According to Chris Gray, it’s very easy for us in Australia to say “Oh look, property prices are high and that’s all going to crash,” but at the same time, we are in the top ten of the best cities to live and work in the world and the property prices reasonably should be up there. He has just returned from China with a whole new perspective.
Kevin: Joining me in the show now, Chris Gray from Your Empire buyer’s agents.
Chris, you’ve just returned from an overseas trip. It doesn’t hurt to leave the country occasionally to get a bit of a perspective about what’s happening back here. What’s your take on the market right now, Chris?
Chris: It’s great to travel the world because you get a different perspective on things. I was in Guangzho in China about six weeks ago, and they were selling apartments for $40,000 or $50,000 a square meter – $50 million penthouses – and I’ve just been in Seoul, literally flew in this morning, and again, property prices are high there.
It’s very easy for us in Australia to say “Oh look, property prices are high and that’s all going to crash,” but at the same time, we are in the top ten of the best cities to live and work in the world and the property prices reasonably should be up there. I think you just have to take the media and take some of these thoughts with a pinch of salt, because just looking out the window now, we live in an amazing country.
Kevin: We talk about the cost of housing but we then associate that with affordability. Do you think that’s a valid argument? Is property becoming unaffordable?
Chris: It is definitely an argument, and it’s one that is a worldwide issue as well. Again, I think when you’re comparing us to other countries you have to take the exchange rate into account as well, because if the exchange rate changes 20% or 30% compared to Europe or Asia, or the U.S., we’re still earning Aussie dollars and we’re still paying the same mortgages, so whatever something is in another country, I think is absolutely irrelevant.
John Edwards from Residex – who a lot of us have followed for decades – one of the things he’s said is that affordability is a problem but the market finds a way to get around it. So, we live in smaller houses than our parents, we have two income earners, we have first-home owner grants, we have very, very low interest rates, and all of these things help for us to be able to afford the property.
The bottom line – again, quoting him, as one of my guests on Sky News – is it comes down to supply and demand. We know areas around Australia – like the mining towns – where there’s a massive supply of properties and no one works there, and so the market’s going to crash, and it might have crashed down to 20% of the former prices, but we know that there are other places in Australia where there’s no stock, there are lots of rich, high-income, young people who are willing to work and are willing to sacrifice who can afford that and there are parents who will give the kids a 10% or 20% deposit to help them get into the market. This is the thing that the economists don’t always get, I think.
Kevin: Chris, the point you made there, that comment from John Edwards, I think is very, very worthwhile considering just for a moment and that is we do adjust over a period. I look back several decades and I’ve told this story before about how difficult it was then, but we adjusted and we did purchase.
Do you think sometimes we just complain about a situation and try and make it better for ourselves rather than try to look for an opportunity to adapt?
Chris: I reckon 99% of the time, we complain, whinge, and moan. It’s either bashing the banks or you’re bashing the politicians or something. I recently did an article talking about my first home, which I bought at the age of 22 – so 24 years ago, so obviously a long time.
The numbers then were I earned £10,000 and I could borrow three times my income – so £30,000 – and that would get you nothing. You’d be in a horrible little pit in a horrible place in town, but I guess with being able to work out my numbers and also having parents’ support in terms of a guarantee – so not necessarily a handout but more of a guarantee to get me through the mortgage – I borrowed seven times my income to buy a place for $70,000 or $80,000 that was worth $100,000.
I negotiated well. I got 20% off, which was two years’ salary. My mortgage was massive – it was more than my income even before tax – but because I was willing to sacrifice and have two people live in the house, their rent actually paid for the whole of my mortgage.
I guess the equation then is do you want to live in your own home and own it 100% but live in a bad place, or do you want to suffer and have a couple of other people living with you but spin it and get some mates in and have a good time because then suddenly they can pay all of your mortgage?
I think it comes down to if there’s a will there’s a way. If you really want something to happen even if you have no money, no job, no nothing, there is a way. You just have to work a bit harder.
Kevin: Yes, make those sacrifices. Final question for you – I probably know your answer to this one – whether or not you can see the market continuing to rise, Chris.
Chris: In some areas, I think it will, yes. I think in a lot of areas, it won’t. With APRA, with the banks changing all the serviceability, it’s getting tougher and tougher. Even with me, I have $10 million of debt, before they used to assess me at $500,000; now they’re assessing me at $1 million. So, it hits all of us, and even though we professionals may make it look easy, it’s not.
There are some areas that are really going to be stuffed, and I think it’s the high rise developments, the brand new stuff that’s being overpriced, sold to foreigners who can’t get the loans to settle on it. I think those are the danger areas – not all brand new property but some of it.
Again, the further out areas, some are going to be good and some are going to be bad. But again, my core thing – everyone knows my strategy – which is the median-priced, blue-chip, inner-city suburbs, there’s no more stock and there are lots of queues of people with money. It’s not going to go down, I think, but the growth rate is going to go down. I think we’re still going to be in the positive growth but just not as much in the double digits as before.
Kevin: Always good talking to you, Chris Gray. Chris, of course, from Your Empire buyer’s agents.
Chris, thanks for your time.
Chris: My pleasure. Thanks a lot.