Epsidoe 1: What's Happening in Property Today?

Welcome to season 1 - episode 1 for the Property Now Podcast.  In this episode, we focus on property investment in Australia in 2023.  We explore the current state of the Australian property market and how it's evolving in response to economic, social, and technological trends.

We'll cover topics such as the impact of COVID-19 on the property market, how and why to look for new opportunities and overall what it is that is happening in the property landscape currently. 

Whether you're a seasoned property investor or just starting out, this podcast episode will provide valuable information and perspectives on how to navigate the dynamic and exciting world of property investment in Australia in 2023

Transcript

Speaker 1 (00:01):

Welcome to the Property Now Podcast, where we talk all things property, investment and new homes with your host Matt eol. Speaker 2 (00:09):

Yes, there's bad debt. Yes, there's good debt. The good debt is not bad. It will never send you broke. Ever rich people rely on debt to expand because without debt it's pretty hard to expand. It's almost impossible. Speaker 1 (00:20):

If you want to learn more about what's happening in the market and how to benefit from property investment, then go no further. We dig deep as to why our sector is a key to building financial security and safety for your family. Never before has it been more important to understand the playing field than now. Speaker 2 (00:39):

And I would say this, this is probably going to raise some eyebrows with some people, but your family home is not an asset. It is a liability. It's taking money out of your pocket from a cashflow position. Speaker 1 (00:49):

So let's get on with the show. Happy listening and we'll see you on the other side. Speaker 2 (00:54):

I am your host, Matt l and this is off the cuff. I have a new road device. We call it the synthesiser. Well, I call it the synthesiser. So there you go. It's like a little disco machine here. I feel like I'm going to cut some decks and put some cool stuff on. So anyway, we're talking about properties today and what's going on in this crazy world of property. We have had a volatile couple of years volatile for the up and volatile for the down. That's really what volatile means. Anyway, so there you go. What are you going to do? We are fulfilling dictionary words very well. I dunno what I'm talking about. Haven't had my coffee yet. Anyway, so what's happening in the world of property? It's an interesting space. Currently we've seen a response to a global pandemic in a way that really no one predicted.
(01:45)
We're hearing all sorts of stories, which is pretty funny because we hear this all the time from the media and their so-called experts, how the world or the sky is always falling with property. No one will invest in property ever again. I remember seeing an article, it goes back a bit, but it's late nineties and the article reads something along the lines of no one will ever buy property ever again, property prices to crash, and I think the meat in-house price was 125,000 at the time, so that was pretty funny. Well, some of the things that we hear, we had some experts come over here a while ago and say that the Australian property market is a bubble and that it would crash. Here we are. So a lot of areas that we sell in, we've seen 40% increases in three to four years, and the two years, 2021, I think capital growth increase of 26% or 22% or something along those lines.
(02:37)
The year before, maybe 12% strong numbers. And now that we're seeing an adjustment, I think capital growth prices or meeting in house prices and capital cities are down sort of 5%, maybe a little bit more, maybe six or seven, which is rare. I mean, we don't see property decrease in value very often, but it does happen. If you look at the cycles of our historical data, we do see the prices lose money every now and again, but we always say that consistent 10 year graphing is pretty safe to say that you're going to be doubling your money or you're going to be going somewhere near that range if you've got land and if you're in a reasonable area. Yeah, and that's one of the reasons why really buying in a good location is important, and we really talk about where it is that you should be buying and why you should be buying that.
(03:23)
We look to create our own economies when buying in new areas and create our own markets. So there you go. So prices have dropped off and this is really what the Reserve Bank are trying to achieve. They're trying to curb inflation, which has just been crazy in recent times. We've sent 8% inflation when really they want to sit between two to 3% inflation. They want to see things increasing in value so businesses can build, wealth can be created and our economy can grow, but 8% nowhere near hyperinflation. But you're starting to see some crazy stuff with that lettuces being eight bucks and I hear all sorts of stories and you go shopping or go for dinner these days and it's 200 bucks before you even blink, and that's not ideal. I often get asked why inflation occurs. The simple answer is that, and it's such a powerful law because you can really apply it to all sorts of industries.
(04:17)
It's probably the number one determining law of all markets in my opinion, and that's the supply and demand component. So with inflations, what's been happening in recent times is our employment sector is very strong, so we have a lot of people working and not many people not working. So unemployment's a very, very low rate. I think it's in the low three percents at the moment where normally it's sort of five to 7% and we don't want it that high. We want it low. It's a good thing. But what that means is that we're struggling for people that employers, people running businesses, people paying people to work for them are struggling to find people. So what happens with that is that production drops, businesses can't produce the amount of produce that they need to produce to keep up with the demand. Our population's growing. It's probably going to start increasing a lot faster again now as international migration comes in, but they can't afford to keep up with the demand of materials.
(05:15)
And look, a good example of that in the food industry is when you hear of hurricanes in banana land up north, there might be a massive cyclone and it wipes out bananas and there's not many bananas left, and then all of a sudden banana prices go through the roof because the businesses still need to keep their doors open. They have overheads, they run at a breakeven amount, and only those businesses know what that number is, but they need to keep cashflow going. Cashflow is the most important part of a business of creating wealth for yourself of any component when it comes to trying to do better financially. Debt is not bad. Yes, there's bad debt. Yes, there's good debt. The good debt is not bad, it will never send you broke. Ever rich people rely on debt to expand because without debt it's pretty hard to expand.
(06:01)
It's almost impossible, but cashflow, it's critical. If we don't keep our cashflow going, we will go broke unless someone comes and saves us. And then it's the same thing again. We've got to maintain that cashflow. So that's how inflation works. It's a very simple explanation of how it works, but that's essentially what's going on, which is exactly why these are the things that we look at when we're assessing the property market as well. But that's the exact reason why international migration will increase considerably. We're expecting the government's forecast, 600,000 international migrants coming in per year. Yes, there will be an exodus of about 400,000 people a year from Australia, which means a net international migration amount of about 200,000 people a year. They're saying by 2070, our population will sit at about 35 million, which is big. It's a 40% increase on where we're at now.
(06:54)
So for people who say the property market's going to drop, especially with employment being very strong and us needing more people, I would challenge that position. Yes, I do think it will keep correcting for a little bit. I think it's going to flatten out. It already has flattened out, but it's always going to cycle. It's a cyclical natured beast. If you have a look at the historical data, it's a beautiful trend. It's so consistent, the up, down, up, down, up, down on a positive trend upwards, and it gives you the tips. There's the evidence right there. There's the information that you need to understand where we're at in a cycle. Yes, we can't predict tomorrow, but we can read the information at hand, and I've always believed that making a decision, as long as you make that decision based on the integrity of the information that you have available, if that decision goes wrong, then you've still done the right thing because you can't really control what's going to happen the next day.
(07:46)
So yeah. So for people saying that they won't buy property, I think there's a couple of interesting things that we can talk about here. First being, well, firstly, do you even have the capacity to do that? We are actually the wealthiest that we've ever been. However, our cashflow positions are tight. There's that word again, cashflow. If we're not able to support expanding, and usually from what I'm seeing at the moment, most people in the investment space have the ability to support deposits and whatnot because our household savings are up and our household equity positions are up considerably. The value of Australian real estate's actually tipped $10 trillion. Australian residential real estate. That is last year. It's dropped down to about 9.7, 9.8 now. So it has dropped off a bit. So we've got a lot of wealth. People have equity in their homes, however, they're obviously finding that a little bit more difficult to manage now because of what's happening with interest rates.
(08:39)
So first thing, if you want to buy an investment property or expand, we always look at whether or not you've actually got the capacity to do so. If you do, then I would encourage that we'd at least explore it because why wouldn't you explore it? If it's going to cost you a lot of money to do that, then I understand that might not be something you want to do. We don't charge anything for our services. We are a fee free service, and the service that we give is elite. It's advanced, it's very supportive and very guided. So come and talk to us. I'd highly encourage that. And what we will do is we will sit down and we will work out what it is that's most important to you and really understand your position. What are your ambitions for the future? Where do you want to be in five years, 10 years, 20 years?
(09:21)
When do you want to retire? How long are you going to live for? Obviously these are variables that we can plan for, but they might not play out exactly how we want 'em to. But sitting down and really digging deeply into what it is that's going to drive you, what's going to get you up in the morning, what kind of property is going to work for you, and then reverse engineering that to understand the numbers to make that work for you. One of the biggest mistakes I see with people who invest in property is that they really don't reverse engineer the process. They go out and they see a property that's close to home once they've got a borrowing capacity from their bank or a broker or whatever it is, and they go, great, I've got the ability to spend 600 grand. Let's go get an investment property.
(09:59)
I'm a property investor now I know what I'm doing. Oh, that property is nice and close. We can drive past it. Oh, and my auntie's ex-husband told me at the barbecue last weekend that this is a good area to buy in because it's got a lake and just hold up. Okay, you've got your borrowing capacity. That's great. Let's not rush this. I'm not saying let's sit on our hands and not make any decisions, but let's not rush this. Let's really have a good look into some areas and let's see what's going to work for you. But reverse engineering those numbers, what kind of cashflow we're going to have is that word again, and how's it going to affect our position? How's it going to affect our lifestyles by acquiring this investment property and is it going to support us expanding into the next property if that's what we want to do?
(10:40)
So we'll dig deep into that. We'll do, it's called a gap process, working out how much you're going to need in retirement to live the life that you want to live. And do you do that through super? Do you do that through shares? Do you do that through savings? Do you do that through property? How are you going to create that wealth to enjoy your golden years, which is what retirement's for, and do you want to have money left over for your kids? Do you want to help them? It's going to be more tough, more challenging for younger people getting into property moving forward. From what we can see, the percentage of home ownership rates is definitely dropping, which is concerning. So we need to help our younger generation. This is a driver as to why I'm doing what I'm doing at the moment, is to help people and help people understand that, hey, we do have some issues here and let's address it.
(11:24)
There's things that we can do to address these issues. So that's what we do. Then what we would do is once we've created a bit of a strategy is we go to work and we set our team. We've got 20 staff members. A bunch of those have been brought on board to help us spread a net around where it is that we want to be and what we want to find for our clients. So our team goes off to work. You've got a little army behind you. We work closely with, firstly, we're very, very close with a number of agencies across the state, especially in Victoria, also up in Queensland. But we get the insight intel. We have a good relationship, which gives us availability of stock. And then we also have over 10 different builders that we use to provide the best products that we can.
(12:07)
Now, the type of product that we build is important too, because we might want to go down a bit of a different path. We're developing a range at the moment, which provides people with the opportunity to create a much stronger income whilst also improving the potential of capital growth within the one property. And now I think this is a really powerful proposition, and I think it's probably the way forward. We have a serious problem with affordable housing, and the government needs to do a lot of work. I think we need to do a lot of work to support them as well, because the government can't do it all. First time, I've talked nicely about the government for a while. There you go. Yeah, so your product is very important, but the product's not even important until we get to the stage of understanding where it is you want to be, what it is you want to do, where are you now, and how are we going to go about getting there as quickly as possible.
(12:55)
So for anyone who just goes, oh, bang, here's a product. We don't need to talk about your position, you should buy it. It's a great investment. So I would challenge that because everyone's position is different. So yeah, do I think that you should be buying property? My answer to that is that, and it's not my own quote, but I love it. The best time to buy property is always yesterday. The worst time to buy property is always tomorrow. So yes, I do. I think acquiring income, producing assets is going to be the most important thing for families to do should they want to set themselves up financially and have some security behind them. And I would say this, this is probably going to raise some eyebrows with some people, but your family home is not an asset. It is a liability. It's taking money out of your pocket from a cashflow position.
(13:45)
Yes, it might be increasing in value, but so is everything else around it. So when you get to that retirement maturity and you want to settle down and retire and maybe downsize, everything else has gone up as well. So just consider that. Yes, you can still make some money from your family home, but it's the potential equity that you have to create more wealth, which is exactly what wealthy people do that will get you to where you want to be. If you're in a strong position, you have a really good equity position within your home, you've got a good income, you don't have too many liabilities or bad debts, you should absolutely, well, I shouldn't say you should, absolutely, because everyone can do what they want, but you should be considering your options and people who are scared to go into further debt and expand that position.
(14:28)
I would say that you don't need to be fearful of that. Of course, there's risk involved, but without risk, there's no reward. So I think it's educated risk in a controlled environment whilst understanding your position that's going to get you to where you want to be. So yeah, that's pretty much all for me. I've really just jumped on the microphone without any notes or anything and just spoken. So I hope it's been valuable. I want to keep these episodes really short. We are very, very positive that the property environment is going to continue to grow for a very long time, forever, essentially. So there's probably going to be some good opportunities coming up with the market, softening a little bit because the best time to buy is when other people are fearful. The worst time to buy is when other people are greedy. So just remember that human emotions, a big part of driving markets and when something's dropping off usually means that there's some really good opportunities available.
(15:20)
So that's it from me. Reach out. If you've got any questions you want to talk, please do. We're always here and we'd love to help. Bayfair Property Group has an investor centre. We're very excited. I'll just quickly give this a plug. We're hoping by the end of the year it'll be open. It's probably more likely to be early 2023, but we're building a big display home in Austin Estate and Lara, and it's going to be a room by room journey for investors and first home buyers who want to set themselves up, and it's called the Investor Centre. So we'd love to have you along. We'll be holding seminars, we'll be holding events, all sorts of different things, and we'll release some information on that in the near future. So we'd love to have you there. Yeah, have a great day. Be good. Remember, always be brave. Go above and beyond and back yourself. Until next time, we'll chat then. Thank you. Bye-Bye. Speaker 1 (16:09):

Thanks for listening to The Property Now podcast with Matt elo. We hope you learned something valuable and enjoyed the show. Should you wish to reach out to us, you can do so by calling 1 302 8 9 3 2 4. Or you welcome to email matt@hellobayfairproperty.com au and he'll be more than happy to help. However he can. Have a great day.