Serviceability vs affordability + Should you hold off until after the election?

John Symond from Aussie Home Loans takes a big stick to all politicians over the debate on negative gearing.
Lots of questions coming in about what the banks are doing, where rates are headed and how much I can borrow.  Andrew Mirams from Intuitive Finance looks at the difference between serviceability and affordability
There’s a lot of uncertainty surrounding our property markets at present, much of it related to the intense debate between the government and opposition about housing tax policy including treatment of Capital Gains tax and negative gearing and whether these would be good for property or not.  So it’s understandable that many investors are considering putting their plans on hold until after the election.   But is that a sound strategy?    That’s a question I’d like to ask of Michael Yardney.
Patrick Bright – EPS Property Search director and author of the Insider’s Guide to Buying Real Estate joins the chorus of those warning to be cautious about how you buy off the plan
Cindy wrote and asked about investing in property with the use of super funds.  She is concerned and asked for our thoughts on risk and reward.  Ken Raiss answers her questions.
We tell you about a new app that is available to help you work out exactly how much your property is worth.
Kevin:  It seems that a popular way for investors to get into the market is to buy off the plan. I’m attracted to a release that came out from Patrick Bright, who is EPS Property Search Director and also author of The Insider’s Guide to Buying Real Estate.
Patrick, thanks for your time.
Patrick:  A pleasure.
Kevin:  You say there are risks associated with buying directly off the plan. I suppose there are risks in buying any kind of real estate, but you’re focusing in on buying off the plan. Why is that?
Patrick:  Everything you do investment-wise carries some risk, but the risks have always been a little bit higher with off the plan, which is why you would expect a better than average return. I see that the risks have been increasing steadily over the last decade and they are at a level now, and have been for a few years, where I just think they are too risky.
You have a lot of foreign investment, which is having an impact on it. Essentially, buying off the plan is speculating. You’re punting on the fact that the market will go up, and that doesn’t always happen.
Kevin:  Is it more acute now than it was in the past? And if that’s the case, are there some off-the-plan purchases that do make sense?
Patrick:  Of course, there are going to be exceptions to the general rule view that they’re higher risk and some people will win – and people do. I’ve done off the plan investment 15 years ago and we did win out of it. But if I reflect on that, I have to admit we got lucky as much as we did some good planning. It was a fact that we did well but there was a bit of luck that came with it.
I just see that it’s got a lot harder these days. You have different rules and regulations with off-the-plan properties. We didn’t have the foreign investment impact, which I think people shouldn’t underestimate. The latest stats that I’m reading is that 24% of new off-the-plan property bought in Sydney was bought by foreigners last year. It’s 40% in Melbourne. It’s 33% in Brisbane.
These are very big numbers – and these numbers were less than 2% just eight years ago.
Kevin:  Given that we’re talking here about investment, what about owner-occupiers wanting to buy off the plan? Is that a different scenario, Patrick?
Patrick:  Sure. I’d see it a little bit differently from the point of view that you’re going to be living in it, and if you want to buy at a certain position and a certain view and in a certain building, then you’re going to need to take that commercial risk. You would hope that you would make money and the property would go up, but it’s not as big an impact on you if it doesn’t, because your primary place of residence is more of an emotional purchase rather than looking for a dollar return.
Also, if you’re thinking about having to finance these properties, some of them are not valuing up at settlement, so you could be in negative equity come settlement time, which is a risk that you have in trying to fund that property. So you want to have better than a 10% deposit. In fact, we’re seeing the banks saying that they want to see 20% and in some places and locations, 30% deposits. That is simply because the bank sees this as a higher risk strategy, as well.
Kevin: Why is established real estate often considered a lower risk than buying off the plan?
Patrick:  Simply because it’s there now – you can see it, you can get a return on it, you know what the rent is going to be on it – and it’s finished. A lot of these off-the-plan projects are delayed. I’ve seen some CBA Bank stats that show that one in four developments go broke or are taken over and finished by a different developer, so that obviously sends a message that there is higher risk involved in it, too.
When comparing an existing property to an off-the-plan property, you’re not knowing who is buying it. You can look at the records and see how many owner-occupiers versus how many investors in a Strata Report. You can talk to the Strata manager and get some information on that because they have a record of that. But you don’t know with off the plan. It could be that 100% of a building could be sold just to investors, and then say 20% of those people can’t settle or want to sell it, it can make the price fall.
Kevin:  Some of the developers move all around Australia and are very well known. Are they the ones who are more likely to complete and then be able to provide you with a product that they promised you at the outset?
Patrick:  There are some very reputable larger development companies that are running around, yes, and you can be pretty confident that they are going to finish the project. The challenge is that you don’t know that the price is there.
Again, I come back to this influence that wasn’t really there a decade ago, but this foreign investor influence because they buying because they want to get money into the country, into Australia. They are not buying with their checkbook and calculator; they’re paying premium prices. The locals are having to compete with that, because they don’t care who they sell it to; they’d rather get the most money for it.
So if they can sell it for an extra 10% – and in some cases well above that – to a foreign buyer, they would, rather that than sell it to you. And they are available to sell them to these. They can sell 100% of a new development to foreign buyers, and in some cases a big chunk of these buildings are being sold to foreigners. They are spending tens of thousands of dollars per apartment marketing these products overseas. That has to be paid for, so you’re going to be paying for that.
That’s why my view is that to reduce your risk, steer clear of it. Because you’re less likely to be buying an overpriced product, you can then get an instant return on your money if you buy an established property because you can rent it out the next day. You can see the history of the building. A lot of buildings have problems. I avoid buying anything less than 10 years old because I want to see the 10-year history of the Strata Report to know what issues the building has had and how they have dealt with them.
All buildings have issues. All new buildings have some issues – some a lot more expensive than others – so you don’t want to be hit with special levies and a lot of drama. Most of these issues will show up in the first five to ten years.
Kevin:  Patrick Bright from EPS Property Search and also as I said at the outset, the author of The Insider’s Guide to Buying Real Estate.
Patrick, thanks for your time this morning.
Patrick:  A pleasure Kevin, as always. Thank you.
Kevin:  One word comes up time and time again when we’re talking about property, and that is about affordability. There’s another word, too, that you need to be concerned about, and that’s serviceability. What’s the difference, and how do you apply them to your own individual situation? I’m going to ask that question of Andrew Mirams from Intuitive Finance.
Hello again, Andrew, and thanks for your time.
Andrew:  Hi, Kevin. How’s things?
Kevin:  Good, mate. Run me through the differences between affordability and serviceability.
Andrew:  That’s a great question, Kevin, and at the moment with APRA and our regulators looking over the lenders’ shoulders and just making sure that they have some strong prudent lending standards, the differential is really widening.
If we talk about affordability, that’s what you’re literally paying out in terms of what rate you’re paying and your interest-only payments or principal and interest payments, and this is where the differential is starting to widen. With rates at all-time lows, to hold money it’s arguably never been cheaper than what it is today, whether that’s a home loan or an investment property, etc., so with really low rates, that’s your affordability question.
Also, if they’re interest-only versus principal and interest – there needs to be some analysis around that – then obviously your affordability is really low because you’re getting a rent coming in and it’s not uncommon for that rent to meet the best part, or if not, if it’s positively geared, meeting all your interest repayments.
On the other side, you have serviceability, and this is where, of recent times, the regulators have been doing a lot of work around. What they’re doing is lenders are basically being asked to service, and even with the recent rate decrease, lenders haven’t adjusted their serviceability rate. So they’re still servicing debts at 7.5% to 8%, around that sort of figure, and if you have an interest-only loan of, say, a five-year term in there, you’re actually servicing it over only the remaining term, being the 25 years. So you have the double whammy of a shorter term with a higher interest rate that you actually have to meet your serviceability.
This is where clients and a lot of people aren’t quite understanding the difference between what it’s actually costing them – which is very, very low – versus now what the regulators are saying: “No, if clients can’t meet those standards, you’re not to lend any more money to them.”
Kevin:  That buffer is increasing, I take it, between affordability and serviceability.
Andrew:  Absolutely.
Kevin:  That’s largely driven by the banks trying to be conservative, I guess. Is that right?
Andrew:  Well, it’s not really the banks. The banks make money by lending money, Kevin, so that’s not lender driven; this has very much been the regulators. In the middle of 2015, they came out and said, “Right, all the lenders, you’re either going to have to put up and raise more capital, or you’re going to have to start to change your standards.”
They were worried about some of the lending standards that they didn’t believe were that prudent, and I agree with a lot of the measures. Really high LVRs, 97% LVRs, to people investing in investment probably just because the market’s going, I think, wasn’t prudent. There were some things around the serviceability measures that I don’t think were prudent.
I do think they might have over-extended a little bit of recent times because rates being so low, so if you think about all the banks servicing at 7.5% to 8% as a ballpark, but that’s about where it is, I don’t think any time soon we’re going to be having rates back up there, but that’s what lenders are now being asked to do it at by the regulators. And if they don’t tack on then the regulators are just going to say, “Right, you can just put more capital aside,” and that’s a greater cost to a bank or a lending institution than actually making a few tweaks to their servicing calculator.
Kevin:  That figure you mentioned, 7.5% to 8%, that’s the figure that the bank calculates whether or not you can actually service the loan. Is that right? They say, “If the interest rate were at 7.5% or 8%, could this person pay it back?” Is that what you’re saying?
Andrew:  Yes, correct. Absolutely. You’re probably looking at most people at the moment with rates at around the low fours, 4% to 4.5%, so you’re actually putting a 3% differential. Now, that’s been around for a long time. It was normally about 2% or so, but as rates have been coming down, the banks have just held it at that rate, so as that gap widens, so just think about that’s a 3% differential on 4.5%, it’s 66% loading, that’s pretty significant when you have all-time lows.
That’s what the regulators have concern over, that with really low interest rates, people are going to get themselves in too much debt and that’s going to create a market that if and when rates do increase down the track, there might be [4:57 inaudible] and people who are in a position that they just can’t service their loans.
Kevin:  Are you seeing a lot of mortgage stress at present?
Andrew:  No, I’m not. I guess there are certain markets where that is the case. I’m fortunate with our investor clients that I think we set them up with big buffers so that they have the equity and the capacity to be able to manage their loan, but at the same time, rates are at all-time lows, so if there is some mortgage stress out there then those clients probably shouldn’t have been lent to in the first place. And that, again, is what the regulators are trying to avoid.
Kevin:  Do you work on the same kinds of buffers that the banks work on? In other words, are you still calculating at 7.5% or 8%, or are you even higher?
Andrew:  No, we’re bound to use those sort of figures. I work on a buffer as well as an equity buffer, so the clients have either cash or equity aside so that if and when… See, when you’re buying a property or an investment property, it’s about buying time; it’s not actually about buying the property.
What the rates are today, you know if you’re taking a loan over 30 years, things are going to go up and down, so it’s about having the time on your side so that if there are any short-term blips in the road where someone might lose their job and in between getting a new job, you need to have some equity there to make sure you can make your commitments while that’s happening. Hopefully, there’s enough buffer there that’ll allow people to get back on their feet.
In terms of servicing rates, yes, we’re bound by those rates as well by the lenders. That’s just the playground that we’re all playing on at the moment.
Kevin:  Yes, well said. Andrew Mirams there from Intuitive Finance, and an interesting look behind the scenes at how you are assessed if you’re going to go for a loan.
Andrew, thanks for your time.
Andrew:  My pleasure, Kevin. Thank you.
Kevin:  There certainly is a lot of uncertainty surrounding the property market right now, much of it related, of course, to the intense debate between the government and the opposition about housing tax policy, including treatment of capital gains tax and negative gearing, and whether or not it’s going to be good for property.
It’s also understandable that many, many investors are considering putting their plans on hold until after the election. Is it such a good strategy? This is highlighted in a question that I received from Adam. Adam, thank you for your question, which I’m going to read now and then refer to Michael Yardney.
“I’m just wondering what you or any of your experts may think about investing in this current time with an election looming and both parties with very different views on negative gearing. Do you think that by buying now, pre-election, you could end up in a bit of strife should Labor come into power and do what they say they’re going to be doing with negative gearing?”
Adam then goes on and makes a few nice comments about the show, so thank you for that, Adam. It is a great question.
Michael, I know there is a lot of confusion about this. You can see that in Adam’s question, can’t you?
Michael:  Definitely. A lot of people are wondering. Maybe we should start off with what are the proposed changes that are being discussed a lot? The first thing is that the Opposition proposes to stop negative gearing of established properties that are bought after the 1st of July, 2017. In other words, you can only get negative gearing for new properties.
The other is that they’re talking about capital gains tax of any investment property, both old and new, bought after the 1st of July, 2017. They will be subject to more capital gains tax. You’d be paying 75% of any gains that have accrued over time compared to 50%, which is the rate today.
Kevin:  What’s the thinking behind this? Why are they doing this?
Michael:  Labor is saying they’re doing it to make properties more affordable, but in my mind, it’s probably to raise additional revenue. They’re also saying it’s to increase housing supply to make properties more affordable. But Kevin, there are lots of places in Australia where there is oversupply of properties; it doesn’t make them more affordable. The only way you make housing more affordable is to make it cheaper, and I don’t think those 8 million people who own homes in Australia actually want their homes to go down in value, Kevin.
Kevin:  Yes. The other thing that’s confusing a lot of investors, too, is that if Labor do win, they’re not going to come in and make it retrospective on current investment properties. If you have a property that’s negatively geared, you’ll be able to continually negatively gear that until you sell it.
Michael:  Correct, Kevin. The other thing is that there’s a window of opportunity when this new regulation comes in on the 1st of July. In my mind, that’s going to create a boom in established properties for 12 months. It will bring forward demand just like it did when we knew there was an end date to first-home owner grants or stamp duty concessions.
I also believe after that, though, many investors are going to get burned. Negative gearing losses are only worth enduring if you’re going to get capital growth at the end. But it’s going to drive people to the new and off-the-plan properties and the new estates where there is minimal capital growth.
They’re going to own what will in the long-term probably be secondary properties, and if they choose to sell – and many have to because they end up having a bit of financial trouble – those investors are now going to have a limited market to sell to, because what’s going to happen is they’re going to have second-hand properties rather than new properties.
Kevin:  What do you think property investors should do? I guess that is the question that many people are asking.
Michael:  Good question, Kevin. My thoughts are based on investing through numerous checks, changes, and homebuyers’ incentives over the years. Most of the time, they were supposedly going to seriously impact the market. Remember they were going to remove negative gearing in the 1980s? I invested through that. There was the introduction of capital gains tax and that was going to wipe out property. There were these reductions of GST in the early 2000s, and that was going to make properties too expensive. They increased stamp duties, they decreased stamp duties, they gave us First-Home Owner Grants.
Interestingly, history has shown that investors will thrive if they don’t let all these tax changes distort their asset selection process.
Instead, they really have to remain focused on accruing quality assets and then holding them for the long term. History seems to have shown that the investors who have lost out are the ones who are purchasing the wrong assets to try to take advantage of the latest tax changes or schemes
I guess what that means if you were really to invest today, do it now rather than putting it off for several months just to see the outcome, because the consequences really never seem to matter as much as the politicians would like us to think they will.
Kevin:  Indeed. That’s great advice from Michael Yardney, Metropole Property Strategists.
Michael, thanks again for your time.
Michael:  My pleasure, Kevin.
BONUS:   See Ken’s ebook on buying property in your Super Fund and you will also get access to some video presentations on the same subject.
Kevin:  I want to address an e-mail that I received from Cindy. Cindy lives at Murrumba Downs, which I think is in the northern part of Brisbane. My apologies if that’s wrong, Cindy. More importantly, what did you say in your e-mail? Cindy writes, “Hi, Kevin. My Sister and her husband have just withdrawn all of their super money to invest in real estate.” We’ll qualify that in just a moment.
“They’ve used their money as deposits on three separate properties with all of them being cash-flow-positive by just a few dollars a week. This whole idea is new to me and I have a lot of reluctance to pull my money out of super, but it seems like a good way to make money now and also have multiple properties at retirement. Could you please talk about this on your show and discuss both the risks and the rewards?”
Thank you for your e-mail, Cindy. I’m going to refer this to Ken Raiss from Chan & Naylor.
Hi, Ken. Thanks for joining us on the show.
Ken:  Thank you, Kevin. A great question from Cindy.
Kevin:  It is a great question, but let’s firstly qualify. What concerns me is the comment that they have withdrawn all of their super to invest in real estate. Can you actually do that?
Ken:  I picked up on that. Look, the short answer is normally no. There is what they call a condition of release before you can take your money out of super, which for most people is at age 65, at retirement. There are a few other conditions that you can get it a bit early.
Kevin:  It could be the terminology from Cindy, too. Maybe it’s just they’re investing their super money in real estate.
Ken:  It could be that. You have to be very careful if you take money out when you’re not supposed to because the ATO can penalize you up to 50% of the capital value of your superfund if you do something wrong – plus penalties.
Kevin:  Warning noted. Let’s assume that it’s going to be invested in real estate because there are a number of questions I want to ask you, the first one being about positive cash flow. Does that make sense, or should it be negatively geared in a superfund?
Ken:  We should never use negative gearing as an investment strategy. Long term, you’ll lose money. But you have to look at the investment as an investment first, not “Do I buy it in super or outside?” It has to be a good investment to start off with. What we’ve been finding over the reasonable long term is capital growth is what gets you retirement. It gets you cash flow eventually. It’s what gets you in the money.
Good capital-growth properties tend to be a little bit negative at the beginning, but then because you get increased rent and if you ever sell it, you get a better capital value, I’d be looking at that sort of property, which is what I personally do. Then do I put it in super or outside?
Kevin:  I want to talk to you about how you put it in super, but firstly, negative gearing is just a name given to property… It’s more of an outcome; it’s not a strategy, is it?
Ken:  Correct. Negative gearing is “My expenses are more than my income,” and it applies to businesses, shares, everything. It just so happens to have been a label that they’ve put on property in current times.
Kevin:  Largely around the fact that they’re probably going to put a 20% deposit in, which means you’re borrowing 80%, which probably means it is going to be negatively geared. However, if you put 50% into the purchase price, it’s possibly going to be positively geared, but you’re putting in more capital.
Ken:  Correct. You’re positive on the rental income, but there’s an opportunity cost of using more of your own money. You have to weigh up both of those.
Kevin:  I think it was valuable to just talk about that and relate that back to the question. Can I take you in a different direction? How do you buy property in a super fund? Do you need to set up a trust?
BONUS:   See Ken’s ebook on buying property in your Super Fund and you will also get access to some video presentations on the same subject.
Ken:  Yes. You need to have your own self-managed super fund. You can’t go to one of the big super providers and tell them to buy you a property. You have to have your own self-managed super fund. You’re allowed to borrow, and you can buy the normal types of properties that everybody buys. You can do renovations on them. You can do extensions. There are just different rules on whether you use borrowed money or super money if you do an extension.
The big no-no is you can’t buy a property in super with debt, bulldoze it, and then build a duplex, for argument’s sake. The asset you buy has to be the asset that you end up with; the property you buy is the property you end up with.
You have to have a self-managed superfund. You have to set up a second trust to hold that property. That’s because the bank can only take the property as security. They can’t take all of your other super fund assets as security. That gives you, as the super fund member, a bit of safety. The banks may want a personal guarantee, but that’s okay.
We find a lot of banks are lending 80%. Interest rates are little bit higher than if you borrowed outside of super, but the advantage in super is once you retire and once you’re in pension stage, there’s zero tax on the rent and there’s zero tax on the capital gains.
Property in itself is a long-term asset. You should be buying it to take you through a couple of cycles, and super is a long-term investment vehicle. So, it’s almost a marriage made in heaven. The structure is long-term and the asset is long-term.
If it is a property that you’re buying that’s going to be negative, meaning that the rent isn’t enough to cover the interest, you fund that shortfall with your super guarantee, the 9.5% that you’re funding into super all of the time, any of the profits that the other money you might have in super is making, or thirdly, you can contribute more into super.
As long as you’re within your contribution caps – that, until the Budget, was $30,000 or $35,000 per year – if you bought that property outside of super and it was negatively geared, you can still effectively negative gear it in super against your wages by just salary sacrificing that amount of money into super. By that, I mean contribute more money into super to absorb that loss. While you’re working, you’re getting all of the normal tax benefits against your wages, but in retirement, it’s in a tax-free environment.
I have four steps you should look at if you’re going to contemplate buying in super. The first one is talk to a professional to make sure the type of property you’re wanting to buy is allowable. The second one is then go and get some pre-approved finance. Thirdly, set up the structures. Then fourthly, go out and buy. That will keep most people out of trouble.
Kevin:  Ken, I forget which point it was now, about setting up the structures, but getting back to Cindy’s original e-mail saying that her sister and her sister’s husband are buying three separate properties in their super fund, that means they’ll have to set up three separate trust accounts because you can’t have one trust account for more than one property. Is that correct?
Ken:  Correct. You have the one self-managed super fund, but that additional trust that will hold the property is only allowed to own or hold one asset at a time. But that’s fairly minimal costs – those trusts that hold the property – and you don’t have to do a tax return for that trust that holds the property. You only do the one tax return for the super fund as if it was all in the one super fund.
Kevin:  But it does actually make a slight problem when you’re purchasing the property: because you are buying it in a trust, that takes a little bit longer for that process.
Ken:  Correct. We’re finding it can take the banks an extra couple of weeks in their approval process. The big thing is they tend to charge you a slightly larger interest rate.
Thirdly, sometimes they may not give you the 80% LVR. It might come down a touch. But about 80% is the maximum, whereas outside of super, we’re seeing banks now lending anything up to 90% or 95% again. But in super, assume 80% cap on your loan in relation to the valuation and a slightly higher interest. But you’re paying a little bit more interest today to have it tax-free later, so if you do the numbers, you’re well ahead.
Kevin:  Ken, we’re out of time, unfortunately. I can talk to you for such a long time about this because it’s such a big issue. But thank you for your time. Ken Raiss from Chan & Naylor.
We’ll talk to you again real soon, Ken. Thank you.
Ken:  Thank you, everyone.
BONUS:  See Ken’s ebook on buying property in your Super Fund and you will also get access to some video presentations on the same subject.
Kevin:  Interested to read during the week that John Symond, founder and Executive Chairman of Aussie Home Loans, made the comment that property prices would fall 10% to 20% under Labor government. John joins me.
John, thank you for your time. Is this all around negative gearing?
John:  Yes, it’s around the proposed policy of the Labor government, or Labor, if they were to form a government, to effectively abolish negative gearing on existing properties going forward, so if you were to buy a property, you won’t be able to claim negative gearing benefits.
I’ve made it very clear that totally hitting it on the head is insane and can cause property falls. I’ve previously said that there are improvements can be made. Improvements can be made to anything, including negative gearing, but there’s a big difference between making improvements and abolishing it. Of course, my concern is Labor is looking at abolishing it, not improving it.
Kevin:  I guess what concerns me and what concerns a lot of people is the lack of research around this issue and really getting an understanding about it, John. Your figures of 10% to 20%, where do they come from?
John:  Look, that’s anecdotal, Kevin. Who knows? All I can say is I’ve been in this business of property and home loans for 50 years. I’ve seen governments come and go. I’ve seen a lot of good policies. I’ve seen a lot of crazy policies. I have a reasonably good knowledge of housing, and it is my opinion – and my opinion only – that if Labor was to abolish negative gearing going forward, you would create an oversupply of properties hitting the market, an undersupply of buyers, and that can only mean one thing for properties, and that’s properties dropping value on existing properties.
For the government to say, “Oh, but you’ll get negative gearing benefits on new properties,” well, a day after you settle that new property, it becomes an established property, and who’s going to buy that property when you don’t get any negative gearing benefits going forward?
I just feel very frustrated when politicians don’t consult industry players who might know more than they do and might know more than academics who study statistics only, so I’m very critical about it. I’m not talking up my own game, because I’m someone who always says what I really do believe in, and I believe that this is fundamentally potentially a disastrous policy if ever it was implemented.
Kevin:  Yes, they seem to be treating it very much like a black-and-white issue: it’s either there or it’s not. You mentioned earlier in our chat that maybe they should do some enhancements around negative gearing. What would you recommend they look at, John?
John:  Well, they could possibly put a ceiling cap. Look, you see, probably 80% of investors are PAYG, hard-working moms or dads earning less than $80,000 a year. If they want to protect them that’s fine, but put a ceiling limit where you might not be able to claim above a certain dollar threshold, and anything over that goes in as a capital cost, so that in the future if ever you sell the property and if you sell it for a profit, you can then add those capital costs to the cost base.
There are many ways you can improve it, and that’s what I was saying when I made comments on Q&A three years ago, but to go and totally abolish it just makes no sense whatsoever. Labor says, “We want to help first-home buyers.” No one wants to help first-home buyers better than I do. We all want our kids to be able to go out there and achieve the great Australian dream of home ownership.
But you don’t go and smash the other 80% and hurt those, particularly, as I said, most of them are moms and dads just doing their best to build up a nest egg for their later years in retirement.
Kevin:  There is a school of thought as well that if Labor do, in fact, win government and implement their policy that it will likely have the reverse effect where there will be a rush of investors wanting to get in before negative gearing does actually shut down. In fact, there are some agents around Australia reporting that that is already happening, John.
John:  Well, that can happen, as well. Again, any surge – up or down – is not a good thing to ensure we have a healthy housing market. We have to remember the housing industry has underpinned the Australian economy the last four years while we’re transitioning from a commodities country to a non-commodities country, and why play with fire? Why take a huge risk to destabilize the one thing that’s propping up the Australian economy?
Again, I can’t see any logic, and it’s crazy, and whether this policy came from Liberals, Greens, Labor, I don’t care; I would still make those comments, because I think it’s crazy and it’s dangerous and it will hurt all Australians.
Kevin:  Yes, once again, it gets back to what you said earlier, too: they should really be consulting with the industry, people like yourself, and it’s interesting to see that real estate agents around Australia have actually banded together, as well, to come out and also echo the concerns that you’ve just said.
John:  Let’s hope that Labor wakes up to themselves, do some homework, and as you say, talk to the industry, talk to property developers, real estate agents, real estate industry, lenders, banks.
All they have to do is talk to banks and say, “Well, how will this impact bank balance sheets?” You have big Australian banks, half their balance sheet is housing loans. If all of a sudden the value of their balance sheets drop by X percent, the ratings agencies aren’t going to be too happy, and that might cause banks to lend less money. Is that what we want?
There are always unintended consequences. I’m not suggesting for one minute Labor is going out with not honorable intentions; what I’m saying is they haven’t done their homework and it could have catastrophic repercussions, and they have to be very, very careful, particularly when the world globally is in a very uncertain state. We’re hanging onto the Australian economy, doing the best we can. Don’t do anything so extreme to tip it over. That’s my concern.
Kevin:  John, great talking to you. Thank you very much for your time today.
John:  Good, Kevin.
Kevin:  Thank you.
Kevin:  There is no doubt it’s a national obsession for people to want to know about real estate, what’s happening, what the sales are like in their area, but more particularly, the question that I’m asked the most often is “What is my place worth?” I can tell you now that there is an app that will do exactly that for you. All you have to do is go to the app store or even into Google and type in “What’s my home worth?” and you’ll see an app there called It was developed by my next guest from the USA, Todd Miller.
Good day, Todd. Thanks for your time.
Todd:  Thank you very much, Kevin.
Kevin:  I understand that even though you developed this for your own marketplace – you’re an agent in America – to put you in touch with people who wanted to know what their place is worth, it’s now gone viral; it’s across the States. But I’m surprised that you are actually getting people out of Australia as well who are responding to this. Has that surprised you, Todd?
Todd:  Yes, it’s a big surprise. We made this app for the US to let consumers find out what their house is worth and get a pretty accurate value doing it, and what we found is people in Canada, the UK, and Australia are using the app.
Kevin:  I guess most people want to know, what their place is worth but there are some big differences between how real estate works in America and how it works in Australia. Have you been able to overcome those? Is it going to be user-friendly for us in Australia?
Todd:  Sure. It doesn’t really do anything with the real estate transaction or involve how real estate is sold; all it does is it’s a tool to let you source some information by yourself to an agent. The app lets you take pictures of your house and enter any notes, anything you think is special about the house. Of course, you put the address in there, and the agents can pull the public data, they can look at the pictures you’ve put in, and then they can give you a better idea of what your house is worth.
The great thing is if you have five or six agents in your postal code, you can get five or six responses independently that can all tell you what they think it’s worth. If you ever want to call one of them with more questions, you get all of their info, but they don’t have the ability to contact you.
Kevin:  That was going to be my next question because I can hear a lot of people saying, “Oh, no. The last thing I’d want is six agents calling me.” So they are not going to get my contact information?
Todd:  No. You can use the app anonymously as a consumer. We certainly don’t give it to them. We’ve done hundreds in the US and I’ve never had a consumer call me and say, “Hey, a bunch of real estate agents have been calling me since I used your app.”
Kevin:  Okay. But they will obviously get my address; they have to have that because that’s how they are going to do the valuation. Have you got any figures on how close some of these valuations have been?
Todd:  We’re actually surprised that the agents tend to come in very close to each other, which tells me that they are doing a good job looking at comparable properties and getting a market view of what a buyer might pay versus the automated valuations that you get online that sometimes don’t take into account specific features of your house, your exact neighborhood, your lot, and all of that.
Kevin:  Okay. Is there a price? Do I have to pay for the app at all, Todd?
Todd:  No, it’s a free app. You can register or use it anonymously. You take pictures, enter your address, enter notes, and then you just sit back and you’ll get notified as agents respond with a value and how they came up with that.
Kevin:  I’ve used this, both as an agent and as a consumer, and I found it to be really, really easy to use. It’s a very simple app. It’s nice and clean and works extremely well.
The app again is called, and you’ll find that in the app store, or as I said at the start of this interview, just Google “What’s my home worth?” Look for that app, and you’ll see it there. It’s a free download.
Great service, Todd. Thank you for joining us, and great to hear that the world is getting smaller as we start to come together.
Todd:  It’s getting smaller but at least people are going to know what their house is actually worth.
Kevin:  Indeed. Thanks for joining us, Todd Miller. Thanks for your time.
Todd:  Thank you, Kevin.

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