21 Jan 2019 is NOT the year of the pig – Rich Harvey
According to Rich Harvey from Real Estate Buyers Association, this is the year of the home buyer. He says the mood has changed and swung in favour of the home buyer and away from the property investor. What’s ahead? He tells us.
Kevin: 2019, what is it? Well, it’s not the year of the pig or the cat or the dog, or anything like that. It is in fact the year of the home buyer according to Rich Harvey from the Real Estate Agents, Real Estate Buyers Association of Australia.
Kevin: G’day, Rich. How are you doing?
Rich: Very good, Kevin. Nice to be with you this year.
Kevin: Yeah, indeed, mate. I’m looking forward to talking to you quite often during the year as well.
Kevin: So you’ve said this is the year of the home buyer. Tell me about that, and also, why do you think it’s going be a good year to buy a property?
Rich: Oh, look, I definitely think the mood’s changed in the market. Investors have gone to ground because it’s just so much more difficult for them to get finance. So the volumes are way down on the investor market but I think it’s a year this year for home buyers to really shine. Prices have retracted significantly in both Melbourne and Sydney and in some other areas, so it’s actually giving first home buyers … it’s giving the downsizers and the upgraders a bit of a chance to have a sniff of getting into a market at a much better price, and particularly some suburbs that they previously couldn’t have afforded. So it’s really for those that have been sitting on their hands waiting for the market to drop a bit so they can get in. I think the first six months of this year is going to be prime time for them to take advantage of that opportunity.
Kevin: Yeah. I sometimes wonder too if APRA realise they might have made a mistake by making it harder for investors to get into the market when they look at playing around with interest only loans. Interesting if they come back in or they become even more popular, Rich.
Rich: Yeah, well, I think interest only loans has been … There’s a been repricing of those loans and it’s forced a lot of investors to go to P&I to get the cheaper rates
Rich: But APRA went pretty hard in telling the banks to cut back their lending to investors and forced the banks to really tighten up the screws up on lending. So I think we will see the pendulum swing back the other way because if the investors stay out of the market for too long it will discourage housing supply, which will push up prices and push up rents over time.
Kevin: It’s going to be an interesting year too particularly with a federal election on the landscape. What’s going to happen with interest rates? You think they’ll go up or down?
Rich: Oh, look, I think interest rates will stay where they are and, if anything, will go down. But I don’t think they’re gonna move at all, to be honest with you. I mean, we’ve got a pretty strong economy in most states. New South Wales and Victoria are very, very strong states. I think we’re gonna see interest rates stay where they are.
Rich: But the election certainly will add a bit of instability to people’s thinking. But in my mind, when there is that stability that’s the time to pounce on property-
Kevin: It seems-
Rich: … when others are sitting on their hands doing nothing.
Kevin: Yeah. Really interesting to see too that some recent surveys have indicated that people aren’t as out of favour with negative gearing as what a lot of people might have thought. So it is going to be an interesting landscape this year.
Kevin: Can we talk about upsize and downsize? Because there’s good opportunity in a softening market, which is really what we’ve got now.
Rich: That’s right. Absolutely.
Rich: Look, I think a lot of home buyers have been sitting on the fence waiting for the market to turn down a bit, thinking, “You know, I play sport with a couple of guys and they say, ‘Oh, look. Now, just the market needs to crash 50% and then I’ll buy.'” Well, that person will never end up buying.
Rich: But it’s certainly an opportunity. So those that are considering upsizing, downsizing, or coming into the market for the first time … because if you’re selling your property, yes, you won’t get the highest price that you would have got a year ago. But what you potentially lose in that sales process you will more than make up for the buy process, the buy price, because you’ll be able to get a much deeper discount than you were able to previously, so …
Rich: And the other thing is, those home buyers, you’re not rushing to exchange like you were during the boom. It was ridiculous. There’d be 10 bidders at auction and everyone fanning their numbers up in the air, and it would just be a fear of missing out. But when it’s a softer market there’s a lot less pressure, there’s more time to make a considered decision, and as buyers’ agents we’re getting a host of off-market opportunities, so all of our members are seeing a lot more opportunities out there.
Kevin: Supply and demand—that’s what property’s all about.
Kevin: We’re seeing a lot of population growth as well. That’s going to add to that demand for more property isn’t it? We need to build more.
Rich: Well, absolutely. If we continue to go down this route of being a country that invites migrants to Australia … I think last year we had around 262,000 migrants coming. There’s been some talk of reducing the migrant intake, but we need a migrant intake because our natural population growth is not sufficient to sustain our economy. We’re an open-door country, we have a skilled migration programme, and the simple facts are we need to house people, and those numbers will continue and increase and put population … sorry … put pressure on dwelling demand.
Kevin: We’ve mentioned already about the federal election. That’s probably going to be one of the biggest interesting things to follow this year. But we always see that market sentiment is adversely impacted by elections, isn’t it?
Rich: It is, yeah. I mean, obviously Labor’s policy to remove negative gearing is at the forefront there. But there’s just a general sort of wonder about well, which party’s gonna get in and what are they gonna do the economy? Are they gonna improve it or stuff it up?
Rich: And obviously if Labor does get in and remove negative gearing my prediction is there will actually be a little mini-boom on investment property, because people think, “Gosh, negative gearing’s gonna be removed. I better go and get an investment property for my future before I can not get the negative gearing benefit,” so I think that’ll be perhaps one side impact of it.
Rich: The other impact is that it will also potentially adversely affect the demand for new properties, and where those new properties are being promoted may not be the best area to invest in. So my advice to any potential budding property investor out there: don’t buy new just because you get a tax break. Look at the fundamentals of the area that you’re buying in.
Kevin: Yeah, really good advice.
Kevin: And the other thing we find out too is that, you know, real buyers are out in the market no matter what the conditions are, no matter what the sentiment’s like.
Kevin: We’ve all gotta have somewhere to live, so …
Rich: That’s right. Look, I love buying in these times of uncertainty. During the GFC it was great. I bought about three properties that year, Kevin, so I’m getting cashed up again ready to buy in 2019 myself. So great opportunities.
Rich: But I think that window … as I said about the beginning of our discussion … that window of when to that buy while the market’s going through this sort of fluctuation phase is going to be short lived. I think it’s a three- to six-month window in 2019, so I would say to buyers: don’t skimp on your research but don’t dilly-dally either. Don’t beat around the bush waiting for the perfect month to buy because it will pass you by, essentially.
Kevin: Good advice from Rich Harvey, who is the president of the Real Estate Buyers Agents Association.
Kevin: Rich, thank you so much for your time. I look forward to working with you during 2019.
Rich: Thanks, Kevin. Hope you have a great year. Thank you.