{"id":10161,"date":"2016-12-15T10:00:55","date_gmt":"2016-12-14T23:00:55","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=10161"},"modified":"2016-12-15T10:00:55","modified_gmt":"2016-12-14T23:00:55","slug":"what-will-put-the-brakes-on-the-market-in-2017-where-the-smart-money-is-going-patience-and-long-term-thinking-will-be-essential","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/what-will-put-the-brakes-on-the-market-in-2017-where-the-smart-money-is-going-patience-and-long-term-thinking-will-be-essential\/","title":{"rendered":"What will put the brakes on the market in 2017 + Where the smart money is going + Patience and long term thinking will be essential"},"content":{"rendered":"

 
\nHousing affordability and the high cost of relocation will see a lot more people opt to stay put and renovate according to Cherie Barber<\/strong>. Cherie talks about the renovation trends we will see in 2017.
\nJosh Masters<\/strong> says that Sydney and Melbourne markets are likely to slow down in 2017 \u2013 but by how much and what are going to be the areas to invest in next year? He tells us.
\nWith banks tightening up on lending, especially to investors, finance is likely to be the \u2018x factor\u2019 in 2017 according to Michael Yardney<\/strong><\/a>. Michael discusses where he sees the smart money going next year.
\nNoel Whittaker<\/strong> says he is continually shocked at the prices some people are prepared to pay to get into the property market. He questions if it can continue and says he is witnessing a bigger separation between the \u2018haves\u2019 and the \u2018have nots\u2019.
\nPatience is a virtue especially if you want to buy property next year.\u00a0Patrick Bright<\/strong> has some advice about what he sees will be the trends next year and where he will be investing.
\nPresident of the Real Estate Agents Buyers Association thinks that successful investors will need to curb any short term thinking next year because they will need to start thinking about where the best returns will be in the next 10 years not just next year and the year after.\u00a0 He tells us where and what he will be investing in next year and why.
\n <\/p>\n

Transcripts:<\/strong><\/h4>\n

Sydney and Melbourne set to slow down – Josh Masters<\/h2>\n

Kevin:\u00a0 <\/b>2017 could just be the year that we see Sydney and Melbourne markets slow down. That\u2019s according to Josh Masters, who joins me.
\nJosh, you don\u2019t have a continuing confidence in those two cap city markets?
\nJosh:\u00a0 <\/b>Look, <\/b>I think there has been a lot of growth. Over the last four years, we\u2019ve seen extensive growth over both those capital cities, but it is really unprecedented to this level. While there are some predictions from SQM: Louis Christopher came out and said we\u2019re probably going to see another 8%, 9%, 10%, 11% come into these markets
\nI think that may be true on the back of low interest rates, but it\u2019s going to be very patchy, and I think it\u2019s going to be really focused on the affordable points in those marketplaces, because people just can\u2019t keep paying these sort of prices.
\nEven though interest rates are at current lows, wages growth hasn\u2019t really done anything for some time, so there is only so much that we can pay out, and they are looking for value right now.
\nKevin:\u00a0 <\/b>What do you see as some of the other challenges for property investors who want to continue to grow their portfolio next year?
\nJosh:\u00a0 <\/b>I think overall, it\u2019s going to be very patchy across Australia. Investors are going to have to be very savvy with where they\u2019re putting their money, obviously. The West Coast is still suffering a bit on the downturn from mining, Perth and Darwin.
\nBrisbane has been one of those cities that we\u2019ve all been watching very avidly, hoping that we\u2019re going to see some growth, but again, we\u2019re really only seeing growth in the owner-occupier market in the housing market, which has been quite consistent and quite popular. I actually think the owner-occupier space is probably a key area for us moving forward into next year.
\nWe\u2019ve also seen some of the smaller cities coming up: Canberra, Hobart doing exceptionally well coming off from the bottom. Even though they are very small markets, so there is a higher element of risk there as opposed to your larger metros, for those people who are willing to get into those markets, they may be able to cherry-pick some of the growth that will happen in Australia in the next 12 months.
\nKevin:\u00a0 <\/b>What do you think will be the standout states? We\u2019ve seen WA and Northern Territory really struggle in 2016. What do you think will be their story at the end of 2017?
\nJosh:\u00a0 <\/b>I always liken the market to an ocean liner. You can invest in the stock market and it\u2019s like sitting on a jet ski \u2013 you zip up and down \u2013 but the ocean liner is the property market. It takes a long time to get going, and it takes a long time to slow down.
\nIt\u2019s the same with Perth and Darwin. Even though we\u2019re looking at quite high vacancy rates there, high unemployment, the market is not doing very well. It\u2019s going to take some time to turn around, and we certainly haven\u2019t hit bottom.
\nSo, I don\u2019t foresee those states doing much better in the next 12 months. Fingers crossed, we will see them bottom out, but I don\u2019t see an uptick in those western states.
\nKevin:\u00a0 <\/b>What do you think about the type of investment property people should be looking at? It\u2019s very simple to say between units and houses, but do you have a preference?
\nJosh:\u00a0 <\/b>I get that question asked often, Kevin. I think people throw them all into the barrel and say, \u201cIt must be a house or a unit.\u201d It really depends. For example, if you go to the outer areas of Sydney, I\u2019d be looking at a house, because I\u2019m aiming for investors. The predominant market out there is housing, and that\u2019s what renters want.
\nHowever, if I come into the inner city, the inner 10-kilometer radius, I\u2019m going to be looking for affordability, something that renters want to get into at a reasonable price, and it has to be units. I just can\u2019t afford to get into houses at that level.
\nI don\u2019t think the house or unit conversation is that relevant for investors these days. It really depends on what their affordability is and what is attracting investors in that particular marketplace where they\u2019re looking.
\nKevin:\u00a0 <\/b>I\u2019m talking to Josh Masters from BuySide.com.au.
\nWere there any surprises for you during 2016 \u2013 things that you didn\u2019t see coming, or anything that stood out for you that we learned from?
\nJosh:\u00a0 <\/b>I think we\u2019d all have to stand back and say that we didn\u2019t expect Sydney and Melbourne to continue the way they have, but that really has been on the back of this low interest rate environment. People simply have more money in their pockets to spend on mortgages, which obviously Australians love to do.
\nFrom a professional point of view, one of the things that we have seen is on the rental market \u2013 and we do predominantly focus on investments. The rental market in Brisbane and Melbourne inner CBD areas, as we know, high unit supply, oversupply coming into the marketplaces.
\nWe really saw that affect the rental market even out to a 10-kilometer radius, attracting a lot of renters into the inner CBD areas because they could get a lot of stock there at a very affordable price, and it\u2019s really affected the vacancy rates all the way out to that 10-kilometer radius.
\nWe\u2019ve seen vacancy rates \u2013 especially in Brisbane \u2013 go from 2% to 3% across the board within that circle. I think that was really unexpected, because we were looking at good, solid townhouses that were performing well, and now they\u2019re looking at three- to four-week vacancy rates.
\nIt does really hammer home how much unit oversupply can affect particular markets. Now we\u2019re starting to see a little bit popping up in Sydney as well, in the Hills District and working down to Parramatta, especially in Mascot and the Zetland area, as well.
\nKevin:\u00a0 <\/b>Fast forward to this time next year, 2017 at the end, at Christmas time, if we\u2019re talking again, what do you think you\u2019ll be saying about the year that has just gone, Josh?
\nJosh:\u00a0 <\/b>Even though we\u2019ve had the low interest rate environment, I really think Sydney and Melbourne will be topping out coming into 2017. I think there will be some discounts on inner city apartments coming.
\nWe all know the oversupply issue is there. It is becoming more predominant coming into 2017 and especially 2018 when a lot of that stock will be released. So, I think we will see some discounting in that area.
\nPersonally, for me, I think the outperformers will be those owner-occupied stock in the affordable states. Brisbane is definitely on the cards for us. We\u2019re seeing some really good interest coming there from the affordability point of view and especially from the owner-occupier market. And potentially Canberra and Hobart moving forward, although they are the smaller states.
\nKevin:\u00a0 <\/b>Any particular areas, say, in Brisbane that you\u2019ll be looking at?
\nJosh:\u00a0 <\/b>Definitely. We\u2019re particularly focused on that 5- to 10-kilometer radius. We are looking in the north and south side. To give you some of the juicy suburbs, Stafford Heights we\u2019re very keen on, and Kedron. Down in the south side, we\u2019re looking at Tarragindi \u2013 very popular down there \u2013 Holland Park West, even to Camp Hill, those places that have great owner-occupier stock that is still affordable for people from Sydney and Melbourne looking at those areas. They love that sort of stuff.
\nEven out towards that south-southwestern corridor, out towards Ipswich, there is some great value happening out there and very high yields, so it is very attractive for investors right now.
\nKevin:\u00a0 <\/b>Good to spend some time with you, Josh. All the best for what\u2019s left of 2016 and into 2017. I look forward to talking to you then.
\nJosh:\u00a0 <\/b>My pleasure, Kevin. Thank you.
\nKevin:\u00a0 <\/b>Josh Masters from BuySide.com.au. Thanks again, mate. Talk to you next year.
\nJosh:\u00a0 <\/b>Sounds good, Kevin. Thanks.
\n <\/p>\n

2017 ‘x factor’ – Michael Yardney<\/a><\/h2>\n

Kevin:\u00a0 <\/b>According to Michael Yardney<\/a>, finance may just be the big stumbling block for a lot of investors next year. He joins me. Michael, of course, is a regular on our show \u2013 Michael Yardney<\/a> from Metropole Property Strategists<\/a>.
\nMichael, thanks for your time.
\nMichael:\u00a0 <\/b>Hi, Kevin.
\nKevin:\u00a0 <\/b>Michael, you say that getting finance is going to become difficult. It\u2019s interesting to see that at least one of the banks is really cutting back on lending to investors. Is this behind your concern?
\nMichael:\u00a0 <\/b>It\u2019s a combination of things, Kevin. While interest rates are low \u2013 and they may even go down a little bit more considering what\u2019s happening with Australia\u2019s economy \u2013 the banks\u2019 serviceability criteria have been tightened.
\nIn other words, investors \u2013 particularly investors who have multiple properties \u2013 have to be able to service all their loans at highish interest rates \u2013 often 7.5% to 8% \u2013 and be able to pay off their loans at the higher levels, as if they had principal-and-interest loans.
\nWhat that means is the banks are stress testing, allowing themselves some leeway in case the markets change, but it\u2019s going to make it harder for already established investors to get new loans. They may just have to sit tight for a year or two, Kevin.
\nKevin:\u00a0 <\/b>One of the things that I\u2019m hearing from a lot of investors is that while it is great to get a lot of information \u2013 and there is a lot of information available on the Internet, and even through our show, we talk to a lot of people \u2013 it\u2019s actually cutting through all that information and deciding what would be best for you. Is that a big challenge for next year, do you think?
\nMichael:\u00a0 <\/b>It\u2019s going to become a bigger challenge because there are so many mixed messages and so many people purporting to know what to do. One of the challenges is not only going to be to find which properties to buy that are going to be investment-grade but also to know who to listen to, who not to listen to, and also which properties not to buy, which markets to avoids.
\nBecause if we just look back 12 years, a lot of the so-called hotspots or potentially strong markets haven\u2019t really transpired, have they, Kevin?
\nKevin:\u00a0 <\/b>No, they haven\u2019t, Michael. It\u2019s interesting to hear you say there about who you should be listening to. What are the warning signs? Is it that if someone comes out and says, \u201cI\u2019ll tell you how to get 50 properties in five years and you\u2019re going to make $1 million every year\u201d \u2013 those sorts of promises?
\nMichael:\u00a0 <\/b>Of course, there are those whole group of spruikers who have got a vested interest, who are trying to sell you either educational programs or their own properties or properties that they\u2019re selling. And of course, there are the property developers and their associated agents and marketers who have a particular product to sell. It\u2019s actually not too difficult to fiddle with figures and make it sound like that particular location is going to do well because of demographics, infrastructure or population growth.
\nI\u2019d be getting advice from someone who\u2019s independent, who\u2019s unbiased, who doesn\u2019t have a product to sell \u2013and interestingly, someone who\u2019s borderless.
\nI think over the next year or two, the big change or the continuation of the trend we\u2019ve seen is that Sydney and Melbourne are going to outperform the other capital cities, relative to their own economic growth, their own population growth, their wages growth in those areas and making things affordable.
\nThe other thing is the wealth effect, because those who are already in that area now have more equity than they had a year or two ago. So, I think the gap is going to widen over there next year.
\nTherefore, speak to advisors who are borderless and who don\u2019t really care where you invest as long as it\u2019s going to be an investment-grade property in the right location.
\nKevin:\u00a0 <\/b>Yes, it comes down to having a formula. Michael, is there a type of property that you would recommend avoiding? And here I\u2019m talking about things like off the plans, units, or houses in particular areas.
\nMichael:\u00a0 <\/b>In the last couple of years, houses \u2013 or properties with land \u2013 have actually appreciated more in value than apartments. It\u2019s because, in general, we have an oversupply of apartments.
\nThat doesn\u2019t mean that there are not more people wanting to live in apartments \u2013 and it\u2019s a trend that\u2019s going to continue \u2013 but at the current stage of the property cycle, particularly in Melbourne, Brisbane, and Perth, there is an oversupply, which is causing a dampening of apartment values, even established apartments. Interestingly, it\u2019s not as obvious in Sydney, where there isn\u2019t that large oversupply.
\nI\u2019d be avoiding new apartments in the CBD, I\u2019d be avoiding off-the-plan apartments because you\u2019re usually paying a premium, and I would be careful with \u2013 I definitely wouldn\u2019t be avoiding \u2013 buying established apartments, to make sure that you\u2019re buying them at the right value and the right locations.
\nKevin, I think the other area that\u2019s going to suffer in due course is a lot of the new house-and-land package suburbs in the outer suburbs, because there has been an interesting trend. Overseas investors, often the Chinese investors, who were buying off-the-plan apartments are now being led to those outer new suburbs, and there is going to be a whole group of new investors oversupplying those areas.
\nKevin:\u00a0 <\/b>Where did we get it right in 2016, and where did we get it wrong with some of our predictions?
\nMichael:\u00a0 <\/b>I think those who predicted that it\u2019s going to be the areas where economic growth, wages growth, and established housing has increased in value have done pretty well. The fundamentals haven\u2019t really changed \u2013 the fundamentals of supply and demand, the fundamentals of demographics driving property markets, and the fundamentals of local economy driving property markets.
\nWhile we all have the same federal government, we all have the same tax schemes, we all have the same interest rates, interestingly, there\u2019s been a huge disparity, and it has fallen back to those fundamentals of local confidence, local economic growth, local population growth, and supply and demand, Kevin.
\nKevin:\u00a0 <\/b>Michael, it\u2019s been great working with you not only through 2016 but for the many years we\u2019ve been working together. I look forward to chatting to you again next year. This is probably the last chance we\u2019ll have to have a bit of a talk during 2016, so I just wanted to say thank you for all your support and help.
\nMichael:\u00a0 <\/b>Thank you very much, Kevin. I think next year is going to be a challenging year, where we\u2019re going to have a bit of a credit squeeze, so it\u2019ll be interesting talking throughout 2017 to see how that transpires.
\nKevin:\u00a0 <\/b>Certainly will, and we\u2019ll certainly get your input. Michael, thanks again for your time.
\nMichael:\u00a0 <\/b>My pleasure, Kevin.
\n <\/p>\n

“They paid how much?” – Noel Whittaker<\/h2>\n

Kevin:<\/b>\u00a0 A look ahead at the market for 2017 would not be complete unless we spoke to our good friend Noel Whittaker, AM, executive in residence, and adjunct professor, QUT Business School. He is an author, a publisher, an educator, and an all-around good guy.
\nNoel, good to have you in the show.
\nNoel:<\/b>\u00a0 Just an ordinary bloke.
\nKevin:<\/b>\u00a0 I always value your opinion, Noel. What do you see ahead for the property market in 2017? What are the challenges do you think?
\nNoel:<\/b>\u00a0 I think the biggest challenge for anyone who wants to be into property is finding a good deal. I\u2019m shocked at the prices some people are paying, especially in non-residential. We had a place going at the coast this week that sold <\/b>for 3%. I think that\u2019s crazy.
\nI think the biggest challenge is finding a good deal. The old thing about property: you buy well and you add value. I think that\u2019s going to be the hardest thing for people.
\nKevin:<\/b>\u00a0 What about commercial? Is commercial property a good proposition for next year, Noel, talking about returns?
\nNoel:<\/b>\u00a0 Having been so burned when I got mixed up in a development years ago, I would never touch it personally. I go through syndicates \u2013 people like [<\/b>1:16 inaudible] <\/b>I like <\/b>very much. I invest with [1:18 inaudible]<\/b>. But I would never again go my own [1:21 inaudible] <\/b>because I don\u2019t like the thought of a two- or three-year vacancy. [1:27 inaudible]. <\/b>There are plenty of good outfits out there where <\/b>you can invest in non-residential property using professional methods.
\nKevin:<\/b>\u00a0 I was shocked this week to read, Noel, that a number of the banks are pulling back on some of their lending to investors. I think ANZ alone, about a $2 billion cut-back in what they\u2019re lending to investors. Is that a concern, do you think, that they\u2019re concerned about the property market?
\nNoel:<\/b>\u00a0 I just think it\u2019s silly. Normally, if you\u2019re an investor, you have a good equity in your own house to start, and also the interest is tax deductible, which means that a lot of the [2:11 inaudible]<\/b> are taken out of the payments. To me, at least prima facie, an investor would be a much better borrower than a first-home buyer. I just can\u2019t understand what the banks are doing, to be honest.
\nI also notice that they tell me that they\u2019ve raised servicing requirements to interest rates plus about 3% [2:33 inaudible]<\/b>. In other words, if rates are currently 4% \u2013 and I used to base the budget on if they went to 6% \u2013 they\u2019re now adding 3%, saying \u201cWe\u2019ll do your repayments on the basis that they went to 7%.\u201d I\u2019m not saying they will, but I think it\u2019s a good thing to do. But they\u2019re certainly tightening up their lending.
\nKevin:<\/b>\u00a0 Were there any surprises for you during 2016 with the market that you probably didn\u2019t see coming?
\nNoel:<\/b>\u00a0 Where do we start? What we\u2019ve seen is a big move to people wanting to control their own future. About half an hour ago, I read a story about a man who\u2019s from Stanford who\u2019s now invented the American Dream Index, because people talk about the American Dream but they can\u2019t quantify it. He\u2019s just saying it proves that ordinary people are worse and worse off.
\nWhat you\u2019re seeing is society moving to haves and have-nots. With interest rates dropping, it left those with assets buying more property and shares. It also pushed up the price to make it harder for people who don\u2019t have them now. So what we\u2019re seeing is the increasing polarization between the haves and have-nots.
\nThey\u2019re seeing it now in Britain with Brexit. We\u2019ve seen it in America with Donald Trump. We\u2019ve seen it here with Pauline Hanson. People are getting sick of politicians and their [4:00 inaudible]<\/b>.
\nKevin:\u00a0 <\/b>What about fast-forwarding to this time next year, Noel, what do you think we\u2019ll be saying about 2017?
\nNoel:<\/b>\u00a0 2017, this time next year? My friend the economist Dr. Don Stammer says <\/b>there\u2019s always factor <\/b>X \u2013 what is going to happen that we can\u2019t imagine is going to happen? The thing about factor X is by its nature you can\u2019t predict it.
\nI would think we\u2019ll see rates will rising a little bit, but I don\u2019t see them rising much. We\u2019ll be approaching a federal election. I think the government will be more talking [4:40 inaudible]<\/b> but nothing much happening. Hopefully no more changes to superannuation. I just think it\u2019s situation normal; that\u2019s all.
\nPeople have to make the best of what they can do. I\u2019ve noticed far too many people worry about things that they can\u2019t control but they don\u2019t pay notice to the things they can control. I think people should be really practicing good budgeting skills because I think the economy is more likely to get worse than better.
\nKevin:<\/b>\u00a0 Very good advice, as always. We expect that from you, Noel.
\nNoel Whittaker\u2019s been my guest. Thank you, Noel, and great talking to you. All the best for 2017 and the New Year, and we look forward to talking to you as the year progresses.
\nNoel:<\/b>\u00a0 Here\u2019s to a healthy and happy 2017.
\nKevin:<\/b>\u00a0 Well done, Noel. Beautiful.
\n <\/p>\n

Patience is the key to a good property decision – Patrick Bright<\/h2>\n

Kevin:<\/b>\u00a0 The advice coming from Patrick Bright at EPS Property Search is that if you are an investor looking to get into the market next year, be patient; take your time; do your research.
\nGood day, Patrick. How are you doing?
\nPatrick:<\/b>\u00a0 Well. Thanks, Kevin.
\nKevin:<\/b>\u00a0 Do you think people are going to jump in a bit too much? Are they getting a bit over their researching do you think, Patrick?
\nPatrick:<\/b>\u00a0 That\u2019s what I\u2019ve been noticing a lot lately. People are frustrated. They\u2019re over-looking. People do make what I call the fed-up purchase, and that\u2019s going to end up being probably a suboptimal purchase because they\u2019ve been looking for a while, the market\u2019s tight on stock, they\u2019re missing out a lot, and that increases the chances of an impatient buy.
\nKevin:<\/b>\u00a0 What makes a suboptimal purchase, Patrick?
\nPatrick:<\/b>\u00a0 I think something that\u2019s really not going to meet the brief. They start making compromises. They can\u2019t get what they want. They keep getting outbid. You have to stick to your guns. That\u2019s the important thing. Once you set criteria, you need to find that sort of property and obviously buy it at the right money to make the whole thing work.
\nI think another thing that\u2019s going to become a bit of a challenge for people is financing. The banks are going to be tightening up on investor lending, and I think that\u2019s going to be a bit more of a challenge. They\u2019ve been doing that slowly. They\u2019re looking for more owner-occupiers.
\nFinding a market to invest in: where do we go in 2017? Where are things heading? Who to trust? I think that\u2019s becoming harder and harder.
\nKevin:<\/b>\u00a0 It\u2019s interesting to hear you talk about the banks cutting back on investor lending. I read the other day that ANZ bank had pulled back on their book for investors by about $2 billion. That\u2019s a big adjustment. Is that an indication that they\u2019re a bit concerned about the property market do you think, Patrick?
\nPatrick:<\/b>\u00a0 I think it\u2019s just them rebalancing their books as having a decent amount of owner-occupier loans versus investor loans. I think that\u2019s because of the APRA changes that started a couple years ago and all the banks have been having to head that direction.
\nKevin:<\/b>\u00a0 What are the big opportunities you see for investors? What advice would you have for those wanting to get into the market in 2017?
\nPatrick:<\/b>\u00a0 I think the start is don\u2019t be influenced. I\u2019m seeing a little bit of a resurgence of the celebrity endorsement or the sporting star endorsement. Spruikers use them all the time and they pay them tens of thousands of dollars to get their face on a project. Don\u2019t be influenced by that. That\u2019s something pretty important to know.
\nOther opportunities: I think people need to decide what sort of an investor they are. Are they a speculator or an investor? I think a lot of people actually think they\u2019re investing but they\u2019re really speculating. For example, buying off the plan is clearly speculation. It\u2019s not investing. So you need to decide what your risk profile is and whether that\u2019s something that you want to do.
\nThere are always opportunities out there. You need to narrow that down, work out what your budget is, and then work out what market you can play in. If you work out your risk tolerance \u2013 do I want to be an investor or a speculator? What price point can I play in with my investments?
\nKevin:<\/b>\u00a0 You mentioned earlier there about that frustration of going to auctions and being outbid. I know that\u2019s been something we\u2019ve heard a lot about, particularly in that Sydney market. What\u2019s on average the number of properties that you\u2019re finding people have to either get involved in or start to negotiate with before they can actually secure one, Patrick?
\nPatrick:<\/b>\u00a0 I\u2019m hearing from people; some people are telling me that they\u2019ve been to half a dozen or more before they\u2019ve secured something. I personally normally probably buy around about a third of what I would go to auction on roughly over the years, but I think over the last 12 or 18 months, it\u2019s been closer to probably 20%.
\nIt\u2019s just gotten tighter because the stock\u2019s tighter and people are bidding it up. We go with a well-researched, sensible limit, and we either buy at our limit or we don\u2019t. So if people are prepared to pay a little premium or even just above fair money, they\u2019re going to own it over us.
\nKevin:<\/b>\u00a0 I\u2019ve just completed doing a series in the other show we do, Real Estate Uncu<\/i>t \u2013 that\u2019s the show for agents \u2013 and in talking to a number of the market leaders around Australia, there\u2019s a lot of concern about a drop-off in stock in 2017. Do you think that\u2019s on the horizon, in other words, less choice for buyers?
\nPatrick:<\/b>\u00a0 I hope that doesn\u2019t continue. It\u2019s not uncommon to see a lack of stock for a quarter, maybe two quarters, but we\u2019ve now been having back-to-back quarters for about 18 months with a decided lack of stock.
\nI know in the lower North Shore, I\u2019ve been speaking to a couple of sales agents from the larger agencies who have staff who track all sales to know their market share and things like that. They were saying to me that just the lower North Shore of Sydney, for example, was down 47% for the first six months of this year on transactions on the three-year average.
\nKevin:<\/b>\u00a0 Wow. They\u2019re quite staggering figures, aren\u2019t they?
\nPatrick:<\/b>\u00a0 They are. We\u2019re seeing sales agents leaving the industry already. That\u2019s started. You have to imagine you have the same amount of people fighting over 47% less stock to sell, so somebody\u2019s missing out. Some agents are just doing less but still enough, and some aren\u2019t doing enough to even stay around.
\nI think 2017 will see more of that. If the stock doesn\u2019t free up and we get more transactions, then I think that\u2019ll get tighter. I was playing at a charity golf day the other day and people were ask what you do and you talk about real estate and they go, \u201cYou guys have been having a ball the last couple of years.\u201d I said, \u201cWell, you don\u2019t understand, nobody in real estate who I know is actually doing a heck of a lot better than what they were three years ago\u201d
\nMost people I\u2019m speaking to \u2013 successful agents who have been around a decade or more \u2013 we\u2019re all generally working harder for similar or less money. It\u2019s just because there\u2019s less stock to transact.
\nI know for our business, as well, we\u2019re out there working as hard as ever but we\u2019re not actually doing a whole lot more transactions as a buyer\u2019s agent simply because there\u2019s not enough stock to buy and we can\u2019t fulfill the clients\u2019 needs as easily as we would if there were more stock. So nobody really in the industry is thrilled about the situation.
\nKevin:<\/b>\u00a0 Patrick, if you were looking for a property for yourself to put into your own portfolio, where would you be looking? What sort of property would you buy?
\nPatrick:<\/b>\u00a0 Because I\u2019m a long-term buy-and-hold investor and I am not a speculator, I\u2019m going to buy something that has good fundamentals and is going to have good fundamentals in the years to come. I\u2019m looking for something that\u2019s going to be generally a capital city-based property, something that has good multiple infrastructure options for transport, something that has a view, a good floor plan, ideally a nice outlook \u2013 things like those that are a bit unique in the market. That\u2019s what I\u2019m chasing, that sort of stock, personally to add to my portfolio.
\nI have a 10+ year outlook on everything I buy, so my view is that if the market shut down tomorrow and I could not sell it, would I be happy to own this for the next 20 years? If I don\u2019t answer yes to that question, then I\u2019m questioning why I\u2019m buying it.
\nKevin:<\/b>\u00a0 Would it be a unit or a house?
\nPatrick:<\/b>\u00a0 An apartment. I have some houses that I bought over a decade ago, but the last decade, I\u2019ve focused pretty much on apartments because that\u2019s where the market\u2019s been heading. We\u2019re going to see more of that.
\nYou look at the Baby Boomers who are downsizing to apartments from their bigger houses, generally they want a three-bedder, or you\u2019re seeing a lot of one-bedders as well where they can have that \u201clock and leave\u201d Sydney base and they can buy that out-of-town weekender or semi-permanent base and then they have the Sydney pad, or they make Sydney their base usually with a bigger apartment and they make the tree-change or sea-change type out-of-town investment that they use, as well.
\nI\u2019m always looking for what\u2019s going to be in demand not only now but 10 or 20 years out from today. It\u2019s hard to pick 20 years out, but certainly not hard to pick at least a decade out.
\nKevin:<\/b>\u00a0 Patrick Bright from EPS Property Search. Thanks so much for your time, Patrick.
\nPatrick:<\/b>\u00a0 Pleasure, Kevin.
\n <\/p>\n

More people stay put and renovate – Cherie Barber<\/h2>\n

Kevin:\u00a0 <\/b>Just what\u2019s on the horizon for renovators? We could get no better advice on that from Cherie Barber from Renovating for Profit, who joins me.
\nGood morning, Cherie, and thanks for your time.
\nCherie:\u00a0 <\/b>Good morning.
\nKevin:\u00a0 <\/b>I\u2019m keen to hear what you see as the trends for next year. Is renovation still going to be something that wise investors will be doing in 2017?
\nCherie:\u00a0 <\/b>Absolutely. With housing affordability being such an issue and the high cost of relocating, more people than ever are choosing to stay put and renovate instead, so that\u2019s great.
\nI do see that there is going to be continued strong demand for quick cosmetic renovations. Unfortunately, a lot of structural renovations these days are becoming a lot more troublesome with council and cost of reports and CC certificate, so I\u2019m definitely seeing an uptake in the amount of cosmetic renovations.
\nKevin:\u00a0 <\/b>What are the key things to be careful of if you\u2019re looking at picking up a property, renovating it, and turning it over quickly? Are the fundamentals good for that right now?
\nCherie:\u00a0 <\/b>Yes and no. The buy, renovate, and sell strategy, it\u2019s not particularly a very good market. Again, when the prices rise, the buy, renovate, and sell strategy fizzles out a little bit, so to speak.
\nThere\u2019s very strong interest in the buy, renovate, and rent strategy right now. Again, housing shortages, tenancy shortages, there is always good demand for tenants. So yes, definitely the buy, renovate, and rent strategy is the winning formulation for 2017.
\nKevin:\u00a0 <\/b>Are you finding that any particular markets are better than others in Australia, Cherie?
\nCherie:\u00a0 <\/b>I think a lot of markets are still really good. Obviously, cosmetics don\u2019t tend to work well within 20 kilometers of the CBD. Outside of those areas will work, 20+ from any major CBD.
\nRegional areas will work okay, but it\u2019s very much suburb-dependent. As we know, Kevin, renovations don\u2019t work in every single suburb, so you have to be selective and choose the suburbs that are going to get you good growth potential as well, because that\u2019s a big thing for renovators.
\nA lot of renovators buy a property, they get in and renovate it, they\u2019ll get it revalued, or they\u2019ll flip it. Most people are getting the properties revalued, and they do rely on getting good capital growth so that they can refinance into that six or twelve months or two years later, whatever it may be, and then leverage that equity as the deposit to go do project number two.
\nKevin:\u00a0 <\/b>I know that you help a lot of people around Australia \u2013 and have done so for many years \u2013 get into the renovation market. Has the profile of the typical renovator changed, Cherie, the people who are coming to you for advice?
\nCherie:\u00a0 <\/b>Strangely enough, it\u2019s all sorts of people. You have young people, young property guns. <\/b>There are a lot more people who are educated on property these days, so we\u2019re definitely seeing a very broad market \u2013 young people right through to people as old as their 80s, and I have no problem with that. I think anybody at any age can renovate or do anything in property, so it\u2019s good to see.
\nAnd obviously, a lot more women coming through the renovation ranks. At the moment, 70% of my students across the country are female, so it\u2019s an interesting step.
\nKevin:\u00a0 <\/b>What do they bring to the renovation skillset that may be males don\u2019t, in your experience? Is there any way to define that?
\nCherie:\u00a0 <\/b>It\u2019s definitely not a Battle of the Roses. The reality is if you\u2019re a female at a renovation site, you need men on site; they have physical strength that we just don\u2019t have as females. But what I do think works well for women is our organizational skills. We are born multitaskers.
\nThat\u2019s not to say that men aren\u2019t, but women tend to be particularly good at this. And we all know that on a renovation site, the key is how well organized you are and your ability to coordinate many people. Women do really well with that. They also have great skills in design and color as well, maybe more so a little bit than our male counterparts.
\nBut as I said, males and females each bring their own collective skills to the party, so as long as we all work together, that\u2019s what we hope for, a successful renovation.
\nKevin:\u00a0 <\/b>That ability to manage a project that you talked about there and get all the timeframes right and do all that careful planning, is that one of the big pluses that females bring to this?
\nCherie:\u00a0 <\/b>Absolutely. You can\u2019t ever go into your renovation disorganized. You have to map everything out before you start. You have to coordinate your trades, you have to book them in, they have to have a scope of works.
\nWhen you\u2019re not organized, that\u2019s typically when it costs you more money in labor costs, rework, materials being installed and then having to be ripped out, so good planning is the foundation of any successful renovation.
\nKevin:\u00a0 <\/b>What are your plans for 2017 in terms of education and seminars and so on, Cherie? What have you got on the agenda?
\nCherie:\u00a0 <\/b>We\u2019re rolling out a whole series of new online courses. We have Cosmetic Renovations for Profit coming in the new year. We\u2019ve just launched Interior Design for Profit. That\u2019s for anybody who wants to know the basic principles of interior design and property styling so that they can potentially train themselves on how to do that themselves.
\nAnd we have a whole series of other property-related courses \u2013 granny flats, small developments. Yes, there are five or six courses rolling out, which we\u2019re pretty excited about.
\nKevin:\u00a0 <\/b>And all available through your website?
\nCherie:\u00a0 <\/b>Yes, RenovatingForProfit.com.au
\nKevin:\u00a0 <\/b>Always good talking to you, Cherie Barber. Thank you so much for your time, and all the best for 2017. I look forward to talking to you as the year goes on, too.
\nCherie:\u00a0 <\/b>Thanks, Kevin. I appreciate it.
\n <\/p>\n

Start thinking long term – Rich Harvey<\/h2>\n

Kevin:<\/b>\u00a0 Not getting sidelined by short-term thinking is going to be one of the big obstacles that property investors will have to look at next year. That\u2019s according to Rich Harvey, who is the president of REBAA \u2013 the Real Estate Buyer\u2019s Agents Association of Australia \u2013 and his website is PropertyBuyer.com.au.
\nRich, welcome to the show. Why do you think that\u2019s going to be a challenge for property buyers?
\nRich:<\/b>\u00a0 Thanks, Kevin. Great to be on the show again.
\nI think this year has been quite a challenging year, and next year will be probably an even greater challenge. We\u2019ve had really significant price rises in the Sydney and Melbourne market. The rest of the country is coming along in different phases. The challenge for investors is knowing where they\u2019re going to get the best return for their dollar, not just next year but for the next 10 years.
\nThat\u2019s why I talk about short-term thinking. Some people get very hung up about a statistic that might come out from a property provider and latch onto that one statistic and then make a decision only based on very short-term thinking.
\nKevin:<\/b>\u00a0 There is a lot of information available now for buyers and sellers, I guess. Has that made it a bit more difficult trying to work through what you should be paying attention to, Rich?
\nRich:<\/b>\u00a0 Absolutely. There\u2019s just so much noise out there in the media from different providers. CoreLogic will put out a report saying there\u2019s been a substantial drop in prices in Melbourne, and so everyone runs from the Melbourne market, or Sydney\u2019s due to have a crash. They\u2019re just sensational headlines.
\nYou have to look at the underlying factors that drive the two big behemoth markets, and if you can\u2019t afford those markets, there are plenty of other markets that investors and home buyers can get into around the country.
\nKevin:<\/b>\u00a0 One of the big mistakes we\u2019ve seen during 2016 is that people tend to think that it\u2019s one property market as opposed to a whole lot of different ones.
\nRich:<\/b>\u00a0 Exactly.
\nKevin:<\/b>\u00a0 Have you got a preference? Would you be investing in a house or a unit?
\nRich:<\/b>\u00a0 Great question. The answer to that question is it depends. I think generally going forward, houses will probably track at a faster appreciation rate than apartments. However, if you\u2019re buying an apartment in an area where 95% of the stock is apartments \u2013 like for example, if you\u2019re in Sydney and you\u2019re buying in Elizabeth Bay or Potts Point or Kirribilli, you\u2019re not going to be able to afford a $6 million or $7 million house in that area, so apartments will probably do equally as well in those really tightly held inner city areas.
\nDon\u2019t fall for the fallacy that land always appreciates, because you can easily go and buy a house out in the sticks \u2013 suburbs out at Longreach or Mount Isa \u2013 and do pretty poorly over time, as well. It all depends on the underlying drivers of supply and demand in the market that you\u2019re looking at.
\nKevin:<\/b>\u00a0 Do you think that we could be at risk? You talked there about units or apartments. Particularly inner city, we\u2019ve heard a lot of stories about oversupply. Do you subscribe to that?
\nRich:<\/b>\u00a0 No. Great question. I actually addressed that in my last newsletter, as well. A lot of people are asking me questions, \u201cRich, is the market oversupplied?\u201d I think there\u2019ll be little pockets of oversupply, and that doesn\u2019t diminish the whole market.
\nAn example, again back in the Sydney market, if you\u2019re looking at places like Parramatta, or Homebush, Blacktown, Liverpool, Auburn, Zetland, Mascot, those areas will potentially have a small oversupply. In fact, SQM is suggesting that we might have an oversupply of only 4000 dwellings next year and about 9000 dwellings in 2018.
\nBut you have to consider that Sydney\u2019s population is 4.9 million. So that oversupply is a very temporary blip in a long-term trend of undersupply. We\u2019ve had almost a decade of undersupply and a lot of the growth has been catch-up. Going forward we\u2019re going to hopefully get a more balanced market, and I think then regulations are tightening up now and I think you\u2019ll get to a position where we\u2019re going to be undersupplied yet again in, say, 2019 or 2020.
\nKevin:<\/b>\u00a0 How do you feel about the regional markets around Australia? Once again, I\u2019m not asking you to put them all into the one box but compare regional to cap city markets.
\nRich:<\/b>\u00a0 I think there are some good opportunities in some of the regional markets. Again, you have to exercise a lot of caution in those regional areas. Just because they\u2019re attractive to visit doesn\u2019t always mean they\u2019re going to go up. But I think as long as they have a stable economy and really good growth drivers going forward.
\nThere\u2019s small regional and large regional. What I mean by the small regional, it might be like a Mudgee or an Orange, or if you\u2019re in Queensland, it might be some of the smaller areas. The larger regionals are places like Sunshine Coast or Newcastle or Wollongong. They\u2019re much safer bets in my view because they have a bigger population base and a more diversified job market, and that\u2019s going to help drive the property market in those areas.
\nJust be really careful of mining towns. That would be my one tip. Again, sure, commodity prices are potentially recovering in some sectors, but it\u2019s just such a volatile market.
\nKevin:<\/b>\u00a0 Speaking of mining towns and mining markets, what\u2019s your feeling about the West Australian market for 2017?
\nRich:<\/b>\u00a0 I still think it\u2019s going to be pretty lackluster. I think the time to buy in the Perth market is not now. I think it\u2019s probably going to be another 12 to 24 months before you could start to look at that one. And the same for Darwin. They\u2019re the two markets that I would say are still suffering.
\nIf you want to be super countercyclical and go in two years early, then go for it, but for my money, I wouldn\u2019t be putting it there at the moment. Just too much tied to the resources sector to really go forward.
\nKevin:<\/b>\u00a0 Of course, in some of those markets \u2013 and you made that point just now about being countercyclical \u2013 there are some great buying opportunities, provided you\u2019re going to get in there for the long haul, Rich.
\nRich:<\/b>\u00a0 You have to make sure if you are countercyclical, you have to know it\u2019s not going to have a dead-cat bounce and just stay down. For my money, I like to be more conservative and know that I\u2019m going to be investing in a town that\u2019s going to have a very, very long future. So Sydney, Melbourne, and Brisbane are the three key markets that really attract most of my personal investment strategy because I know that all of those markets have a very, very long-term future. Yes, there might be some small corrections along the way but they certainly rebound with a bang and like I was saying, particularly in Sydney, and gone off.
\nI don\u2019t see it slowing down much next year. In fact, everyone\u2019s saying Sydney is going to grind to a halt. Well, I think we\u2019re going to have pretty reasonable growth next year because we have a constriction in supply.
\nKevin:<\/b>\u00a0 That probably answers my next question. My final question to you is if you were looking for a property for yourself right now, where would you be looking and what price range would you look in?
\nRich:<\/b>\u00a0 Again, it depends on your individual strategy. For me, I look for value-adding strategy. I\u2019m still looking in western parts of Sydney. Anything to do with the Badgerys Creek area, that\u2019s really going off really well. I love to buy in blue-chip suburbs where I can do a small reno. I love to try and do things where I can do a duplex. I also like the positive cash flow.
\nI really like the Brisbane market, particularly around the Logan Shire. We\u2019re doing quite a bit up there in adding granny flats where we can buy houses and get around 6% yield but adding the flat, we get 8%.
\nNewcastle, I\u2019m also pretty keen on because I think that market has some strong legs and getting really good rental returns, as well.
\nKevin:<\/b>\u00a0 Good talking to you, Rich Harvey. Thanks for your time.
\nRich:<\/b> \u00a0My pleasure. Thank you, Kevin.<\/p>\n","protected":false},"excerpt":{"rendered":"

  Housing affordability and the high cost of relocation will see a lot more people opt to stay put and renovate according to Cherie Barber. Cherie talks about the renovation trends we will see in 2017. 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