Melbourne set for a downturn + Investment tip you should ignore

Melbourne set for a downturn + Investment tip you should ignore

 

Charlie Albone, landscape designer on Selling Houses Australia has just returned from Hong Kong and shares some great design ideas he picked up there and as well he has some advice that will save property sellers losing up to 25% on offers when they sell.

Simon Pressley from Propertyology believes that Melbourne is on the cusp of a market downturn and he tells us why.

Michael Yardney shares his top 7 property investment tips you should ignore.

We sort out the confusion that surrounds media reports that confuse median price movements with actual market fluctuations.

When you hear the word forensic do you automatically think of CSI and other TV series that use science to solve crimes?  Now we have forensic cleaners who are being used more and more in property and we tell you why.

Ben Kingsley balances the debate about the Melbourne market and says while things might get tough he doubts it will get as bad as Simon Pressley is saying.

 

Transcripts-

Richard Rossman:

Kevin:  One of the frustrations I’ve had from time to time is how the media constantly plays on medians. If you see a movement in the median, either up or down, they’ll maintain that’s an indication that the market is moving either up or down when it has absolutely nothing to do with it.

Let’s try and clarify that a little bit more for you. I can do that by introducing my next guest, Richard Rossman from Secret Agent and a really interesting article that they’ve put together, which is why you can’t trust averages or even, in this case, medians. I want to talk about the difference between all of those and what that really means.

Richard, welcome to the show, and thanks for your time.

Richard:  Thank you for having me.

Kevin:  This is long overdue, trying to clarify what medians are. Firstly, in your own words, explain to me why we really can’t rely on medians as an indication about what’s happening to the market.

Richard:  Yes, sure thing. Let’s just discuss what an average or a median really is. It’s a metric that tells you if you have all data points, or in this case, all housing sales in your sample and divide that by the total number to get the average or you find the middle number. If you think about it, it’s basically the total money invested in the housing market per house.

Kevin:  The way that I’ve described it – tell me if I’m right or wrong here because you’re much more skilled at this than me – the median is really an indication of where the predominance of people are buying. In other words, if more people are starting to buy more expensive properties, then the median is going to move up. It’s not an indication that the market is moving; it’s an indication that buyers’ habits are moving up. Is that a fair way to talk about it?

Richard:  Yes, basically. The median, if you think about it, is just the middle number of your data set, so it’s between the minimum and the maximum. Especially looking at the whole aggregate, if you have smaller houses and bigger houses, if they’re moving in different directions, the median won’t pick up on that sort of thing; it just picks up on the very general trend of are people spending more money on houses; it doesn’t tell you about the stock or supply of the actual houses.

Kevin:  Let’s take an example because I know in your newsletter, you’ve done that. Let’s have a look at Fitzroy in Melbourne as probably a classic example. Run me through the figures there and that’ll demonstrate the message, I think.

Richard:  Absolutely. We looked at Fitzroy housing sales from 2011 until the end of 2015. What we found was that the reported average would be about 8.7%. Those are the big figures that you often see on national TV, on RealEstate.com.au, or other sources like that. But if you compare it to just using houses that were bought and sold multiple times in that time period without any structural changes to the houses, then you’re looking at a growth of about 5.75%, which is a difference of almost 3% in over-statement from the average. One big factor is a building developer coming in, buying a big house or a big block of land and then subdividing it, which adds a lot of value to the market. The average doesn’t segregate that.

Kevin:  Then explain to me why we are so focused on medians. What do they tell us?

Richard:  I think it’s the simplest and quickest way to get an overview. Often, people don’t look any further because it tells you a general overview of the market right now. It’s is there more demand for houses and how is the housing industry going? Are people spending more money in it or less money in it? But it doesn’t tell you if you have a house, how much it will be worth a year from now.

Kevin:  How do you find that out?

Richard:  The way you find that out is by constructing an index using just houses that were bought and sold multiple times without any structural changes such as renovations, subdivisions, or anything like that. If you just use those, basically, what you’re getting is the true capital growth and you’re taking out all other factors that are adding value to the housing market, which is reported in averages.

Kevin:  Where can the average punter get that sort of information?

Richard:  Our website, quite simply. It’s something we’ve been working on recently, especially since it’s not really out there that much. Housing indexes are done on a very big basis – say, all of Australia, for example, would have a housing index. But if you want to invest in a city or even a specific section of suburbs, it doesn’t really tell you enough.

What we’re doing at the moment is we’re working on constructing indexes for suburbs, specifically, and also for cities such as Melbourne that give you much more in-depth insights into the true capital growth.

Kevin:  Will that information be available for all of Australia or just for Melbourne?

Richard:  Because we’re a rather small team, we’re just going to be working on Melbourne at the moment. But we might be able to do a collaboration in the future on all other areas, as well. It just depends.

Kevin:  The website is SecretAgent.com.au. That’ll get you there.

Richard, I want to thank you for giving us your time. We’re unfortunately out of time, but it’s really interesting. As I said, it’s one of my major frustrations, this focus on medians.

Richard:  Me, too.

Kevin:  The website to go to: SecretAgent.com.au. Richard, thank you for your time.

Richard:  No worries. Thank you very much.

 

Simon Pressley:

Kevin:  Property price falls are forecast in Melbourne from 2017, due to massive car manufacturing job losses and rampant overbuilding of houses and apartments, according to some new research released by Propertyology. Joining us from Propertyology once again is Simon Pressley.

Simon, thanks for your time.

Simon:  It’s nice to talk to you again, Kevin.

Kevin:  With the extent of this fall, are you able to forecast by how far it will fall?

Simon:  No, I’m not. We’re always reluctant to put percentages on things because with every market, whether it’s Melbourne or anywhere else, it’s obviously going to be influenced by international events and federal events, as well. But whatever broader Australian property markets in 2017 and 2018, we feel there’s every reason to expect Melbourne to be quite a bit below that.

Kevin:  We hear about closures in car manufacturing impacting the Adelaide or South Australian market. Why are you saying it’s going to extend through to Melbourne?

Simon:  A couple of years ago, Kevin, when the three big car manufacturing plants announced publicly to all of us that they were closing, we automatically go to things like that to work out what potentially impacts on which market.

Not long after the announcements, there was a report released by the University of Adelaide. We have no reason to take that on anything other than face value. Because they’re academics, they don’t have a vested interest. They estimate that nationally, there will be 200,000 jobs lost. Not all of those will be working directly in a plant. Some will be in the supply chain of that. But 98,000 will be in greater Melbourne. A lot more are in Melbourne than Adelaide, Kevin.

Kevin:  Has this or anything like this occurred anywhere else in Australia and this is what you’re making comparisons on, Simon?

Simon:  In our history, has there been something like this?

Kevin:  Yes. Are you comparing this with impacts anywhere else in Australia?

Simon:  The closest recent comparison we can make is with Perth. To us, the fundamentals of Melbourne now resemble what we saw unfolding in Perth two years ago. At that point in time, Perth’s property values were still rising. However, commodity prices, especially iron ore, were starting to decline, and we anticipated that that would lead to job losses in Perth.

At the same time, we could see lots of development or building approvals, which eventually equates to more supply. We put a report out forecasting Perth’s values would decline, and history stands that we were accurate in that.

We think there’s a similar dynamic unfolding with Melbourne. Right here and now, today, Melbourne’s market is one of the strongest in the country – no denying that – but those jobs will be lost. Those factory announcements have been made. And the supply of new housing in Melbourne is not contained to just the inner city Melbourne stuff that’s been well reported for a while now.

Kevin:  Yes. In your report, you mentioned two factors. We’ve pretty well covered one, which is the downturn of the car industry. You also mentioned there about an overbuilding of houses and apartments. Are they equally contributing to this, or is one worse than the other?

Simon:  It’s not just unique to Melbourne, Kevin. There’s been a big increase in the number of apartments relative to all dwelling styles built over the last three years. For a long period of time, apartments represented about a third of all new dwellings approved in a typical calendar year. Now, it represents 50% to 55% of all dwellings built in this country each year.

That’s not unique to Melbourne, but we all probably have known for a while that there have been too many inner-city apartments built in Melbourne. This is official data. Our research shows that there is going to be an oversupply across greater Melbourne. In fact, 16 out of 31 local government authorities that make up Melbourne have approved in excess of 50% more dwellings each calendar year than what they normally build. That correlates to the demand side of things. The rate of population growth of Melbourne has been the same last year as it was the year before, the year before that, and the year before that. Demand is the same, but supply is a heck of a lot more.

Kevin:  You’re saying 2017. When in 2017 do you think we’re going to start seeing the impact of this?

Simon:  Look, it would be great to have that crystal ball, but we know that the first of the car manufacturing plants will be closing in October 2016, about six months from now. That’s not that far away. It’s highly likely leading up to that that there’s going to be lots and lots of stories reported in the broader media about households affected by this. The next two closures will occur – I don’t know the exact dates – over the following 12-month period.

The downturn will be directly related to when the factories close, to the sentiment related to the stories about it closing, as well as the unfolding of the extra supply. It’s likely to be a few years of being quite grim, according to our research.

Kevin:  Simon, I understand you have some graphics on your website that demonstrate this point.

Simon:  Yes, we do, Kevin. We’ve produced a heatmap that shows the specific local government authorities from an oversupply of housing point of view and also the councils that will likely be affected the most by these car manufacturing closures. They’re available on the Propertyology website.

Kevin:  Okay, go to the website – I’ll give it to you in just a moment – or you can use the link here. We take all of our interviews word to text, so we’ll put that link across the text in there. You can read that, and it will link you straight to it.

Simon, it was great talking to you. Thanks very much for your time. Simon Pressley there from Propertyology.com.au. Thanks for your time, Simon.

Simon:  No worries, Kevin.

 

Michael Yardney:

Kevin:  As investors, it can be very hard to separate the good property advice from the bad. We’ve quite often talked about this. Let’s be honest about it. There is a lot of advice out there. Most of what you hear, of course, on Real Estate Talk is going to be okay, but by the same token, we have to filter through it. I’ve asked Michael Yardney to join me.

Let’s have a look at some of the advice, Michael, that maybe you’d ignore and you might suggest we do the same. Good morning.

Michael:  Good morning, Kevin. Yes, there is lots of advice to sort through, to sift through, to filter, and sometimes it is very hard to decide what you should follow.

Kevin:  What about buy locally so you can visit the property?

Michael:  A lot of people say that, don’t they? You should be able to look at it, you should be able to go past it, you should drive past it. It’s your comfort zone. I can understand the appeal of it, but as the basis of an investment strategy, in my mind, there are lots of potential dangers.

Remember there are lots of different markets around Australia. They all have different growth drivers, different growth cycles, so investment based on just location is important, but not necessarily your location.

Kevin:  Yes, you could also be missing out on a lot of great opportunities, as well.

Michael:  The markets are so fragmented, that’s exactly what is happening.

Kevin:  What about just searching for high yield opportunities?

Michael:  We know that there are the two big schools. Some suggest strong cash flow is a great way for investors to go, but in my mind, it’ll never make you rich. There is no way. Cash flow from high-yielding properties, sure, they help you manage your investments, they help your cash flow. But in my mind, it’s capital growth that you require to build your asset base, to build your net worth, and then you transition to the cash flow stage.

Kevin:  The next one on the list you gave me, I must admit I pondered over for a while, and that is about investing in the United States because it is so cheap, isn’t it?

Michael:  It is. I can think of now probably for 15 years, people have been suggesting investing in the United States because it’s cheap. You can buy a house cheaper than the price of a used car. But I guess you could find those places now in Whyalla or in Moranbah in Australia, as well. There are always cheap properties out there, Kevin.

Kevin:  That’s very true, actually. That’s good advice. This next one is a good one. Only invest in properties that you’d live in yourself. I think this is a real big mistake.

Michael:  Very much so, and so many people fall for that. The goal is to take your emotions out of the equation by looking at properties that suit that particular market. In some areas, a one-bedroom property is appropriate, and in other areas, it may not be. In some areas, apartments; maybe in other areas, it’s really house and land. I’ve owned many well-performing properties that are consistently tenanted, but I wouldn’t live in them myself.

Kevin:  No. What about investing just to take advantage of tax deductions?

Michael:  That’s another piece of advice you should ignore. You should never invest in a particular property because of the tax benefits – depreciation, negative gearing, rental guarantees. You’re leaving yourself exposed to changes in the tax rules. We just talked about that in previous shows – about negative gearing. But the main thing is your property should be a growth asset and the tax benefits are really the cream on the top.

Kevin:  A lot of people do think that investors are only investors because of things like negative gearing, Michael.

Michael:  That’s not really the case. I know that is a strategy that some people talk about, and what we’re saying right now is that it’s the sort of advice that’s fraught with danger.

Kevin:  Absolutely. This next one: buy a holiday home that you can personally benefit from. By this, you mean that you’re going to use yourself?

Michael:  A lot of people buy a holiday home and use the excuse that “It’s also an investment but I can actually go there along the way. I can use it as holiday time with my family and get two benefits out of it.” I think along similar lines is “I buy this property because maybe in ten years’ time, I’m going to retire into it.”

I think having these mixed uses means it’s never going to be a particularly good holiday home and probably not a good investment. I’d be just using a specific purpose for your property. Have it as an investment. Holiday locations don’t usually make good capital-growth locations. Instead, stay at a new holiday location each year or take a week’s vacation in the best hotel in that area.

Kevin:  I can hear the chorus of listeners now saying, “Oh yes, I fell for that one.”

Michael:  It’s so common. Again, we’re human and have emotions and needs. We’ve all made these mistakes. That’s why I know these lessons. I’ve made a lot of them myself.

Kevin:  I’m so pleased this next one is on the list because time after time, I still hear about people who are buying off-the-plan because they think they’re going to buy at today’s prices to get tomorrow’s benefit.

Michael:  We’re talking about the investment tips you should ignore. That is one that if you buy off-the-plan, you’re buying at today’s price. But in fact, it’s not today’s retail price. There are two tiers in the property investment market, and off-the-plan prices are not set by the market; they’re set by the developer, often for as much as he can get based on – often – what overseas buyers are going to pay. Therefore, the real test of a property’s value is when it comes onto the secondary market.

Kevin, recently, we’ve been seeing a lot of properties being sold a year or two after contracts have exchanged at up to 30% below the contract price. You can’t forecast future growth. There are too many risks in off-the-plan. In my mind, that’s a bad piece of advice to listen to.

Kevin:  Those are seven pieces of advice that you shouldn’t listen to. I guess that list could go on and on. You could probably write a book about this one. In fact, that’s a good idea.

Michael:  It is. All of the mistakes people make and the bits of advice not to take – Kevin, I could easily fill a book with that.

Kevin:  I’m sure you could. Michael Yardney, always great talking to you. Thanks for your time.

Michael:  Thanks, Kevin.

 

Charlie Albone:

Kevin:  I’m delighted to say our special guest in the show is Charlie Albone, who is a landscape designer from Selling Houses Australia, of course – very well known for that. He’s also owner of Inspired Exteriors, and general all-round stirrer of Andrew Winter, I believe.

Charlie, good day.

Charlie:  Hello. Yes, that is my favorite job, [0:16 inaudible] of Andrew Winter.

Kevin:  You do it very well, too.

Charlie:  He’s just so easy. That’s the thing.

Kevin:  He’s easy to bait, is he?

Charlie:  He is very easy to bait.

Kevin:  You’ve just come back from Hong Kong. Was that a holiday, or were you there on business?

Charlie:  No, I was there on business. I just went for three days. I have a client there. We’re designing the gardens around their house. It’s very nice.

Kevin:  Are gardening concepts different in Hong Kong from Australia?

Charlie:  Yes. They say, “Oh, we have a big block for you to look at,” and you turn up and it’s the size of the smallest townhouse here, and you think, “Yeah, huge.”

Kevin:  Yes, I suppose the plants would be different, as well.

Charlie:  Yeah, it’s a very humid climate. The issue you have is it can be very overcast and foggy and humid, and then all of the sudden, the sun comes out and the leaves all have water on them and they start to burn. So you have to be really careful with what you select.

Kevin:  When you travel like that, Charlie, do you pick up ideas, new design concepts?

Charlie:  Absolutely. I think travel is one of the most important things you can do for new ideas. It doesn’t have to be a straight copy of something. Traveling around, you might find an interesting texture on the wall that you see, and that might spark something to maybe use that texture in a paving pattern, or colors in color combinations, as well. Traveling is really good for sparking ideas.

Kevin:  Speaking about travel, we spoke to you after you came back from the Chelsea Flower Show last time. You hinted then that you might be going back. Is that still the case?

Charlie:  Yes, absolutely. I’m heading back. I leave in three weeks. We start building a garden on the other side of the world in the pouring rain, getting it ready in 21 days for the Queen to have a look at.

Kevin:  That’s a wonderful experience. Are you going to give us any ideas as to what the design is, or is that going to be a secret?

Charlie:  Unlike last year, this design is very formal. Last year’s garden was a Sydney-based garden. This year is Melbourne, and it’s for a busy couple who really gets a lot of support for their busy life from their garden. I travel a lot, and I tend to work quite a lot. I have young kids, as well, and I think I get so much from my garden. It just adds that extra layer of support and lets me relax, and I want to try to recreate that feeling in the garden this year.

Kevin:  Charlie, can you afford to have any all-time favorites, your own favorite type of plants? Are there some that you will absolutely avoid at all costs?

Charlie:  There are things like Japanese peonies that I absolutely love, but being in Sydney, it’s far too humid to grow them. I have a few of those in the garden at Chelsea this year. There are a lot of go-to plants that are really good. I use a lot of lilly pilly hedging just because I know I can buy it instantly tall. I love rosemary hedging, as well. That’s a good one. I do quite like all the pretty flowers and stuff like that, but they do take quite a lot of work to get looking good.

Kevin:  Jade, our producer, told me that your producer has a weird phobia about cacti. Is that right?

Charlie:  Yes. A lot of people have weird phobias about cacti, that’s for sure, which is odd because you just put them in the ground and ignore them.

Kevin:  In your home, given that you’re so busy, what type of gardener are you? Do you prefer those all-round plants, or are you into really high-maintenance annuals and bulbs?

Charlie:  No, I like a combination of the two. I think it’s important to have a combination of the two that give you the structure from stuff that you can ignore or give limited love to, and then have smaller areas where you focus your energy on all of the fiddly pruning and the dead-heading and stuff like that. That way, you can enjoy the best of both.

My favorite thing in my whole garden is actually my automatic lawnmower, which is great for someone who travels as much as I do.

Kevin:  Automatic lawnmower? How does that work?

Charlie:  You put a perimeter ring around your garden, which is a wire, and then it just goes off. Because of the size of my garden, it does two hours of mowing in the morning, and two hours in the evening. It just takes the tiniest amount off the grass, and it always looks fantastic.

Kevin:  You wouldn’t want to have an overly complicated lawn, then, would you?

Charlie:  Mine goes around trees and paths and all that sort of stuff. So once you’ve programmed it, it’s absolutely fantastic.

Kevin:  I’ve never heard of that. What brand is it?

Charlie:  It’s a Husqvarna. They’ve actually made them for 20 years.

Kevin:  Goodness.

Charlie:  In all of Sweden, every second garden has an auto-mower over there. It’s a very Swedish thing to do. They’re quite new over here, but really, for busy people and people who want the best for their lawns, they’re fantastic.

Kevin:  Charlie, I want to take you in a different direction, and that’s to talk about street appeal. There was a Finder survey out recently. It said that sellers risk losing up to 25% on offers due to a lack of street appeal. You probably have seen this in your work on Selling Houses Australia. Would that be right?

Charlie:  Absolutely. I was talking to Andrew Winter about this. We did An Audience with Selling Houses last week, and somebody asked a similar question. Andrew said it doesn’t matter how nice your house is on the inside or how nice your back garden is; if someone drives past the house, and it has bad street appeal, they might not even give it the time. They might just drive off. It might be the perfect house for them at the right price for them, and they’re willing to pay more than somebody else, but they might just not stop because of the street appeal.

The same goes for if your house isn’t particularly nice and you have nice street appeal. Then someone might say, “That looks nice,” and then go in, and first impressions last, so they might give it a bit more time and a bit more thought than they necessarily would have.

Kevin:  I hope you recorded that comment that Andrew made because I reckon there’s grounds there for you to get a pay increase for your importance on the show.

Charlie:  I’d like to say that, and I did mention that to him, but he said, “Don’t do the back garden, then. Just do the front.”

Kevin:  Fair enough. What are the biggest turnoffs for buyers that you’ve found when it comes to a lack of street appeal?

Charlie:  Mess is a big one. It doesn’t cost anything but your time to get out and cut the grass and pull the weeds out and give the shrubs a bit of a prune. Just make them look a little bit tidier. That makes a huge difference. Sweep off the paths and things like that. You wouldn’t have people around your house having a messy house, so why do it with your garden?

A fresh coat of paint makes a huge difference, as well. If you don’t have the budget to do that, just clean the house down, pressure-wash the house down. That makes a huge difference, as well.

Kevin:  What about places that have a lot of concrete, big retaining walls, and so on? How do you go about softening those?

Charlie:  Paint will do a lot, as well, but planting is the key there. You want to try to get rid of as many hard edges as you can to make it more inviting.

Kevin:  It’s interesting. Inside houses, we’ve gone into the area of having big, open spaces – we’ve seen that – and good light coming in. What about gardens and fences? Is a fence always a good idea?

Charlie:  It depends on your market. If you’re in an area that

doesn’t have fences between the gardens – and we’ve done a few houses on Selling Houses that don’t – then having a fence is an odd thing. If everybody has a fence, then having a good fence is a positive thing, if that makes sense.  For garden design, though, it’s really important that you pay attention to what your fences do because that sets the backdrop to everything within the garden. Often, you’ll find I clad a fence with some sort of screening or try to hide it with some planting. If you want your space to feel bigger, the lines where fencing meet the ground, where they meet corners, and then when they stop, if you can hide all of that, you trick the eye into knowing where the boundary is, and the space will feel bigger.

Kevin:  Of course, we can always see you on Selling Houses Australia, but your own website, InspiredExteriors.com.au, carries a lot of great tips as well, Charlie?

Charlie:  Yeah.

Kevin:  Excellent. I expect you to say that. You have lots of videos, as well?

Charlie:  Actually, I don’t do it. Someone else does it for me. I don’t know.

Kevin:  Okay. It’s great, believe me. I’ve been there. Check it out for yourself. It’s called InspiredExteriors.com.au. My guest has been Charlie Albone from that company, and also designer and landscape designer from Selling Houses Australia.

Charlie, great talking to you, as always.

Charlie:  You too, thank you.

Kevin:  Give my regards to the team, and we’ll talk again soon.

Charlie:  Absolutely.

 

Ben Kingsley:

Kevin:  Earlier in the show, I was talking to Simon Pressley from Propertyology about what’s likely to happen in Melbourne with prices. His view is quite dim, saying that in 2017, likely because of massive car manufacturing job losses and overbuilding of houses and apartments in Melbourne, there’s likely to be some fairly substantial price falls.

I want to get a bit of balance on this. Of course, every commentator I talk to around Australia expresses the view that there has been overbuilding in Melbourne. What’s the impact of that likely to be? I’m talking now to Ben Kingsley, who is the CEO and founder of Empower Wealth.

Ben, thanks for your time.

Ben:  A pleasure, Kevin.

Kevin: You’re aware of these concerns, and you’ve probably already seen what Simon had to say. What’s your view of the Melbourne market into 2017 and 2018?

Ben:  I think Simon raises some important points around how some pockets of the marketplace are mostly likely going to be oversupplied. I would be careful in my consideration of medium- and high-density apartments. I think there are going to be those areas where we have planning regulations for medium to high density. We’re going to overshoot the mark in regards to having an oversupply in those areas. I’d also be a little careful in regards to some of the land releases and the building activities having right out on the fringes.

They’re the two areas that would give me some consideration, but in terms of the fundamentals in some of the other areas, we’ve often talked about this – haven’t we, Kevin – in terms of markets within markets, there’s really strong demand for houses, the old style flats, and also villas and townhouses in that 15 to 20 kilometers toward the city. That’s the market that most families would like to get in. All the amenities are there, all of the infrastructure is there.

We’re still seeing Melbourne as being one of the significant economies inside Australia. We’re probably not as pessimistic around the broader market, but there are certainly some of types of accommodation that we’d be steering clear of.

Kevin:  Simon’s predicting anything up to 100,000 job losses in Victoria. That certainly would have some impact, though, wouldn’t it?

Ben:  It would have enormous impact, but I think one of the things we need to understand is that these jobs can transition. It’s not as if it’s been a broad announcement where we’re closing down a refinery or we’re making a sharp decision that’s going to see those job losses occur.

We’ve seen Geelong do a great job in trying to transition out of some changes that are happening down there. I think Victoria generally is going to be looking at some large infrastructure projects. Obviously with our construction boom that’s going on down here, there are some jobs in that particular market, as well.

Again, I’m not as pessimistic about the job losses. Yes, I think there’s no doubt the Andrews government… And broadly speaking, we need to see some stimulus in terms of keeping the number one livable city in the world strong. But I would also add to that that there are potentially other markets around Australia that might represent better investing. You just have to know where you want to go.

Kevin:  Ben, before I let you go, we’ve seen some pretty big figures on people moving into Melbourne in recent times and even overseas buyers. Has that artificially held that market up?

Ben:  There is a great story about foreign investment into property in Australia, and I don’t think it’s just Melbourne; I think it’s right across the board. There’s a lot of Chinese money flowing in. We’ve seen some recent data come out around the growth in those types of numbers – literally in the hundreds of millions, if not billions, of dollars. They are important things, so if the China story does start to slow down, that’s important to understand.

But I also think the Australian investor is a bit savvier these days than they were in the past. By that, I mean it’s very clear that with 93% of all new investment loans going to existing property, I think the local investor is getting smarter about that.

If you’re going to look to invest into an apartment, a townhouse, or a high-rise, then you really have to do your homework. You have to make sure that it has real exclusivity about it, making sure that those uninterrupted views are going to be there indefinitely and can’t be built out. They are the types of little things you need to look for if you’re going to go into that market. I for one wouldn’t be going into that type of market.

Positively, though, the economy’s good down here. It’s a very livable city. We certainly need to do a little bit more with our transport modes, and I’d say we need to do more around that east-west link, which will eventually happen. When we start to see some of those announcements coming through, I think Melbourne has a good story to tell over the next five to ten years.

Kevin:  That’s great advice. Thanks for your time. Ben Kingsley, CEO and founder of Empower Wealth.

Ben, great talking to you. Thanks for your time, mate.

Ben:  Thanks, Kevin.

 

Pam Marsden:

Kevin:  When we hear the word “forensic,” we quite often think of CSI and those crime shows on TV where they go into all of the forensic science. But forensic cleaning is something we don’t get to talk about very often. There is a company in Brisbane that we can touch base with now to learn a little bit more about what’s involved. That’s BVM Clean Scene. Pam Marsden is from that company.

Pam, thank you very much for your time.

Pam:  My pleasure, Kevin.

Kevin:  Tell me, firstly, what is a forensic cleaner, and what do you do?

Pam:  Specifically, it’s cleaning up crime scenes, death scenes. It could also branch into squalids. Basically, mostly things that nobody else wants to do.

Kevin:  You’ve been doing it for quite some time because I understand you were, in fact, Australia’s first established forensic cleaning company. Is that right?

Pam:  That’s correct.

Kevin:  How did the company come about?

Pam:  It came about because there was a niche. I read about a lady in the States who was doing it, and I thought, “That sounds fascinating.” I did a bit of investigating and there was nothing. It used to be left to people who had been previous victims of crime themselves, and I thought, “This isn’t right.” I thought, “There’s a need here and I’ll fill it.” That’s how it came about. I started it on the 1st of November, 1996.

Kevin:  Has your business changed in recent times? Here, I’m referring to the growth that we’re seeing in meth labs.

Pam:  Yes, it certainly is a growth industry at the moment.

Kevin:  Tell me how broad it is. We don’t get to hear a lot about it unless the police do a raid and then we hear about it. Are you being called in more and more?

Pam:  I think it’s the tip of the iceberg, really. Yes, it is. It’s huge. Unfortunately, because there’s not really – probably – suitable regulation, a lot of it’s going under the radar.

Kevin:  That’s a bit scary.

Pam:  It’s very scary.

Kevin:  I’ve heard of people doing this type of activity even in motels. Have you seen that?

Pam:  Absolutely, and in car boots and caravans. They just go anywhere.

Kevin:  I believe it would be very toxic so tell me about what precautions we need to take if we’re actually going to move into a house where this has been exposed.

Pam:  You really need to make absolutely sure that the place has been decontaminated because they remain toxic for a very, very long time if they’re not cleaned. There are some ghastly chemicals involved in the making of this stuff. It just goes on.

Kevin:  Is there a test kit that we can get before we move into a property just to make sure this hasn’t been going on?

Pam:  That’s a very good question. I’m not sure. I’m sure there must be plenty of test kits you can get. I do test strips to send off to a laboratory. That’s probably a bit much for a resident to try and do each time they move into a place.

But really, there should be a history. In America, if a property has been a clandestine drug lab, they are obliged to tell the tenant or the buyer about it, whereas that doesn’t happen here.

Kevin:  I was going to ask you that question, whether or not there is an obligation for disclosure.

Pam:  No.

Kevin:  There’s not, at all.

Pam:  No, there’s not. It’s the same with crime scenes. The only thing that they’re obliged to tell you about is a murder, but violent crime and all the rest of it, no.

Kevin:  Good, because we have heard of instances around Australia where people have purchased a property and then found out a ghastly murder had taken place in there. They’ve even been able to overturn some of those transactions because they didn’t want to move in.

Pam:  That happened here with the Gonzalez murders. A house that was in a suburb in Sydney, we cleaned it and then it was sold to a family from Burma. Of course, they’re very sensitive about spirits and all the rest of it. They actually got out of the sale, so now it’s called the Gonzalez Effect and they have to disclose the fact that there has been a murder on the premises.

Kevin:  It must be terrible on a personal level for you to go to some of these awful murder scenes. How do you handle that?

Pam:  I have a nursing background, so that probably helps. Also, we’re not actually emotionally involved. We get satisfaction from actually making the place look much better and acceptable to people who have to come in and get their relative’s possessions, etc.

Kevin:  Getting back to meth labs for a moment, if I were to walk into a house where a meth lab had been set up, what could I expect? What would that smell be like?

Pam:  Sometimes you can detect a chemical smell. Some people confuse it with if you go into a squalid premise, it smells like rotten food, the freezer has gone off or whatever. But a meth lab that’s been in clean premises, it’s really the chemical smell.

Kevin:  That’s the smell. What about discoloration of the walls? Is that a factor?

Pam:  Sometimes, especially because a lot of these things will catch light because they’re quite flammable, as well. If there’s been a fire, then obviously, yes. Sometimes there is a discoloration.

Kevin:  Tell me about situations other than drug labs and murder scenes. I understand also you have been called in to clean up some pretty filthy houses, as well.

Pam:  The hoarders and the squalids, that’s right. Once again, it was something that nobody else wanted to do, so it fell into our lap. Yes, we do that, too.

Kevin:  We’ve seen on television those hoarder type shows, and I’m quite horrified to think that people would live in that kind of squalor. Do you see that very regularly?

Pam:  Yes, there’s a lot of it out there. Once again, it’s the tip of an iceberg. What you hear about is just a small proportion of actually what goes on. Often, these people are only discovered when they have to go into hospital, and then, of course, the social work department goes out to see what the conditions that they live in are and are horrified.

Kevin:  What’s the worst one you’ve had to clean up?

Pam:  It was probably a premises in Bondi, and we couldn’t even open the front door more than about four inches. It was up at door level, the height. We just had to pick it away until we could open the door and keep going. It was unbelievable.

Kevin:  Is it normally squalor, foodstuffs and things like that, or is it newspapers and cartons?

Pam:  It’s everything, Kevin. They go around, the council clean-ups, and they bring all the stuff home regardless of whether it’s workable, or they want it, or whatever. They just bring it home. It’s a mental illness, though. Yes, it’s a problem.

Kevin:  When you have to go in and clean these premises up with those bad smells and so on, do you use chemicals or natural-based products?

Pam:  Usually it’s natural-based products. We have a machine for the unattended deaths that have been there for quite some time. I have a machine that runs for 24 hours to get rid of the odor.

Kevin:  Pam, before I let you go, I wanted to cover off again on that disclosure element because that somewhat concerns me – that there is no obligation to disclose, particularly if there has been drug manufacturing happen in a rental unit or a house. That’s right across Australia, is it?

Pam:  I don’t know about right across Australia, but certainly New South Wales. The police put a notice on the door of drug labs that they’ve busted, but it’s up to the council to see to it that these properties are decontaminated properly. But really, because there is a lack of regulation, I don’t think it happens as much as it should be.

Kevin:  If I were a landlord and my rental property were used as a drug lab, am I responsible for having it cleaned up? In other words, do I have to pay for your services?

Pam:  Unfortunately, yes you do, unless you have insurance. But a lot of insurance companies won’t touch this sort of thing because they’re extremely expensive procedures.

Kevin:  Tell me how much it would cost if someone had been operating a meth lab.

Pam:  It’s a bit like asking me how long a piece of string is because everything is different. In a car boot, it’s a bit different to a four-bedroom, two-story house or something.

Kevin:  I suppose in a large house, it would permeate all of the rooms, not just the one where it was done.

Pam:  It does. We’ve had to take the whole Gyprock wall system down in some houses. It’s just unbelievable. It depends on the severity of the drug lab, too, how long it’s been operating, and the lab test results when they come back.

Kevin:  The company is called BVM Clean Scene. My guest has been Pam Marsden.

Pam, thank you so much for your time.

Pam:  My pleasure, Kevin. Thank you for your call.

 

 

 

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Kevin Turner
kevin@realestatetalk.com.au
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