Today’s show features the co-host of Location, Location, Location Australia and partner at Empower Wealth, Bryce Holdaway.
According to Bryce, there are some clear signals about how buoyant the market will be this year and he tells us about some markets that he believes will show good growth this year.
Kevin: This time every year, we always like to take a look ahead. It’s easier to look back, but what’s coming up into 2015? I’m talking to Bryce Holdaway now who is the co- host of Location, Location, Location Australia – a great show on LifeStyle television – and also a partner and director at Empower Wealth along with Ben Kingsley.
Good day, Bryce. How are you doing?
Bryce: I’m good, Kevin. How about you?
Kevin: Good mate. I was just watching your video that’s on the website there, too, where you and Ben did your overview of 2015 or your look ahead. I thought we might just spend little bit of time and talk about that. Where do you see the market heading this year?
Bryce: It’s an interesting question when someone says, “Where do you see the market heading?” I think the thing is that anyone who has been investing long enough knows that Australia is not one big market. It’s made of hundreds and hundreds of sub-markets.
I guess probably the major story of 2015 is that there are a few cycles that are probably at the top end, there are a few that have probably had a pretty good run of late, and there are a couple that are looking really good in terms of the upside.
Kevin: We’ll talk about a few of those. But it was certainly demonstrated in 2014, wasn’t it, just that variety in markets around Australia?
Bryce: Yes. As you know, I travel around the country, and it’s quite a contrast. It’s interesting. Even the Reserve Bank is trying to do a little bit of jawboning and to try and put a lid on maybe the problem children of Melbourne and Sydney. But they’re having a really tough time because any measure that they do – whether it’s interest rates, macro-prudential tools, whatever they do – it will probably have an impact on Melbourne and Sydney, but unfortunately, it will really negatively impact the markets that need the help the most. It’s a bit of a challenge.
Kevin: There was even talk this morning about taking another look at a negative gearing, and I think that’s a pretty dangerous path to go down. It’s easy to say investors are pumping up the market, but I tell you what, take them out of the market, and what it’s going to do to rents?
Bryce: That’s the other challenge, isn’t it? They tried in 1983. It was a little bit of a disaster. They had to bring it back in 1985 and give you some sort of depreciation benefits to entice the investors back. If the government actually takes it away, it creates a huge burden for them to provide the rental accommodation.
But let’s be honest and get to the crux of it. Probably most politicians have got some form of property investment themselves, so they’re unlikely to cut off their nose to spite their face.
Kevin: Are you suggesting self-interest here, Bryce?
Bryce: I wouldn’t suggest that at all!
Kevin: In your video with Ben, let’s have a look at what are some of the good markets to be looking at around Australia, and where will you be talking to your people through Empower Wealth?
Bryce: Look, we are suggesting that the opportunity moving forward is that you really want to try and get some yield play, where a part of the cycle is getting some upside. We’ve seen that Brisbane has an opportunity to buy there and get good yields at the moment, because they have been flat for a little while as a combination of probably post-GFC, a little bit of natural disaster, and a little bit of negative sentiment. The upside of the cycle looks pretty good in terms of growth. But right now, we are buying stuff there that’s getting 5%, 5.5%, and in some cases 6% yield. The opportunity is looking good.
Kevin: What about other areas? You did touch on briefly there Sydney and Melbourne and how hot they are. But what’s your view on the future there?
Bryce: I think that you’re re always going to find good opportunities in those two big metropolises in this country. I say all the time that they’re in the top 100 cities in the world as measured by population, so it’s never a bad idea to have good real estate in those cities. But given that they’ve had such a strong run, probably selection is more critical than ever.
There’s always going to be a bit of an owner-occupier contingent in any city, and that’s what you really want to be focusing on, because I think the investor sentiment is largely looking outside Melbourne and Sydney in 2015.
I even think that there are opportunities to run the ruler over places like Adelaide or Hobart, because they have got such low entry points. They have got really good yields, and if you can buy in the very few unique and specific suburbs in those two cities, there could be some upside there.
But for the safety of having a larger population base, a bigger economic base, you would probably stick to Brisbane.
Kevin: What about some of the stronger regional markets, like Townsville, Cairns? I know they’re based primarily on tourism, but also Newcastle, New South Wales, some of those strong regional areas, Bryce?
Bryce: Yes, I think that Newcastle in particular will get a ripple effect of Sydney being so strong. You can still get the lifestyle. You still have the access to the capital city job market there. I think that particular market is good.
I even think if you are looking at places like the Gold Coast, or you talked about Cairns, they’ve been depressed markets for so long that if you do run the ruler over, you might see some opportunities.
Now I’m certainly not suggesting that you’re investing in those markets, because there is a little bit of speculation to it. But given that the price point you’d suggest is at the bottom, so the downside risk would be low, given that there’s some yield, there might be some upside that gets some ripple effect of the fact that people have had some good results in Melbourne and in Sydney and they’re looking for other opportunities, particularly to help them retire and get some yield
Kevin: Always great talking to you, Bryce Holdaway. Thank you very much. Bryce, of course, is the co-host of Location, Location, Location Australia and with Ben Kingsley at Empower Wealth. Check out their videos, too. There’s a huge number of them on their website at EmpowerWealth.com.au.
Bryce, always welcome anytime, mate, and great talking to you.
Bryce: Likewise. Thanks, Kevin.