Ben Kingsley balances the debate about the Melbourne property market and says while things might get tough he doubts it will get as bad as Simon Pressley is saying.
Kevin: Earlier in the show, I was talking to Simon Pressley from Propertyology about what’s likely to happen in Melbourne with prices. His view is quite dim, saying that in 2017, likely because of massive car manufacturing job losses and overbuilding of houses and apartments in Melbourne, there’s likely to be some fairly substantial price falls.
I want to get a bit of balance on this. Of course, every commentator I talk to around Australia expresses the view that there has been overbuilding in Melbourne. What’s the impact of that likely to be? I’m talking now to Ben Kingsley, who is the CEO and founder of Empower Wealth.
Ben, thanks for your time.
Ben: A pleasure, Kevin.
Kevin: You’re aware of these concerns, and you’ve probably already seen what Simon had to say. What’s your view of the Melbourne market into 2017 and 2018?
Ben: I think Simon raises some important points around how some pockets of the marketplace are mostly likely going to be oversupplied. I would be careful in my consideration of medium- and high-density apartments. I think there are going to be those areas where we have planning regulations for medium to high density. We’re going to overshoot the mark in regards to having an oversupply in those areas. I’d also be a little careful in regards to some of the land releases and the building activities having right out on the fringes.
They’re the two areas that would give me some consideration, but in terms of the fundamentals in some of the other areas, we’ve often talked about this – haven’t we, Kevin – in terms of markets within markets, there’s really strong demand for houses, the old style flats, and also villas and townhouses in that 15 to 20 kilometers toward the city. That’s the market that most families would like to get in. All the amenities are there, all of the infrastructure is there.
We’re still seeing Melbourne as being one of the significant economies inside Australia. We’re probably not as pessimistic around the broader market, but there are certainly some of types of accommodation that we’d be steering clear of.
Kevin: Simon’s predicting anything up to 100,000 job losses in Victoria. That certainly would have some impact, though, wouldn’t it?
Ben: It would have enormous impact, but I think one of the things we need to understand is that these jobs can transition. It’s not as if it’s been a broad announcement where we’re closing down a refinery or we’re making a sharp decision that’s going to see those job losses occur.
We’ve seen Geelong do a great job in trying to transition out of some changes that are happening down there. I think Victoria generally is going to be looking at some large infrastructure projects. Obviously with our construction boom that’s going on down here, there are some jobs in that particular market, as well.
Again, I’m not as pessimistic about the job losses. Yes, I think there’s no doubt the Andrews government… And broadly speaking, we need to see some stimulus in terms of keeping the number one liveable city in the world strong. But I would also add to that that there are potentially other markets around Australia that might represent better investing. You just have to know where you want to go.
Kevin: Ben, before I let you go, we’ve seen some pretty big figures on people moving into Melbourne in recent times and even overseas buyers. Has that artificially held that market up?
Ben: There is a great story about foreign investment into property in Australia, and I don’t think it’s just Melbourne; I think it’s right across the board. There’s a lot of Chinese money flowing in. We’ve seen some recent data come out around the growth in those types of numbers – literally in the hundreds of millions, if not billions, of dollars. They are important things, so if the China story does start to slow down, that’s important to understand.
But I also think the Australian investor is a bit savvier these days than they were in the past. By that, I mean it’s very clear that with 93% of all new investment loans going to existing property, I think the local investor is getting smarter about that.
If you’re going to look to invest into an apartment, a townhouse, or a high-rise, then you really have to do your homework. You have to make sure that it has real exclusivity about it, making sure that those uninterrupted views are going to be there indefinitely and can’t be built out. They are the types of little things you need to look for if you’re going to go into that market. I for one wouldn’t be going into that type of market.
Positively, though, the economy’s good down here. It’s a very liveable city. We certainly need to do a little bit more with our transport modes, and I’d say we need to do more around that east-west link, which will eventually happen. When we start to see some of those announcements coming through, I think Melbourne has a good story to tell over the next five to ten years.
Kevin: That’s great advice. Thanks for your time. Ben Kingsley, CEO and founder of Empower Wealth.
Ben, great talking to you. Thanks for your time, mate.
Ben: Thanks, Kevin.