25 Jan “More steady as she goes” – Jan Somers
Jan Somers – another one of our experts whose opinion we sought this time last year is saying that this year will be much the same as what she said about 2016.
Transcript:
Kevin: Another update on the market that we had a look at this time last year, and I was joined at that stage by Jan Somers, who joins me.
Good day, Jan. How are you?
Jan: Hi, Kevin. How are you?
Kevin: Fantastic. Happy New Year. Great to be talking to you again.
Jan: Thank you.
Kevin: Just to refresh your memory, here’s a small grab of what you and I talked about this time last year.
Jan: I think if you take a long-term view, then my view is we should be looking at the “same as same as.” We don’t need to be looking at the ups and downs of the cycles, although it’s very interesting to observe. But if you’re in it for a seven- or ten-year period, I think next year should be the same as it has been for the last ten years if we’re looking in decade lots of property investment.
Kevin: Well, Jan, would it be fair to say that your view probably hasn’t changed? Because you do look at the market long term, don’t you?
Jan: I do. In fact, as I’ve said a few times, Kevin, I’m probably a fairly boring interviewee because I say the same things every year: take the long-term view and hold on, and forget what the market does up and down in between.
Kevin: Yes, there is a lot of talk – and we’ve been talking about it in the last couple of weeks – about the possibility of a unit oversupply, particularly in Brisbane. We’re seeing a bit of a slowdown in the Brisbane market as we are in the Melbourne market. What would be your advice if someone did want to buy a unit?
Jan: Probably 20 years ago, it was six of one and half a dozen of the other, just depending on your income and what you’re looking for. Now I have to honestly say you need to be careful when you buy a unit.
Not only have the vacancy rates of units in Brisbane increased – I think it’s over 3% now, and that’s added to the vacancy of houses – but the compliance required with body corporate has just gone out of all proportion. It’s just astronomical.
So, my advice would be to be very careful if you are looking at units for those reasons: the high number on the market, which increases the vacancy rate, and what the body corporate costs are.
Kevin: I guess we’re seeing signs in Brisbane – and in some cases, in Melbourne, as well – of a bit of a slowdown in approvals, which is always a good sign. But it takes a couple of years to catch up.
Jan, what would be your advice if I came to you now and said, “I’m looking at investing into the market in 2017. Where should I be looking and what should I be looking for?”
Jan: It’s probably the same as I would have said in a book about 25 years ago: look for something in that median price that’s very close to infrastructure or where there’s potential for infrastructure.
As a prime example, our first house in Kippa-Ring we bought 43 years ago, and the Redcliffe train line is now only a hundred meters away. We certainly wouldn’t have anticipated that, but it pays to buy where you think there’s going to be infrastructure or there already is infrastructure in place. That’s what tenants want.
Kevin: Just to sum up our chat, Jan, some of the highlights that you see coming up for 2017. I know this may be a little bit difficult for you, but do you think the banks are going to make it more difficult, because they’re really tightening up on their lending for investors, aren’t they?
Jan: They do. I think because bureaucracy means they have to be very careful with their lending now. They don’t want to be caught out, and probably rightly so. It’s a good thing for the market, because people really have to assess their financial situation before they delve into such a large loan. They have to go in with their eyes open.
And that’s the same for borrowing any kind of money. Particularly if you’re buying investment property, you need to be aware of that lending situation.
Kevin: Is this a time to buy and hold, Jan, or could this be an opportunity if you buy in the right area to do a little bit of flipping and maybe renovation and make some profit?
Jan: I think it’s a combination. I think buy and hold is good, but there’s no problem in doing a bit of renovation on the way. If you’re buying a property to renovate and then flip it over, that really is a timing thing and it’s fraught with danger. But I think buying and doing a bit of renovation to make it very rentable is a good thing, especially if you can do those things yourself.
Kevin: Yes, that is really good advice: look for something that you can add some value to, which is going to give you a better return in the long term, as well as add a bit more capital value, which you can then turn around and gear against at sometime in the future.
Jan: That’s right. It’s a good learning experience. I cut my teeth so to speak pulling kitchens apart and putting them back together again. It’s a great learning experience to know how the building trade works.
Kevin: Always good talking to you, Jan. Thank you so much for your time.
Jan: My pleasure, Kevin.
Kevin: Another update on the market that we had a look at this time last year, and I was joined at that stage by Jan Somers, who joins me.
Good day, Jan. How are you?
Jan: Hi, Kevin. How are you?
Kevin: Fantastic. Happy New Year. Great to be talking to you again.
Jan: Thank you.
Kevin: Just to refresh your memory, here’s a small grab of what you and I talked about this time last year.
Jan: I think if you take a long-term view, then my view is we should be looking at the “same as same as.” We don’t need to be looking at the ups and downs of the cycles, although it’s very interesting to observe. But if you’re in it for a seven- or ten-year period, I think next year should be the same as it has been for the last ten years if we’re looking in decade lots of property investment.
Kevin: Well, Jan, would it be fair to say that your view probably hasn’t changed? Because you do look at the market long term, don’t you?
Jan: I do. In fact, as I’ve said a few times, Kevin, I’m probably a fairly boring interviewee because I say the same things every year: take the long-term view and hold on, and forget what the market does up and down in between.
Kevin: Yes, there is a lot of talk – and we’ve been talking about it in the last couple of weeks – about the possibility of a unit oversupply, particularly in Brisbane. We’re seeing a bit of a slowdown in the Brisbane market as we are in the Melbourne market. What would be your advice if someone did want to buy a unit?
Jan: Probably 20 years ago, it was six of one and half a dozen of the other, just depending on your income and what you’re looking for. Now I have to honestly say you need to be careful when you buy a unit.
Not only have the vacancy rates of units in Brisbane increased – I think it’s over 3% now, and that’s added to the vacancy of houses – but the compliance required with body corporate has just gone out of all proportion. It’s just astronomical.
So, my advice would be to be very careful if you are looking at units for those reasons: the high number on the market, which increases the vacancy rate, and what the body corporate costs are.
Kevin: I guess we’re seeing signs in Brisbane – and in some cases, in Melbourne, as well – of a bit of a slowdown in approvals, which is always a good sign. But it takes a couple of years to catch up.
Jan, what would be your advice if I came to you now and said, “I’m looking at investing into the market in 2017. Where should I be looking and what should I be looking for?”
Jan: It’s probably the same as I would have said in a book about 25 years ago: look for something in that median price that’s very close to infrastructure or where there’s potential for infrastructure.
As a prime example, our first house in Kippa-Ring we bought 43 years ago, and the Redcliffe train line is now only a hundred meters away. We certainly wouldn’t have anticipated that, but it pays to buy where you think there’s going to be infrastructure or there already is infrastructure in place. That’s what tenants want.
Kevin: Just to sum up our chat, Jan, some of the highlights that you see coming up for 2017. I know this may be a little bit difficult for you, but do you think the banks are going to make it more difficult, because they’re really tightening up on their lending for investors, aren’t they?
Jan: They do. I think because bureaucracy means they have to be very careful with their lending now. They don’t want to be caught out, and probably rightly so. It’s a good thing for the market, because people really have to assess their financial situation before they delve into such a large loan. They have to go in with their eyes open.
And that’s the same for borrowing any kind of money. Particularly if you’re buying investment property, you need to be aware of that lending situation.
Kevin: Is this a time to buy and hold, Jan, or could this be an opportunity if you buy in the right area to do a little bit of flipping and maybe renovation and make some profit?
Jan: I think it’s a combination. I think buy and hold is good, but there’s no problem in doing a bit of renovation on the way. If you’re buying a property to renovate and then flip it over, that really is a timing thing and it’s fraught with danger. But I think buying and doing a bit of renovation to make it very rentable is a good thing, especially if you can do those things yourself.
Kevin: Yes, that is really good advice: look for something that you can add some value to, which is going to give you a better return in the long term, as well as add a bit more capital value, which you can then turn around and gear against at sometime in the future.
Jan: That’s right. It’s a good learning experience. I cut my teeth so to speak pulling kitchens apart and putting them back together again. It’s a great learning experience to know how the building trade works.
Kevin: Always good talking to you, Jan. Thank you so much for your time.
Jan: My pleasure, Kevin.
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