04 May A.I. ends online trust + Property ‘smoke signals’ + Media ‘hype’ is just that
Highlights from this week:
- The ‘Deep Fake’ threats online
- Be careful how you read the smoke signals
- New tool to help banks help you
- NZ continues to struggle with affordability
- Ignore the media hype
The ‘Deep Fake’ threats online – Joel Leslie
Kevin: The future of AI, artificial intelligence, is both amazing and frightening. It can help our lives in so many useful ways and things will just get easier, like never having to worry about running out of things at work or at home, and even organising appointments. But what about the AI that we aren’t considering, like deep fakes? These aren’t just about copying the identity of a celebrity or a head of state. It goes, actually, far beyond that. And we’re teaching AI now to get smarter, so is that increasing the danger?
Kevin: Joel Leslie, from Property TV and expert in online technology development has attended the Inman Connect conference in New York earlier this year, and he joins me to talk about this topic. Joel, thanks for your time.
Joel: Thanks, Kevin. Thanks for having me.
Kevin: Tell me about the conference in New York. What did you notice is one of the biggest AI growth areas?
Joel: Look, AI is a hugely growing industry right now, not just in property. But property seems to have really taken the ball and run with it.
Joel: One of the great achievements I saw this year … quite a few companies too were actually using AI to detect what is in an image. And that is huge impact into the real estate industry right now.
Kevin: Explain to me why.
Joel: So if you consider, when you put an image into a classifieds website, like a search results, they’re generally considered a flat image but they’re actually full of data. So if you consider a kitchen that’s in someone’s house and you’re putting that onto a classifieds website, imagine if you could tell that they … a certain type of bench top or a Smeg appliance, and the width between the window, how wide the fridge is. All those things are actually in the image, and it just takes a little bit of nous to work out how to get it out.
Kevin: Okay, so once it comes out is this helping companies target me if I like a photo or if I put a photo up about a property?
Joel: Well, both. So you can actually think of two different markets here. So not only now do I not have to describe the image that I’m loading into the real estate website for those consumers to search, the actual AI will say, “Hey, there’s a kitchen here. There’s a Smeg appliance here. There’s a granite bench top here.” So not only do I not need to describe that anymore, I can also have those images now that are detected and then advertising extracted out of that image.
Joel: So if I’m one of the big real estate portals of the world and I have advertisers that are external to the property industry, let’s say home improvement or appliances, what better positioning for those advertisements on those real estate websites than to be beside an image that actually displays how they look in an actual home setting?
Kevin: So this is all about teaching AI to get smarter. Let’s look at some of the downsides of this. As we, obviously, teach it to recognise this stuff, how easy is it for it to make something fake?
Joel: Very, very easy. And what’s happening at the moment, there’s this concept … well, not a concept, it’s actually something that’s happening right now, and it’s called deep fakes. And what they are is it’s actually AI that’s learning from this imagery, learning from the things that make up a photo, but then assembling them into a brand new photo. And so one of the most recent uses of these, or one of the most known uses of these in the last 18 months is actually duplicating leaders, so let’s say Donald Trump or whoever it might be in other parts of the world, talking and saying things that aren’t actually them saying it. It’s actually a robot, and written a script from someone that isn’t necessarily saying that. And it actually goes far beyond that. I think what you’re touching on here is how does that impact the real estate industry.
Kevin: Right, it’s going to be my next question.
Joel: Yeah. So it actually does that too. So imagine you could emulate a real estate agent that didn’t exist. They’re vouching for this property that didn’t exist. But what about if the property never existed? And so what’s actually happened at the moment is there’s some very clever tech out there that’s actually putting together real estate listings that are for sale that just don’t exist.
Kevin: So I guess the real danger there would be if you’re buying without physically inspecting the property, and I know some people do that. That could lead to you actually losing a lot of money.
Joel: Exactly. And like you said, that’s common. People do do that. So specifically investment, there are investors out there who do invest in properties that aren’t inspected.
Joel: But also in the holiday letting scene, the long term and short terms, you can rent a property sight unseen and you can lease a property sight unseen. And that happens all the time, if you think about real estate websites, specifically TripAdvisor or whoever it might … Flip Key I think use their version of that. Those types of properties you turn up to in San Francisco, you’ve booked this property from Australia to go and stay at, and it never existed. And I’m not saying that they’re copying photos from the internet and putting it into a listing. These photos of the lounge room, of the kitchen never, ever existed. Everything is placed in there from the furniture to the view to even the person standing beside the bed.
Kevin: There are a couple of examples … I should have mentioned at the outset, too, that Joel has kindly written a blog article for us which you can get to on Property TV. We’ll also put it on Real Estate Talk as well. But if you go into the transcript below this interview, I’ll make sure that we put a link in there that will take you to this article because there’s some really good demonstrations of how this works, and you’ll see how effective it is.
Joel: Put it in there because there’s some very good links in there that’ll actually take you through to see how it’s actually being used right now. One of the most frightening things you’ll see is that the photos of the people that are put together who look real have never, ever been born and do not exist.
Kevin: Okay, well what technology is coming through … I think I know the answer to this one … that could actually help with this, giving us more security online?
Joel: There’s a lot of work being done at the moment on to validate, and I think that’s the big key here, validate and trust this type of technology. And it all comes down to who you know and how well you know them. Even within this environment that you can have someone that you’re talking to online that has never breathed in air on this planet, this is where technologies like blockchain will come in and really help this solution, because it is a trusted solution that can never be altered. So it’s back to the certification, it’s back to the trust, and it’s back to the verification of the person or the entity that’s putting the listing online.
Kevin: Okay, well, check it out for yourself in the transcript below this interview. You’ll see that link that’ll take you straight through to Property TV. You can look at the article. You can also click on the links and just see exactly what Joel is talking about.
Kevin: Joel, thank you so much for your time and for drawing our attention to this. I guess the bottom line is really just be aware that this could be happening.
Joel: Absolutely. Just have a look, be out there and do your investigations first, and know who you’re dealing with.
Kevin: Joel, thanks for your time.
Joel: No trouble. Thanks, Kevin, appreciate it.
New tool to help banks help you – James Vaughan
Kevin: Well, with lots of news now about what the banks are doing with tightening restrictions and so on, it’s becoming more important for banks to offer really good tools to their customers, both to build their customer base, but also to hang on to existing customers. I was interested to see, therefore, that CoreLogic have released a new portfolio analytics tool that is going to be a great help for the banks in doing exactly that. To explain the ins and outs of this and the pros and not so much the cons, but the pros, James Vaughan, who is the general manager of banking and finance solutions at CoreLogic joins me. James, thank you for your time.
James: That’s no problem.
Kevin: Tell me how the portfolio analytics tool will work, and how the banks will be using it, James.
James: Well we’re finding with a bit of turmoil in the property market and some restrictions and changes in lending regulation, but our customers being the banks are looking to give some more value to their customers, to make sure that they stay sticky with the bank and give them nice retention services. And we’re finding that a great way to do that is to give them a … give their customers a position of equity in their properties rather than just giving them a big liability and presenting them with a mortgage balance.
Kevin: Yeah, cause banks are out all the time, aren’t they? To look at their level of customer … informational customer support, so I imagine this is certainly going to help. Does it bring a lot of that information together?
James: Yeah, I think that’s a good point. Banks are generally pretty good at understanding their customers from a individual and credit perspective, so lots of information about their transactional and behavioural information, but what we’re going is helping them uncover the blind spots from a security perspective and where those securities are located. So I think giving it … You get a real time estimate on how much that property is worth, and some information around the suburb or geography that that property’s located in. And that’s really helpful for customers to know, if they’re looking to move or refinance, or just other valuable piece of information to know about where you live.
Kevin: I imagine too, selling, buying, moving and renovating clearly influences home loan refinance or bank switching. Any powerful information that the banks can get, I guess, is going to help them; provide a bit of service and hold on to those customers, James.
James: Yeah, certainly, not just the value of the property but we get indications of when properties are likely to list or when they’re selling or being renovated which are highly correlated with consumers looking at their financial position. You’re rightly saying rates are at historic lows, if you’re now looking to renovate or sell, it might be a time that you want to think about your lender or go talk to a broker; which makes it increasingly important to give some value to those customers in and around those really critical times in their banking relationship.
Kevin: Yeah, we’re talking about the CoreLogic portfolio analytics tool. I imagine, too, this could actually give the banks a great opportunity to look into a portfolio to help a borrower get more growth? Even highlight some improvement situations as well, James.
James: Yeah, two sides of the story which are either risking opportunity … In the opportunity side, for some of our customers what we’re doing is also helping banks present what a rental income should look like for a particular property. So for instance, a customer may be … may have an investment property with a bank and may not be getting a rent that’s commensurate with what could be charged for that property. So that’s another opportunity to help that customer even improve their financial position, link to the security information that the bank may not know.
Kevin: From a consumer’s point of view, how will they know to, will they notice any difference? Or will it just be the level of discussion they have with their bank?
James: The most sophisticated banks are doing this really nicely through their digital banking tools, so a couple of the major lenders are now presented might in nice apps, or services whereby you can just see that every time you interact with a bank digitally. Others it might be just that they’re a lender or the brokers are talking to them in a different fashion using the information that they have at their disposal.
Kevin: James, I’d also imagine the market being as dynamic as it is and unfortunately we’re seeing some values falling in certain areas. I’d imagine this would also allow the banks to be a little bit more proactive in maybe talking to their customers about what could be ahead in the future.
James: Yeah, we’re seeing a lot more of our banking customers look at individual level treatments based on what their security position might look like. So for instance if someone happens to fall into negative equity in their inner geography where lots of properties are being lifted on the market and it looks like the trajectory may continue on that path, it might be a very different discussion to help them find the different alternatives rather than just taking them into possession. Example, it might be better for a customer to sell that house quicker rather than for them to fall further into negative equity, rather than typically making arrangements. But what it’s meaning is banks are getting more adept at treating individuals based on their financial circumstances, much better at a customer level, rather than just applying blanket treatments to everybody.
Kevin: James, thanks very much for your time. Been talking to James Vaughan who is the general manager of banking and finance solutions at CoreLogic. James, thanks for your time.
James: No problem, anytime.
Be careful how you read the smoke signals – Rich Harvey
Kevin: Well, we’re now only a matter of weeks away from the federal election. What quite often amazes me, and I’ve been in real estate for decades, just how many people will either put off buying or selling because of an election coming up, whether it’s state or federal, so a timely warning from Australia’s largest professional body representing independent buyers’ agents warning home buyers and investors not to delay buying property based on the outcome of the upcoming federal election. It’s quite critical right now, and I think there’s a lot of discussion, mainly centred around what the Labour Party have suggested with negative gearing, those changes, and also changes to capital gains tax.
Kevin: I’m talking now to the president of the Real Estate Buyers Agents Association, Rich Harvey. El presidente, hello, and welcome to the show.
Rich: Thanks very much, Kevin, always a pleasure to be with you.
Kevin: Yeah, this is a bit of a troubling trend here, isn’t it? A number of people would say, “Well, that’s what we would expect buyers’ agents to say.” But there’s a lot of foundation behind that statement. Let’s dig into it, because some of the facts that are floated by the Labour Party are false.
Rich: Absolutely. I think, Kevin, one of the things that we’ve got to look at is the modelling that was done by the Labour Party to suggest that removing negative gearing and only leaving it applied to brand new housing would bring in an incredible amount of savings for tax revenue. But they used a figure of saying that only 7% of new properties are bought by investors, where in fact it’s been shown it’s at least 22%, if not higher. So there’s a lot of flawed modelling in their negative gearing analysis. So I think that’s something that needs to be highlighted to the voters out there.
Kevin: Yeah, and also the fact that if they do go ahead with what they’re suggesting, it’s going to leave a shortfall of not millions, but billions of dollars.
Rich: Yeah, absolutely, exactly. So if you’re basing a certain tax policy and saying we’re going to make X billion dollars worth of savings, but that’s all based on flawed modelling, it’s not going to achieve its outcome.
Rich: I think even more than that, Kevin, we’ve got to look at what the impact of this is on the economy, and particularly on renters. It has been shown before that if you abolish negative gearing it is going to create, potentially, another shortfall for the private sector to create housing because there’s no incentive for mum and dads and Joe Public to go and produce investment properties to provide for the rental market. And that will then see rents go up. So that’s the definite by-product of removing negative gearing on existing property.
Rich: And I think a second thing, Kevin, that negative gearing will do, or removing negative gearing and only applying it to brand new properties, is it’s going to skew investment decisions to certain areas that only have new properties. And it may not necessarily … these new properties, it will not, possibly, in the areas where they’re going to grow and deliver the capital growth that the investors are looking for in the first place, and bring the spruikers out of the woodwork.
Kevin: Yeah, well, we’ve seen that happen already in a different case, different scenario, in different states around Australia, where the First Home Owners Grant was actually skewed toward new properties … I’m thinking here of Queensland … which was totally useless in the areas where existing stock needed to be turned over, in some of the regional areas where new stock is not even available.
Rich: That’s right. Well, certainly new stock is needed in certain regional areas. I was even talking to a lady yesterday who’s wanting to buy something in the Southern Highlands and there’s just no townhouses available in that certain area.
Rich: So I think any investor listening to this should just consider, don’t just make decisions to buy a property purely on the basis of tax. You’ve got to consider the fundamentals of the area. Look at: is the population increasing, is there good job prospects, and is there good transport and education opportunities? That’s fundamental.
Rich: And the other thing to think about is that investment’s a long term gain. Any investor’s got to aim to buy quality and think about the long term fundamentals, not just the short term cash flow. It’s all about the long term growth and the long term cash flow.
Kevin: Very good advice. And I’ve heard you say, too, in the past that if an investor is relying wholly on negative gearing to prop up their investment, then they have a problem with their portfolio, not the policy.
Rich: Yeah, that’s right, exactly. So it’s about doing your numbers before you go and buy any property, because you don’t ever want to hold a negative gearing property forever, Kevin. Negative gearing enables the investor to prop up that investment for the early years, a bit like nurturing a baby. You’ve got to feed it milk before you can feed it milk. And the investment property needs to stand its on it two feet. So after a number of years, hopefully after three or four years, it should start, with the rent increases, start to show a positive return, because there’s no point having an investment that shows an infinite loss. There’s just no point. Sure, the negative gearing investors are doing it to make a capital gain, but there comes a point which you may not be able to hold that property to realise that gain in the future.
Kevin: And irrespective of all of that, worst case scenario if Labour do win and they do fulfil their promises to go ahead and play with negative gearing and capital gains tax, it is going to be grandfathered, so it shouldn’t really stop any purchases right now.
Rich: No, well this is the thing, Kevin. It opens up a huge opportunity for the savvy investors to buy now in the midst of the uncertainty. I think buying a property on election day is the best time to buy, when everyone’s distracted. I mean, I’m hearing all the time from so many agents, “Oh, Rich, have you got a buyer for this, because the vendor’s willing to drop it by $150,000?” We’re just seeing buying opportunities left, right, and centre. So the next seven or eight months, if Labour does get in, and mind you it’d have to get through the Senate too, but if it does get in there’s going to be seven or eight months of opportunity for investors and home buyers to get into the market while the market’s softer and vendors are more negotiable and get a negatively geared property in your portfolio.
Kevin: Rich Harvey, president of the Real Estate Buyers Agents Association of Australia. Thank you so much for your time, Rich.
Rich: That’s great, Kevin. Thank you.
Ignore the media hype – Veronica Morgan
Kevin: It seems to me that every day you pick up a paper, you’ll hear that there’s either a property boom or the market is about to crash. What do you read into this? I mean, how do you actually make some good solid decisions? I was talking to Veronica Morgan, from Good Deeds Property Buyers, the other day about this issue. Veronica joins me to have a quick chat.
Kevin: Veronica, is that how you start your day? Do you pick the paper up to find out which way the market’s headed?
Veronica: Absolutely not. It annoys me when I see these headlines. I think it annoys most people in the property game but, because look they are all largely useless. For starters, they generally refer to the Australian property market and I think we all know there’s no such thing.
Kevin: Yeah, what amazes me is that, even though there are some experts who’ll talk about how the market’s going to crash, or how the market is going to boom, there’s no middle ground. And most of the market, there I’m saying the same thing, but most markets tend to sit in the middle, you very rarely see them on the peaks or those troughs, but they’re the ones we focus on.
Veronica: Well, because lets face it, you know, saying “Oh, ho hum. It’s business as usual here.” Doesn’t sell papers, it doesn’t attract clicks, and people aren’t looking for stories about business as usual. And we’re as liable as the consumer, as the reader of this stuff, and so they’ll actually generate the content. Unfortunately we all play our part in this game and it’s rather irritating, but it is a fact.
Kevin: One of the things that amazes me, is that I’ll pick up, you know, there are good publications like your investment property magazine, which is one that supports us and we support them. And you’ll read through the magazine, a lot of the success stories are from people who’ve approached the market very intelligently, have stayed in it for a long time, and they don’t look for the quick bucks. Yet, that’s what a lot of investors actually focus on achieving.
Veronica: Unfortunately, I think, and I don’t have any accurate data to support this claim, but what I’m about to say is that I think that most people investing in property, in this country, are actually not that educated, as to the property market.
Veronica: So they do believe that you have to find the next place, that’s going to take off. They think that that’s the secret. What they fail to understand is the secret really is understanding the fundamentals and buying up quality assets and let time do what time needs to do. And that’s boring though. That’s a very very boring method. But in ten, twenty, thirty years time, there isn’t anything boring about having that sort of investment portfolio.
Kevin: It’s that thinking though, that has actually brought on spruikers, that’s why spruikers can be so successful, because they work on that gullibility. The fact that they’re selling that dream. Which in all the cases will never ever materialise.
Veronica: It’s exactly right. I hear so many terrible terrible stories that people have gone on to an investment seminar, in inverted commas, educational seminar, but it’s really just a massive, big, very sleek style pitch and they come away with this idea that, because fundamentally a lot of people can’t actually afford to buy quality assets, and so they go on to that.
Veronica: And they’re told, “Yes you can, it’s only going to cost you a cup of coffee a day” or it’s basically with negative gearing and this is only going to get worse of courseif Labor get in and put forward their new policy. But with negative gearing, and depreciation, and rental guarantees, and oh, I might even throw in a car and some frequent flyer points, and all the rest of it, you too can be a property investor, this whole, great Australian dream, not just about owning a quarter acre block now, but it’s being an investor. And unfortunately, what these people are actually buying are liabilities.
Kevin: We talked there about seminars and there was once a time, Veronica, where we would say, “If they’re selling you something, be wary.” But it’s actually deeper than that. Some seminars will, I was talking there about selling you a property, but some seminars will do nothing more than try and get you into some educational programme, that will then, in effect, sell you something. So you really do have to be very careful.
Veronica: Well you have to be on your guard. And look, the thing is, and it does come back to investment fundamentals, and if you don’t understand them, you can fall into the trap of buying with these incentives and, you know, lured by incentives and lured by tax breaks, and a lot of other things,, nothing to do with what makes a good investment or not. For those who’ve never really spent the time or dedicated themselves to actually understanding what makes a property market tick, and what actually are the fundamentals that makes a good investment, then they’re easily conned. Easily conned because it’s a very powerful, very very compelling message.
Kevin: Veronica Morgan, it’s always great talking to you. How’s that podcast going? To the Elephant. Is there any elephants in the room?
Veronica: Well we did, talking about this in terms of headlines and media and all that sort of stuff, we actually released a “Full or Foolcaster” report on April Fool’s Day. It is available for download on the website. There was an episode that goes with it, which is theelephantintheroom.com.au. That has been fascinating because we have really been looking into all these sort of claims in the media, and the doom and gloom, and the amount of people, we’ve been looking at who is successful in making these claims. And look, I don’t want to be, spoiler alert here, but not many is the answer.
Kevin: That’s right.
Veronica: So we’ve researched a lot into what goes on, why this is the case, why these headlines are so prevalent, why we react to them. It’s quite interesting stuff.
Kevin: Okay, Elephant in the room. Is it elephantintheroom.com.au
Veronica: It is, theelephantintheroom.com.au
Kevin: Theelephantintheroom.com.au. It’s a great podcast, check it out for yourself. Veronica Morgan from Good Deeds Property Buyers, thank you so much for your time. We’ll talk again soon.
Veronica: Absolute pleasure.
NZ continues to struggle with affordability – Kelvin Davidson
Kevin: Looking once again at the New Zealand market, the CoreLogic report, the quarterly property market and economic update report has just been released. For an insight as to what that’s showing, I’m joined by Kelvin Davidson. Kelvin, thanks again for your time.
Kelvin: No worries.
Kevin: What were the major outtakes for this for you for the economy in New Zealand? Because I think I want to focus, if we can, on housing affordability once again, which is a big issue whether it’s Australia or New Zealand. Kelvin?
Kelvin: Yes, that’s right. So in the economy, we’re doing a slowing economy. GDP growth is inching lower, but it’s still pretty good. So we’re not talking about an economy that’s racing away, but it’s not collapsing either. So generally pretty supportive for the property market. What I’m not seeing is wage growth, so even though GDP growth is okay, it’s not really flowing through to any increases in wages. So really any increase in house prices is actually making affordability just that little bit worse, ’cause wages aren’t really going anywhere.
Kevin: So is that impacting first home buyers?
Kelvin: Yeah, it definitely will be. Affordability isn’t getting dramatically worse, but it’s already at a fairly low level. So buying houses is pretty much as hard as it’s ever been. Even though it’s not really changing much, it’s starting from a very low level in terms of affordability.
Kevin: Yeah, just looking at the stats, though, first home buyers, a 24% market share would seem to me to be fairly good. We’ve seen it as low as 10%, which is really when the market does start to tighten. Would you be happy with a 24% market share?
Kelvin: Yeah, for first buyers, they are still finding ways into the market. As I say, affordability is pretty stretched, but they’re finding other ways in. So actually seeing the KiwiSaver deposits, which is quite a big influence in New Zealand, as well as, I guess, just real willingness to compromise on the location or the property types. They’re still finding a way in. So I guess some of the groups that they could be having to face competition from have been, they’ve been sort of toned back a little bit. Certainly the investors are facing pressures from the government in terms of extra regulations. There’s a bit of extra costs they’re facing. So yes, maybe some of those competing groups have been slightly checked, and so that’s allowing first time buyers to get in, even though affordability is pretty stretched.
Kevin: Yeah, would you say those measures against investors, you know, or making it a little bit tighter for them has helped with affordability?
Kelvin: I don’t say we’ve seen a huge impact yet. Some of these things are still off in the distance. So going through Parliament now, there’s a measure going through Parliament at the moment to sort of curb the tax advantages that investors get from running losses on rental properties. So there is actually a bill passing through at the moment to make that much less favourable. So that is something that investors are having to think about now, but it’s just not quite law. There’s a few things that I don’t think, you know, they’re not quite in yet. But they’re poised to have an effect, I guess, over the next year or two.
Kevin: And what about LVRs, loan-to-value ratios? The banks, are they getting a little bit more flexible in that area?
Kelvin: Yeah, there has been a bit of a loosening there in the last … So we saw the rules loosened again, especially on the first of January so that they are just, I guess, creeping in the favourable direction for borrowers. But still, the LVR speed limits that are in place here aren’t quite being tested yet by the banks. The banks are still pretty cautious. Even though they have headroom to lend a bit more, they’re not quite using it yet. But I think that will provide a bit of momentum for credit flows over the coming months. People can get mortgages, but you just need to pass quite a few tests to that finance, ’cause-
Kevin: To get it, yeah.
Kelvin: … you’ve got to have the deposit obviously, and you’ve got to be able to prove that you can afford to pay the mortgage. And banks are testing that a lot more tightly than they have in the past. So yeah, there is money available and there’s press and some momentum to come from that yet. But as I say, you’ve got to jump a few hurdles.
Kevin: Good stuff. Kelvin Davidson, thank you so much for your time.
Kelvin: It’s a pleasure.