Shannon Davis has some thoughts about what the banks are likely to do this year and if they are much of an influence on what property investors do.
Transcripts:
Kevin:   As we get further into 2019 I want to catch up with Shannon Davis. Shannon is a regular on our show. He is from Image Property. Shannon has a wonderful brain about real … I hope you don’t mind me saying that to you Shannon, or about you because I do appreciate your insights into the property market.
Kevin:   Shannon, I want to ask you about the banks. What do you think they’re likely to do this year and are they really much of an influence on property investors anyway?
Shannon:   Definitely Kevin. We’re in the midst of a credit crunch right now, if it’s not being reported from people in the front line. We’re seeing lots of financial deadlines being missed, a lot more scrutiny, people’s borrowing power reduced by up to a third under the new sort of servicing laws.
Shannon:   It’s definitely already effecting and there’s yet to be the federal government response out of the findings as well. I hope that it’s not an over reaction because really banking’s the archery of the economy and we need it to be strong and we need access to credit. It’s already having an impact.
Kevin:   For those who maybe have been sitting on the sidelines for a while, not necessarily having to raise money, just really sitting with their portfolio, if they’re thinking of doing something and developing that this year, what’s the landscape going to be like for them say if they haven’t really been approached, been talking to the banks for a couple of years? How different will they see it?
Shannon:   There’s going to be a lot more scrutiny on your spending habits, so be prepared for that. Also, they’re going to take into account a higher interest rate. It’s not necessarily that 5% is going to be around forever. The banks are sort of taking into account more and more up to 7%.
Shannon:   If you’d been to the bank a couple of years ago and they told you you could lend say $500,000, you might expect that to come back at around about $350,000 under the new rules that are out there.
Kevin:   Sobering, so be prepared for that. Shannon, I want to take you in another direction now. I know you’re Brisbane based, but can you tell me, you’re on record in this show of having said that you think the Brisbane’s going to be the benchmark for the future. Why do you think the Brisbane market is going to be a hot market this year?
Shannon:   It just hasn’t had the boom so it’s not going to have the bust that some of the other states there, and I think it shows a lot more value. It’s not overpriced. With Brisbane you’ve really got to include the gold coast and sunshine coast in the southeast corner. You’re seeing people moving back and you’re seeing people be part of the market, in a lot more confidence.
Shannon:   When people see end prices going the wrong way what happens is you get a bit of a buyer’s strike. What was a certain price this week is actually cheaper next week, so it doesn’t actually encourage people to take part because they might, if they wait, get it for a cheaper price. That’s what you’ve got in some of the southern capitals right now, whereas in Brisbane the opposite is in fact true for our stand alone properties and houses. It might cost you more if you don’t take action soon. That’s what’s driving a lot of the activity.
Kevin:   That’s an interesting insight. If you sit on your hands you’re likely to lose and it’s probably going to cost you more. I guess a valuable lesson there for any buyers, if you find something that you like and it ticks all the boxes, make sure you move on it, or at least attempt to.
Shannon:   Yeah definitely.
Kevin:   Shannon, just in closing, I want to ask you, I always like to ask this question of people like you before we finish our conversation. A lot of take home value for our listeners, but the most important lessons, or even if it’s only one of them, that you’ve learned about property investing in your time?
Shannon:   I think just take the long-term. It’s really a long-term activity. You can’t really be flipping with the entries and exit prices. If you’re about to get into property for investing reasons make sure you’ve got the right character and the right mentality for it because if it’s something that you turn around and going to sell in two years time because it hasn’t been a get rich quick for you or something, be prepared for some significant losses. I’m talking stamp duties and commissions and if the market’s moved against you. That’s not for everyone.
Shannon:   You see it all the time where investors come in and they make and crystallise massive losses just because they’re impatient really. Have that long view in mind and also remember owner occupiers drive the market not investors, so if it’s a good house to live in it’s likely a good investment.
Kevin:   That’s some great advice. Just in terms of what you just said right at the start there about understand, it’s all about the why isn’t it? Do you ask why you’re doing this. Really understand what it is and if it’s for a quick turnover. If it’s for quick cash maybe this is not the right vehicle or the time for you to be doing it Shannon?
Shannon:   Definitely. When we have to talk exit strategy, and especially in a short time frame, I get really nervous because I can’t control the market. No one can. For me my exit strategy is to hold them as long as I can and over time the forces of capital appreciation work it’s way and I have very little effect on it. I can pick up the paint brush but that’s about all I can do.
Kevin:   It is something that I’ve learned over the years too, and that is that people that have made a lot of money out of real estate are the people who’ve been prepared to buy well and then hold on. It’s over that period of time that you actually make your wealth.
Shannon:   Yes, you don’t have to look that smart. It does the work for you over time.
Kevin:   Wonderful stuff. Hey Shannon, thanks for your time. I look forward to talking to you during 2019 and all the best.
Shannon:   Thanks for having me.