Property Hub - Investment Insights & Inspiration - Get Invested: Pete Wargent on our investment future

Episode Date: November 22, 2020

How are you going to protect and invest your hard earned money moving forward? What does the future hold? To give you a clearer picture on what is likely to happen as we emerge from the global pandemic, I’m joined this week by Get Invested regular Pete Wargent – one of Australia’s top investment experts and the best person I know fully understands the global scene and appreciates the machinations of the economy, the share market and property markets – a very rare combination.  When Pete talks, I listen – his independent, objective and forward looking insights are second to none. Now, if you want to find out if property is for you or how do to property and your finance better, because property really is a game of finance, so that you can protect and optimise your situation in the times ahead, join me on one of my regular Freedom Flight live zoom sessions where I summarise all of the gold from my step by step guide to financial freedom detailed in my book The Freedom Formula – just click here https://knowhowproperty.com.au/freedom-fighters to book in a time that suits you and I look forward to talking with you personally. The ‘Why invest?’ sessions are live and free, they are intimate and interactive – it’s about giving you inspiration and information without pressure so you can decide what the best way forward is for you. And if you’re already on the hunt for good property opportunities, head across to Pete Wargent’s Buyers Buyers site at www.buyersbuyers.com.au. Not only will you get free access to property reports on properties right across the country, but you’ll also be able to tap into an affordable panel of buyers agents that gives you access to find and negotiate the purchase of every property and every suburb in the country. Get Invested is the podcast dedicated to time poor professionals who want to work less and live more. Join Bushy Martin, one of Australia’s top 10 property specialists, as he and his influential guests share know-how on the ways investing in property can unlock the life you always dreamed about and secure your financial future. Remember to subscribe on your favourite podcast player, and if you're enjoying the show please leave us a review. Find out more about Get Invested here https://bushymartin.com.au/get-invested-podcast/  Want to connect with Bushy? Get in touch here https://bushymartin.com.au/contact/  This show is produced by Apiro Media - http://apiropodcasts.comSee omnystudio.com/listener for privacy information.

In the short term, there's an initial sugar hit, and I think stocks are at about an eight-month high today. But I think, generally speaking, the stock market will be driven by fundamentals, and the market's pretty expensive, but you might expect to see that anyway with low interest rates. I think one of the big drags at the moment is that bank profitability is really going to be down for the next year or two. So that's going to hold things back a little bit. But I don't think overall the u.s election will have a huge impact on where the market's at in australia um i think more importantly uh locally australia's got the virus under control so a lot now hangs on australia's ability to reopen the international border so that's really the big pressing issue

for next year and property market i think again that's driven more by local dynamics and particularly the interest rate cut that we've seen recently is just bringing people back into the market now. There's all the usual catastrophic forecasts, but that's nothing new. That happens every year. I think there are forecasts out there of 30% declines and 40% declines. If you looked at where National Elite prices are at in November, they're almost exactly where they began the year. Welcome to the Get Invested podcast, where we share great conversations with experts from all walks of life to uncover their secret know-how and where they invest their time, their skills, and their money, and the benefits that this has created.

You see, the truth is that everyone invests. Every minute of every day, we're investing our time, our skills, our energy, and our money in something. Some of us are investing consciously, some unconsciously, sometimes for good, sometimes for bad, sometimes for no impact. Get Invested will help you to start living by design, not by default. I'm going to help you to make it happen, not let it happen. You'll hear the top tips on how you can live with conscious intent so that you can live more, work less

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Thanks for listening and now let's get invested. And Sydney and Melbourne property values are predicted to take a 15% hit, while Adelaide will fall 10%, according to National Australia Bank's economist, Alan Oster. Hi Freedom Fighters. Have I grabbed your attention? Are you holding your breath as your heart starts to race? Are you wanting to call up into a ball and hope the world's just going to go away? Well, this is exactly what these sort of sensationalist and nonsense fear factory headlines that are designed to do. To keep us in a perpetual state of paralysed fear, so we keep staring at the screen deluging on a diet of doom and gloom. Or worse, we rush off and make rash, reactive, knee-jerk decisions to our detriment. Like many did when the stock market tanked overnight by 30% earlier in the year.

Now these headlines are just a small sampling of the dire predictions that the Main Street media had led when the coronavirus was first announced in April and May of 2020. When the world was turned on its head and economists were rushing out their forecasts of property Armageddon. Now since the emergence of the global pandemic, we've seen many other economists and many media commentators pile on to the doomsday narrative of a looming Australian property market collapse. Now, this isn't unusual. For many years, we've seen countless prophecies about the pending property implosion. The only problem is every single one of them has gone unfulfilled.

There isn't a year that's gone by in the last 35 years that I've been involved in property that I haven't heard a world-ending, sky-falling, will-all-be-doomed property prediction that has failed to materialise. and the end-of-days predictions for property post-COVID-19 are also set to miss the mark. So where are we heading? What does the future hold? As we shakily emerge from the aftermath of the contagion,

as well as the other great virally spread infection that has permeated world's news for months, and I'm talking about the US election, many are asking, what does the future hold? how can you read the tea leaves and the winds of change to not only survive but to thrive in the days ahead with the greatest change comes the greatest opportunity and that's always for those who swim against the tide and are contrarian like myself it all starts with where you source your information where do you turn to to get reliable information to help you make informed decisions

How do you sift through the facts from the fiction, the absolutes from the opinions? For me, I always turn to independent, informed, evidence-based, forward-looking and active experts who have no vested interest in the outcome of their insights. So the last place I look is the mainstream media. Why? They've got an absolute vested interest in scaring the hell out of us 24-7-365 so that we're glued to the screens or we're nervously thumbing through the horrendous headlines

of a continuous pending disaster. Through traditional mainstream media is a dying beast that's hemorrhaging the loss of advertising income to other mediums. So there's a growing desperation to maintain a following. And what's the best way to do this? Well, clearly bad news sells and continuous conflict exacerbates arguments and polarises opinions and then just stretches out stories.

Fear attracts and holds our eyeballs and our ear time. This negativity is then further polarised by the echo chambers that social media algorithms have created. As we rely more and more on social media platforms that are designed to be addictive, we create insular separatist worlds that feed on themselves where you only see more of what you like, resulting in further divided, polarised communities. And nowhere has this been more evident than the recent US election,

where it's absolutely clear that the calamitous cocktail of mainstream media feeding into social media silos has collectively divided the country. China and Russia don't need an army to defeat democracy, they just need to feed misinformation or fake news into the self-polarising social media world and America will self-destruct and implode all by itself, as we can see happening before our very eyes. listening to the current president trump ignore and play down the coronavirus while he runs while it runs rampant and spirals out of control with upwards of 190 000 people a day contracting it and approaching 2 000 dying every day resulting in over 11.5 million cases to date and over a quarter of a million deaths so far just beggars belief it feels like we're watching a rerun of the fall of the roman empire where emperor nero

turned his back on the people and just continued to play the fiddle while rome burned to the ground but maybe there's a method in his madness i've been trying to work it out while he continues to wreak havoc and maintain his macho divide and conquer win at all stakes approach unfortunately i don't believe that he's finished yet not by a long shot by calling fraud on the election before voting had even commenced, it's created a cloud of illegitimacy around the election result, where Biden is seen as a false king that has stolen the crown, regardless of the reality of the situation. And it looks like being a paper crown, as the equivalent of a hung parliament, is likely

to mean that it's going to be impossible for Biden to get anything done or move the dial on any of his initiatives. He's inherited a poison chalice. and with over 71 million votes and in excess of 88 million twitter followers all trump has to do is set up his own tv channel and media network continuously shine the spotlight on the biden administration's inability to get anything done over the next four four years while conveniently ignoring the fact that biden doesn't actually have a hold on a strong majority and then trump can ride back in on his white horse to resume the White House in 2024

and point his finger down the camera and say, you're fired. I desperately hope that I'm wrong. Thankfully though, here on our isolated island of Australia, the virus is pretty much under control apart from the isolated outbreak and we've got one of the safest, most affordable and best performing economies in the world with plenty of monetary reserve to see us through any further global turbulence.

In fact, Australia is currently the envy of the world and people will be busting the doors down to get in and call Australia home once the international borders are lifted. So what does the future hold? I keep hearing about this new normal. Don't you just take that term? What's new is that there is no normal. There's only going to be an ongoing, ever-changing world.

This will be the only normal that we continue to live in. But I'm getting off topic here. How can you discern the facts from the fiction? With cash savings going backwards, with interest rate bank account saving rates of just 0.2% against inflation of 1.9%, You're actually losing money, leaving your money in the bank, and you're going broke slowly.

So where are you going to protect and invest your hard-earned money moving forward? And what does the future hold? To give you a clearer picture on what is likely to happen as we emerge from the contagion, I'm joined this week by Get Invested regular Pete Wardgen, the best person I know who fully understands the global scene and appreciates the machinations of the economy, the share market and property markets. A very rare combination.

When Pete talks, I listen. His independent, objective and forward-looking insights are absolutely second to none. But before we dive into Pete's commentary on the short to medium-term future, I want to whet your appetite on the property front by sharing excerpts from a recent opinion piece that I was asked to write for InDaily, the highly respected and well-regarded online daily news that grew out of the Independent Weekly. Feel free to check out the full article by googling

InDaily, Bushy Martin, Fact or Fiction and click on the InDaily article link. In April-May of 2020 this year, Seven News quoted US author Harry Dent's predictions that Adelaide would take a 30% dive in property values while Sydney and Melbourne property prices would fall up to 50% this year. Now, for any property owner or investor following mainstream media,

it would have made you sick to the stomach. But the future fear fiction hasn't played out against the cold, hard facts of reality. And I've seen this time and time again over the last three decades. What does history teach us? As I've said many times before, the only thing we've learned from history is that we don't learn from history.

But a ride back through time continues to demonstrate two very clear things. Firstly, that the sky is falling property price predictions are invariably wrong. And secondly, that property continues to prove very resilient to economic shocks. Let's break these down. Firstly, some economists and a number of media commentators have a very poor track record when it comes to property price movements. To demonstrate this, let's have a look at the reliability of frequently quoted financial writer Harry Dent's property price forecasting track record over the last decade. So here we go.

Fiction number one. In 2011, Harry predicted that the real estate market will crash with prices falling more than 60% in the following year. The fact? The Australian medium house price actually increased by 4%. Fiction number two. Harry predicts house prices will fall by at least 27% over 2014-2015. The fact, the national medium house price grew 17% over the same period. Fiction number three.

In 2016, Dent predicted prices would fall by 50%. The fact, the medium house price grew by 11%. Fiction number four, in 2018, Harry forecast that this time, your real estate will come back 20, 30, 40, and up to 50%. The fact, during this credit tightening period, leading into and after the Royal Commission into banking, the Australian medium house price fell by just 5%, and take a note of the credit tightening impact there, because I'll come back to this later. Fiction number five, Australian prices will fall by 50% in 2019.

The fact that medium house price grew 6% over the same period. There's a bit of a stuck record starting to occur here. And here's a really interesting fact. Over the eight years that Harry was making these highly promoted property predictions, the national medium house price actually rose by nearly 53%. These predictions are an epic fail. What a surprise. Why?

Because Australian property has always been very resilient to recessions and economic shocks. Why? As you will hear shortly, property is a game of finance, not an economics game. I'm amazed that with Harry's zero strike rate that the media continues to quote him and others of the similar ilk. But this is just a point. Many in the media are no longer interested in reporting the facts, just the harrowing headlines that will grab your attention and own your eyeballs. And there's no consequence to these falsities.

It appears that the bigger the lie, the more that people want to believe it. So let's now turn our minds to what has really happened since the onset of the pandemic in Australia. If we look at the reality that defies the rhetoric, the truth has been much less dramatic or newsworthy. Positive and boring just doesn't make the grade with the media. So according to reputable property research crew CoreLogic, their data on property values indicates that they've only fallen

by a national average of just 1.5% in the five months since the onset of the COVID contagion in March. Breaking it down by capital city, Melbourne saw the biggest decline of 5.6%, while Sydney saw falls of 2.3%. On the flip side, and in a game of swings and roundabouts, property prices in smaller capital cities have been rising, with the top-end capital, Darwin, being the best performer. Values there have risen 3.9% since the start of the pandemic. And at the same time of this recording in late November 2020, JustRelease core logic data on residential property values, reveals that house prices across Australia

have risen with monthly data showing that, as a collective average, the housing market has experienced a 0.4% rise in October. And as we go around the nation's capitals, Darwin and Adelaide are both up 1.2% for the month, Canberra and Hobart are up 1%, Perth is up by 0.6%, Brisbane up by 0.5%, Sydney just tipping into positive at 0.1% and Melbourne's the only remaining capital in negative territory at minus 0.2%. And in a continuing move to safety and security, the decentralisation to the regions has also seen regional housing markets bring the nation's average up, with its housing prices rising

by 0.9% in October. So at the moment, regional markets are actually outperforming capital city markets. So while it's still too early to call, it appears that a low tide may have turned already. If you look at what the property value numbers have done over the 12 months though, the picture is also very different. Not a single capital city market has seen an overall reduction in its average house price since October 2019. Sydney's annual property value has risen by a staggering 6.1%, so year on year, COVID

hasn't had much of an impact at all. It's clear that these subdued results are a far cry from the wholesale price slaughter that was being bandied around at the beginning of the pandemic. But unfortunately, the misinformation doesn't end here. For example, you may have heard that rising unemployment will kill property values. This is also fiction.

There is simply no direct correlation between unemployment and property values. When unemployment spiked rapidly from 6% to 11% in the early 1990s recession, medium house prices continued to rise in all of the mainland capitals during half the days of Keating's Banana Republic, according to the Bureau of Statistics figures. And you may have read that the pause on migration would be damaging to property values.

Wrong again. 4,000 expats are flowing back into Australia every week, replacing the 220,000 new immigrants that were expected to come into the country. Further, we're also seeing the forces of internal migration provide a boost to the lesser capitals like Adelaide and Brisbane property as more people move out of Sydney and Melbourne to smaller cities and regions. There's anecdotal reports of more than 80,000 interstate Adelaideans seeking a move home while other secondary cities will also benefit from the big shift towards remote work

as well as significant workplace and behavioural change. As has consistently been the case historically, property values have proved to be resistant to economic shocks. So why have most of the property forecasts failed to eventuate? Well, COVID triggered a recession we decided to have in contrast to our recession in the early 1990s that we had to have. And because we decided to have it, the government has controlled the economic slowdown

with a massive fiscal stimulus across a raft of integrated programs that have created a financial and psychological safety net that have underpinned property owners. This has meant that if you don't need to sell, you don't sell. Then the basic economics of supply and demand come into full effect. Despite the circumstances, when there are limited properties for sale with consistent ongoing demand, which is the current state of play in Australia,

property prices are maintained or grow for good quality homes and there's an emphasis on good quality there. As I've repeatedly said, property is a game of finance. What most crystal ball gazers don't recognise is that the property market is all about the money and access to borrowings and credit, not economics. During both the recession in the early 1990s and the dot-com bubble in the early 2000s

property values either remain stable or rose. In fact, the only time property values fall is when access to credit and borrowing is tightened through tough lending restrictions. We saw this happen after the GFC in 2008 and most recently before, after and during the Banking Royal Commission from 2017 through to the end of last year. Finance has never been cheaper,

yet it's never been harder to get. Record low interest rates don't mean much if you just can't get your hands on the money. The federal government has realised that the flow of credit has been logjammed and has moved to relaxed lending laws from March 2021. This has already caused banks to drop the benchmark servicing rate from 5.35% to 5.05%. What does that mean?

or if it increases your buying capacity by about $100,000 on average for the potential homeowner. But this doesn't mean that the coast is clear for all property owners. Property performance is a two-speed race. Suburban housing performs very differently to inner-city units and apartments. COVID has been a volume switch and an amplifier of underlying conditions. While good high-demand properties continue to perform well, poor quality and oversupply properties with low demand have suffered more. COVID has simply hit the accelerator,

quickening growth for good properties and bringing forward the pain for poor properties. The city apartment market in the nation's capitals continues to be in for a tough time on this basis. There are plenty of city apartment owners around the country who are feeling the pain with a surplus of new apartments, suffering the sudden absence of international students and foreign investors. As an example, according to SQM research, vacancy rates in the Adelaide City have jumped alarmingly from 2.8% in January to 7.2% in September.

Commercial property is different again. A lot of work has been done to pause the market through deferred bank repayments and a code of conduct for landlords and tenants to get through the pandemic. Lockdowns and work from home have clearly hurt office tenancies in the big cities, with Sydney office vacancies rising 43% from 3.9% to 5.6%, and Melbourne by 81% from 3.2% to 5.8% from January to August, according to the Property Council of Australia. But while much of this has been made of the office market, there's a huge growth in other commercial sectors

including non-discretionary retail, storage and other warehousing as we see the shift from just-in-time storage offshore to just-in-case warehousing locally here in Australia. It's certainly far from doom and gloom for commercial property investors. And now we turn back to the most important question. What does the future look like? Because now is our time to shine. We've avoided much of the carnage experienced by the rest of the world,

and now our diverse economy and our fast response to COVID has set the springboard for a very sharp rebound. And this is backed by independent, trusted property data. According to property predictions, who have been accurate with over 90% of their price movement forecast nationally since 2011, the average property value across Australian capital cities is expected to see an uplift of 4.5% in the next 12 months. Adelaide is likely to top the POPs

and is heading for more than 8% growth in property values over that period, while Canberra is forecast to see 7.6% growth, with Brisbane at 5% and Perth at 4.6%. If we look even further out to three years, according to the latest BIS Oxford Economics latest forecast, which is extremely conservative, by the way. Adelaide is looking at 5.3% growth and 3.8% growth for South Australia more broadly.

And it'll be interesting for the eastern states. Inner Melbourne and Sydney are projected to take a hit with minus 1.9% and minus 1.2% respectively. But growth will come further out in the surrounding regions. Victoria is expected to see a 11.1% rise and New South Wales 7.3% in those broader regional locations. Similarly, Brisbane is expected to see a 8.9% rise with the surrounding areas seeing 7.8% growth.

Perth is projected to perform strongly at 7.5% growth while Canberra rounds out the numbers at 6.3% increase. And these are only the mean averages which often doesn't reveal the much higher growth locations that can be found at the local and suburb level. So while there's always plenty of hype and headlines, the reality is much more predictable. If we learn from history and we follow the money,

we'll see that property will continue to be a stable and reliable market as Australia rebuilds post-pandemic. So I hope this introduction provides a good backdrop to compare with today's guest, Pete Wardgen's predictions. For those of you who haven't listened to Pete on previous episodes of Get Invested, if you haven't then I highly recommend you have a listen to episode 50 to hear his full story. Pete Wargent is a successful investor across property and shares internationally and he helped others to achieve the same as a property buyer in real estate and an equities expert.

Pete's one of Australia's most respected financial and housing market experts. He specialises in the analysis, dynamics and market impacts of Australian household debt, construction trends and real estate market cycles, producing subscription reports for funds and international institutional investors. Pete is the investment analyst that all of the other analysts follow. He's a must-read, must-follow and one of Australia's brightest financial minds for accurate and in-depth analysis. now i've been investing for over 30 years and i still learn new concepts from pete because he's

one of the best commentators and unlike many others he's not just a theorist he's an active international investor himself check him out at pete wargent.com and make sure you grab one of his must-read books like get a financial grip or his latest low rates high returns that uncovers timeless investment principles and the low-risk way to actually ensure that you're going to blossom in the decade ahead. Now, after listening to today's episode, you'll realise that we're currently presented with a very rare window of opportunity in Australian property over the next six months. Not because you can get property cheaply now, but because it's going to look very cheap in a couple of years' time, and you'll kick yourself then if you don't take

advantage of it now. Why do I say this? Because we're seeing a once in a 10 to 15 year planetary alignment of all the key drivers of property value that include a strong and ongoing government stimulus, a massive infrastructure spend that always creates property growth opportunities in the affected areas. We've got the lowest interest rates on record. And I'll say again, it's not worth holding your money in a savings account because you're actually going backwards. but the most significant driver of all is the proposed relaxation of lending laws to come into effect in March 2021 which has been projected by a number of finance commentators to boost your borrowing capacity by 20% or more. Now this is a game changer as easier access to borrowings will

have a significant impact on demand which is likely to push up pricing. This significant change hasn't been factored into any of the price forecasts that I mentioned earlier. Now, in my humble opinion, this is likely to lead to property value growth for good quality property as opposed to average quality as the rising tide is not going to float all ships. It'll happen in two growth waves. Growth wave one will come into effect following the lending law relaxation. wave two is likely to kick in when our international borders are open and the immigrants

and skilled workers flood in together with international students that's they'll all come to australia on the basis of our growing reputation as the best place in the world to live as far as lifestyle health safety and our economy is concerned so watch this space a perfect storm is on the horizon. The last time this occurred was back in 2002 following the dot-com boom when we saw a flight to safety of property as investors got out of the stock market

along with very easy access to credit and borrowings and property values spiked very strongly during that time. Now I need to stress that what we're sharing with you on Get Invested is general advice and our personal opinions. It's not intended nor should it be taken as personal financial advice as everyone's situation is different. So reach out to our team at Know How Property Finance or seek out independent professional advice

before you do anything. So in my humble opinion, now's the time to get prepared and take advantage of the opportunities that we've got with us. If you want to find out if property is for you or how to do property and your finance better because property really is a game of finance

so that you can protect and optimise your situation in the times ahead, feel free to join me on one of my regular Freedom Flight Zoom sessions where I summarise all of the gold from my step-by-step guide to financial freedom that I detailed in my book, The Freedom Formula. Just jump on knowhowproperty.com.au forward slash freedom dash fighters. That's knowhowproperty.com.au forward slash freedom dash fighters.

Good old freedom fighters. and book in a time that suits you and I really look forward to talking with you personally. The Why Invest sessions are live and free. They're intimate and they're interactive. It's about giving you inspiration and information without pressure so that you can decide on what implementation feels right to you and your sleep at night factor.

About giving you all the information you need to make fully informed decisions and what, if anything, you decide to invest in. No pressure, no obligation. Just good information. So I'd love to see you there. And if you're already on the hunt for good property opportunities, head across to Pete Wardgen's Buyers Buyers site at www.buyersbuyers.com.au.

That's B-U-Y-E-R-S, Buyers Buyers. And not only will you get free access to property reports on properties right across the country, but you'll also be able to tap into an affordable panel of buyers agents that gives you access to find and negotiate the purchase of every property in every suburb in the country. And in the meantime, get ready to be inspired again with this great chat with Pete Warchant. Welcome back, Freedom Fighters.

Now, despite doomsday headlines in the mainstream media forecasting ongoing falling property values, our know-how finance-breaking business has seen buyers across Australia having to negotiate hard and actually pay more for the limited number of quality properties that are on sale in the market. And many buyers are getting really frustrated at the continuously missing out on properties or paying too much. So clearly, the reality is very different from the rumours and the media fear factory. And given that we're finally emerging from the shadows of COVID here in Australia, and the US election result appears to be behind us, it's a great

time to check in on where investment markets are and what's happening in property so the best person i know in the country to give you the facts on this is our get invested regular pete wargent and as well as being one of australia's brightest financial minds pete's well known to us here on get invested as a six-time published finance author a leading investment analyst and now i can't even say it leading investment analysis pete on the back of his work as a active investor himself, a property buyer's agent, a strategist, and a mentor where he uses his tried and tested strategies to assist you in achieving your financial goals across the broad spectrum of property and equities. Mate, that's a big mouthful and a lot of stuff on your business

card there, mate. And to help property buyers level the playing field, Pete has recently been instrumental in launching a new national buyer's agent business called Buyer's Buyers. And it's harnessing the knowledge of Australia's leading buyers' agents at a price that every Aussie home buyer can afford. So we'll look forward to deep diving on that shortly once we get through what's happening in the market. So welcome back and let's get invested again, Pete. Pleasure, Bushy. Great intro. Thank you.

I'll have to try and live up to the expectation now. Mate, that's easy for you, mate. You're humble at the best of times, mate, and that's what I love getting back on the show. and you've just got one of those untainted, unbiased views of the whole market, which is pretty rare in the space, mate. So, mate, let's start with the most topical issue, if we can. And as we know, the US election, which has pretty much been dominating the entire space

for the last couple of weeks, particularly here in Oz, it appears to have an outcome. What impact, if any, do you think it's likely to have on, firstly, the equities market, and, secondly, property here in Australia? Well, I think for stocks, I mean, in the short term, there's an initial sugar hit, and I think stocks are at about an eight-month high today. But I think, generally speaking, the stock market will be driven by fundamentals,

and the market's pretty expensive, but you might expect to see that anyway with low interest rates. I think one of the big drags at the moment is that bank profitability is really going to be down for the next year or two. So that's going to hold things back a little bit. But I don't think overall the U.S. election will have a huge impact on where the market's at in Australia. I think more importantly, locally, Australia's got the virus under control.

So a lot now hangs on Australia's ability to reopen the international border. So that's really the big pressing issue for next year. and property market, I think, again, that's driven more by local dynamics and particularly the interest rate cut that we've seen recently is just bringing people back into the market now. Yeah, 100% agree. It's funny how the commentators want to try and relate the election to everything but the reality is that once we get past the blip,

everything pretty much continues on as it always has. But, mate, there's been a fair bit of fiction versus fact that we've been seeing across the media, particularly in relation to property value movements since COVID came in. What's your view of that and where do you think the actual facts do lie and what impact is that likely to have on property as we start to now emerge from COVID here? there's all the usual uh you know catastrophic uh forecast but that's nothing new that happens every year i think uh there are forecasts out there of 30 percent declines and 40 percent declines if you look to where nationally prices are at um in november they're almost exactly where they began the year so there's been uh there's been a bit of an impact especially in melbourne and some sectors of the market have been impacted by the lack of immigration.

So most notably CBD apartments, there's a lot of vacancies there, but there's other markets that are doing really well. So I think a lot of the forecast was scaremongering as usual and they'll prove to be way wider the mark. And in fact, prices are rising in a lot of markets now. Yeah, exactly right. So given that there has been a little bit of a wake-up call and that there's been some shifts in some of the habits

around how people are living and what they're doing. What are you seeing as the emerging trends that are going to impact, particularly on property moving forward? Yeah, I mean, the big thing that's happened this year has been... Some of it began as anecdotal, but, you know, we've got direct client experience of this, and that's people looking at coastal or tree-change property. and it may not all be persisting in the years to come.

But at the moment, a number of markets like the Southern Highlands in New South Wales or Northern New South Wales coast, there's a number of markets, and I'm sure it's the same down your way, there's just been an outward demand shift away from density, which I suppose is rational when you've got a pandemic or risk of a pandemic in Australia's case. So, you know, just hearing reports of local schools being oversubscribed, you know, loads of competition for houses in certain coastal regions.

So I think more people have been working from home this year. So lots of people have decided to do that remotely where they can. Yeah. What's your thinking around the permanency of this? Because I've heard a couple of commentators talk about the fact, well, yeah, there's a bit of a knee-jerk reaction to, you know, a run to safety and security and space but you know they're sort of questioning whether there's any longevity in that and once things sort of return to some form of normal and COVID

is sort of forgotten behind us in say 12 months time we may see a bit of a bounce back to what it has been I'm not convinced on that given the the scale of disrupting households and and moving and buying properties but what's what's your read on the the sort of permanence of the the trends that we're now seeing yeah i think some of it will stick because there'll be more virtual meetings there'll be more people uh wanting to have uh regional bolt holes but i think um you know it's a classic human trait that whatever's happening now we assume will always happen i think if you thought that the regional trend will continue um you may be right but you'd be betting against a multi-decade long trend and not just in australia that's a global thing the global share of the

population living in cities well half of the global population now lives in cities and that has just been a huge trend that's been going on for 120 years plus in australia the capital city population was around 50 percent in 1950 now it's it's above two-thirds so that's the way things are going as you know i tend to look at these things with a statistical hat on and the big thing that's changed this year has been no immigration and once immigration returns of course uh probably 90 of immigrants go to the capital cities and stay there and so there's definitely been a shift this year that's that's beyond question um my suspicion is that once the borders reopen you'll see the capital city starting to get the bulk of demand again but largely driven by new arrivals to

australia because including people like myself where do you go when you come to australia sydney first maybe melbourne now that's where the demand tends to go when people arrive from overseas yeah it's spot on and i and i think the the good news for australia is that because we're pretty much the envy of the world at the moment in terms of how we've managed both the the covid and the economy, we're going to look extremely attractive once people can come to the country. And while we've got other factors that are driving the market in the short term, it's going to put significant pressure on what will happen to property, particularly in those cities where that's the likely first point of call. Is that your read of what you think is likely to happen

once we do open the floodgates? Yeah, totally. I mean, I am biased because I suppose it's somebody who, when I was in my late teens and early 20s, I wanted to move anywhere. I wanted to go somewhere in the world and live overseas. And Australia has always been top of that list for me. But even more so this year,

there's really two countries that have emerged with an enhanced reputation from this year, and that's essentially New Zealand and Australia. And there is a potentially huge opportunity for, for example, higher education facilities and universities. There'll be a lot of international students weighing up what to do in 2021. And if Australia can find a way to bring those students on shore, then all of the people who are currently dithering between London, the UK, Canada and all the other international options. well, Australia will be top of the list at the moment. So if Australia wants to find a way to do it,

it can actually be a real positive news story. Yeah, I absolutely agree. And certainly cities like Adelaide, my hometown, who are very much orientated around the whole international education sector, are very well placed to take advantage of that. So it'll come down to political will in terms of their drive to take advantage of it. But, mate, sort of leveraging off that and talking more back

on the equities front for a minute, the opportunities from a sector perspective as you see them rolling out in the short to medium term that will come out of this, what's your read? In equities, did you say? Yeah. Yeah, well, I think if you look at, well, let's start from the top down the biggest and most important market in the world is the u.s um markets had a

very tumultuous 2020 but even now post rebounds historically are very expensive um so um i suppose if you take one of the most popular measures the cape ratio at 32 well that kind of implies that your expected return over the next 10 years should be about three percent nominal from that point so i don't think there's much value over there um australia is kind of in between it's not ridiculously expensive but it's far from cheap given every all of the challenges that are facing uh banks so probably a bit of caution warranted in australian stocks um there are cheap markets around the world uh i suppose of the developed markets the um the uk is one of them uh it's been it's had a pretty rough time over recent years with brexit and now a lockdown period but um if

you look at the market there it's relatively speaking good yields and relatively cheap so there are markets around the world that are worth a look and some of the emerging markets have just been smashed this year so that's where the value is yeah yeah and sort of drilling down let's look at the the australian market for the local investors what sectors uh do you see as as the ones that are likely to benefit from what we've come through and which ones are going to continue to suffer? Yeah, I think, well, there's two different things. Which sectors of the market are thriving?

At the moment, everybody's, well, some of the supermarkets have done well, but it's all the tech companies, that's where all the popularity is. But I suppose as an investor, you just need to be careful because when something is popular, that's when people tend to overpay. By far the most hated sector over the past three or four years or probably six years has been energy, particularly globally. There's been a severe drop in oil prices and the energy, the shift towards electric. So energy is where a lot of the value is. But in Australia, we've got quite a narrow market.

We've got a massive focus on financials and some big resources companies. So if you're buying the whole index, you just need to be a bit mindful of that. Yeah, it's pretty much tilted that way. Yeah, okay. So let's switch back into the property side of the equation then. As you and I have spoken about before, property is very much a game of finance and is driven by the access to credit. We saw the Reserve Bank drop the cash rate down to 0.1% last week

and only sort of tentative moves by the banks to pass any of that on. That's done the old hat trick of offering cheaper fixed rates but not playing around with the variables so they've got a little bit more room to play moving forward. And, of course, in coupling with that, we had the recent Treasurer's announcement of subtle but very significant changes to the lending laws in switching responsibility from the banks to the borrowers

that is likely to take effect in March of 2021. What's your read on that trend towards the change in the policy and its impact on access to credit and the flow-on effect that that's likely to have in the property game? Yeah, I mean, people saw a lot of commentary saying, oh, you know, a cut in the cash rate from 0.25 to 0.1 won't make any difference. But as you well know, that's not how monetary policy works.

You know, we spent several years there where every day there was a scare story about rising interest rates. And, of course, not only did it prove to be wrong, actually, rates are now falling. But often people make decisions based on the trend. And clearly fixed rates are only heading in one direction at the moment, and that's down. So it will definitely pump up the property market. That's beyond doubt. The thing to be mindful of, as you just touched on there, is just because there's a low mortgage rate available, it doesn't mean you have to jump on it because you need to consider your financing strategy.

And for a lot of particularly investors, you need to have the appropriate flexibility. And the cheapest mortgage rate may not be the best product. Even if it's pumping up the market, you need to look at it in the context of your own situation. Is there an offset facility? What happens to mortgage rates beyond that fixed rate period, which is something that seems to get overlooked? But that's where you guys as the experts in finance come in, I guess. Yeah, I often refer to fixed rate loans as shagulator loans

because they offer you what appears to be a cheap deal to lock you in. They become a little bit like golden handcuffs because the break costs then to make a shift and I've seen a lot of people who've fixed rates in over the last couple of years only to see rates plummet and then they try to make the move. An example I'd give, we've got an investor who's got a number of properties. It's going to cost him $24,000 in break cost to get out. And while he's in that fixed rate, yes, he's perceived as getting a cheap rate,

but all offsets are turned off, so there's no offset capacity that's helping. very limited ability to make extra payments and if you have to shift a property or make changes to any of that lending structure it becomes expensive and very difficult so you know i'm like you it's more important to focus on the cost not the rate and that cost takes in into account you know the offset benefits and and all the rest of it but also the capacity side and what i see with a lot of people looking at the finance side, they focus on the rate. But I think the biggest asset with finance

is the borrowing capacity because that capacity tells you how much property you're going to be able to secure. And there's still, would you believe, Pete, a 50% variation across the lenders in terms of how much they're prepared to let you borrow. So if you look at cost and you look at capacity and you look at control,

they're the three key things that you want as an investor. just chasing around for the cheapest fixed rate seems to be a bit of a fool's game, a bit of a fool's gold exercise in that regard. But, mate, I'm doing too much of the talking here. I'd much rather hear your views. As things start to open up in March next year and that very subtle but significant shift

from the bank's responsibility for the lending effectively shifting it back to the borrowers, i think we'll see a bit more common sense come back into the way the uh the approval process is starting to be structured and the living expenses which have just got out of control in recent times and really limited people's uh capacity uh it looks like it's already starting to shift what sort of an impact do you think that's likely to have on on capacities and and demand particularly next year as we as we emerge from covid yeah i think you might just speed things up a bit because as you said it'd become a very onerous exercise providing banks with

all kinds of detail on living expenses and you know in some cases tiny amounts being questioned by lenders because they were too panicked by the banking royal commission to do otherwise so hopefully it should increase the flow of credit and just make the the exercise of borrowing a bit less painful so i think that will have an impact it may take time but i think the important thing a bit like with interest rates falling is simply that the pendulum is now moving back in that direction because we've had uh well really it's been seven or eight years of credit uh tightening but now the pendulum is turning back in the other direction so i think generally that that will lead to an up cycle for property uh which is um positive for investors and potential buyers

and hopefully a bit more common sense coming through as well. Yeah, absolutely. The sorts of areas that, and I'm not getting specific here, but the sorts of locations that are likely to continue to struggle in the short to medium term and those that are likely to benefit, across your National Buyers Agency business, have you seen any trends in that regard? yeah at the moment there's a huge um a lot of people are engaging by his agents because there's

no stock so a lot we're seeing a lot of work in the coastal markets um mentioned uh northern new south wales and so on i i think when the when things reopen in earnest and um potentially as the borders reopen um some of that demand will swing back to capital cities um i think the markets that are struggling um yeah i mean as mentioned it's it's a lot of that investor type stock in it in the capital city cbds and surrounds um there's there's very weak rental markets around there um so i think generally speaking uh the markets uh that will do best are those sort of family suitable properties in um in areas that are popular with families because that's where the shortage of stock has been, and I suspect that's where the demand will return.

The other thing that's really noticeable is the number of first-home buyers coming back into the market now is at the highest level since 2009, so it's really taking off on the back of the stimulus packages. Yeah, exactly right, and sort of bringing forward demand in that regard, and I mean at certain states you can get up to sort of 55 grand thrown into the back pocket to build a new home for a first home buyer so it's a fairly attractive proposition that's incentivising a lot of them to to move in and the rates are so cheap it's you know in terms of servicing the debt now once it's done that's cheaper than rent so we're certainly uh helping the demand in that regard

mate um just sort of coming back to what we spoke about now in my introduction uh but we're certainly seeing very strong demand for good quality properties around around the country and and seeing buyers, one, struggle to find the properties, two, having to pay a lot more than they're even listed for and struggling to do that. Given your expertise in your new business, Buyers Buyers, and your previous experience in the buyers agency market, what sort of negotiation strategies can buyers use

to help themselves secure properties in the current climate? Well, the first thing is you've got to be clear on what it is you're searching for because if you need to move quickly you need to be in a position to make an offer where the right property does come along and at the right price so the first thing is being prepared if there really is no stock and you're just surfing the listing portals every day then you probably need to go a step beyond that and actually get into the ear of local agents about what you're looking for so you can get first look at it because we're often finding at the moment if you just wait for properties to be listed online well it could

be too late by then and you'd be competing with numerous other potential buyers and then before you know it it goes under offer and you're on to the next so it's really being prepared but also being proactive yeah yeah spot on yeah dead right now the buyers agents aren't new to the country They've been around for quite a while, but I, you know, from our own experience, don't see a lot of buyers taking advantage of the expertise that buyer's agents bring to the table. Why should property buyers reconsider using a buyer's agent, do you think? Yeah, there's a number of reasons.

Using a buyer's agent tends to save time because market research shows that most property buyers. They take seven months to buy a property. On average, they make six offers before they finally get one accepted. And then they very often tend to overcompensate and overpay. So it can save you cost as well in terms of negotiation skills. And a big thing for a lot of buyers is simply saving stress because the market surveys and research show that about half of buyers find the process very stressful or even overwhelming so those are the main things time cost and stress can also reduce risk I think if you don't really know what you're doing you can end up buying a sub-optimal property but also potentially

buying properties with structural issues or special levies or maybe the block of apartments being built next door there's a lot of stuff that you might not think about if you're not in the market every day so it's those unseen risks that buyers agents can help you to avoid yeah no well spotted there mate now so why don't more property buyers use a buyers agent do you think well they do in some countries so if you went to the united states for example maybe about 45 percent of transactions go through a buying agent as they call it over there And the big thing in Australia, the industry has been growing over the past 20 years, but just very slowly. And it's really just simple supply and demand economics that the cost is too high for most people to justify.

If a buyer's agent is charging 15K plus GST or very often in Sydney and Melbourne now maybe 20 to 25 plus GST for a huge chunk of the market, They can't justify spending that much of their savings on a buyer's agent. So at the moment, only 2% to 3% of transactions in Australia go through a buyer's agent. But what we're doing differently at buyersbuyers.com.au is actually giving people a more affordable alternative. And that can open up the market just like it has in the States towards maybe half of buyers using a buyer's agent because the cost won't be too onerous. yeah and that is a big hurdle psychologically it's a hurdle and in any case so let's drill into that a little bit in terms of what buyers buyers is is bringing to the table uh tell us about how buyers buyers is going to do it differently from what individual buyers agents

are doing at the moment yeah i mean the main thing we we do is that we've got packages to suit every budget so if you want the full service buyers agency product we still offer that but for some people they already know roughly speaking what they want to buy and where and therefore the full search isn't really what they need. So for people who have already identified a property we have a basic entry-level property called WeBuy where the buyer's agent focuses on the things that the buyer needs so comparable market analysis, inspections, negotiation but also just overseeing the property searches and settlement process so by doing that it can obviously be much cheaper than the full service and so that's what we do differently we don't just charge one

fee it's not one size fits all and where we can reduce the fee by the buyer doing some of the legwork then that's exactly what we do so it's a bit like the Ikea model you know the Ikea founder came along and said, well, if we could get the customer to do some of the work, the self-assembly and maybe no frills in terms of home deliveries and so on, then they could deliver the product for half the price. And yeah, that's essentially what we've done with buyers, buyers.com.au. Love it. A couple of other things that I noticed is a bit scattergun for a lot of probably buyers. I'll go through the listings on realestate.com, but they don't do a lot of research. What options does buyers give them in relation to that sort of market intelligence

that they need to get some real confidence around the properties they're looking at? Yeah, so we've got a lot of free tools that people can use. So if you check out our website, there's two sections. There's WeLearn, which is sort of market education, all free. But also, if you drop in your email address to our WeIntelligence section, there's loads of free tools there so you can get property valuations for free.

You can get market research reports on any region around the country. So we're building that to be some unparalleled free data that people can access. So rather than me trying to sell you on the idea, check out our website. There's heaps of free information there, and you can only benefit from more market research. 100%. And sort of in addition to that, one of the areas that I see sort of sporadic use of buyer's agencies in the auction process, what does Buyer's Buyers offer them in that capacity? Sorry, I missed the question there, Bushy.

I was too busy thinking about our wee intelligence section and I got lost. You're too intelligent, Pete. Yeah, I was talking about the auction slice. you know, there's sort of been most people go to an auction and just stick their hand up, and it's a very stressful process for a lot of people and a very emotional process because of the fear of losing out. Does buyers offer anything that can help potential buyers in that space?

Yeah, totally. So we have a product called WeBid. So for people who don't want to bid at auction or if they're not sure about how the process works, you can hire one of our panel of agents. So we've got a hand-picked national panel of buyers' agents who are experts in the field, and they can just bid on your behalf on the day. They can also help just oversee the process so that it reduces the stress

because for people who don't buy property regularly, turning up to auction, if you don't know what you're doing, it's a very intense experience. So, yeah, our WeBid products can really help on that front. Yeah, it sounds like Buyers Buyers is really sort of making it very affordable and almost levelling the playing field because traditionally the Australian market has been very much dominated by the sellers agents and the vendors and the buyers agents are sort of like the Dave and Goliath left to look after themselves. It really does sound like that you're offering cost-effective services both and free resources in terms of the intelligence piece that's really going to upskill them and get someone on their side that's likely to be able to assist them in securing property at a much more affordable sort of an exercise. Matt, if we sort of pull all that together, given your view, I wouldn't mind your summary really on where you see the market heading, particularly over the next couple of years as a consequence of what we've spoken about

and where you think buyers-buyers is going to fit into assisting investors and homeowners to be able to take advantage of the opportunities that emerge. Yeah, I think if people listen carefully to what the Reserve Bank Governor has been saying. So they've essentially pledged that interest rates will stay where they are at for the next three years. So the cash rate will not be increased for at least three years. Based on recent history, that could prove to be much longer. But essentially, the Reserve Bank has given people the green light to expect no rate hikes for the coming years. and also they've encouraged lenders to get out there and keep the flow of credit moving.

So there's a lot of indications there that we're going to see an increase in borrowing over the next few years and that will drive property higher. How long it goes for, it's always hard to say. There could always be regulatory intervention in a year or two's time. I think the thing that will eventually bring the next cycle to a close is probably the rents won't increase as quickly as prices. So just make sure that the cash flow stacks up if you're going to buy a property.

But it looks to me like we're heading for a big up cycle over the next few years. So potentially a good time for property buyers looking to pull the trigger. Yeah, 100% agree. Let's look a little bit further than that because I know you've released a book not too distant future that talked about the fact

that we're in for a decade of low rates and low yields. In that context, as far as investment strategy is concerned, whether it be equities or property, how do you think that should influence and what sort of decisions and what different sort of approaches should investors be using, knowing that that's likely to be the case? Yeah, the big challenge for people these days

is that cash in the bank or even term deposits just aren't delivering in terms of returns. I think probably the most popular strategy in Australia over the next decade will be property buyers investing heavily in property, but using mortgage offset facilities or redraw facilities to park their extra cash. So if mortgage repayments are low, people are going to build up a nice buffer in their offset accounts. So at least the money is not completely lazy, as cash in the bank might be. And then when big opportunities come around to deploy that fund or that buffer, then they will look to deploy it potentially into stocks or elsewhere.

But it serves useful purposes for people. It keeps your money working for you, but it also gives you a buffer and also an optionality value when better opportunities come around. Yeah, very well summed up, mate. But in closing, then, any final comments or areas that you think the listeners need to know about, given the times that we're in? Yeah, I think just generally, I think it's a confusing time for a lot of people. So I think this is a really good time just to take stock and actually try and begin with the end in mind. So maybe it could be time to take stock of your situation and actually put together a plan for the coming 10 years, because the landscape has changed a great deal over recent years.

We've gone from a time when, certainly before the financial crisis, that cash and term deposits was a big part of what people wanted to do. But now there's that real reach for yield. So I would say it's probably a good time to put together a 10-year plan and try and begin with the end in mind. Very good advice, mate. That's certainly something that touches my heart because that's the first thing that I do with anyone that comes to us. We put together the overall plan so that we know where you're heading

because there's no point going and buying property if you've got no idea how it's going to contribute to your longer-term future. And we've had a massive wake-up call, I believe, with that and with what we're now changing. If people aren't clear on where they're heading and what they're investing in that's going to help achieve that, then they're pretty much flying blind. So great advice, mate. Always lovely having you on the show. I'll make sure that all the details for getting in touch with you and the team at Buyers Buyers are in the show notes.

a pretty exciting time and a great time to be launching a national panel of leading buyers agents that offers a much broader range of opportunities for buyers to secure particularly at a time when good properties are few and far between and very hard to secure

so really appreciate you continuing to share your wisdom with us today mate Always a pleasure, thanks Bushy and it's always great to get your insights as well Thanks Pete, keep in touch mate, we'll talk soon Cheers, take care Cheers.

Well, Freedom Fighters, how good was that? To get a summary of all this investment gold in the show notes, just email me on hello at khgroup.com.au. That's H-E-L-L-O at khgroup.com.au. Or check us out at www.bussymartin.com.au forward slash getinvested. I look forward to joining you next week for another episode of the Get Invested podcast. So thanks for listening.

And as always, dream as if you live forever and live as if you die tomorrow.