"I remain a supporter of innner city investment" – Chris Gray

"I remain a supporter of innner city investment" – Chris Gray

Again this week, we will back track and hear what some of our experts had to say at this time last year about what was ahead. Chris Gray predicted that the major markets would continue to improve – correct – but was he surprised about what happened in Sydney?


Kevin:  As we seek the opinion of another one of our experts, Chris Gray from Empire buyer’s agents.
Chris, thank you very much for your time. Just a reflection back: this time last year, we spoke, and I’ll just play a very small portion of what you had to say then.
Chris:  It obviously depends where you are. There are lots of different property markets around Australia, but I think if you’re in the main markets of Sydney, Melbourne, and Brisbane, then I think a lot of people are going to look back and say, “That was another great year. We maybe made 5% or 10% capital growth over the time.” So we should be pretty happy.
Kevin:  Chris, I think you were pretty well spot on there. You highlighted the fact that Sydney and Melbourne were going to be two of the peak markets. Do you see that continuing this year?
Chris:  I think I do. It is a bit boring and it doesn’t make a big media story and those sensationalizing headlines or anything like that. I guess most of your viewers know that my market is more the second-hand, inner-city, 5-to-15 K kind of market at the median price. I’ve always generally thought it is pretty strong. A lot of the other research companies, especially people like Louis Christopher at SQM, think it’s going to be a pretty good year again and thinking anywhere from 5%, 10%, or even 15% growth in some of those areas.
Kevin:  I know you say that you’re a pretty boring type of investor. You’ve said that to me on a couple of occasions. But it’s held you in fairly good stead, hasn’t it? That inner city ring and that median price range has always been pretty good for you, Chris.
Chris:  It’s slow and steady wins the race in my book. It’s quite often too simple for most clever people and so they don’t actually follow through with things. There’s actually a legal and accounting conference in Aspen and again, there are a lot of very senior people, a lot of well-paid people, and they always expect that things are going to be harder. There are lots of fund managers and people like that, trying to find the latest greatest, thing in the stock market.
But in the 22 to 23 years that I’ve been investing, it’s just basically finding something of good quality. You’re not going to get it cheap. It’s going to be fair priced. But just hold on and in the years, then the results follow.
Kevin:  Chris, you’re in Aspen as you said, at an international conference. Are you getting much feedback about what’s happening internationally with the number of changes around the world? What if any impact is there going to be on the Australian market?
Chris:  Obviously quite a few people have mentioned Trump over here, and even sitting on the ski lift you talk to the locals and they all have mixed opinions. There’s obviously scaremongering going on. There are a lot of people who think that the world is still going to come to an end. But I think the main thing with property is unless interest rates really do push up high very, very quickly, I think that for the main markets in Australia, it’s still going to be pretty solid.
But saying that, there are some risky markets out there, and I think that there is some worry that people should be worried about, and a lot of that is the brand new properties, especially in Brisbane. A lot of people have been talking about all the cranes up there. To a lesser extent probably Melbourne and Sydney, as well.
The main thing is the people who buy those things quite often are speculators the, so they try and buy off the plan and try and make an instant profit with virtually no money down. And then you’re getting all the foreigners. I think our Foreign Investment Review Board laws in Australia are pretty good, so foreigners can only buy brand new. Obviously, a lot of banks and APRA have cracked down on the lending to foreigners, and so a lot of people won’t be able to settle on those brand new properties.
I think if anyone has to worry, that’s where you need to worry in Australia in 2017.
Kevin:  Are you seeing some of that coming into effect right now in terms of what APRA has done and with some of that new product, as well?
Chris:  Even in the last 6 to 12 months, we have had clients where they’d bought off the plan before [3:55 inaudible] 6 or 12 months ago. And even the local agents up there, when the properties are settled, they say, “Let’s dump it now, because you might drop $30,000 or $40,000 now but if you hang onto it you might be dropping $50,000 or $100,000 later on.” I think that has been good advice for those clients.
Now, I’m not an advocate of selling, but if you listen to all the stories – and most people are pretty consistent on these kinds of things… The CBD markets have always been scary anyway because there’s almost no limit to supply because you can keep building higher and higher towers and there’s a limit of how many Australians actually want to live in a CBD. I think if you’ve got into some of that stuff and are maybe looking at it and thinking maybe take your losses…
But look, there are always exceptions to the rules. There are always people who will buy off the plan and they’ll make a lot of money. There’s never a “one size fits all” with any of this stuff.
Kevin:  Just before I let you get back to your conference or skiing or whatever it is you’re doing there, Chris… Are you getting a chance to do any skiing by the way?
Chris:  I manage to get a few runs in during the day. The conference is in the evening. But the body is not the same as it was when I started investing back when I was 22.
Kevin:  Yes, we all know that feeling, Chris.
Chris, before I let you go, crystal ball for me: this time next year what do you think we’re going to say about 2017?
Chris:  I think we’re going to have exactly the same conversation. The people who have bought in Sydney, Melbourne, and a bit of the Brisbane in the second hand market, I think they’re going to be pretty happy. Whether we get 5%, 10%, or 15%, who knows?
Perth is obviously a bit of a mixture. Obviously it’s mainly around one industry sector, so I think that’ll be a bit tougher. And then the rest of Australia, I’ll leave to the local experts. But I think if you bought good-quality property for the median price so that lots of people couldn’t afford to rent it or to buy it, I think you’re in pretty solid ground.
I guess the only worry I have is the banks. I think the banks will still tighten lending criteria, which squeezes a lot of people. But as long as they’re not doing anything too drastic, I think it will be a pretty happy year for a lot of people.
Kevin:  Chris, are you back on Sky again this year?
Chris:  Yes. We’re back. The show actually started last week while I was [6:12 inaudible] and I’ll be missing next week’s, but I’m back on from I think about the third Monday in the month.
Kevin:  Beautiful. Always great talking to you, Chris.
Chris:  I think all the other guests will have the same feelings as me – that they’re pretty positive, as well.
Kevin:  Always great talking to you. Thank you.
You can contact Chris. Your website, Chris, is YourEmpire.com.au.
Chris:  Wonderful. Thanks a lot.
Kevin:  Chris Gray has been my guest. Thanks, Chris. Talk to you again soon. Enjoy that skiing, mate.
Chris:  Will do.

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