07 Mar Brisbane and Perth to shine – Emma Everett
I attended a breakfast meeting recently where Brisbane was highlighted as one of the markets in Australia that is going to do quite well this year. Momentum Wealth is also tipping Brisbane along with Perth as the markets to watch. Emma Everett from Momentum joins us to outline more detail from the survey of just under 500 investors across Australia.
Kevin: I was actually at a breakfast meeting this morning and Brisbane was highlighted as one of the market’s in Australia that is going to do quite well. I was interested to receive a release from Momentum Wealth about how they feel about the Perth market, and tipping also is Brisbane and Perth are going to lead the pack amongst prospective investors. Joining me now, buyers agent or team leader for Momentum Wealth buyer’s agent Emma Everett joins me. Emma, thanks for your time.
Emma: Thanks for having me.
Kevin: It’s about time we had some good news about Perth. It’s been struggling for awhile.
Emma: It’s been a tough market for coming up to five years now. So we’ve seen some false starts and a variety of conditions have kept selling conditions soft, so great for buyers getting in and getting a bargain but tough for people waiting to see some growth on their properties. So good to see some good news.
Kevin: Now this information’s coming off the back of some research that you’ve done. You had a talk to what, just under 500 investors across Australia, and they picked Perth and Brisbane as the two areas to watch.
Emma: That’s right, yeah. Almost 500 investors all across Australia and Perth and Brisbane were the most popular cities in Australia from an investor sentiment point of view. And 70% of Perth based investors considered that it was or WA investors believe it’s a good time to buy in WA.
Kevin: Is that because-
Emma: That was a strong response two years in a row.
Kevin: Yeah, was that like a hometown advantage in some ways?
Emma: Look, it might be. Having said that, we’ve had, as you can appreciate after a couple of years of tough market, previous surveys haven’t delivered that response so it’s really been a big increase the year before now and that’s continued this year. So we are seeing improved confidence in WA, no doubt as mining pipeline starts to build up a little bit again and we see that the big resources influx. And also the rental market recovery gives you a lot of confidence as well.
Kevin: Mm-hmm (affirmative). At the breakfast meeting that I was at this morning that I mentioned at the start of the interview, a lot of talk there about lending restrictions and how that’s actually put a bigger damper on the market than even supply and demand. Would you go along with that?
Emma: Absolutely. We meet with a lot of qualified buyers who are really interested and motivated to get into the market. And because of the changes to either bank calculators or government policies, they’re not able to get the loan that they’re seeking that they might have qualified for a couple of years ago. So that is definitely keeping some buyers out of the market. Not just in Perth, of course, but all around the country.
Kevin: Mm-hmm (affirmative), as we’re also hearing in the show today, some restrictions coming into the New Zealand market and a lot of caution there about what’s happening. So I think governments have gotta sit back and maybe take a bit of a deep breath because while we might be trying to make it more affordable for first time buyers, we could also be doing the market a lot of damage, Emma.
Emma: Well, it’s an interesting thing and financial policy decisions is a tough one because it’s a national decision, that’s national policies, and yet, every property market in the country might be effected in a different way. So when APRA announced some of these changes in restrictions, the Sydney and Melbourne markets were overheated by anyone’s definition. Sydney had almost 50% investors in the market at that time, which is just not sustainable. Those policies did work in slowing down investor activity, slowing down what they considered to be a bubble waiting to happen, to burst. But the Perth market was soft at that time, and so were some others, so we didn’t particularly need that slow down and having said that-
Kevin: Yeah, sorry, Emma, but not only Perth, but a lot of the regional markets around Australia too were-
Emma: That’s right.
Kevin: They’re the ones that suffered the most.
Emma: And the same policies were applied to all different types of investment properties. So whether it was an off-the-plan apartment or a rental property that was in the suburbs, they’re all kind of treated the same way, so that’s the limitation I suppose to some of those types of instruments. The government can’t make a policy necessarily that only impacts, for example, New South Wales and not other parts of the country. So they did their jobs and APRA themselves have come out and said on the record that they have done more than they expected and they’re not going to be kind of imposing any further restrictions and that they’re gonna be seeking to relax some of those requirements. But then of course they had the Royal Commission as well, and so banks are understandably being a bit cautious in the wake of all that and being extra careful to make sure that they are not being accused of lending money that people can’t afford. So some of their policies have become more cautious in the light of that.
Emma: So hopefully that’s behind us now and everything can settle down and we can find a new normal with how that plays out.
Kevin: Yeah, I wouldn’t be at all surprised if the RBA in fact take rates down, which is a lot of the tips that are coming out now that’s likely to happen, which is an indication that the economy’s not doing all that well.
Emma: Well, again, that’s a national instrument. So if it helps people in Perth qualify for their loans, that’s great news. We are finding that there is increased business confidence in WA and certainly the investment pipeline in to the resources sector is really good news for WA. But again, they’re responding to a national property market and national lending situation. But if it helps people get into the Perth market because their capped rates get to be kinder, then I’m all for it.
Kevin: Another national issue too and almost the elephant in the room, which we’re not gonna find out about until later this year is negative gearing. That’s set to impact a huge number of investors around Australia-
Emma: Absolutely. It will. It’s an interesting one, 61% of our survey respondents have a cash negative portfolio so they’re relying capaital growth to offset their negative gearing over time. Having said that, the Labor government has been quite clear that they will only, the Labor party I should say, have been quite clear that that will not be retrospective. So, it won’t effect 60% of all investors. It would just effect new investors coming into the market, Is our understanding at this time, of course policies can change. So our expectation is that will effect new investors coming in and not existing investors, so if anything, that might be a reason to buy sooner to lock in those advantages now.
Kevin: Mm-hmm (affirmative).
Emma: And for investors that buy after policies are announced and then governments change and policies are finally agreed on, which can take some time, there will still be other strategies and other opportunities. So it’s important for investors to remember the tax deductions on negative gearing are attractive and they’re really helpful to investors, but there are other ways to make cash flow affordable and the overall fundamentals of the investment are the most important thing and so it’s just another factor to take into account. Just like loan costs or the rent return at that time, any of those things, just factor it in, and to seek advice because it might effect you less than you think.
Kevin: Always great talking to you, my friend, team leader for Momentum Wealth’s buyer’s agents, Emma Everett. Emma, thank you very much for your time.
Emma: Thanks, Kevin, always love to chat with you.