Free eBook explores supply & demand + Rents under pressure + Kitchen reno blunders

Free eBook explores supply & demand + Rents under pressure + Kitchen reno blunders

Highlights from this week:

  • National vacancies fall putting rents under pressure
  • FREE eBook link
  • What not to do in a kitchen reno
  • Take a stake in HashChing
  • New real estate brand comes to Australia

Transcripts:

Supply & Demand – FREE eBook – Simon Pressley

Kevin:  In an e-book that’s produced exclusively for Real Estate Talk, Simon Pressley from Propertyology makes the point that everything on Earth that has a dollar value is determined by a relationship between supply and demand. However, as Simon points out, the price of property is much more complex. In the e-book – supplied free of charge as a bonus for Real Estate Talk subscribers – he points to a third force, which is sentiment. He joins me to talk about that.

Simon, thanks again for your time.

Simon:  Hi, Kevin. Always good to chat. Yes, this information in this e-book has never been produced before. It’s a must-download for anyone who has an interest in property markets.

Kevin:  Yes, it’s totally free, and you’ve put a lot of effort into this. Now you’ve taken us through state by state. Just give us a couple of the highlights, some of the things that we can pick up in there.

Simon:  We’re covering a 33-year period, so there have been a lot of changes in Australia over those years. We’ve had a couple of property booms, including the one that Sydney and Melbourne just finished. We’ve had a GFC in there. We had the introduction of the GST, which had an impact on property markets. We’ve seen interest rates go from 3.5% recently to 10.5% at one point.

We’ve seen populations change from Western Australia and Queensland being the strongest growth rate periods to more recently, Victoria. We’ve seen shifts. We’ve done interstate migration.

And we’ve certainly seen a big change in dwelling supply, both in a volume sense – total number of dwellings approved in each capital city – but also in the style of dwelling, a big push over the last five or six years to more apartment supply.

Kevin:  In the opening, I mentioned that we’ve credited price growth in property all about being supply and demand, but it really isn’t that simple, is it? There’s a lot more complexity behind those figures.

Simon:  There certainly is. This e-book focuses on what we call the base level of supply and demand. What we mean by base level on the supply side is the number of dwellings constructed, and on the demand side, the base level is a change in population. But the overall property puzzle, there would be nothing less than 30 individual metrics that affect supply, demand, and that keyword sentiment that you mentioned earlier.

That’s the buyer mood. We don’t have to buy a property. There’s no law that says we have to live in something that we own. We can rent. We can live in a one-person household or a ten-person household. We can live in a capital city or a regional location. There’s a whole bunch of things that affect supply, demand, and sentiment.

Kevin:  It’s an extensive study and a great e-book. Just going through it, just having a quick look at it now, each of the states is broken down. You’ve looked at each one, analyzed the complexity behind it.

What did you learn from doing that exercise? Is there anything that jumped out at you, Simon?

Simon:  Yes, we saw that there’s no doubt that the last five years, Australia is in a residential construction boom. That’s more Australia’s big four cities more so than regional cities. There are some amazing charts that we put a lot of time and resources into to put in this e-book that really graphically illustrate how in some locations, the supply is much higher over the last couple of years than what it’s ever been before.

We have also seen, as I said earlier Kevin, a real change in the style of dwelling that we’re building, and some of the charts show you over the 33-year period that we’re charting here, the number of houses built in a typical year, the number of apartments built in a typical year, the amount of population growth in a typical year, and just seeing how that changes over the last few years, there are some fascinating charts.

And there’s some great – what we call – fun facts as well. I’ll give one away. Whilst Darwin’s property market has been in the doldrums over the last couple of years, it had eight consecutive years, Kevin, of double-digit price growth between 2002 and 2009. There’s not a location in Australia that has achieved that, eight years in a row of double-digit price growth. That’s just one of many fun facts that we’ve put in this e-book.

Kevin:  You’ll certainly learn a lot by picking up the e-book. As I said, it’s totally free of charge to subscribers for Real Estate Talk. You can do that. And we thank Simon and his team at Propertyology for doing it for us.

Now, how do you get it? Well, it’s very simple. There are a number of buttons all over the site, Real Estate Talk, to help you get that. It’s a free download, as I said, so jump in, look for any one of the buttons. If you can’t find it, send me an e-mail, Kevin@realestatetalk.com.au. I’ll certainly give you that link.

Simon, thank you so much for your time. Thank you for all of the time and effort that you put into putting this e-book together. I think it’s a wonderful contribution to educating our listeners. So, thank you very much, once again, for doing that, Simon.

Simon:  My pleasure. We’ve had a lot of fun putting it together, and I sincerely mean anyone who has an interest in property, this is a must-read.

Get your free copy here

Rents under pressure – Louis Christopher

Kevin:  If you want to know what’s happening with the market, particularly investor stock, I love to pick up Louis Christopher’s report from SQM Research that talks about vacancy rates around Australia. It gives a really interesting insight. Louis joins me to talk about it.

Good day, Louis. Good to have you on the show again.

Louis:  Good day, Kevin. Good to be here again.

Kevin:  Thanks, mate. The latest report talks about vacancy rates: some up, some down. What do you read into this? Let’s go cap city by cap city.

Louis:  Okay. The national result was that we recorded a rental vacancy rate of 2.1% in April. So, on our numbers, 67,800 residential properties were vacant in April. That compares to March where the rate was 2.1%. So, effectively, it was a steady market in April. Looking at where we were this time last year, the national vacancy rate was 2.4%.

Now, in all this, Kevin, as you’ve said, some cities have gone up in vacancies, some have gone down. When I look at Brisbane, we recorded a vacancy rate for 3%, which sounds elevated. Now, that was down from 3.2% in March and down from 3.7% in April last year.

Kevin:  Let’s bring some perspective into this. What would you call a balanced market? Is it around that 2% or 3%?

Louis:  Yes, that is correct. When it’s below 2%, generally speaking, it’s a landlord’s market. When it’s 3% and above, it’s a tenant’s market. But in all this, what is important to note is the relative movement. For example, we saw this some years back up in Gladstone, where Gladstone once upon a time had a vacancy rate of 9%. That vacancy rate has now come back to about 5%.

The rental market has actually tightened up. It’s still relatively loose, there’s plenty of stock available, but given the fact that it has tightened, that has actually created a little bit of a rise in rents. So, it’s a relative movement that you also need to consider.

Kevin:  What’s happening in Sydney and Melbourne?

Louis:  Vacancy rate in Sydney at the moment is 2.3%, which is steady month on month but was up compared to April last year when the vacancy rate was 1.7%. Melbourne on the other hand has now quite a tight vacancy rate of just 1.3%. This time last year, it was at 1.5%.

So, Melbourne is very tight even while we’ve had an increase in dwelling completions – a rapid increase in dwelling completions, might I add? It seems as though the very accelerated population growth rate has absorbed a lot of the surplus stock.

Kevin:  What about the difference between houses and units, Louis?

Louis:  We don’t break it down, Kevin, because what we see regarding units is you can get a misleading read on units at times, so we generally publish a combined houses and units vacancy rate. But what I like to look at, though, is areas where we know there are lots of units. For example, Brisbane CBD, where you won’t find too many freestanding houses there.

So, we have a vacancy rate now in the Brisbane CBD of about 5%. That’s actually been trending down as well of late, which I find interesting. And it may well suggest that the worst is behind us regarding Brisbane’s apartment glut, but still very early days.

Kevin:  Yes. When looking at the figures, what do you read into it cap city by cap city in terms of what’s likely to happen with rental returns?

Louis:  It is very much a mixed market overall. We just went through some of the cap cities. Perth for example is recording a 4.1% vacancy rate. That said, though, it’s coming down. There’s still surplus stock in Perth due to the mining downturn, but our view is that we were at the bottom at Perth. We’re already past the bottom of Perth now and the rents will likely start to rise again, assuming that the uptick in commodity prices continues.

It’s the same issue with Brisbane where everybody is aware of the over-supply, and we’ve just talked about the fact that maybe we’ve passed the worst of it once again in Brisbane.

Darwin, on the other hand, we have a vacancy rate of 3.3%. We don’t think the worst is over yet. We had to actually recently revise our forecast for Darwin downwards because we’re still seeing a lot of surplus stock. I think Darwin has not quite bottomed out yet.

And then when we look at Sydney, I think for now, vacancies are likely to continue to increase. So, our outlook for the rental market in Sydney is pretty flat at this point in time.

Kevin:  Always a great reports at Louis’ website too, SQMResearch.com.au. And if you want to find out about distressed properties as well, some reports there that you might want to look into.

Louis Christopher has been my guest. Louis, thanks again for your time.

Louis:  Good to be here, Kevin.

Get a share of the future – Siobhan Hayden

Kevin:  It’s not very often we do an interview like the one we’re going to do now, but I think this is such a wonderful opportunity that fits right into the property arena that I just want to bring it to you. It’s an opportunity if you were looking to buy a part share in a company that’s really making some great ground in this area, the company we’ve spoken about on a number of occasions called HashChing.

To explain a little bit more about the opportunity, I’d like to welcome into the show, the COO for HashChing, Siobhan Hayden, who we’ve spoken to in the past.

Good day, Siobhan.

Siobhan:  Thanks, Kevin. Nice to be here.

Kevin:  It’s a great opportunity for investors to buy a piece of HashChing or buy a piece of the future. Tell me about how you’re engineering this.

Siobhan:  Yes, it’s really exciting, Kevin. We shortly kick off equity crowdfunding for the business. We’ve been in business for nearly three years in August, and in that time, we’ve only raised $3.4 million. And that probably doesn’t sound like a little amount of money – it probably sounds like quite a lot – but for comparative industries or other business operators in our space, they’ve raised much, much more money. We’ve been really running quite a lean business and we’ve done very well, and we’re now looking to open it up for a $5 million capital raise.

Where this all started was a customer who had successfully settled a loan eight months ago who reached out and wanted to invest a couple of hundred thousand, and she wasn’t able to because she wasn’t deemed a sophisticated investor.

Kevin:  How do you determine a sophisticated investor?

Siobhan:  It’s a bit complicated – I’m definitely not one myself – but you need to have $1 million net assets and a letter from your accountant, in broad terms. So, there are probably a few more boxes to tick, but in broad terms, you need to be obviously well-positioned financially to be able to make significant investments in businesses that have already raised money, and that was the precursor for that person. We had already raised enough money in a particular window of time, which precluded her.

So, what we’re looking at now is actually going to people like this lady, what are called retail investors. People can contribute or pay for or buy a minimum of $250 up to $10,000 through the equity crowdfunding piece, which I think is a really exciting opportunity.

We have 38,000 customers – and growing – who have already used HashChing. We have a network of mortgage brokers around the country, over 700. We have lots of people who have already registered for this offer to go live and Equitise is the platform that is helping us do it. And they’re a great little start-up as well.

Kevin:  That’s a platform that allows for this to happen. Is that right?

Siobhan:  Yes. You can go onto their site, and they have loads of businesses that they’ve already raised money for. It’s actually a really good site. I have friends who own their own hospitality businesses who have already downloaded the Equitise app, so we’re across the opportunities that Equitise offers in all different business verticals.

Of course, we’re in the home loan and property space, but they have an “Invest” tab, and if you click on that, you can see their whole offer.

Kevin:  Okay, tell me a little bit about HashChing. I’d like to know the business behind it but also the risks involved for anyone who wants to become involved.

Siobhan:  Yes, totally. When the offer becomes live on Equitise, it will have all the documents available for consumers to read, and it is a risk that a customer needs to review in detail and make that decision themselves.

At the point of the capital raise, the equity crowdfunding, the business is valued at $25 million pre-valuation, so pre-money, so pre-raising the funds, and we’re looking to raise the $5 million, as I suggested.

The main reason for the funds or the main use of the funds that we’re raising is really to get the branding out there and primarily to grow the business and help more customers own their own home sooner, which is what our passion is, and obviously, not to be owned by a financial institution.

We want to really maintain that view of having multiple lenders across the panel that customers can genuinely trust and not being influenced by any parent company.

Kevin:  The website is called Equitise.com.

Siobhan:  That’s right.

Kevin:  There are quite a number of businesses on there that you can have a look at. By the time this goes to air, when we broadcast this, that offer will be live, I understand?

Siobhan:  Yes, that’s right.

Kevin:  Okay, so it’s live right now as you’re listening, so go to Equitise.com.

Anything else you’d like to add about the future for HashChing?

Siobhan:  We’ve already done so many things in the business that we’re excited about, but recently added our own HashChing home loan deals, two deals that brokers in our network are now able to chat with customers about, which we’re really excited about, and we’ve also launched our customer portal when customers launch a lead with us or an interest to talk to a broker, they’re given access to their own customer portal, which is where they will also receive offers and alerts about their property.

Kevin:  Wonderful. A great opportunity, I think, for small investors or investors wanting to start out. If you have some confidence in the product, it’s called HashChing, and the website to go to to find out a little bit more about investing is Equitise.com and all the information will be there.

Siobhan Hayden from HashChing, thank you so much for your time and telling us about this opportunity. It’s great to talk to you.

Siobhan:  Thanks, Kevin. Much appreciated. Have a good day.

What not to do in a kitchen reno – Brett White

Kevin:  No doubt there are two areas of the home that will really appeal to buyers, and we’ve spoken about it in the show in the past. One is kitchen, and the other one is bathroom. Today in this segment, I’m going to be focusing very much on the kitchen, some of the dos and don’ts about renovating the kitchen. I’m talking to Brett White, who is the chief inspector for Inspect East Building Inspections out of Victoria.

I guess, Brett, it would be fair to say that in your building inspections, you’ve come across some shockers but you’ve also come across some really good kitchens.

Brett:  Absolutely. Yes, it’s an area of the home that people spend a lot of money on and spend a lot of time in.

Kevin:  Yes, they do. And it can certainly help sell the house, even encourage buyers to make an offer because it gives that first impression about what the house is like. I know the outside impression is important, but once you get inside, it has to feel like a home.

In an article I read that you wrote recently on our website, you talk about ignoring the little stuff. What do you mean by that?

Brett:  Some important aspects when it comes to kitchens. Ensuring all materials meet Australian standards is one of the first. People forget it is a wet area and it has a high usage, and those things are important.

Kevin:  What about the heights of the cabinets? Is there any regulation on those?

Brett:  There is. There is a set height. There is some tolerance built into those heights, but generally, they’re around 900 millimeters to top of bench. That’s for usability.

Kevin:  Yes. I have a mate who’s particularly tall, and when he had a kitchen put in, he made it oversize, he made it a little bit higher. How would he go on in selling that? Would he need to bring that to any kind of regulation?

Brett:  Like I said, there is some tolerance that can be built into that, and some people will have their cabinetry built higher, but that will deter potential buyers in the future. We’ve had that issue raised where clients have moved onto another property because of that fact.

Kevin:  I guess it’s important, too, when you are renovating the kitchen that you’re catering for workflow. What have you found? Are the smaller, compact kitchens more popular? Chefs have told me that’s what they prefer.

Brett:  Yes. Quite often, we’re finding upright cookers, walk-in pantries, lots of different layouts for kitchens, but it’s a high use area and those sorts of things should be brought into consideration.

Kevin:  What are you noticing in terms of style? Are people going for more of the open field, the kitchen flowing into the family area?

Brett:  Yes, open living areas, island benches with serveries or breakfast areas. It’s the hub of the home, so people really look at kitchens closely when they’re purchasing a home.

Kevin:  Is it possible to make a kitchen too trendy, put too many gadgets in it?

Brett:  Interesting question. There is a lot of focus on kitchens. Some people will go overboard with ovens and appliances in kitchens, where personally, I like to see it stripped back with some raw materials and a more robust aspect, personally. But you have to remember they’re one of the prominent areas and the photos are always looked at closely, and that high gloss level and that extreme finish is expensive but well sought after.

Kevin:  Anyone looking at doing a kitchen makeover or a remodel, who are they best to turn to? Is it an architect, or are there specialist kitchen designers you’ve come across, Brett?

Brett:  It depends on property to property. You need to realize your budget. And yes, some properties will require an architect’s input to get that design layout correct, and there are quite often large budgets spent on kitchen space these days.

What we do recommend is ensuring that all your trades are licensed and everything is done to Australian standards. We quite often see some unsafe conditions produced, upright cookers not being secured in position and the correct sealing – like I say, it is a wet area – and ensuring it’s all functioning correctly.

Kevin:  As a building inspector, you obviously look for all of those major defects. But do you also look at lighting and workflow and how a kitchen is going to work, or are you really just focused on the building?

Brett:  Mainly the building. We do take into assessment extraction and performance of the kitchen, but lighting is really a personal touch in those areas.

Kevin:  Great talking to you. Brett White is the chief inspector for Inspect East Building Inspections out of Victoria. A few good tips there for your if you’re looking at a makeover in your kitchen.

Brett, thank you for your time.

Brett:  Thank you.

Big brand real estate comes to Australia – Simon Cashman

Kevin:  There’s a brand new real estate kid on the block. It’s called Better Homes and Gardens Real Estate, not to be confused with the Better Homes and Gardens television show. The man behind the new brand is Charles Tarbey, who was also the chairman and owner of Century 21 Australasia. Simon Cashman, however, will be responsible for the operation of the brand in Australia, and he joins us.

Good morning, Simon.

Simon:  Good morning. How are you?

Kevin:  Well, thank you. Simon, is there any association between the real estate brand and the television show?

Simon:  No, there’s not. We’re quite unique, as any real estate brand is. We have a great relationship developing with Pacific Magazines, so we’re working quite closely with them at the moment, and we’ll be advertising properties in their magazine moving forward. But there’s potential for that, but certainly, there isn’t any at the moment.

Kevin:  I would have thought it’s a great multimedia hook, being associated with the magazine, but also the television show. A great opportunity, I would have thought.

Simon:  Yes, that is correct. The success of it is coming out of the States. The Meredith Corporation over there, one of the largest publicists, has had a very successful job working with BHG Real Estate and Sherry Chris. So, we are following a bit in those footsteps.

Kevin:  I mentioned on the outset there about Century 21. Are there any plans for Better Homes and Gardens, the real estate network, to work closer with Century 21 in Australia?

Simon:  The opportunity is there for C21 offices. They get the first right of refusal. If they’re looking at opening up another shop, by all means, we are welcoming that conversation with them. And that arm has been extended to them quite openly at the moment, and we do have some interest already. It gives them the opportunity to reach across a broader demographic and a broader area, and I think that’s the best opportunity we can extend to them before we go to market.

Kevin:  Yes. It’s a bit like the Colgate Palmolive story, isn’t it? Colgate Palmolive with so many soap brands, it really helps with market share.

How big is Better Homes and Gardens in Australia, just to give us some perspective, and also, like Century 21, will you be hoping to leverage off that?

Simon:  You mean in the States?

Kevin:  Yes.

Simon:  There are about 350 offices and about 11,000 brokers over there, as they call them, as opposed to agents as we call them. So, under the realty umbrella, where C21 sits as well, BHG is actually quite a formidable brand. It’s a common name. It’s as omnipresent as much as it is here.

Kevin:  What are your ambitions for Better Homes and Gardens Real Estate and its growth in the Australian market?

Simon:  We’re looking at launching in the latter half of this year. We have a number of offices, as I mentioned, people who are keen. The interest has been massive since the [2:35 inaudible] article and the other articles we’ve had. So, we are looking at growing at a steady pace, and we believe that we should have a number of offices within the first 24 months and should be able to double that within five years.

Kevin:  Do you have the rights for New Zealand as well?

Simon:  We do, yes. That’s our next cab off the rank. We’re going to establish ourselves comfortably in Australia first, and then certainly, we will be going across the ditch into New Zealand.

It’s important to note that we already have a number of offices chomping at the bit that are keen to go with us, but we want to make sure we have the right strategy – which we do – in place to work the Eastern Seaboard, swing around to South Australia and WA, and then certainly branch out into New Zealand.

Kevin:  Some would say that we’ve already over-crowded the Australian market with real estate brands. How will this one stand out?

Simon:  I believe we have a point of difference in the simple fact that if you mention the name Better Homes and Gardens anywhere in Australia, people already know it. It’s a very well-known brand. The association with how the rest of the media is portrayed for BHG at the moment is that we’re a very warm and welcoming brand.

We believe that our agents – who we’re going to call service personnel – will be able to take you through the whole journey of the home. A lot of agents proclaim that now, but I think we have an advantage with a magazine that will be placing advertising and articles in association with its partner at Channel 7 that we will be able to utilize.

Picture this: I’m moving into the new home, and for the next seven years, I’ll be able to help you maintain that investment and look after that property. And we’ll be able to promote articles that we’ve seen in the magazine or on the show that associate with better landscaping or a renovation or fixing your driveway or things like that that as an agent or a service person, he or she will be able to offer those services on an ongoing basis throughout the whole journey of the home. So, in seven to ten years’ time, who else would you call?

Kevin:  You called them service personnel. Is that an American influence?

Simon:  No, not at all. It’s ours. We certainly want that to be portrayed. The real estate agent as we know it is stereotypical in a lot of ways, and we are certainly looking for people who are real estate agents but believe in that full-service approach to looking after their clients, not just as a traditional agent would today.

Kevin:  You’re experienced in both the Australian and the American market. Is there much we can learn from America, or is it going to push back the other way?

Simon:  That’s very interesting, Kevin. I would suggest there’s a lot to be learned from Sherry Chris and what she has done as the president and CEO. An extremely successful brand, and we have a lot to learn from them and how they’ve done things over there. In turn, I think Australia leads the way on the globe of how we tackle real estate, and certainly its marketing and property advertising.

I think it’s a two-way thing. I think we’re going to be able to help each other out, and we are very close to sharing her team already. It’s a great relationship.

Kevin:  Of course, we do know that the Australian market is the most expensive market in the world to advertise a property on the Internet. No doubt that makes the Australian market quite attractive to a brand like Better Homes and Gardens, I would have thought.

Simon:  Yes, it does. Absolutely. I think BHG, Better Homes and Gardens, has been watching Australia for some time. The opportunity came, we seized the day. But yes, they are already very watchful and very mindful and offering as much support as they can right now. Sherry herself is very frequently in Australia. She’s coming out again in a few more months from now to be involved with some of our PR.

It’s a pleasure to be working with them, and you’re right, they are very keen to see what we can do with the brand down under.

Kevin:  Yes, wonderful stuff. Great talking to you, Simon. Simon Cashman is behind Better Homes and Gardens Real Estate and what it’ll be doing in the Australian market.

Simon, thank you so much for your time.

Simon:  Absolute pleasure. Thanks so much for the call.

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Kevin Turner
kevin@realestatetalk.com.au
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