13 Nov SA property not to be ignored – Bushy Martin
Bushy Martin wants to set the record straight about the South Australian market and how it is being unfairly judged. He also takes a swipe at proposed changes to negative gearing and CGT.
Kevin: Well, as we like to look around Australia at what’s happening with property markets, it’s so easy to get clouded in the shadow of what’s happening in Sydney and Melbourne. And there’s a market I want to talk about now. And that’s South Australia, which I think has been heralded as a market that’s not really going anywhere, but I think that’s grossly unfair.
Kevin: Joining me to talk about this, Bushy Martin. And Bushy is no stranger to the show. Good day mate, how are you doing?
Bushy: Yeah, how are you going, Kevin, it’s a real pleasure to be here again, mate.
Kevin: Yeah. I want to talk to you about a couple of things. One, I want to talk about the South Australian market. I know you’re there, and you’re deep into it. So, I want you to tell me about that market.
Kevin: But I also want to talk to you about something that really concerns me, and that is these proposed Labour changes to negative gearing and capital gains tax. But let’s firstly talk on about South Australia. What’s happening there?
Bushy: Yeah, look, Kevin, I think there’s, in a world where the mainstream media is willing to paint a picture of gloom and doom, particularly focused around Sydney and Melbourne, the picture here in good old South Australia continues to be stable and strong.
Bushy: I guess I’ve always felt, Kevin, having lived here for a long time now, that we’re almost like the solid achievers in the property market, because it’s a very safe, consistent, and very affordable place. And if you look up over the last five years, we’ve seen progressive growth of around about four percent, year on year.
Bushy: And I do a lot of research, dipping into independent studies by the likes of Riskwise, CoreLogic, and a number of other groups. Tending to focus on those that don’t have a vested interest in pushing a certain ballet. And I’ll back that up with some chats to the Real Estate Institute here, I’ve had a good chat to Greg Troughton, who’s the CEO. And I always talk to a number of the agents that are active on the ground, just to get an anecdotal feel for what’s going on.
Bushy: And all of them are saying the same thing, that, moving forward, we’re likely to see continuation of that growth around the four percent mark, at least in the foreseeable future, over the next three years.
Kevin: This is for South Australia, Adelaide, you’re talking about?
Bushy: Yeah. Yes. And predominantly, there’s a little bit of a distance between houses and units. Like most other capital cities, there’s an oversupply of units here in Adelaide, in particular. But on the housing side of the market, and, as you know and you’ve said before, there’s always a danger in focusing on the median price value.
Kevin: Yeah. That’s right.
Bushy: because it sort of tends to belie what’s happening in certain precincts. Now, if we look at some of the high-demand and blue chip areas here in Adelaide, and they’re a bit higher-priced, but let’s say the premium in Adelaide, would you believe, is up around the sort of million-dollar mark. We’ve been seeing capital growth in those locations of double digit up to sort of 20 percent. So, and that’s despite the last twelve months we’ve been seeing very significant credit creeping around lending policy.
Kevin: Mm-hmm (affirmative)-
Bushy: So, there’s some hidden gems there, mate, that people aren’t making too much noise about.
Kevin: Yeah. Well we do a study every Monday morning we look at the auction results around Australia, and always commenting always about the value that you get in Adelaide and also the value in Brisbane.
Kevin: Compared to some of the other markets, and it is quite amazing what you can buy in Adelaide for a million dollars. And I think if there ever was a down turn, you look at a market like Adelaide. And I know where I’d much rather have my money, in Adelaide or in Sydney. If it was going to be a bit of a rough patch, that’s for sure.
Bushy: Yeah. Absolutely. I totally agree with you that the two areas that I think are consistent performers. We are the quiet cousins, and we don’t have the peaks and all the troughs for that matter, but as nice consistent growth, Brisbane’s certainly top of the pops and Adelaide’s not too far behind.
Kevin: Yeah. I agree.
Kevin: Now. Can I take you to the other subject? And this is I think one of the most burning things we got in front of us right now as we head towards a Federal election probably sometime next year. Well, no doubt, next year. That is, if Labour do actually win power, their promise to change negative gearing. We’re already seeing the impact of just talking about it as to what it’s doing to the market. I’ll say again that I think the market is all driven by how the consumer feels. It’s got a lot to do with supply and demand, but also if consumers aren’t confident, they don’t buy, you’re going to see a lot of problems with the market. Now I believe we’re already seeing it.
Bushy: Yeah. It’s the old story, mate. If in doubt, sit it out. And what is interesting, I had a look at a number of studies again done by well respected independent research houses, and Riskwise in particular have done a very in depth study on this. And the clear correlation between the leadership spill with the liberals when Scott Morrison came in, which then led to predictions of a 90 percent chance of Labour getting into power and as a direct consequence of that, and let’s take Sydney as the easy example. Sydney has been falling at about half a percent a month in recent times, that’s actually accelerated since that date to about .75 percent. So, we are seeing in effect a 50 percent increase in the rate of fall as a direct consequence of the fact that the uncertainty that’s now flying around this.
Bushy: It means that investors in particular are cooling the jets and sitting out of the market and then talking on the ground to agencies in South Australia. They’re reinforcing that demand, which is often driven by that percentage of investors around the sort of 25-40 percent mark whereever you are, is really starting to effect the number of buyers in the marketplace. So, we are seeing some immediate impacts, but I guess the scary thing to me, Kevin, is that we’re also seeing the fact that moving forward we are likely to see the projections of anywhere between 6-9 percent drops in property values across the board. And this is not just investors, we’re talking every other house holder,
Bushy: And if I look at the South Australian situation, and I apply a six percent drop in property values that means I’ve just kissed goodbye 30 grand.
Bushy: If you’re in Sydney, they are projecting nine percent there, that’s 90 grand you just wiped off the value of your home. So, very concerning. I find the biggest concern to me Kevin is that the Labour party don’t seem to be listening –
Kevin: That’s right.
Bushy: To all of these independent studies that are saying exactly the same thing.
Kevin: Yeah. I agree mate. And I just want to make a point here if I may, and that is that I’m not suggesting for a moment that Labour don’t have a right to win in the next election. What concerns me, is their blindfold attitude toward negative gearing. They are just not listening to the evidence. It’s very much low hanging fruit and I think it’s totally driven by what’s going to win the most votes. And I just, I’m really afraid of the impact that it’s going to have. I implore them to listen to all of the information that’s coming forward and take it into consideration. Then you got to look at what happened last time when they played with it. How long did it take them to reverse it? Was it a couple of months? Six months or something?
Bushy: Eighteen months.
Kevin: Was it eighteen months?
Bushy: Mid 80’s. And I lived through that so I get –
Kevin: Yeah, so did I.
Bushy: Yeah. I’ve seen the downside and it’s the old story. My biggest concern is we’ve had a number of pressure points that are tightening access to money which has a direct flow on to property values. Now it doesn’t take much once you started to lump this together, or it can create the perfect storm. And my biggest concern is those quite significant tax changes to negative gearing and capital gains tax could be the straw that broke the camel’s back.
Kevin: Yeah. Well we know how rapidly the market changes and unfortunately Labour are really basing all of their thinking on the modelling they did two years ago, Bushy, and its …
Kevin: Mate, we’re out of time, but I got to go. Thank you so much for your insight.
Bushy: Appreciate the time, Kevin. Talk to you again soon.