Lessons from the last decade – Michael Yardney

A lot can happen in 10 years as you will hear today as Michael Yardney reflects back on the last decade. Michael outlines the 10 big factors that have impacted our property markets. A walk down memory lane.


Kevin:  Gee, there are so many lessons we can learn by looking backwards. It’s always easy in hindsight – nothing truer, of course, than the property market. I want to ask Michael Yardney… And I’ve given Michael some notice on this.
Michael Yardney from Metropole Property Strategists. G’day, Michael.
Michael:  Hello, Kevin.
Kevin:  I set Michael the task of looking back over the last couple of years or even 10 years and looking at what have been the major changes that you’ve noticed, Michael, the big factors that affected the property market. What did you come up with?
Michael:  Let’s see if we can come up with a top ten list like they do on the TV shows, Kevin. I think one of the big changes over the last decade has been technology. The way property is bought and sold is different to 10 years ago when the property portals were in their infancy. In those days, you used to look at the newspapers on the weekend or you used to go to an estate agent and look at the listings in his window. Today, the vast majority of property is marketed online.
And unfortunately, some people are even buying sight unseen – we discussed that before – incorrectly so, in my opinion because they think they can get a good indication of what’s happening online, Kevin.
Kevin: Yes, it is a big mistake. The 3D walk-throughs, they are all enhanced, and I think you need to remember that.
Apart from technology, information has been a big change, too. I’ve noticed as a real estate agent that the passage of information from the agent to the consumer has been a big shift.
Michael:  Kevin, it has been. It’s created a generation of much better informed home buyers and property investors. That’s good, but the very many mixed messages and the clutter has also led some investors to I guess what’s called analysis paralysis. They just have too many bits of information and don’t have the perspective to decide what’s good and bad.
Others, unfortunately, have made disastrous investment decisions based on bad information. So it’s a good and a bad thing, this abundance of information, Kevin.
Kevin:  That, Michael, has opened up an opportunity for more people to come in and help consumers understand all that information. They’ve set themselves up as gurus.
Michael:  It happens all the time, and over the years, there have been people who have come and gone. There have also been some very good educational professionals who are stable and that have been around for a long time.
But every now and then with a couple of my professional colleagues, we play a little game of “Where are they now?” because people were very famous in their professional education space leaving many burned investors – uneducated investors – in their wake. It’s very easy today to look professional with a website but not have much substance behind you.
Kevin:  Yes. It was only last week, Michael, we talked about the growing number of investors – particularly older people – who are now investing in property. That must have been a big change, as well.
Michael:  Over the time, more Australians are wanting to secure their future, and it is related to the factor we just spoke about a moment ago – the availability of information. According to CoreLogic, there are now over two million property investors in Australia, yet most can’t last the distance because they sell up after a while and most never get past their second property, either, Kevin.
Kevin:  We’re halfway through your top ten List, Michael, and I notice that number five you’ve put the Global Financial Crisis. I would have been disappointed if it wasn’t in there.
Michael:  We’re talking about the ten things that affected property over the last decade, and clearly it did. And nobody saw it coming. I remember when I first heard about this sub-prime crisis across the ocean in America, I thought, “Oh, that’s not going to affect us here.” I was naïve about it, as well, but it did have a profound effect on the world’s economies and some countries are still not back to where they were before economically with that.
It has changed our nation, as well, in the short term and actually made us a bit different in the long term with regard to lending criteria because we could have gone down that route, as well. We were giving a lot of no-doc and low-doc loans. Banks were giving money to almost anybody who approached them. And there but for the grace of God go I; we could have had those problems in Australia, too.
Kevin:  To follow on from that, Michael, the mining boom in Australia pulled us out of that Global Financial Crisis, didn’t it?
Michael:  The resources boom did, and we were very lucky that China wanted anything that we could dig out of the ground. But with it, it led to a mining property boom fueled by those hot-spotting property researchers. This created droves of short-term property multi-millionaires who soon learned that investing in locations that lack multiple growth drivers is fraught with danger, and some of them today still have significant negative equity. But it was definitely one of the features of the last decade, Kevin.
Kevin:  Indeed. What about the rise and rise and rise of Melbourne and particularly Sydney property?
Michael:  That’s been one of the features over the last decade, as well. The gap between Melbourne and Sydney and the other capital cities, and then further the regional cities, has changed, too. So two big international cities are attracting significant economic growth, population growth, jobs growth, and this is pushing up the property prices. And Kevin, if I can predict into the future, I think the gap between those two big cities and the others is only going to widen.
Kevin:  Michael, recently – just last week, in fact – you and I spoke about the HILDA Survey, and in that you identified that I think it was as soon as next year, more than 50% of people will probably be renting. That’s not a sudden change; that has been happening over the last few years, hasn’t it?
Michael:  Our demographics are changing. The older people are getting wealthier because of the properties they own and the superannuation they have, and younger people are choosing not to buy properties as early in life or definitely not buying their homes but they’re becoming renting investors.
The demographic changes that have occurred are that more of us are moving to medium-density apartments and townhouses and more people are buying investments before they’re buying their homes. The other big demographic shift is to the Big Smoke from regional areas related to where the jobs are. And these demographics are what drive our property markets, Kevin.
Kevin:  Of course, what does actually drive the property prices is supply and demand, and we’ve seen a huge amount of demand because we haven’t been able to keep up with supply. That is largely on the back of some population growth.
Michael:  Population growth, which for a period of the time in the last decade, Kevin, was driven by the mining boom and people coming in to service our resources industry. Significant growth has definitely been one of the big drivers of our property markets and it’s going to continue because we’re having more babies, we’re living longer so there’s more natural population growth, and Kevin, there’s also more immigration. More people want to come into Australia than we can take at the moment.
Kevin:  Michael, 10 years ago, what was the interest rate?
Michael:  I think we were paying about 10%. Kevin, I remember that if your home loan was less than 10%, you used to be really happy with that. Today, rates are half that. I think one of the big differences in finance is finance is cheaper, but we’re finishing off this talk about the decade with the fact that we’re going through a credit squeeze.
In the last decade, even during the Global Financial Crisis, it was never as hard for property investors to get money because of the regulations that APRA has put on banks, tightening the screws and making serviceability difficult.
Kevin:  Of course, Michael, all of this accumulation of knowledge… And I know you’re a great student of this and you document a lot of it and you’ve written a number of books. Your first book 10 years ago was How to Grow a Multi-Million Dollar Portfolio in Your Spare Time. You’ve just celebrated the launch of your new book, as well.
Michael:  Yes. It’s the 10th anniversary of How to Grow a Multi-Million Dollar Property Portfolio in Your Spare Time, and I’m very proud of that book, but I’ve rewritten it because times have changed. I’ve actually looked at what’s happened in the past as we’ve just discussed now, and if we could come back next week I’d love to give you a hint of 10 things that could happen over the next 10 years in our show.
Kevin:  I will look forward to that, Michael. Thank you. Have a great week, and we’ll talk to you next week in the show.
Michael:  My pleasure, Kevin.

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