11 Mar Knowing when to fold – Jeremy Sheppard
New research has revealed the locations across the country where property prices will not even keep up with inflation over the next three years. The analysis by sellorhold.com.au found that one in seven property markets in Australia will likely have negative capital growth between now and 2022. Jeremy Sheppard – the websites head of research delivers the news
Kevin: Well as we can see, the thirst for knowledge, for accurate property knowledge is growing all the time as the market really tightens worldwide. People really need some high end information about where the market is headed. I was delighted to read about a new website that’s called Sell or Hold. As the name implies, this is a site that’s devoted totally to telling you where particular markets are headed. New research has revealed the locations across the country where property prices will not even keep up with inflation over the next three years. You can get the information in an analysis on the website sellorhold.com.au. One of the drivers behind that is Jeremy Shepphard who joins me now to have a look at this. Jeremy, thank you very much for your time.
Jeremy: Thanks very much for having me on the show, Kevin.
Kevin: It’s my pleasure. Tell me about Sell or Hold. How does it work? Why have you developed it?
Jeremy: Well, it works by trying to estimate where property markets going to be in the next few years, and it was born out of an enormous number of clients that we saw, who were asking this question, you know I bought this data, bought it three or four years ago, it has not moved, or even worse it’s gone south. There’s been this very subjective sort of decision making process about whether to offload it or not, and so we thought there’s got to be something that we can provide that’s far more objective, and so we do an analysis on their circumstances and this is exactly what the software does. It crawls all over their property and then it crawls all over Australia and finds alternative markets, and it checks to see whether they’ll be possibly in a better circumstance if they were to sell, and replace their property with an alternative, or whether the exit and re-entry costs are simply too prohibitive and it’s better to just hang in there.
Kevin: Yeah, because some of the wisest investors over the decades, we’ve seen some people build enormous wealth out of property with a buy and hold mentality. In other words, never sell. You know, buy it and I will never sell it, it will grow in value.
Kevin: That’s obviously changing, as we can see some of these markets performing at totally different levels, so the buy and never sell mentality is probably a bit out dated.
Jeremy: Well, it was drummed into me, when I was a novice investor that you buy and never sell. I ran into circumstances myself where I really should have kept my eye on the property markets that I was exposed to, because some of those did turn south. But it’s been excellent advice in the past, because we don’t really know where property markets are going to go, so just hang in there, and sooner or later growth will do its thing.
Jeremy: But what we’re finding now is that with the moving forward as technology and the ability to analyse data and a lot more data sets becoming available, it’s possible now to have a much clearer idea of where property markets are going. There are some alarm bells ringing in some markets around the country right now, where really investors would be much better off if they offloaded rather than digging deep for the long haul.
Kevin: Well you put the number down as about 860, well you said nearly 860 markets in the nation that are on track to post price falls over the next three years. That’s a big statement. Are there any states that really jump out?
Jeremy: Well, it’s interesting. There was a lot in New South Wales, which you’d expect from in Sydney.
Kevin: Wow. Yep.
Jeremy: Then the problem areas with Western Australia, and Queensland, and some of those regional markets where the economy has just fallen apart with the change in the resources. And some of them are unit markets, possibly in capital cities where there’s just tremendous over supply, so developers are seeing opportunities and have been given permission to just go crazy, and there’s just too many units. So a lot of the off-the-plan type unit developments have popped up.
Kevin: We mentioned there units. I’m just looking at the bottom five property markets by state and territory. Actually, one of them is a housing. Well, several of them are housing markets. It’s not all units, is it?
Jeremy: Yeah. That was a big surprise actually-
Jeremy: … that roughly half the markets … Now bear in mind that this is … These are the worst five in each state, so the ACT which is less than one percent of the country’s market gets a good hearing there. But New South Wales of course is a massive state, and yet it’s only one small portion. It’s one-eighth, because there are eight states and territories, so it’s a little bit biassed in that respect. But, yeah, there are houses and units across the board, so it doesn’t really mean that every market that’s a troubled market is an over supplied unit market. The problem with over supply is it’s so easy to knock down a house next door, and build a whole bunch of units. Of course, units are more susceptible to over supply than houses. Houses require more land, and a little bit more infrastructure. But, it’s not just over supply that’s the problem. Sometimes it’s just demand, and demand has just fallen out of the market.
Kevin: Mm-hmm (affirmative). When someone jumps into the site, and it’s called sellorhold.com.au, what can they expect to see and what level of reporting is available to them?
Jeremy: Well, they’ve got to put in a lot of their own information, because the system in order to make a fair assessment has got to understand their particular property details. One investor could own a property for, say that they’ve had it for the last three years, and it’s gone nowhere. They’re not going to have any capital gains tax if they sell, which makes selling quite good. But if it was a different investor that had owned the property for 20 years, it may have tripled in value, in that time, and they have a huge capital gains tax liability, and therefore the system may say don’t sell. It really comes down to the individual as well as the market, and that’s why they’ve got to put in so much of this detail. But, they’ll get a report listing all the alternative markets they can invest in. A big, long report with all the reasoning behind it, capital growth forecasts, and a breakdown of their current circumstances and where they could be better off.
Kevin: I’ve been talking to head of research Jeremy Shepphard at the website sellorhold.com.au. Jeremy, we’re out of time, but thank you so much, and all the best for the site.
Jeremy: Thank you, Kevin.
Kevin: We’ll watch it. Thank you.
Jeremy: Thank you.