03 Dec Developers ‘flog substandard projects’ – Helen Collier-Kogtevs
A recent comment by Helen Collier-Kogtevs that property prices will fall by 20%, received a lot of comment – both good and bad. Helen joins us to justify her comments while at the same time making some harsh comment on the quality of some unit developments.
Kevin: Well, a recent comment by Helen Collier-Kogtevs from Real Wealth Australia, that property prices are predicted to fall by 20%, received a lot of comment. Helen’s comment was made on the back of an article in the Financial Review that more than 350,000 households are at risk of negative equity. Helen joins me to discuss that. Helen, it’s no wonder that you got that response. Hello and welcome to the show.
Helen: Thank you for having me, Kevin.
Kevin: It’s a pleasure. Were you surprised and do you agree with that, that the situation is that bad?
Helen: I believe it’s going to head that way. Absolutely. I think it’s not a case of if, it’s a case of when, and I want to be clear though Kevin, it’s not 20% off every property in Australia, not all property is going to fall or experience a fall, but there are a lot of properties out there that are not near infrastructure. They’re lacking investment, there’s not a lot happening, and I guess, investors or owner occupiers have gone in, waiting for all of that to come, and I think they’re the ones that are going to be hardest hit in the short term.
Kevin: You seem to be concerned about Queensland property developers, as you say, and I quote you here, “Trying to flog their substandard projects to unsuspecting Sydney and Melbourne investors.” That seems a bit harsh given how affordable property is in Queensland, Helen.
Helen: It might be affordable, Kevin, but it doesn’t mean it’s good stock. And, I get approached by developers all the time. So, my thing is I don’t sell real estate, but they approach me because they know I’m an investor, and I deal with investors. And, I get that … Well actually of late, they are coming out in droves, because I know they’re starting to panic and get desperate. So, when I actually sit down and out of curiosity, I like to have a look at what stock they are offering, the floor plans are terrible, they are too small, they are lacking in quality fixtures and fittings. It’s just like a sausage factory where they just churning out these properties and selling it to unsuspecting Sydney and Melbourne investors, which I think is disgusting, quite frankly.
Kevin: Well look, there’s no doubt that property investors have pulled back. Is it just a lack of confidence, you think, in the market or is it the result of tougher lending restrictions?
Helen: I think it’s a combination. So, it’s a bit of a perfect storm happening now. So, yes, we’ve got, APRA has started making the changes. The Banking World Commission has now come in and picked up where APRA has left off. Then we’ve got all the labour noises about changes to negative gearing. It’s become … It’s a perfect storm where investors are like Hmm. It’s getting harder to borrow money when actually it’s not, that is a fallacy, but we can talk about that separately. However, because there’s that belief that money is tough, then investors are going, oh, you know what, I think I’ll sit back now and just wait and see what unfolds.
Helen: However, even with all the changes that are going on with the banks, et cetera, I’m finding, Kevin, that if investors line up their financial ducks, they are still able to borrow. Are we able to borrow 98% or 97% like we did a decade ago, no. The changes that APRA and the Royal Banking Commission are making, is to tighten up lending to make us all fiscally more responsible and even make the banks more responsible with their lending. However, their still in the business of lending money and I want people to hear this. But the issue is, you can’t just rock up to a bank, throw them a couple payslips and expect them to lend you the money. They’re just going to now dot their i’s and cross their t’s, and be more thorough, and that’s okay. I think that’s a good thing for all of us.
Helen: However, it doesn’t mean that they’re not lending money. They’ve still got shareholders to report to. They’ve still got targets they need to meet, and you know, unless they lend money, if they don’t lend money, money’s only going to get more expensive. So, it’s important for the banks to keep lending. They’re just looking for the right people to lend to, and that’s where I really like to teach people about lining up the financial ducks, so the banks do say yes more often.
Kevin: Yeah. Just moving away from finance, for a moment, and having a look at supply. Are we building enough properties to cater for a growing population, Helen?
Helen: No, we’re at a deficit of around 40,000 a year. So, you know, and building approvals are on the decline. In my opinion, what we’re going to see now, Kevin, is a wonderful little boom that’s going to come up and it’s not property prices going up, but it’s going to be yields going up. They’re going to start to sky rocket and we’re already seeing that in the ACT and even little old Hobart.
Kevin: Yeah. You also expressed some concern about a slow down in public sector supply of housing, at the same time that there’s a slow down in private sector development. What do you think that’s going to do to property prices as opposed to returns?
Helen: Well, I think because there is enough negative sentiment in the market. I don’t see property prices sky rocketing or going off. There might be a little run on the property market, before the election and if Labor get in, and they do make changes before they legislate. There might be a run on the property market there. However, I think now, we’re going to come into a cool market for the next couple of years and I feel that this is where yields will now enjoy that mini boom.
Kevin: In one of the articles you’ve written recently, you warned about a dramatic collapsing property market. Is there any way to avoid that? What do you think is the solution?
Helen: Okay, so it’s important for … If your market ends up in negative equity, if your property ends up in negative equity, don’t panic. If you don’t need to sell, don’t sell. Just sit tight while this rides out. Again, what you need to do, if you’re looking to purchase in this market, it’s a great time to be buying, but you’ve got to make sure that you’re looking for good quality property that tenants want to rent and that has a history of growth, just because it’s cooled off and everything is not growing, so it’s collapsing in some areas or just stagnant in others. The key thing here, Kevin, is for people not to panic, sit tight, negotiate if you’re going to buy. I love Christmas time for that.
Helen: I always encourage all my students get out there and buy now, there are lots of vendors that would love, love, love to have the property sold by Christmas and celebrate over Christmas. So, let’s give them what they want, but make sure you’re negotiating and asking for discounts.
Kevin: Yeah, they’ve become a lot more negotiable. Sometimes when they want to meet that deadline, they don’t have to have it necessarily settled by Christmas, but to know that it’s sold by Christmas. For a lot of people is very … It helps them relax a lot more.
Helen: It does, and it’s just that knowing of, okay, I’m starting the new year off fresh. I got rid of that property, I’m now moving on in the next chapter.
Kevin: Always great talking to you. Helen Collier-Kogtevs is from Real Wealth Australia. Helen, thanks for your time. All the best for Christmas and the New Year too.
Helen: You too, Kevin. Thank you.