14 Nov Movers and Shakers who shape the property market – Louis Christopher
In his latest Boom and Bust Report, Louis Christopher names the Top 10 people who, through their decisions impact the rise and fall of the property market. We name them today and give you details about getting this comprehensive report.
Kevin: Well, here’s some exciting news for you because in a couple of days time, the annual Boom and Bust report from Louis Christopher’s SQM Research is about to be released. It’s only a matter of days away. I’ll tell you how you can get a copy of that in just a moment, but Louis joins me. Good day, Louis. How are you doing?
Louis: Good day there, Kevin.
Kevin: This is one of the outstanding reports of the year. One that we’re very proud to tell all of our listeners about because I think it goes into great depth about where the market’s been and where it’s going. Interesting to note, this year, that you’re also going to feature the Movers and Shakers. These are the people who actually really do influence our property market, Louis.
Louis: That’s right, Kevin. Over my 18 years of professionally covering the housing market, I’ve just generally found and observed that we don’t have a standard seven-year cycle. What we have, though, are some interesting and very powerful people who make decisions that affect the market.
Louis: Now, often these people are reactive to events, but some of them can be proactive to events. Ultimately, these people’s decisions, which can change the direction of the market. And because of that, I think it’s worthwhile having a little bit more scrutiny on these people. How do they make these decisions? Why are they making these decisions? Are they making it in the best interest of the community? Hence, the reason why this year, we’ve decided to list down the top 10 most powerful people that have the biggest influence on our housing market.
Kevin: I guess not surprisingly, the Prime Minister is in there. There are two State Premiers in there, the state Premiers for Victoria and for New South Wales, as well as the opposition leader, although he’s down towards the end of that list. I do want to pick up on one mid-range through, and I’ll come to that in just a moment. But interesting to note that number 10 is a developer. Mark Steinert from Stockland.
Louis: Yes. That’s exactly right. Now, Mark has been, for a lack of a better word, throwing his weight around in terms of his views on what negative gearing … What should happen to negative gearing. He’s actually in favour of changes to negative gearing. I don’t think we should be too surprised by that because if Labour does get up and they change negative gearing in the way they said they would do it, this will be a … potentially a boom for property developers and stocklands who Mark is CEO of would benefit tremendously if it goes the way that Labor thinks it’s all going to go.
Kevin: Well, interesting. On that point, if I could just pick up on it. I did an interview, I think it was last week in the show with the Master Builder’s Association, or Master Builders of Australia and they’re saying that if this actually does happen, they are predicting some pretty dire outcomes, particularly for builders.
Louis: And I’m not surprised because our view is that we don’t think we’re going to see a major pick up in construction activity if negative gearing comes in, just a reminder for your audience, labour has said that for new building, the negative gearing benefits will still be there. But we take the issue with this that. Okay? Can you imagine you’re an investor, you buy an off-the-plan development with a view? Okay. You’re going to get this negative gearing benefit, but you must realise that the secondary market, when it comes time to sell, the next buyer doesn’t get the benefits and so they are going to demand a discount. They will have to. And so the resale of these off-the-plan developments, which I’m sure you’re well aware, can be tricky at times …
Kevin: Yes. Yeah.
Louis: … could be even more trickier because we think that the secondary buyer is going to be demanding some type of discount to offset the fact that they don’t get the negative gearing benefits.
Kevin: Yeah. Yeah.
Kevin: That’s a really interesting insight, Louis, one that I certainly hadn’t thought of. I want to take you to midway through that list of the top 10 and talk about Donald Trump. You’ve mentioned him there as number six, the US president, of course. What impact do you think he will have or could have on the Australian market?
Louis: Yeah, I have no doubt some people will think that I’ve thrown in Donald Trump just to get the eyes and look, I can assure you we haven’t …
Kevin: Well, it worked.
Louis: Look, we haven’t done it for that reason, that the reason why we have, is because Donald Trump, of course, is our president of the world’s largest economy. And earlier this year, in fact, the beginning of this year, Trump managed to get through some of the biggest company tax cuts ever seen with a view that he wanted to get the US economy into boom times, and he succeeded in that. Now, as a fallout from that, interest rates have been rising because the reality has been, is that the US now is running a record budget deficit and that has pushed up global interest rates because they have had to borrow money to fund the deficit. And since it pushed up global interest rates, that’s affected our major banks cost of funding.
Louis: The reality is, is that our major banks borrow a significant amount of money from overseas to lend here in Australia. And, to tender this year, they’ve had to lift their rates out of step with the RBA, by between 15 to 18 basis points. And that couldn’t have come at a worse time when we already knew Sydney and Melbourne, at least, were in a housing downturn. And I think that’s accelerated the downturn. The reason why we’ve got Donald in there, is because we think there’s a risk the banks may well have to lift again next year if the US remains in boom times. And hence, the reason why I’ve got him there.
Kevin: Yeah. Well, I think we’ve got to remember, too, that every time the RBA do in fact raise rates, it’s a sign that the economy’s going reasonably well though.
Louis: That is correct. Now, keep in mind, we don’t think that the reserve banks actually going to lift rates next year. In fact, I think there’s every chance they may well have to cut. And, it’s one of the reasons why I’ve got Dr Philip Lowe in there as number one. He’s got the biggest say in terms of the movement in the housing market. He can, at any time, cut rates, lift rates and we all know that that has an impact upon housing. Our view is that the odds are that Philip will keep rates either stable or potentially cut if he starts getting worried about the Sydney and Melbourne housing down turns.
Kevin: Yeah. Number one, Dr Philip Lowe, as Louis just mentioned from the Reserve Bank of Australia. Number two, Wayne Byres, the APRA chairman. Look, it’s a really interesting list. I strongly suggest that you get in now and book this report. There is a link just below this interview to take you straight to Louis’ website to make sure that you get a copy of it.
Kevin: The key features in the Boom and Bust report will include Louis’ personal take on the markets, the capital city forecast, the main drivers of demand and supply, where they’re occurring, all the leading indicators such as stock on market, vacancy rates, special reports on Gold Coast and Sunshine Coast. How the top 10 Movers and Shakers will move the markets in 2019, which is what we’ve just been talking about. All the possible scenarios that could play out next year, so, if you want a really comprehensive look, the best look you’ll get this year and next year into the 2019 market, make sure you have a look at the Boom and Bust report. There’s a link below. Hey Louis, always great talking to you, my friend. Congratulations on a great report and I look forward to talking to you again soon.
Louis: Oh, thank you very much, Kevin. It’s a pleasure and an honour to be speaking with you and your audience.