{"id":6717,"date":"2015-12-18T12:00:08","date_gmt":"2015-12-18T01:00:08","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=6717"},"modified":"2015-12-18T12:00:08","modified_gmt":"2015-12-18T01:00:08","slug":"7-reasons-the-market-wont-crash-equity-shifting-explained-the-impact-on-prices-of-a-flood-of-similar-properties","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/7-reasons-the-market-wont-crash-equity-shifting-explained-the-impact-on-prices-of-a-flood-of-similar-properties\/","title":{"rendered":"7 reasons the market won\u2019t crash + Equity shifting explained + The impact on prices of a flood of similar properties"},"content":{"rendered":"

 
\nThere is a property debate raging at present \u2013 some say the future for property is bright while others suggest our markets are set to crash. Michael Yardney<\/b><\/a> gives us 7 reasons why it won\u2019t crash.
\nEconomist Dr Andrew Wilson<\/b> gives us his view on the house vs unit debate, Brad Beer<\/b> <\/a>has compiled his New Years resolutions for property investors and Ken Raiss<\/b> answers Chris\u2019s question about equity shifting.
\nThanks for all the questions coming in as well. It is how we know what you want to hear about. As well we award our question of the week with a 12 month subscription to Australian Property Investor magazine. Another one coming up today!
\nAlso during the week we heard from Paul in WA, who owns several properties in that state and, through council rezoning, has the opportunity to subdivide but he wants to know the impact of a flood of similar properties onto the market. We talk to a WA agent who gives us the lowdown.
\nSam Saggers<\/b> joins us today as well. Sam talks about his portfolio and why he favours city property investment over regional properties.
\n <\/p>\n

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

Andrew Wilson<\/h3>\n

Kevin<\/b>:\u00a0 A common question I\u2019m asked is \u201cWhat makes a better investment? Is it a unit or is it a house?\u201d Let\u2019s check in with Dr. Andrew Wilson, senior economist with the Domain Group, and get his thoughts on that.
\nGood morning, Andrew.
\nAndrew<\/b>:\u00a0 Good morning, Kevin. How are you?
\nKevin: <\/b>Well, thank you. What would you say in answer to that question?
\nAndrew:\u00a0 <\/b>Well, look, it\u2019s \u201cHow long is a piece of string?\u201d really, Kevin. It depends on the location. It depends on the price point, of course. Typically, units have a lower price point, are less expensive, I guess, more affordable than houses for an investor, and that typically means a higher yield.
\nThe disparity between prices is different to the disparity between the rents when you compare houses and units. That means typically you get a higher yield from an apartment than you would from a house. But at the other end, you tend to get lower vacancy rates on a house. There\u2019s more demand for houses. Lower vacancy rates, so higher occupancy rates, typically, compared to unit.
\nBut it does depend on where you\u2019re looking and the market. Of course, apartments do suit those investors who are looking for a lower entry point, and houses, of course, may suit those who are looking for investment property in their particular region if they\u2019re living in a middle- or an outer-ring <\/b>suburb. <\/b>Look, a lot of investors like to connect with the property that is in their local neighborhood or adjacent to their local neighborhood.
\nKevin:\u00a0 <\/b>Of course, it\u2019s always going to be a better investment in a unit if you\u2019re looking at an area that\u2019s predominantly servicing students. As an example, there are so many of those educational hubs around Australia where definitely, a unit probably is going to be a better investment. So it comes down to location and really what\u2019s what happening in that area, Andrew?
\nAndrew:\u00a0 <\/b>Absolutely, Kevin. That\u2019s a good point. There\u2019s certainly a market for student accommodation. There are now purpose-built developments that are designed specifically for students. I guess they\u2019re what we call the old fashioned bedsit type of apartment, which is basically a single room and then a bathroom, and they\u2019re designed for single-student accommodation.
\nA lot of developers have a one-shop stop type of project whereby they provide all the services, and all the particular on-costs that are involved with apartment living, and of course, they\u2019re designed for overseas students, as well.
\nThese can, for investors, become an interesting proposition because again, they can have a very low entry point in terms of the price of student accommodation units, and of course, they have higher yields.
\nKevin:\u00a0 <\/b>Yes. Of course, you have to think of things like vacancy, too. If you\u2019re going to be going into a highly residential area where you\u2019re going to be attracting a family, you may end up getting longer term tenancies too, anything up to a couple of years. So I guess there are a lot of factors that you have to weigh up, even looking at what type of investor you are, Andrew?
\nAndrew:\u00a0 <\/b>That\u2019s right, Kevin. I do believe that we\u2019re in for a period of higher levels of residential investor, particularly from moms and dads investors. I think residential investment will continue to produce yields well in excess of what we could get, for example, from bank deposits, and also I think that we still have that notion of security with that bricks-and-mortar style investment that\u2019s part of Australians\u2019 DNA to a large degree.
\nI think that will continue to drive residential property investment at higher levels, given also the tax breaks that are involved for residential investors. I think that this will be a growing trend in the market place for investment asset vehicles of this nature.
\nKevin:\u00a0 <\/b>Andrew, always good talking to you. Thank you so much for your time.
\nAndrew:<\/b>\u00a0 Thank you, Kevin.
\n <\/p>\n

Brad Beer<\/h3>\n

Kevin<\/b>:\u00a0 It\u2019s only fitting, as we head towards the end of 2015 \u2013 this in fact is our last show for the year \u2013 that I\u2019ve invited Brad Beer to join me. Brad, of course, is the CEO for BMT Tax Depreciation.
\nGood day, Brad.
\nBrad:\u00a0 <\/b>Hi, Kevin.
\nKevin:\u00a0 <\/b>Looking back on 2015, it came with a few challenges, Brad, didn\u2019t it, for the property investor?
\nBrad: \u00a0 <\/b>Yes, it did. The clampdown of APRA on banks regarding lending. I think there\u2019s still more to see out of that, but just looking at the clamping down on that loan growth in investors by more than certain percentage. We\u2019ve seen increased rates against investors only, which is not something we\u2019ve seen for some time. A lot of things there to make it a little bit tougher for the investor.
\nKevin:\u00a0 <\/b>Yes, they have, indeed. We got some good news, and I guess the year 2015 highlighted for us, Brad, that there are so many different markets around Australia, if you\u2019re going to be a property investor, you really have to do your homework. There was some interesting news out from CoreLogic RP Data as well in \u2013 their quarterly report.
\nBrad: \u00a0 <\/b>Yes. If we take 2015 and look at the substantial growth in the Sydney market, especially \u2013 something that\u2019s fueled by many things and low interest rates and people having a fear of missing out on getting into the property market \u2013 we\u2019ve had such substantial growth, probably too fast. We\u2019re probably on the back of that now, meaning that we\u2019re seeing reduced auction clearance rates and probably a slowing of that market. But then we\u2019ve had other markets \u2013 Perth in WA, for example, that\u2019s not been performing anywhere near as well, and it\u2019s in the same country \u2013 just.
\nKevin:\u00a0 <\/b>It\u2019s interesting, because in the first few shows of next year, we\u2019re going to feature comments from a number of our commentators who we\u2019ve used over the years to give us their view looking back on 2015, looking ahead to 2016. But I thought it would be interesting, because I understand that you\u2019ve done the property investor resolutions for 2016, the first one being \u201cI\u2019ll go outside my comfort zone.\u201d That should be every investor\u2019s resolution, I would have thought.
\nBrad: \u00a0 <\/b>Look, Kevin, I\u2019ve bought a lot of properties over the last 15 odd years since I\u2019ve been investing, and a lot of them are actually in similar areas. One things that if I look back in hindsight, over many of those years, I\u2019ve bought places close to what I know for reasons. Now, sometimes, because I know those areas, that\u2019s good, but the fact is the same area doesn\u2019t always perform, and you need to look outside of \u201caround the corner\u201d because it\u2019s easy \u2013 you can drive past it \u2013 and look at investing to other areas around the country, potentially with enough research to know what\u2019s good and what\u2019s bad, and not just around the corner because you think it\u2019s easy to look after, and you believe in that area because that\u2019s where you live.
\nKevin:\u00a0 <\/b>Yes. The second resolution was that you will not follow the herd, and I think that\u2019s wonderful. That herd mentality is pretty poor because most times, by the time you get there, the rush is already over.
\nBrad: \u00a0 <\/b>And the people follow. Everybody\u2019s making money. It\u2019s growing, the prices are really high, and as soon as that happens, it\u2019s almost like it\u2019s too late to buy there. You have to be picking those places that haven\u2019t had that herd and everybody pushing up the prices.
\nSydney is probably at the back of that at the moment, where we\u2019re seeing those decreased auction clearance rates and the prices probably having that flattening over the next little period of time, especially because people have kept pushing those prices by following herd mentality.
\nWe need to be looking at where it has been struggling with some reason why it will come forward in the future.
\nKevin:\u00a0 <\/b>And looking, too, at the complete picture, highlighted here by the fact that part of the investment journey is all about depreciation, which is your pet love.
\nBrad: \u00a0 <\/b>The cash flow in every way, depreciation is obviously an important part of that. We still have a situation where 70% or 80% of investors don\u2019t maximize this deduction properly. It\u2019s like buying your investment and asking for less than the market rent.
\nEvery part of your investment from a cash flow perspective, you should be asking for market and proper rent and doing whatever it is to the property you need to to make sure it\u2019s attractive to tenants. Depreciation is the one I see missed the most that\u2019s just leaving money on the table you don\u2019t need to.
\nKevin:\u00a0 <\/b>Speaking about leaving money on the table, too, budgeting is pretty important. When things get busy, we tend to overlook that area of it, but you have to keep a close eye on that as well, Brad.
\nBrad: \u00a0 <\/b>Look, simple things like if you\u2019re a normal tax payer doing a PAYG so that you can get more money into your pay packet on a fortnightly basis, which is a really simple thing that your accountant can do after you\u2019ve had your calculations of the year, what it should look like, including your depreciation numbers, then you might as well get that money back in your pocket today so that you can sit it into offset accounts, pay less interest, and actually have use of that money through the year instead of letting the tax office hang onto it and get it back later on when you do get around to doing your tax return. Making sure you\u2019ve budgeted properly through the year and just having that buffer of money available is also a great idea.
\nKevin:\u00a0 <\/b>I think, too, taking notice of people like yourself, and listening to Real Estate Talk and programs like that, you actually learn a lot. You have to learn from that experience, Brad, don\u2019t you?
\nBrad: \u00a0 <\/b>I still go to quite a number of property seminars and things. Often I\u2019m the depreciation speaker at these things because that\u2019s one important part of investing, but one thing I do is always take something away from that to add to my knowledge about investing in the property, and take heed of that.
\nAlso what it does is gets me keen to re-look at my portfolio of properties, make sure I\u2019m always open to learning how to make it perform better and also for those purchases in the future.
\nKevin:\u00a0 <\/b>Brad, all the best for the rest of this year, and look forward to working with you during 2016. Thanks, once again, for your support of our program, as well.
\nBrad: \u00a0 <\/b>Thanks, Kevin. Look forward to it.
\n <\/p>\n

Michael Yardney<\/span><\/a><\/span><\/h3>\n

Kevin:\u00a0<\/b> A few weeks ago on the show, I spoke to Michael Yardney<\/span><\/a><\/span> about what happens when property markets around Australia correct? It was a great interview. Go back and have a listen to it. It was two weeks ago. We originally broadcast that in very early December. So have a listen to that.
\nMichael, I\u2019m keen to talk to you now because we have had some comment about the reasons why the Australian property market won\u2019t crash. I believe you\u2019ve looked into this. You have some reasons that you\u2019d like to tell us about.
\nMichael:\u00a0 <\/b>Sure. What we were saying was that in general, when interest rates go up, when the economy stops, when the cycle runs out of puff, in the big capital cities where there\u2019s market depth, property values don\u2019t crash, they fall over a period of time slowly, and then the individual economic factors catch up, the market catches its breath and goes up again. There are reasons why property values don\u2019t crash as opposed to share markets or other commodities, Kevin.
\nKevin:\u00a0 <\/b>What are they, Michael?
\nMichael:\u00a0 <\/b>I think one of the big factors that\u2019s going to help support our property markets is our robust population growth, particularly immigration and to a lesser extent, strong natural population growth. Kevin, immigration levels have dropped, but they\u2019re still growing at a faster rate than most other developed countries. And these people are going to require some way to live, whether it\u2019s to buy or as tenants.<\/b>
\nKevin: <\/b>Does the economy support our property markets, Michael?
\nMichael:\u00a0 <\/b>Kevin, we have a reasonably healthy economy. Sure it\u2019s slowing a little bit, but it\u2019s continuing to perform at a level that\u2019s envied <\/b>by most Western nations. And what that\u2019s doing is creating jobs for almost anyone who wants one. That\u2019s another reason our property markets aren\u2019t going to crash; we\u2019re not going to have massive unemployment.
\nKevin:\u00a0 <\/b>You\u2019d have to think too, the banking system is probably the envy of a lot of countries, as well.
\nMichael:\u00a0 <\/b>It has become even more sound over the last year or two. We\u2019re all a little bit unhappy that APRA has tightened the screws and put up interest rates a bit and made it a bit harder to get loans. But our sound banking system, with a level of reasonable interest rates, is going to mean that our property market isn\u2019t going to collapse like it did in the United States, and in some European countries, Kevin.
\nKevin:\u00a0 <\/b>Yes, a little bit of medicine, Michael. That\u2019s all it is, really.
\nMichael:\u00a0 <\/b>Yes, it does. I think the other thing that\u2019s going to protect us over the next couple of years is rising business and consumer confidence. The business confidence has increased with the stability of state and federal governments, and consumer confidence is the reason considerably over the year, especially since Malcolm Turnbull was elected as Prime Minister.
\nThat, again, is a reason why, even when the market eventually slows down, there will still be people buying, selling, moving home, getting married, having kids, and that\u2019s going to support our property markets.
\nKevin:\u00a0 <\/b>Yes. Michael, I have heard, too, that household debt is increasing. Is that a concern?
\nMichael:\u00a0 <\/b>Well, it\u2019s still at healthy levels. Sure, we\u2019re borrowing a bit more, but the debt tends to be in the hands of those who can afford it. Many Australians are saving more, they\u2019re taking on less credit card debts, they\u2019re slowly paying off their mortgages. But those who have turned to debt are usually the people with high net worth \u2013 often in their homes \u2013 so this reduces the risk of house prices collapsing if interest rates rise because the people who have got the debt can afford it.
\nKevin:\u00a0 <\/b>Yes. We have a very healthy attitude toward homeownership as well. Does that help?
\nMichael:\u00a0 <\/b>It definitely does, Kevin. What makes the stability in our property market is the fact that around 70% of properties are owned by owner-occupiers, and half of those have no debt against them. So when the economy falters, when interest rates go up, when job unemployment rates go up, it doesn\u2019t mean that people suddenly sell off their homes.
\nThis is a different culture, as you say, from overseas, so with such a large percentage of owner-occupiers, property investors are actually investing in the only market that\u2019s not dominated by investors. This gives us a level of stability, Kevin.
\nKevin:\u00a0 <\/b>Michael, just round out this conversation for us, I guess bearing in mind, too, that it\u2019s not just one Australian housing market.
\nMichael:\u00a0 <\/b>Well, what\u2019s ahead \u2013 I guess there\u2019s no sugar-coating it \u2013 probably prices will slow down in 2016. I think the decreasing affordability, changing sentiment, the oversupply in some of the inner CBD markets, all that\u2019s going to create a volatile mix that\u2019s going to give us very fragmented markets and, in general, slow our property markets. Some are going to move from sellers\u2019 to buyers\u2019 markets. We\u2019re already seeing that with the fall of auction clearance rates; aren\u2019t we, Kevin?
\nKevin:\u00a0<\/b> We are indeed, mate.
\nMichael:\u00a0 <\/b>But yet there\u2019s still going to be a large demand from people who are getting on with their lives, and those who can\u2019t afford to buy homes are still going to be renting them, and this will start to force rents up.
\nSo I think as our economy bumbles along over the next year or two, we\u2019re going to be moving into a period of slower capital growth. Melbourne, Sydney and Brisbane will still do pretty well. I think Perth and Darwin are going to have a more rough year in 2016. Adelaide and Hobart are starting to pick up and keep going up in values along the lines of inflation. But I am concerned that these very few growth drivers for regional towns and mining towns. I\u2019d be avoiding those areas.
\nKevin:\u00a0 <\/b>Mate, this is the last show for the year. I want to wish you and your family all the best for Christmas and the New Year. Michael, thank you for your contributions right throughout 2015. It\u2019s been fabulous to be able to talk to you in this way.
\nMichael:\u00a0 <\/b>My pleasure, Kevin. I look forward to having a fun 2016 together.
\nKevin:\u00a0 <\/b>I have a bit of homework for you over the break, too, because when we come back, our first show is going to be in mid-January, and what I\u2019d like you to do is join all of our other experts and give us your predictions for 2016.
\nMichael:\u00a0 <\/b>We have to put our necks on the line, do we, Kevin?
\nKevin:\u00a0 <\/b>Yes, you do.
\nMichael:\u00a0 <\/b>Okay. I\u2019ll have a think about it.
\nKevin:\u00a0 <\/b>Good on you, mate. All the best, and thanks again, Michael.
\nMichael:\u00a0 <\/b>My pleasure. Great.
\n <\/p>\n

Ken Raiss<\/h3>\n

Kevin<\/b>:\u00a0 I\u2019m going to answer a question in the show that came in from Chris. Chris, I want to thank you for this. Chris writes: \u201cOn one of your recent podcasts, you mentioned the protecting assets through equity shifting. How does equity shifting work, and what are the benefits? Ken Raiss is going to answer that question for you, Chris. Ken, of course, is from Chan and Naylor.
\nGood day, Ken.
\nKen:\u00a0 <\/b>Good day, Kevin. How are you?
\nKevin:\u00a0 <\/b>Well, thank you, mate. Can you answer Chris\u2019s question for him?
\nKen: \u00a0 <\/b>Certainly can. Excellent question, Chris. Equity shifting, as its name suggests, is we\u2019re shifting equity that you have from an unsafe area to a safer area. Let me give you an example.
\nImagine you have a home that you\u2019re going to draw down the equity to use as a deposit to then go and buy another property, what we normally see is people just borrow the equity off their home and then they borrow the remaining 80% of the investment property.
\nWhat equity shift would say is borrow as much as you can against your home \u2013 that\u2019s the one that you want to protect \u2013 not just the 20% \u2013 and then buy the investment property in a trust. The type of trust that you would use would be dependent on your particular circumstances.
\nYou have effectively then bought that property with little debt in the trust, so you\u2019ve moved your equity from your home into the trust, and now you borrow against that equity in the trust as a line of credit for use as a buffer or further purchases.
\nThe advantage is really that it\u2019s pretty low cost. It\u2019s only the cost of the trust, so there\u2019s no lawyers involved. It\u2019s just making sure that you borrow the maximum you can against the property you\u2019re trying to safeguard.
\nKevin:\u00a0 <\/b>You mentioned there, Ken, that the type of trust will depend on your circumstances. That\u2019s where you could help structure that?
\nKen: \u00a0 <\/b>Correct. For wages, people who want to buy the investment property and call it negatively gear against their wages, we have our Property Investor Trust, which is the only APO-approved trust of its type. For people in business, we might use a Business Enterprise Trust. Maybe for people in New South Wales, depending on what they\u2019re doing, we might use a fixed trust. There would be various trusts depending on the circumstances, and we can certainly help Chris or any other of your listeners.
\nKevin:\u00a0 <\/b>Ken, I also understand that you have an e-book that deals with this, as well, have you?
\nKen: \u00a0 <\/b>Yes, we do \u2013 on a number of asset protection strategies.
\nKevin:\u00a0 <\/b>Okay. Well, what we\u2019ll do, Chris, we\u2019ll send you a copy of that, as well. Ken and his team will organize that.
\nKen, if anyone wants it, they just have got to go to the Chan and Naylor site, which you can do, of course, straight off RET. Just go to the Real Estate Talk website, click on the Chan and Naylor button, and you\u2019ll find it in there.
\nChris, I want to thank you for that question. It is a good question, as nearly all of them are, I have to say. Of course, we do get a lot, and you can send them in through the website, or directly to me, kevin@realestatetalk.com.au<\/a>. Chris, we\u2019re going to reward you for that by giving you a 12-month subscription to Australian Property Investor<\/i> magazine. Don\u2019t worry, if you\u2019re already a subscriber; your existing subscription will be extended by 12 months. That\u2019s our way of saying thank you, Chris.
\nI want to say thank you to you, Ken. I know you already have a subscription to API; I can\u2019t give you one, but I\u2019ll just say thank you.
\nKen: \u00a0 <\/b>No, it\u2019s a pleasure.
\nKevin:\u00a0 <\/b>Good on you, mate. Ken Raiss, of course, from Chan & Naylor. Ken, we\u2019ll talk to you again real soon. Thanks, mate.
\nKen: \u00a0 <\/b>Thank you.
\n <\/p>\n

Sam Saggers<\/h3>\n

Kevin:\u00a0<\/b> In the latest edition of Australian Property Investor<\/i> magazine is an article headed up \u201cThe Great Debate \u2013 Cities versus Regionals\u201d. It is a great debate. It goes on and on and on. Sam Saggers has got some very positive views there from Positive Real Estate. Sam\u2019s got some positive views on this issue.
\nGood day, Sam.
\nSam: <\/b>Good day, Kevin. Thanks for having me.
\nKevin:\u00a0 <\/b>Good to be talking to you again, mate. Now, you\u2019re a great believer in the cities. Why is that? What are the things that drive you to believe that?
\nSam:\u00a0 <\/b>Well, cities obviously have an inherent marketplace. It\u2019s very important to understand that where local people are living, where there\u2019s standard owner-occupier trade, it\u2019s very important for investors to leverage off that.
\nParticularly in bigger communities, capital cities, there\u2019s always a level of confidence driven by the fact that people actually just have to simply live there because they go to work in that city and they\u2019re building a life in that city. Their kids to go the school in the local precinct.
\nTowns can be very fickle, and particularly smaller environments, say less than 10,000 people, very dangerous for property investors. I always say investors buy real estate in cities and speculators buy real estate in small towns, isolated areas.
\nKevin:\u00a0 <\/b>Yes, there are possibly some exceptions to that, and we might talk about that in just a moment. One of the things that I think you were just hinting at there is also that in the cities, you have a diversification of trade. It\u2019s not reliant just on one or two industries, Sam. Is that a big criteria for you, as well?
\nSam:\u00a0 <\/b>It\u2019s absolutely huge. Right now, for example, Melbourne\u2019s going through a manufacturing downturn, but if you went to Melbourne, you wouldn\u2019t even know it. You wouldn\u2019t feel it. Actually, the counter is happening in the real estate market. Particularly the housing market in Melbourne is booming along quite nicely.
\nSo having diverse economics is so paramount to property investors. There have so many cases of one-economic towns where there are literally only one or two employers where the environment changes, something happens to that particular employer, and that town really suffers, and so does the house prices and property values.
\nI think it\u2019s also prudent to understand that where the population is growing, they\u2019ll follow the jobs, they\u2019ll follow that diversity of work. So you\u2019ll see that cities \u2013 and big towns, which are really cities \u2013 will do very well.
\nKevin:\u00a0 <\/b>How important, too, is the consideration about the growth of infrastructure? You go to a regional town, and they\u2019ll complain, quite often, about how much infrastructure is being built in the capital cities and the regions that are almost forgotten. But that is something that should also be borne in mind?
\nSam:\u00a0 <\/b>Absolutely. Australia has a business plan. By 2051, which sounds like a long time away \u2013 and it is \u2013 there are going to be over 40 million people living in Australia, and the Australian government and the state governments have a real plan to push the density into our five big capital cities around the country.
\nYou\u2019ll see huge growth rates in Brisbane, in Melbourne, in Sydney, and particularly in Perth because that\u2019s where the government wants people to go and live. It\u2019s a tell-tale sign to me: invest where the government is suggesting people will live, and you\u2019ll do well, surely, over time. So infrastructure is going to go in the big cities because that\u2019s where the population is headed.
\nKevin:\u00a0 <\/b>Now of course, it\u2019s not a black-and-white issue for you, is it? I know in your portfolio, you do have some regional investments. What are the criteria that you look for if you were to invest in the regions?
\nSam:\u00a0 <\/b>Yes, I do have some regional investments. For me, for a start, invest in a big town. The argument is, for example, Mackay, right now is struggling along, but it is a big regional city, it is a big regional town. If you go an hour out of Mackay, or two hours out of Mackay, to Moranbah and Dysart, we\u2019ve seen values fall back 75%. So it\u2019s really interesting: the economics and the stability of the town is so important.
\nAt least, if you\u2019re going to go regional, firstly, you should be making sure you\u2019re getting a very good rental return \u2013 so the reason for going regional \u2013 and then over and above that, make sure that the population base of that town is quite significant. I\u2019d be looking at a minimum of 50,000 people, plus.
\nKevin:\u00a0 <\/b>Sam, good catching up with you, mate. Sam Saggers, of course, from Positive Real Estate. You can read all about Sam and his thoughts on this issue in the latest edition of Australian Property Investor<\/i> magazine, which is out right now.
\nSam, thanks for your time.
\nSam:\u00a0 <\/b>Thanks very much, Kevin.
\n <\/p>\n

Milton Rendell<\/h3>\n

Kevin:\u00a0<\/b> We\u2019re going to answer a question in the show now that came in from Paul. Paul is based in Perth. Thanks for your nice comments about the show, too, Paul. Lovely to have you listening.
\n\u201cOver the last ten years,\u201d Paul writes, \u201cI have been buying a few properties, all of them in the area of Perth that\u2019s now set to be re-zoned. I suspect that when this re-zoning is approved, likely in a couple of months\u2019 time, that a number of homeowners in the area will be taking advantage of this, at the same time, creating possibly an oversupply of battle-ax-type properties for sale. Have any of your panel of experts experienced this in other parts of Australia, and did they notice if it had any impact on potential sale prices?\u201d
\nWe can probably go one better than that for you, Paul, and joining me on the line now, Milton Rendell from Real Estate Plus in Perth.
\nMilton, you heard there what Paul had to say. What\u2019s your view about that amount of stock coming on the market, and particularly for battle-ax-type properties? Is it going to impact prices?
\nMilton: <\/b>I don\u2019t think so, Kevin. I think some of the areas are low-demand in any market, and you have to be mindful you\u2019re not talking about an area like that. But through the northern corridor, I know there\u2019s still a lot of development still <\/b>happening.
\nThe northern corridor, for those who know Perth, is in areas like Yanchep, which is pretty well at the top of that corridor, is seeing new activity. There\u2019s certainly been a lot more activity or hype around that area in the last 18 months, which may surprise a few people. The area that I\u2019m in, which is the eastern corridor, our whole town is zoned for unit development, yet we have buyers still coming through, still inquiring.
\nI think the key to anything is following the government money. I know through the corridor that I\u2019m in and certain bits of the northern corridor, there\u2019s still a lot of government money being spent.
\nWill there be a bit of pressure on prices? I think more realistically, the boom has certainly been over for a while, we know that. Prices have softened slightly, but I wouldn\u2019t say to the extent some people have expressed. I think there\u2019s been more people who just got pressure through losing jobs and probably over-committed more than anything that\u2019s softened some of the prices in some of the areas.
\nKevin:\u00a0 <\/b>Yeah, Milton, Paul especially mentions their battle-ax blocks. Are they fairly popular in Perth, or are they relatively new?
\nMilton:\u00a0 <\/b>They do exist. They\u2019re not uncommon. There\u2019s certainly been a corral for where I am, and I know that within an eight-kilometer range from Perth there\u2019s been quite a bit of it. So it\u2019s nothing new. It\u2019s pretty common, to be honest. We\u2019re getting used to living on smaller lots of land now, and I know there have been government proposals to having blocks of less than 200 square meters and even lower than that.
\nNo, it must be there because they\u2019re approving them. It\u2019s just the developers have to get their heads around what\u2019s the best routine for them. Building has been a little bit slow, so they\u2019ve been taking that opportunity to capitalize on that, as well.
\nKevin:\u00a0 <\/b>What would Paul be better off doing here, getting the approvals to do it, or selling the lot as it is?
\nMilton:\u00a0 <\/b>Look, it\u2019s an interesting one. Obviously, I\u2019m not knowing where it is. I\u2019m always one of holding as long as you possibly can. Do I see the market flying in the next 12 months? Probably in Perth, we\u2019re talking about being steady rather than an explosion.
\nBut you have to be mindful, we\u2019ve been quieter over here than they have been on the east coast for probably the last two and a half years, so we may work against the trend of the east. So I think at this stage, if he can afford to hold on, I\u2019d be holding on for a little bit longer.
\nKevin:\u00a0 <\/b>Okay. Good. There\u2019s an answer to your question, Paul.
\nMilton Rendell from Real Estate Plus in WA, thank you so much for your time, mate. All the best.
\nMilton:\u00a0 <\/b>Happy to help, Kevin. Any time.<\/p>\n","protected":false},"excerpt":{"rendered":"

  There is a property debate raging at present \u2013 some say the future for property is bright while others suggest our markets are set to crash. Michael Yardney gives us 7 reasons why it won\u2019t crash. 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