Are NRAS properties holding value? + Getting agents to compete + A valuer's tips on investing

Highlights from this week:

  • A valuer’s tips on smart investing
  • NRAS – 10 years on – what’s next?
  • When spending too much is forgivable
  • Putting agents in competition online
  • Housing finance continues to fall


A valuers tips on smart investing – Angeline Mann

Kevin:   Well, there’s never any shortage of people who are telling us their tips for your resolutions for the new year if you are a property investor. But I’ve got to tell you, if a valuer gives me a tip, I’m going to take notice of it because not only are they conservative, most times they’re pretty right actually. Joining me to talk about this, Angeline Mann who is a director of Herron Todd White, probably the most respected firm of valuers in Australia.
Kevin:   Angeline, thank you very much for your time.
Angeline:   No problem at all.
Kevin:   Yeah, when you guys talk, we take notice. Valuers have got a very good feel for the market and you, I guess, as opposed to other professionals especially real estate agents. You put a lot on the line when you come with a valuation on a property Angeline.
Angeline:   We do. I think the other big part of it is that we’re very active in the market every day. And usually valuers are locally based so they just cover a particular patch and they’re just looking at that all day, every day. They’re not going from one side of a city to the other. They just sort of stay where they’re based and that gives them a really good local knowledge.
Kevin:   It was interesting to note that your first tip was about doing your budget, particularly at a time when the banks are getting tough, are getting a lot more information and they’re looking very, very closely at what borrowers and investors are doing. I know that valuers work very closely with the banks. What are you hearing and what advice would you have for investors about their budgets?
Angeline:   Yes. I think it’s … it’s quite widely covered in the media that it’s definitely tougher. And certainly the banks that we deal with, that we are talking to everyday they’re certainly finding it harder to get deals across the line. And really they’ve being very strict and they’re scrutinising your spending and savings and that sort of thing. So it is definitely tougher.
Kevin:   Yeah, we’ve heard reports too that the banks are even monitoring that discretionary spends. Like the things that you might use on your credit cards and paying for pizza and takeaway food. So you’ve got to be very, very careful. Second part of your list of tips is checking your leases to making … Is this to make sure that you’re prepared come renewal of lease time, that you can meet what the market is really saying?
Angeline:   Yes, definitely. I think the rental market’s changed and you can’t, at least at the moment, you can’t just expect that your tenant is going to stay on or that you’ll be able to release it at a higher rent so it’s really important to know when the lease expires and then what’s happening in that market.
Kevin:   ‘Cause if the lease isn’t renewed and then you got to turn around and get another tenant into it, sometimes it can take weeks, even months. And that’s a huge loss of income over the year.
Angeline:   That’s right.
Kevin:   Yeah.
Angeline:   Yeah.
Kevin:   Even if you have to sacrifice rent a little bit on a weekly basis, it’s still going to, over the 12-month period, give you a better net return.
Angeline:   That’s right. Definitely in the long run you’d rather have a tenant than have a long period of vacancy.
Kevin:   Absolutely. Looking around getting stats, getting sales and rental information, where would you suggest people should go to do that?
Angeline:   I think these days if you’re looking at sort of any of the major online advertising for real estate, they’re pretty good now at reporting what properties have sold for and obviously even just going through the paper and having a look at the auction results. You just have to really get your head around what’s happening, what’s selling, potentially what they were asking for initially and then what they ended up with.
Kevin:   I think it’s important too when you are gathering facts that you don’t just rely on one source. ‘Cause if you just read the paper, you’d probably get three different versions of what’s really happening. You’ve really got to do your own research and come up with your own determination about the market.
Angeline:   That’s right. And I think if you develop a … In particular, if you were looking in a particular local area and you were talking to the local agents, then they’d be able to give you some information too on what the results have been.
Kevin:   There’s been a lot of focus on the Sydney and Melbourne markets. Our two prime markets. And admittedly, most of our population lives in those two areas but they’re a lot of regional markets too when you’re doing your research to give you a bit of a feel about where the market is heading. You shouldn’t just focus on those two major markets.
Angeline:   No. That’s right. There are certainly some opportunities at the moment outside of Sydney and Melbourne. And again, you have to do your research and have a look at what your overall strategy is. If it’s a long term investment strategy, then looking at the rental returns is really important. If it’s more of a short term capital gain strategy, then you really need to focus on that and looking at the opportunities in those regional areas.
Kevin:   All of this research of course is going to lead to your fifth tip which is about revisiting your investment goals at a very important time. But I find that most people do it around at the end of the year or at the start of the year to look at what’s ahead for the year. But certainly those heading towards retirement, it’s never too early and never too late to keep an eye on it.
Angeline:   That’s right. I think generally people sort of have a little bit of a break in January or they’re a little bit quieter so it gives them a good opportunity to look at their goals for the year and beyond the year. I guess it’s really important too.
Kevin:   Yeah. And of course the final point that I wanted to mention was about your advisors or a board or your group that you actually discuss with. ‘Cause bad advice can bring about absolute disastrous outcomes so you got to trust who you have as your group of experts.
Angeline:   That’s right. Certainly, obviously from my point of view, having a valuer is a good point of contact but having all of your professional advisors ready to go. Particularly if you’ve come across an opportunity and you want to act fast, if you’ve got all of those people in place then you’ll be able to take on that opportunity.
Kevin:   Great chat, thank you very much for your time. I’ve been talking to Angeline Mann who is a director of Herron Todd White. Angeline, thank you so much for your time.
Angeline:   No problem at all.

NRAS – 10 years on – what’s next? – Jason Cubit

Kevin:   Well, would you believe it’s been 10 years since the introduction of NRAS, the National Rental Affordability Scheme. Only seems like yesterday, in fact. But, we hear that the NRAS scheme has now been wound down. No new allocations being made. I’m talking now to Horizon, the Horizon Housing Company, their CEO Jason Cubit.
Kevin:   Now, just by way of introduction, Horizon Housing is a part of the Community Housing Limited Company, the largest community housing provider in Australia. Jason, thank you very much for your time. I’m just keen to hear from you about how successful or otherwise the NRAS scheme was.
Jason:   Yeah. Thanks for your time. NRAS has delivered some great outcomes across the country, providing housing to over 32,000 households over the 10 years, and really targeting the people in highest need. Yes, there were a few issues in the early implementation of the programme which happens with most large scale national programmes.
Kevin:   What were those issues?
Jason:   Just getting them delivered on time and delivery of projects in areas it’s needed and just bedding down the compliance regime, and making sure the assessment of submissions to government were done in a timely manner, so the projects were still there when they’re approved. Things like that which happen generally in building industry, but also making sure they’re targeted at appropriate tenants.
Kevin:   Did it reach all the lofty goals that it was pitched at when it was first launched? I think 32,000 is quite good. But, is that a below par?
Jason:   The original scheme was targeted at 50,000 and then hopefully with an extension to 100,000. So, in change of government that scheme was abandoned and no more allocations issued. So, it was disappointing to see that happen. But, the ones that were out there, they’re out there in our system certainly acheived some great outcomes for the communities and the people living in them, and investors. Let’s not forget about investors.
Kevin:   Yeah. We’ll come to investors in a moment. The uptake on NRAS properties or development of them, was it particularly strong in any one state of Australia or was it pretty well right around the country?
Jason:   All across the country, Queensland did well, WA. It really was dependent on the location, so inner city Sydney and different areas like that. The eligibility for clients made it very hard to achieve outcomes there because the property values were so high, the rent levels didn’t work. People that had an income eligibility required.
Kevin:   Jason. Given that we’re at that 10 year anniversary in some of those properties would now be coming of the scheme. What happens to the tenants who are in there? Does that rent have to go up to normal market rent?
Jason:   Well. It depends on who the properties are being managed by and who the owners are really. In reality with this scheme, this sheme ends so, no more subsidy to the owner to provide that discounted rent of 25% the market rent. So the automatic outcome would be that the tenants lease would end at that date and the rent would be then reset by the owner to whatever level they saw fit, so it wouldn’t be under any control of a government subsidised scheme. The properties we have under management, we’re working closely with the tenants and the owners to try and negotiate an outcome where hopefully the tenant can stay on and the owner is happy with that. So trying to meet half way and resetting the rent.
Kevin:   And how successful have you been with that? Have you got any indication yet?
Jason:   We have only had a few late last year in December, we’ve only had 5 or 6 come out. A pretty high strike rate of having an extension of the leases where they renegotiated rent outcome for both parties. So what we’re trying to work through is what’s the best option for the landlord to make sure that, to minimise the vacancy cost and the refit cost and those sorts of things after 10 years.
Kevin:   Are there any, is there anything on the drawing board to replace NRAS as it is now?
Jason:   Not in current policy. There’s lots of discussions nationally and the state levels looking at NRAS mark two and other options to consider for a replacement scheme, but there’s currently no approved policies or strategies on the table that we’re aware of.
Kevin:   Now. Your website of course There are options there for investors. Could we quickly talk about that? What are the opportunities?
Jason:   The current opportunities for NRAS investment is really the turnover of current property where current investors maybe looking to exit out of the ownership of those properties and resell them and obviously our objective is to get those investors to resell to more investors that wish to retain NRAS on those properties because some might have five, six, seven years left in them, with good NRAS subsidy and solid tenant outcomes. So our aim is to work with those current property owners to on a buyer is willing to stick with NRAS.
Kevin:   Any indication yet as to how they’re holding in terms of their value?
Jason:   Depends on the location. It really is driven, I don’t think NRAS really has much of an impact on the valuation of properties. That was an original concern by banks and valuers, but I think what’s come through is that values are holding like the rest of the suburbs in most cases. So no major impact.
Kevin:   Yeah. Speaking of the banks there, we know they’re tightening particularly with investors. What are you seeing with anyone who’s looking to resell or even to buy one of the properties? Are they struggling as well?
Jason:   Yeah. Same with any investment property it’s pretty challenging to get finance at the moment. Unfortunately or fortunately for the people we’ve had a few that have sold, but they’ve sold out of the scheme and owner occupiers have purchased them. Which is good for them but not good for the tenant or the continuation of NRAS on those properties. So financing with any other project is pretty challenging at the moment.
Kevin:   Yeah. My guest has been Jason Cubit, CEO for housing, sorry, Horizon Housing. Thank you very much for your time, Jason. I appreciate you giving us that explanation and good luck on your work going forward to anything we can do to make properties more affordable. I think for tenants in particular and make it a viable proposition for developers and investors is well worth it. So thank you very much for your time.
Jason:   Alright, thanks a lot.

When spending too much is forgivable – Cate Bakos

Kevin:   Overcapitalization is a term that strikes fear into many people who do renovations and property investors, but you know, there is a time when overcapitalizing doesn’t really matter. You can be forgiven for it. That’s according to Cate Bakos, who’s a buyer’s agent. She’s very well versed in this. Seen it happen, I guess, on a number of occasions. Good day, Cate. How are you doing?
Cate:   I’m good. Thanks Kevin, how are you?
Kevin:   Good. So, when is it forgivable?
Cate:   Wow, good question. I used to think it was never forgivable, but it is. If you’re a homeowner and you’ve got the house of your dreams and it’s your forever home or it’s at least your long-term home and you spend money on it to personalise it and to suit your own needs, so that you and your family can completely enjoy it, I think that’s forgivable. It’s only when people go to sell a property, particularly if the sale was unplanned, that overcapitalization can bite them because obviously, they might not get what they put into the property when they sell it. But, when you’re not selling, then the property value, the property worth, is just on paper and if you’re getting extreme enjoyment out of it, then how do you put a price on that? So, that’s the first one that I think is completely forgivable.
Kevin:   What are the areas you see people typically will overcapitalize in?
Cate:   Putting things in that are a value add to them, but not a value add to others. So, for example, a swimming pool. I can have a buyer looking for a family home and it might have a beautiful pool with landscaped yards and the pool room and the decking and everything that makes it quite phenomenal, but if you’re not into pools or if you don’t want one and you’re looking at getting rid of the pool and covering it over, then that’s a gross overcapitalization that means you’ve added zero value to the home. But, if you’re enjoying your pool and you’re enjoying it for decades, then it’s certainly a value add for you.
Kevin:   Are there any examples you can give me, Cate, where as in investor you might overcapitalize as an example?
Cate:   You might have a property that in its current state is not necessarily attracting the right tenant or it’s not attracting enough numbers of applicants, so you’re facing higher vacancy rates or you’re not getting the ideal tenants in the area. And so, by equipping the property with some high-tech or higher end finishes, you might find that you’re reaching that vacancy period gap and you’re getting a really good quality tenant. Now, you might find that you’re not actually getting a lot more rent, but in cases like that, if you’ve made a decision to hold the property for long-term growth and you believed in the area, then overcapitalizing on the property to get the right tenant and maybe to have no vacancy periods or to increase your rent slightly, could be a good move. But it needs to be a long term hold because if you’re doing it for short term, then you’ve really got to ask yourself whether you’re better off getting rid of that property altogether and buying a different type of property.
Kevin:   I guess it’s a bit like taking a backwards step to take two steps forward, but it’s always a long-term plan, Cate.
Cate:   That’s exactly right. People need to look at it like that. If it’s a long-term buy and hold, then sometimes spending that extra money on a property that you feel is not entirely deserving of it is a wise move if you’re getting a tenant and you’re getting the right kind of tenant and you’re getting the right kind of rent.
Kevin:   Just in closing, Cate, if I can raise one that would probably be a dilemma for many people. They might have found themselves in this situation. They’ve bought what they think is a great investment property only to find after the purchase that it’s not so great and they’ve got to spend money. At what point …
Cate:   Yeah.
Kevin:   … do you say I’ve got to stop because I am overcapitalizing?
Cate:   Well, if you’ve bought a property here, there certainly is a point where you’ll decide enough’s enough, but the reality is if you’ve bought a property with invisible issues, they could be structural issues, could be reshaping the roof, it could be removing asbestos, it could re-plumbing, rewiring electrical. All of those things have particularly big tickets associated with them when it comes to cost and fixing the issues, and that can really send an investor into a spin. They’ll be wondering whether they bought a lemon, whether they’ve got a dud, will they ever get their money back? You’ve really got to look at it objectively and decide at what stage is this not representing a viable asset for you? If you get everything scoped together and you find that you’ve got a difficult property or a bit of a dud, then you may have to face the prospect of selling it, but you need to be aware that if someone does their due diligence and finds those issues, you’ll be facing a reduced sale price.
Cate:   So, my philosophy is that if all of the metrics were there in terms of location, desirability of the type of asset in that particular area, and if you think that it’s representative of a good investment in terms of long-term growth and getting an ideal tenant, I would invest in the property and I’d do it well. And I’d hold it until the long-term, chalk it up as a bad experience. The lesson in that is due diligence. It really is important to make sure that you have someone look over the property, so that those expensive invisible issues are highlighted before you sign the contract.
Kevin:   Absolutely. Due diligence is one thing, but I think also going in with your eyes wide open, as opposed to being wide shut.
Cate:   Yeah.
Kevin:   In other words, go in with the worst case scenario. What would happen if I purchased this property, then I found I had to make some capital improvements to it? What situation would I be in? And, if it’s that you couldn’t do it, then maybe you shouldn’t do it, Cate?
Cate:   Really good advice, and people who are looking at older style properties have to accept that there’s pros and cons to that. The pros is that often the older properties in the established areas represent better capital growth and sometimes, they’ve got a really beautiful inherent style, it might be an old art deco. But you need to remember that anything that was built in 1920 that hasn’t had things updated or replaced is definitely going to give you a big bag of issues to deal with, so it’s not having unfair expectations of an older property as well.
Kevin:   Great stuff. Cate Bakos, who is a buyer’s agent, always tremendous advice. Cate, catch you again soon. Thank you.
Cate:   See you later, Kevin.

Putting agents in competition online – Tim Mathews

Kevin:   I want to tell you about a new website now called Negotiagent, It’s Australia based. It, as the title suggests, is an opportunity to negotiate a commission with an agent. This has been set up for consumers to talk directly with agents and negotiate the sale and the fee that they would pay to an agent for that sale. The CEO of the company is Tim Matthews, a previous agent, probably still active maybe, I don’t know. But anyway, he’s come up with the site and joins us to have a quick talk about it. Good day Tim, how are you doing?
Tim:   Yeah, very well Kevin, how are you mate?
Kevin:   Yeah, good. A lot of talk at present, of course, about value add and how much value an agent brings. We’ve seen a lot of third party sites come on that give consumers the opportunity to assess or rate agents and even talk about negotiation of commissions. Commissions are negotiable, of course. Tell me about your platform, why did you create it, and how’s it going?
Tim:   Thanks, Kevin. Yeah, there’s a lot of good services out there, especially when it comes to agent rating systems and looking at how well agents are doing from a consumer’s perspective, and with a lot of other consumers having rating them previously. We’re a platform where sellers can ask real estate agents to compete for their business, and essentially interview agents online. They can even choose to remain anonymous until they’ve chosen their agents that they would like to meet in person, one or several.
Tim:   The way I look at it is, agent commissions are a pretty similar investment, really, to a new car. But when you buy a new car, you can very easily see all the features that the car offers, the specifications of that car, and of course the price before you ever have to go to a dealer. That’s not the same with real estate agents, generally speaking. But with Negotiagent, you can see exactly what features the agent’s offering, how well they present specific to your needs, and what they’re gonna charge you. And it’s before they’ve seen your kitchen table, really trying to get you to sign on the dotted line, because agents are master negotiators, that’s what you want on behalf of when working for a seller on behalf of a buyer. Sorry, when working for a seller with buyers. But, you can appreciate that. If they are good with.. Yeah, because you have more money.
Kevin:   Yeah, just on that point. I think my comment on that would be that most agents do the same job, only some do it better than others.
Tim:   Absolutely.
Kevin:   So given the fact that your site is called Negotiagent, is it all about negotiating to get the lowest fee?
Tim:   No, absolutely not. And there’s actually a lot of information on our site also about, obviously you want the best agent, that’s the number one importance. And agents are well and truly worth their salt, if they deliver a good job to the seller. So we certainly are not advocating for just choosing the agent with the lowest fees. Our site is for conventional real estate agents, so the agents who are out there getting the best results. And it’s just about making sure that as the seller, you do have competition out there, and that you are able to see the best real estate agents, and that you are able to drive the best result, and get the best deal from those agents.
Kevin:   Yeah, well of course as you’ve already identified, and I agree with you totally that agents are very good at selling themselves, lots of promises that sometimes aren’t met. How do you vet that agents and what they’re representing on your site is actually accurate.
Tim:   Okay, so we pride ourselves on really being a platform. So we’re not a party to the transaction, and it’s up to sellers to do their own research, and to make sure that they feel comfortable that they’re getting the best deal. Our platform helps them do that on a broad scale very quickly, but we would also recommend checking out plenty of other sites, rating sites, something like, seeing how the agents are presenting properties, and seeing how they’re presenting on our sight specific to their needs, and making sure they’re getting the best agent for the best price that way.
Kevin:   Well, Tim, you’ve certainly got a lot of agents on your sight, some 31 thousand agents. Given that you’re not party to the negotiations … sorry, not party to the transaction, how do you make your money?
Tim:   Okay, so we send a lead from the seller to quite a few agents in their area. We want to give a very good, broad cross section of agents. Sellers can see the distribution of which agents the lead’s going to, and they can also choose to add any particular agent that they might specifically want to hear from, if they’re not already in the lead distribution. Or they can exclude any agents that they don’t want to hear from, such as they might’ve already been on the market with an agent, and they’re looking to change, and they want to exclude that agent or the entire agency, go the agency and get the opportunity to respond. We have a nominal fee on each lead for the agents to be able to respond, and we keep that very minimal in order for a very broad cross section of agents to respond and register their interest in the seller … to the seller, sorry.
Tim:   The sellers can choose between three and five agents for a very personalised appraisal, after looking at their profile, etc. and only those agents that pay that fee. They all then have an opportunity to win the lead. And it doesn’t matter whether they win it or not, it’s the opportunity to win it that they’re paying for, and that’s why it’s a pretty minimal fee, compared to the 20% referral type services that are generally in this space.
Kevin:   So when I as a consumer come on to your site, and I imagine I enter a certain amount of detail that’s gonna go to the agents, does that include my contact and address?
Tim:   It does. However, you get the chance as the consumer to decide when you want to actually reveal those details. And those details don’t go out to all the agents, until you decide who you’d like to reveal your details to. So, yeah, that’s totally up to the seller, and they’ve got complete power over that. They even don’t have to reveal their full address, we have a map around their location. If they decide, they can choose to remain anonymous for as long as they decide, until they are happy with revealing their address to agents.
Kevin:   I understand fully that every business has a right to make money. Just to be clear though, if I put my property on your site, and it goes out to say, a dozen agents, the only agents I will hear back from are those who’ve agreed to pay you a fee to get that lead, is that correct?
Tim:   Okay, so our leads go out to approximately, generally around 50 agents, depending on the area density. So in even denser city areas, it can go out to even more agents, ’cause there are a lot of agents around, and sellers can compare them very quickly on our site. So the agents, once it’s gone out to them, they’ll see that fee, the lead specific fee, and they can agree to register interest, and at that time they’re agreeing that only if the seller shortlists them for a proposal as a one in five chance, only then do they pay the lead, not initially. And the lead is generally between 20 and 200 dollars, so it’s very minimal compared to what agents are willing to pay for genuine sellers.
Tim:   Also, the sellers on our site are genuine. They’re uploading photos of their property, and they’re ready to go. They’re just wanting to make sure they’re getting the best agent for the best price. So agents know that as well, and they’re very motivated to get involved.
Kevin:   Well, if you’d like to learn a little bit more about it, the website is Negotiagent, My guest has been Tim Matthews. Tim, thanks for your time.
Tim:   Thank you very much, Kevin.

Housing finance continues to fall – Tim Reardon

Kevin:   … ABS data released reinforces the trend of a market continuing to ease back from its record highs, that’s according to Tim Reardon, HIA’s principal economist who joins us to talk about that. Good day, Tim, how’re you doing?
Tim:   I’m very well, thank you. –
Kevin:   Some sobering figures there on finance figures. Tell us a little bit about how that’s going to play out, do you think?
Tim:   Yeah, so what we’ve seen since the end of 2017 is the market has gradually cooled, and we expect that over the course of 2019 we’re going to continue to see that happening. Now, it’s important to understand that when this cycle began, that the market was at record highs, significantly above any other previous peak. And what we saw was late 2017, the Sydney market started to pull off. From March 2018, the Melbourne markets pulled off, and we expect that that slowing down in building activity will continue to permeate through further out into those states, and some slow down in the other states, as well. And so that will see building activity throughout 2019 continue to slow down.
Tim:   And so, as you said, the finance data that was out yesterday showed finance down 10%. Building approvals, which were out last week said that the lowest level since 2013, and today we have new home sales which show us that they’re back to the same levels they were in 2012.
Tim:   So, new home sales is our first indicator as to what’s going on in the market, so that those new home sales turn up six months before they turn up in building approvals. So, it’s the first sign that we’re certainly not at the bottom of this cycle, and probably towards the end of 2008, the slow down in building activity accelerated. So, for builders at the start of this cycle, they may have had 18 months to two years worth of building work in the pipeline, they’re seeing that pipeline worth of work shrinking.
Tim:   And so at this stage it’s not turning up in terms of employment or a slow down in activity, but we’ll expect over the course of 2019 that the building activity will slow. Building activity on the ground, that is, will start to slow down, and builders will have less work on their books.
Kevin:   So what are the indicators you’ll be watching out for? Is it employment?
Tim:   Well, employment is the one that the politicians will be following closely, and that will probably start showing up in employment data around about May, around about the time we’ve got an election. I do also keep in mind that every time we have a federal election we do see a downturn in building activity, as well as a downturn in new home sales just as people are increasingly cautious. But, these December results are probably not affected by the election cycle at this stage.
Tim:   But, yes, the concern from an economy perspective is that now we have 1 in 10 Australians employed in the construction sector, and the economy has never seen building activity contract from such high levels. So, as a consequence, that the building activity over the past three years has really carried GDP forward, as we see building activity show, it may take a half a percentage point off that GDP figure, and see upward pressure on employment unless some other sector of the economy steps up to the plate.
Tim:   And so we saw building activity stepped up to the plate when mining activity slowed. We don’t know what the next sector is that might step up to the plate there and drive economic growth forward.
Kevin:   We’re hearing a lot of reports, particularly from strategists and buyer’s agents and so on about how difficult it is for people to get finance. There seems to be a retraction, not only from the banks in lending, but, you know, in people’s ability to get finance Tim.
Tim:   Yeah, so, we surveyed our members late last year and asked them those questions. There’s certainly been a lot of anecdotal stories around that. We found two interesting things. One is that the number of loans being rejected has increased from 17% to around about 50%, just under 50%.
Kevin:   Oh, gee.
Tim:   Yeah, that is a significant result. To consider that it was an anomaly to be rejected for a loan, to now knowing that you’ve only got a 50% chance is certainly, particularly then for new home buyers or first home buyers, I should say, the probability there for rejection is probably higher given that they have lower collateral levels.
Tim:   The second piece of information is the time frame for people to get a loan has increased from around about two weeks to around about two months. And so, that’s a lot of what we’re seeing at the moment in new home sales is that because people aren’t able to access finance because it’s taking months rather than weeks, we’re seeing a little gap in the pipeline of activity coming through there.
Kevin:   Are you hearing from developers, from builders, that they’re mothballing a lot of sites now?
Tim:   I wouldn’t say a lot of sites, but there’s certainly a slowdown in activity. I think that we haven’t seen apartment construction slow down to the extent that we might expect it to have happened at this stage. Still a large number of those getting approved and selling and commencing work. But over the course of 2019, we’d expect to see a little more of that.
Tim:   One of the areas that has been quite significantly affected is new detached houses. So that’s new homes, usually in growth suburbs and out of metropolitan areas. And because of the volume of apartments that have come online, a lot of first home buyers and investors are drawn into those apartments that are coming online at the moment. And as a consequence, that’s taken a lot of the heat out of the new home market.
Tim:   And so, for those developers releasing land at the moment, we’re certainly hearing that a lot of those are not being taken up or ballots are being handed back in. That’s certainly a dynamic that’s happening at the moment. But that’s something that we haven’t seen for a number of years, because the industry is at such record highs, but traditionally it happens in market cycles, so we’re heading back into a more normal cycle, so back towards more average levels of building activity.
Kevin:   Tim, thanks so much for your time.
Tim:   Pleasure.

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