Are Property Investors To Blame For High Property Prices
With rising property prices in Australia are property investors to blame for these increased prices?
Ryan: Slick is asking, with investors like the one in your previous episode, with 27 properties.
Dude I just found out, one of the interviews I did two years with this investor Nathan [Soreell 00:06:24]. I published it on YouTube but, it was like private so no one could see it. And, I found out yesterday and I was like why does this only have 13 views, this is a killer interview. And, it’s like private.
So, that interview was actually two years ago, but only just went live yesterday. Because, when I made it public, it made it look like a new video.
Ben: I remember you telling me about when you sat down with him and, you said it was like one of the best interviews you’ve ever had. Like, it was just a sick interview.
Ryan: [crosstalk 00:00:43] half way through the interview found out about the way that he did finance, which was like, he had that personal banker, basically.
Okay, this person … Basically, the question is; Are property investors mostly to blame for high property prices making it harder for first time buyers?
Ben: This is an epic question, something that I wished someone asked every single time we got to do this.
Property prices aren’t driven by investors which, probably represent at the absolute most speculative times, 40 to 50 percent of the market place.
Ryan: Yeah and that’s pretty high.
Ben: That is like insane. That’s a historically high rates of investors buying which, was probably Sydney two years ago versus current rates of investor buying which, historically sits between eight percent and twenty five percent depending on which capital city you’re talking about.
Ben: There’s this thing in the market place that owner occupiers drive pricing. It’s completely untrue. What drives pricing is first time buyers and then owner occupiers.
More than anything else because those two market places … Again, at different times of market cycles can represent anywhere between 50 and 80 or 90 percent of the market place. And, they’re the emotional people that overpay for property prices as opposed to investors that are always trying to get the cheapest deal they can.
Ryan: Exactly, right.
So, investors or some investors do get emotional and spend too much but, generally speaking, investors are more reserved in terms of how much money they are willing to spend on a property and they’re not willing to really go over that.
So, I remember talking to an agent where they were showing me listings of properties that they had sold and one was in [Guamere 00:02:31], in the Sutherland Shire. And they got like … This was before the boom as well. So, this was a few years ago and, they got 80 thousand dollars over the asking price for the property because they had three people interested in the property and they went to those people and said; “Look, give us your absolute … You have one opportunity, give us your best offer for the property”.
And so each of those people had to write that down and send it in and no-one knew what the other person had done and someone had put in a massive price so clearly, really wanted this house.
Most investors wouldn’t do that. But, because that person did, that drives the whole median price up for the suburb and the idea of what houses are worth in the area.
Ben: There’s this incredible newsletter that I follow and it’s probably that you get a newsletter every three days. It’s Michael Matusik’s newsletter.
And again, whatever your thoughts are of any individual analysts in the market place, it doesn’t matter.
He has just been sending through, in the last 18 months, absolutely gold every three days with this really specific stuff. And, the thing that he sent through on Tuesday, so yesterday, was literally around the number of owner occupiers and investors in the marketplace ten years ago versus today versus two years go and the same thing, first timers, across each of Australia’s capital cities.
And, I highly recommend it, it’s a free newsletter sent to you and the little snippets of gold around population, around trends, around data that you get every couple of days is just invaluable. And, the cool thing is they are all bite size. They’re one minute reads or two minute reads.
Ryan: But then there are some exceptions to that rule with investors driving prices.
So, if you look at mining towns, for example. If we look a few years ago, going on ten years ago now, like Port Headland and South Headland, when they were really booming and prices were pushing up there.
I would assume, I don’t know the data, but I would assume that most of the people investing in Port Headland, which is like a mining town, in like North Western WA, I would assume most of them investors pushing prices because the rents there were just crazy and there was good cash flow and so, people pushing prices there.
But, I think generally as a norm, it is probably more owner occupiers and first home buyers driving pricing.
Ben: It’s funny how you say that because it’s 100 percent true.
This is how far removed I am from speculation and hot spotting in mining towns and investor focused areas.
Like, you can probably say Hobart, in the last 12 months, was driven by investors. It has had zero population growth, negative job growth, negative interstate migration and yet somehow this market place has gone up by 14 percent.
Yeah, there’s some people that are cashing out of Sydney and Melbourne and moving down there but, that’s just investors following the herd.
It does happen, I just don’t get caught up in following people around the same track.
Ryan: Yeah, well it’s happened in so many times, like Makai, we’ve seen it at like all of these different towns, up and down Queensland and stuff like that.
But yeah, I hope that answers that question.
Melissa says that we do have good sound and visual so, that’s good. I’m glad that [crosstalk 00:05:42].
Ben: Visual looks good. Looking good.
Ryan: We both are in the same t-shirt and we look like twin brothers.
Ben: We’ve got our uniform on today.
Ryan: Hey guys, I hope that you enjoyed the inside to this question which, came from my live Q and A episode with Ben on YouTube. We will be doing more of these in the future.
If you want to check out Ben, then he is offering free strategy sessions to On Property listeners.
To find out more about that, go to on property dot com dot au forward slash session (onproperty.com.au/session) and you can see all the details over there.
That’s it for today and until next time, stay positive.