activities is around confidence building without causing your frenzy.

Yeah. And I think all of these things that are happening that we’ve talked about in today’s episode, nothing here is a silver bullet that is going to recover the Australian market. And then we’re going to go back to three to five years ago where we’re getting these huge jumps in capital growth. And Yeah, I think most of you out there who listen to our stuff a lot more realistic with that, which we tend to be an absolutely and have talked about for years. And that investing in a way where you can build that strong foundation for yourself, have that foundation of cashflow and then look for that longterm capital growth as well as look to pay off those properties long term and live off the rental income. And so as the market goes down, um, we see more and more opportunities in the market because cashflow is improving, which helps a lot of the strategies that we talk about in a lot of the strategies that clients want to implement in the portfolio.

What are they noticing? Like from a, from a market perspective, cause you and I, you know, despite what’s going on in wider Australia, you know, not too much has changed and now businesses really likely still basically buying the same number of properties we have been for the last few years. Like it’s um, you know, on the ground what I’m saying, particularly in southeast Queensland, which is where we’re primarily focused at the moment, is rents slowly increasing a little bit, vacancy rates coming down. Um, some suburbs getting really, really, really strong demand like stronger DSS was and stronger, um, you know, indicators in terms of like the things that I look at, like how many days on markets are properly taken his cell, like what clearance rates are in a month period and stuff like that. And they’re getting really, really tight but it’s not actually translating into price growth. And in some suburbs where they have loosened up a little bit where we’re buying properties literally below the value of the lanes, like the house is coming in for phrase. So I don’t think that’s necessarily a market correction as it’s more, there’s just not as many people competing for the same product anymore in certain pockets. And it’s interesting buying time. If you’re a person that can stomach buying somewhere close to the bottom, like the bottom might be 10% below where we are now might be 20%, I don’t know. But from a supply versus demand perspective, from a people moving here perspective, it kind of, it feels like an interesting time if you can stomach that and if you’re in a safe cash flow position. Yeah,

and I think I remember I found out I had a video back in February of 2016 looking at some of the data for Sydney and starting to see that those trends like Dsr and days on market and stuff’s starting to move like in a negative direction. And that was February, 2016 in the city market didn’t peak until July of 2017

and so I was like 18 months, 18 months

ahead of when we actually started seeing the decline as to when we started to see those indicators change. So it’s very hard to pick a top of the market. It’s very hard to pick a bottom. But yeah, you’ve just got to do your best and obviously you invest in a way that you can handle both sides, whether it goes down a bit, whether it goes up a bit, being in a position where you can, as you said, stomach that.

Yeah. Like I, I am certainly not rushing into the market and going all in right now, but I’m sure Tay Jukely personally, my portfolio picking off, you know, one strategic asset every now and then and getting them at what I believe is good prices. So same as you’ve, you’ve sort of taught me like, you know, when you’re focusing on buying well, buying the right timing, using people’s information like core logics ors QMS or HTW stuff. Um, you know, buying well, buying something with upside potential, um, whether it’s your renovational buying land below market value and building or something else and then getting great cash flow in the completed product, whether it’s a house in a granny flat or a brand new jeweler. Yeah, I’m just sleeping well at night knowing that at some point over the next 20 years I will get the growth as well. But right now, you know, getting that really strong cashflow and setting up for that next phase. Yeah.

And you sleeping well at, no, that’s a good thing because sometimes I say that you can get anxiety over your property investment. Say, yeah.

Like, I get freaked out about this stuff and it’s taken me two years to really figure out these conditions. But I just, I just, you know, I don’t want to be the positive guy cause I’m like always heavily skeptical and low, low risk. But I am kind of excited again like in a way that I haven’t been cause it hasn’t been good news for years now.

Yeah. So. So yeah. So some good news coming out of the election. I guess the biggest thing is that we’re just not getting the bad news. Right. So we’re not saying the bad news coming in with negative gearing being removed and people being unclear of how dramatically that would affect the market. And then we’ve got some positive signs there as well. So I guess that’s just a little update post election of some of the changes that we’re seeing. Obviously over the course of the year things are going to continue to change as well. And we may do it, update videos in the future talking about this. So if you do like this style of video where we do talk about this sort of stuff and because we’re, we’re in this every single day where we’re learning about this every single day thinking about this every single day.

But I know a lot of people out there aren’t reading articles on what apple is doing. So if you liked this, please give us a thumbs up and please leave a comment in the comment section down below saying that you liked this solid content and then we’ll continue to make more of it. And so I’m going to link up as well to a video man bended on whether or not Brisbane is cheaper now than it was 10 years ago. So that’s actually a really, really interesting idea and really Australia really interesting video. So I’ll link out to that. Um, otherwise, until next time, stay positive.

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