The Bitcoin juggernaut – Graham Cook

There’s been a lot of talk about Bitcoin and its increased value in such a short time.   You might be a bit like me and wish you had jumped on the bandwagon a little while ago with the value that it is now.   But is it such a good investment overall?  Graham Cook, Insights Manager for Finder, says it’s not really a foolish investment.
Kevin:  There’s been a lot of talk about Bitcoin, watching its value. I guess you’re probably a bit like me and wish you had jumped on that bandwagon a little while ago with the value that it is now, but is it such a good investment overall?
Graham Cook, who is the Insights Manager for Finder, joins me, and he says that it’s not really a foolish investment.
Good day, Graham.
Graham:  Good day, Kevin. How are you doing?
Kevin:  Good, thank you. Wouldn’t you have loved… Maybe you did get on Bitcoin. Did you?
Graham:  I tell you; I actually ghost-wrote a blog about Bitcoin about a year ago when it was about $2000 and was talking about how great it would have been to be on the gravy train at that point. And now it’s $11,000 U.S. and God, I wish I had invested then.
Kevin:  Isn’t it funny? We talk about this all the time and we say, “Well, it’s never too late.” Is it too late, do you think?
Graham:  The thing is nobody really knows. You can go onto the Fairfax and news media today and you can read completely conflicting articles about whether or not it’s a good idea to get involved in Bitcoin.
The price has been on an absolute wild ride this year. We’ve seen it peak at $10,000 and then possibly predictably drop a little bit as it hit that ceiling – that arbitrary ceiling, really – and then start to bounce back since then.
The thing is whether this is a bubble or whether this isn’t a bubble… It definitely looks like a bubble, but nobody knows when that bubble is going to burst. Is it going to be at $15,000 U.S.? Is it going to be at $250,000? It’s all wait and see at this point.
Kevin:  It’s a bit of a barometer, isn’t it? When you see it come off, maybe people are now saying it’s peaked; it’s not going to go any further, they wait and they see that it doesn’t fall, so they jump back in and it increases again in price. You could almost watch it like a barometer.
Graham:  Yes. There’s an element of psychology involved with these things, as well. The value it’s increased at is faster than, I think, any commodity we’ve seen. It has a Gold Rush fever almost. You’re seeing the grandparent investors getting involved now and everything. Whether this will end up being a party for everybody involved or whether there are going to be tears at the end of this road, we don’t really know.
But we did ask economists in our monthly REA survey… So this is leading economists in Australia; it’s the biggest survey of its kind. We asked them if they think getting involved in Bitcoin is a foolish investment, and 80% came back and said they don’t think so.
I was expecting it to be a bit more disapproval. If the economists are on board, then maybe it is a wise investment.
Kevin:  Okay, we’ll keep any eye on that one. A couple of other things I wanted to talk to you about, too, Graham, if I may. One is the royal commission into the banks. What’s your feeling about all of that?
Graham:  The thing is this has been bubbling for quite a while. It’s three or four years now that people have been asking for royal commission. The banks have been saying we don’t need a royal commission. The government has been saying we don’t need a royal commission. The opposition has been saying we do. But it’s been going on for so long, it was almost inevitable at this stage.
What triggered it in the end was all four banks coming and saying, “Okay, let’s have this commission. Let’s kill this uncertainty in the market and this doubt against the banks.” They want to clear the air.
Potentially, by the fact that they, themselves, have asked for it, it seems that the banks, anyway, don’t think there are too many skeletons in the closet that could be uncovered by the inquiry over the next year, but of course, time will tell.
Kevin:  Of course, it’s also the fact that they get a little bit more control about what the commission will cover, as well.
Graham:  Yes, exactly, and they’ll have the government running it more closely than if it had been driven by opposition parties. It’s also going to be a relatively short investigation; it’s reporting back in a year’s time. But once you start to open those Pandora’s boxes, who knows what’s inside?
Kevin:  Do you think it’s going to have any impact at all on what the RBA may do over the next, say, three or four months?
Graham:  I don’t know if the RBA is going to be doing an awful lot. That actually leads into a question about interest rates. This is another one that we’re asking our economists every month. We’ve seen no movement at all now in the RBA cash rate or well over a year. I think it’s actually 16 months in a row. I tell you; it’s been getting quite difficult to write about the cash rate every month when it hasn’t been doing anything; it’s just been sitting there.
But the economists are now saying they’re not expecting another rate movement until at least the third quarter of next year. Still no movement in January, so we’re talking six months from then of stagnant cash rate, and then potentially a movement after that.
Kevin:  Graham, on the tail end of that, do you think that borrowers should now be locking in their interest rates with the bank?
Graham:  Now is definitely a good time to look at locking them in. The thing is in this low-interest world, the only way, really, the cash rate could potentially go is up. The question is when that happens, but it’s definitely heading in that direction.
You could have three or four months you can wait before you lock in your fixed rate, but we’re definitely look at rates moving up towards the second half of next year, so it would be a good time to look at locking in your rates around now.
Kevin:  What are the trends like for 2018? What’s going to be happening as we’re entering a brand-new property investment year? What’s the inside running? What are they saying about next year? What’s likely to be happening?
Graham:  There are three main trends that are being signaled by economists for 2018 that we could see from the survey of 40 or so that we conducted this month.
The first thing is we’re still going to see growth in the capital cities but we’re going to see slower growth. We’re going to see single-digit growth, definitely in Sydney and potentially, across the other capital cities – with some surprising cities that they’re picking as exhibiting the highest growth next year. Hobart is one that came out across the board that’s going to be a good investment.
So, continuing increasing property prices in houses – slower than previously, though. But where it’s really going to change is in terms of apartments. We’ve seen a lot of economists come out and say that the over-supply of apartments, the potential glut of apartments that’s about to hit the market could lead to a softening of unit prices next year. I actually saw one economist refer to “the collapse of the apartment market,” so price is definitely going to be more volatile there.
Kevin:  Just on that point, before we go any further, Graham, are they highlighting any particular cities, or was that just a general statement?
Graham:  Melbourne was the one that came up most regularly in terms of cities, and Sydney as well. But definitely, there are a lot of cranes across the Melbourne skyline. There are a lot of apartments going to come onto the market there.
We’re also seeing potentially a sign of an issue with apartments in Sydney, for example. Some developers are now offering discounts of $50,000 for first-home buyers trying to buy units in areas that have a high concentration of units. So, there could be a potential sign that they’re starting to sell those units. If you’re going to invest in apartments, definitely it’s good to be cautious in this coming year.
Kevin:  What a lot of people have lost sight of, too, is the fact that that vacancy tax is about to click into play in Victoria as of January 1, and some people are saying that it could bring as many as 20,000 extra units onto the market in the Melbourne market alone.
Graham:  Which again will be pushing prices down and will definitely make it a volatile investment. If you’re going to invest in property, keep it towards the inner parts of the city and keep it in houses.
Kevin:  Okay, and some of the other tips that are coming from these economists?
Graham:  Aside from slow growth and apartment issues, the third one that came through was something we’re calling renovesting. With the property ladder becoming increasingly difficult to climb, we’re expecting to see an increased number of Australians next year trying to increase the value of their property through actually renovating and getting new kitchens and new bathrooms and new bedrooms and stuff.
That’s been cited by a handful of economists and something we’ve seen people mention a little bit in our consumer survey as well, so we expect that renovesting to be a bigger trend in 2018.
Kevin:  What’s involved in renovesting?
Graham:  Literally, you have some cash, you’re trying to spend it somewhere, you can’t move up the property ladder, so you decide to go for the new kitchen, you decide to get the deck laid outside.
These small changes to the appearance of a house can actually make quite a big difference to what the house will make on the end, especially if it goes to auction. It’s one way that we’re increasingly going to see Australians trying to add value to their homes.
Kevin:  It’s a bit “Improve rather than move,” isn’t it?
Graham:  “Improve rather than move.” That’s a good phrase. I’m going to use that.
Kevin:  You’re welcome to use that. I won’t charge you for that. There is a program on television that springs to mind, Love It or List It. I find it’s intriguing to watch what happens with someone when they believe that they want to make a move and then someone comes in and renovates the house or improves it, and they fall back in love with it, and most times, they’ll elect to stay as opposed to moving.
Graham:  Yes. Often, it’s surprising what a lick of paint can do in terms of changing your environment – definitely a trend we expect to see more of in the future.
Kevin:  Indeed. Graham Cook who is the Insights Manager for, my guest. Thanks for your time, Graham.
Graham:  Thank you, Kevin.

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