31 Dec More judgements on spruikers needed – Peter Koulizos
Peter Koulizos from PIPA runs through his highlights of the year and kicks it off with some rejoicing over a record punishment metered out to a spruiker. But was it enough and will it stop him?
Kevin: PIPA is the association that’s the Property Investment Professionals of Australia. It’s the industry association that represents people in the property investment industry, like solicitors, accountants, conveyancers, strategists and the head of that organisation is Peter Koulizos, who joins us. Peter, thank you very much for your time.
Peter: Thank you, Kevin.
Kevin: You would have been an interesting observer through the association of the activities over 2018. What were the highs and lows for you, Peter? What did you notice?
Peter: Some highs, the most recent one, would have been Rick Otton’s penalty of $18 million. It was fantastic. And hopefully that sets the scene for further prosecutions.
Kevin: You think that’s enough, Peter? Because he would have made a huge amount of money out of that scam.
Peter: Yeah, and I’m sure he would have scammed people of much, much more than that. And, those people that were scammed, they’re not the ones getting the $18 million. It is a very sad story. But thankfully, he has been prosecuted. That, hopefully, will set an example for other people who are thinking of doing the wrong thing. But we still need more stringent regulation, in specifically the property investment industry, so it doesn’t get that bad.
Kevin: I agree with you. I think it’s great to see it happen. But I just don’t think it’s enough. This guy is still walking free, he’s still scamming people in different parts of the world. He should be locked up.
Peter: There are certainly some more severe penalties that could be handed out. $18 million is the largest penalty ever given for such a crime. So that’s certainly a big step in the right direction.
Kevin: It’ll be interesting to follow to see if that’s actually paid as well, Peter.
Peter: Very good point, Kevin. We should keep our eye on it in 2019.
Kevin: I think we will, mate. I think we will indeed. Okay. So what were some of the other highs for you?
Peter: Some of the smaller capital cities are shining now, so we’ve got Adelaide and Brisbane for example. They’ve been in the shadows of Sydney and Melbourne. So they’re the bright sparks, as well as Hobart. But Hobart’s no news to anyone I suppose that follows property, cause Hobart been shining in the sun for about two years. But now it’s time for some of the other smaller capital cities, and some regional areas to have their time in the sun, and have some decent property price growth.
Kevin: What are you hearing in your association about what’s likely to happen in 2019, with Sydney and Melbourne prices, Peter?
Peter: You know me Kevin, I’m a bit of an optimist, but I can’t be too optimistic about what’s going to happen in Sydney and Melbourne, because there are, it’s almost like a perfect storm. We’ve got, they were on the downside of the property cycle anyway so prices were coming down. Then the federal government made it much harder for foreign investors to buy property, and most foreign investors were buying in Sydney and Melbourne. But the most recent and most telling factor is the very tight lending criteria.
Peter: So, you have three very big impacts, on that Sydney and Melbourne market. And I’m sorry to say Kevin, but I think prices in Sydney and Melbourne will be lower in 12 months time than they are today.
Peter: Not much lower. Like there’s no, no need to panic, but I think there is a bit more pain before we have some upside.
Kevin: I think we’ve got to be careful too, that we don’t look at this as a crash in the market. I’ve actually been hauled over the coals, for calling it a correction, but I still think that’s exactly what we’re going through in those markets.
Peter: Well, in Sydney. Like at the moment, it’s almost a 10% drop. It’s certainly not a crash, but I’m a bit like you, if it’s not a correction than what is it?
Peter: And 10% is a pretty big drop in property. In the share market, maybe it’s not such a big drop, but in property, in Australian residential property, that is quite a sizable drop in price.
Kevin: I think you’ve got to balance that out.
Kevin: [crosstalk 00:03:52]
Kevin: Yeah you’ve got to balance it out there, with what’s happened in previous years. We’ve had something like 60% growth, so you know, that’s why I call it a correction.
Peter: I just finished doing some analysis on the first book that I wrote ten years ago and looking at the suburbs that I’d written about, and Sydney, Sydney suburbs on average have done 98% from 2008 to 2018
Kevin: Wow. Hmm.
Peter: So even if it drops 10%, for those people that bought a few years ago, you’re still in front. Same as Melbourne, that has almost doubled in price as well.
Peter: Properties generally are a long term strategy.
Kevin: Yeah that is the message, because I think if you’re looking at people that have purchased there in the last year or two, they’d probably be saying oh this is terrible. But you’ve got to look at a property as a long term hold.
Kevin: Can I take you in another direction Peter, and that is the federal election in 2019. It’s due to happen around May. Your view on that, if there’s a change in Government?
Peter: Okay. If there’s a change in government, there most certainly will be a change in negative gearing and capital gains tax. And again, I’ve done some research, as well on this, and the last time a federal government tampered with negative gearing and capital gains tax was back in 1985. Bob Hawk and Paul Keating, in July 1985, they fiddled around with negative gearing, in September 85, they brought in capital gains tax. And for the next two years, before they went towards rectifying the situation, nationally property prices dropped 10%.
Peter: I generally like to see the glass half full, but if the labor party bring in their changes. Let’s say they bring in their changes next year, one of the first things they want to bring in, that on top of the Sydney and the Melbourne market already falling.
Peter: That is not good news.
Kevin: No, well…
Peter: They need to be sensible, and I’ve written a number of articles already. What I’m calling for, is for the Labor party to get together with the stakeholders, so they can work out a more precise and surgical strategy, to come to solutions, or whatever issues they think there are out there. Rather than this huge sledgehammer of changing negative gearing rules markedly and halving the capital gains tax discount.
Kevin: Well Peter, my theory on that, is that the only reason they’re doing it is not to bring about affordability, not to actually lower house prices, but to actually win an election. So I guess time will tell. If they win the election.
Kevin: [crosstalk 00:06:30]
Peter: It’s very political.
Kevin: Yeah, absolutely. It’s almost like low hanging fruit. Okay mate. Thank you so much for your time, all the best for 2019, Peter. And happy, very happy we are to support PIPA. I endorse totally what that organisation does, and thank you for your time.
Peter: Pleasure, thank you once again Kevin!