Noel Whittaker 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 ‘haves’ and the ‘have nots’.
Kevin: 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.
Noel, good to have you in the show.
Noel: Just an ordinary bloke.
Kevin: I always value your opinion, Noel. What do you see ahead for the property market in 2017? What are the challenges do you think?
Noel: I think the biggest challenge for anyone who wants to be into property is finding a good deal. I’m shocked at the prices some people are paying, especially in non-residential. We had a place going at the coast this week that sold for 3%. I think that’s crazy.
I think the biggest challenge is finding a good deal. The old thing about property: you buy well and you add value. I think that’s going to be the hardest thing for people.
Kevin: What about commercial? Is commercial property a good proposition for next year, Noel, talking about returns?
Noel: Having been so burned when I got mixed up in a development years ago, I would never touch it personally. I go through syndicates – people like [1:16 inaudible] I like very much. I invest with [1:18 inaudible]. But I would never again go my own [1:21 inaudible] because I don’t like the thought of a two- or three-year vacancy. [1:27 inaudible]. There are plenty of good outfits out there where you can invest in non-residential property using professional methods.
Kevin: 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’re lending to investors. Is that a concern, do you think, that they’re concerned about the property market?
Noel: I just think it’s silly. Normally, if you’re 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] 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’t understand what the banks are doing, to be honest.
I also notice that they tell me that they’ve raised servicing requirements to interest rates plus about 3% [2:33 inaudible]. In other words, if rates are currently 4% – and I used to base the budget on if they went to 6% – they’re now adding 3%, saying “We’ll do your repayments on the basis that they went to 7%.” I’m not saying they will, but I think it’s a good thing to do. But they’re certainly tightening up their lending.
Kevin: Were there any surprises for you during 2016 with the market that you probably didn’t see coming?
Noel: Where do we start? What we’ve 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’s from Stanford who’s now invented the American Dream Index, because people talk about the American Dream but they can’t quantify it. He’s just saying it proves that ordinary people are worse and worse off.
What you’re 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’t have them now. So what we’re seeing is the increasing polarization between the haves and have-nots.
They’re seeing it now in Britain with Brexit. We’ve seen it in America with Donald Trump. We’ve seen it here with Pauline Hanson. People are getting sick of politicians and their [4:00 inaudible].
Kevin: What about fast-forwarding to this time next year, Noel, what do you think we’ll be saying about 2017?
Noel: 2017, this time next year? My friend the economist Dr. Don Stammer says there’s always factor X – what is going to happen that we can’t imagine is going to happen? The thing about factor X is by its nature you can’t predict it.
I would think we’ll see rates will rising a little bit, but I don’t see them rising much. We’ll be approaching a federal election. I think the government will be more talking [4:40 inaudible] but nothing much happening. Hopefully no more changes to superannuation. I just think it’s situation normal; that’s all.
People have to make the best of what they can do. I’ve noticed far too many people worry about things that they can’t control but they don’t 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.
Kevin: Very good advice, as always. We expect that from you, Noel.
Noel Whittaker’s 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.
Noel: Here’s to a healthy and happy 2017.
Kevin: Well done, Noel. Beautiful.