Sydney in for a soft landing + The property pulse check with Ian Rodrigues + How to make $100K plus on your next purchase

Sydney in for a soft landing + The property pulse check with Ian Rodrigues + How to make $100K plus on your next purchase

Highlights from this week:

  • How Chinese buyers feel about how we discuss them buying Aussie property.
  • The 10 questions to ask real estate agents when purchasing property
  • Advice for managing the negotiation process
  • What is driving increased confidence in the Queensland market?
  • Are Government regulations slowing overseas buyers?
  • Just how much the gap between Sydney and the rest of Australia is widening
  • How to start your property investment journey – tips for young investors and first-time buyers
  • Getting into a duplex development
  • Advice for investing interstate – how to select profitable property and manage the buying process from another location
  • The key to developing a profitable property investment strategy – how to plan and leverage finance and select good investments
  • Challenges in property investment, including advice for bouncing back from a bad investment
  • The indicators for Australia’s economical well-being

Transcripts:

Sydney in for a ‘soft landing’ – John McGrath 

Kevin:  Recently, I attended a function in Brisbane, and the guest speaker was John McGrath from the McGrath Organization. John always gives some really good insight as to what’s happening around Australia, and John joins me now to talk about his presentation and what he’s seeing in the market.

John, thanks for your time.

John:  Thanks, Kevin. Good morning.

Kevin:  Good. John, in your presentation to the crowd – and quite an impressive group it was, too; thank you for having me along – you mentioned that in your opinion, southeast Queensland is under-valued, that it’s still good value for money.

John:  Yes, and it’s interesting, Kevin, because often the locals are the last ones to find out because it comes too close to home. But if you look at the east coast of Australia right now where Sydney and Melbourne have really de-coupled from the rest of the country in terms of their pricing… And I’ve always seen Brisbane and South East Queensland as equally great real estate and equally great lifestyle, of course, as all your listeners would agree.

The pricing disparity between the two markets or the three markets is too great at the moment. I think that Sydney and Melbourne are due for a slowdown and they’ll plateau at this sort of level, and I think we’ll see South East Queensland start to catch up over the next few years.

Kevin:  What shape will that plateauing take in Sydney and Melbourne, John?

John:  Kevin, I think we’re in for a soft landing. A lot of people have talked about bubbles and markets coming back dramatically; I don’t see that happening. I think there’s enough demand and with low interest rates, that’ll be a nice soft buffer. But I think we’ll see prices stabilizing around these levels. Sure, there’s a possibility of a small correction of a few percentage points. That generally does happen when a market comes to the end of its cycle.

So yes, we might see a 2%, 3% or 4% rise from here. We might see a 2%, 3% or 4% correction from here. But I think the sort of values that we’re seeing in Sydney and Melbourne are about where it will rest for a while.

Kevin:  You gave some great examples about the disparity in prices or the values between, say, South East Queensland or the Brisbane market and, say, the Sydney market. Let’s talk about those for a minute. The square meterage, you’re talking around $9000 a square meter in Brisbane compared to anything up to $50,000 or $90,000 per square meter.

John:  It’s interesting, Kevin, because we’ve been fortunate to have sold a few on the river recently, some really beautiful properties around that $9,000 to $10,000 a square meter for prime residential riverside apartment living.

The equivalent – and Sydney Harbor would be the obvious equivalent, or even Bondi Beach – they’re certainly fetching $25,000 to $35,000 a square meter, and as you mentioned, they’ve gone above $50,000. In fact, the record sale price in Sydney recently almost hit $100,000 a square meter, which was next to the Opera House, or certainly just up the road from the Opera House.

When I look at great living up in Brisbane for $9000 or $10,000 a square meter, or even if we look at the Gold Coast on the beachfront for $9000 or $12,000 a square meter also, and then I think the equivalent in Sydney and Melbourne, which could be two, three, or even four times the dollar amount per square meter, it just feels for me, there has to be a catch-up happening shortly.

Kevin:  John, let’s take a national perspective for a minute. The regions: I think you predicted in your presentation that New South Wales regional areas are probably going to do fairly well. Would you have that view in most of the regions around Australia?

John:  Yes, I think particularly, Kevin, the regional towns that are on the coasts and are fairly close to the big cities. In Melbourne, you might have Geelong or the MorningtonPeninsula. In Sydney, you have areas like the South Coast just below Sydney, Wollongong, and you have the Central Coast, and even areas like Newcastle.

I think areas that have reasonable – within two hours – proximity of the big cities… Because a lot of people that will be looking to move to those areas still have to access the big cities, and if it’s the Baby Boomers, they want to be close to their kids and grandkids.

I think anywhere within two hours of the major cities will really benefit from the current trend we’re calling telecommuting, where a lot of people no longer have to actually go every day to work in the big cities. They can actually work remotely from better lifestyle locations we referenced yesterday or last week in the session. We talked about SunshineCoast as a great example.

In fact, I was sitting next to a lady at the breakfast and she had been living all her life in Brisbane, and she’s moved up to Sunshine Coast and she’ll travel a couple of times a week and the rest of the time, she’ll just work online by the Internet. I think that’ll become a really popular trend that will benefit the lifestyle regionals.

Kevin:  Talking about trends, I know you did talk a lot about trends in your presentation. It’s one of the key things you look at to work out where the market is headed. Let’s talk for a moment, if we could, about overseas investors. What’s your take on what’s happening on how we’re treating them, John?

John:  I was really disappointed, Kevin, when we saw the main states on the East Coast of Australia all put up a stop sign and they all raised their stamp duties significantly. Basically, they doubled the entry price in terms of stamp duty for overseas investors. I think it’s very short-sighted and I think it’s a knee-jerk reaction.

Of course, a lot of people in Sydney were talking about the market getting too hot for the locals to get in. Really, in my opinion, it wasn’t overseas buyers who were doing that; the market was just running very, very hot. An extremely small percentage of those properties overall were being sold to overseas buyers; most of it was local money.

I think, really, we should be, as a nation and as an economy, encouraging overseas investment into us, not saying to people “We don’t want your money.” In fact, Canada – who had been a great recipient of a lot of overseas investment – put up a similar stop sign in the last few years, and their market has been damaged significantly because the overseas markets all withdrew.

I think the Asian region will still find Australia very popular and I think they will come back, but I think, though, they might actually wait until the stamp duty tariffs come off because I don’t think it’s proven very popular today.

But overall, I think Australia is a great destination for other people in the world looking for a safe currency, a great lifestyle, and of course, those who are in the Asian region, close proximity.

Kevin:  Just looking back a little while, too, John, we’re all in great fear of what the impact would be of the Global Financial Crisis. I think you made the point that the banks held us in very good stead. Do you see the Baby Boomers coming through as maybe the next thing that might actually soften any impact for the Australian market?

John:  I don’t think so, Kevin. Baby Boomers are certainly going to be a major influence going forward because they’re very wealthy, there’s a lot of them, and they actually see property and they’ve known property all their life and through their parents’ generations as a very safe haven for their investment dollars.

I think one of the reasons that investment profile has gone up recently is because Baby Boomers are wanting to put a good percentage of their superannuation and their money they set aside for investment into bricks and mortar. It’s a very safe asset for them.

I think, if anything, we’ll find that the Baby Boomers will continue to be very popular advocates of property and they’ll be investing heavily right through, and hopefully, their kids, Gen X and Gen Y, will do the same.

Kevin:  You mentioned in your presentation about the Manhattan Effect. What is that, John?

John:  Kevin, all around the world, big cities – again, like Brisbane, Sydney, and Melbourne – you’re finding the trend that people want to live closer and closer into the CBD and close to the harbors, the beaches, the river ways, and so forth.

Whilst there was a period in our development where people seemed to be moving away from the cities and going out to the suburbs, there seems to be a returning back, especially for the big cities, of people wanting to be close to the action, partly, I think driven by commuting, which becomes harder and harder as you get bigger and bigger cities. It’s just the gridlock becomes incredible and travel time becomes onerous for people. And I think partly because the infrastructure, the available living inside the inner city ring is becoming better and better.

You look at some of the apartments around the rivers of Brisbane and on the beaches up and down the coast; it’s really world-class living now, and I think a lot of people are saying “We used to think that it would be nice to live 25 kilometers out and have 400 or 500 square meters, but now we’d like to have 150 square meters in close to the city, a café underneath, and the ability to walk down to the cinemas and the operas and a whole range of lifestyle activities.”

I think definitely in the big cities, we’re going to see a continuing return of people wanting to live in and around the city. Then that, of course, will be complemented by the trend that we just talked about before where people might have a getaway or a second place somewhat just outside of the city, areas like Gold Coast and Sunshine Coast.

Kevin:  John, great talking to you. John McGrath, thank you very much for your time.

John:  Thanks, Kevin.

 

The property pulse with Ian Rodrigues

Kevin:  I want to introduce you to a new guest. He’s going to be a regular to the show, too. Ian Rodrigues is a director of Bishop Collins Group. He’s a chartered accountant specialized in taxation and superannuation.

By way of introduction, Bishop Collins Group are experts in taxation, business and financial services, as well as wealth management, and in fact, on behalf of investors manage somewhere between $70 and $80 million worth of property.

Ian, welcome to the show. I look forward to your contribution.

Ian:  Thanks, Kevin. It’s good to be here with the listeners, too.

Kevin:  I want to ask you the first question. It’s bit of an overreaching question, I guess, about your view on how Australia is traveling economically on the world stage right now.

Ian:  Yes, Kevin, I think for a lot of the listeners – and ourselves – there’s so much information out there that we’re bombarded with on an hourly, if not daily, basis about the economy, and so much information, much of it conflicting. Many, many views from economists.

There was always a good old joke, back in the university days, about economists, about assuming things and all that. A lot of those predictions are sometimes based on very academic or difficult models. Predicting simple things, like what will happen with rates or exchange rates, there’s a range of views about all of that.

So, whenever I’m looking at the Australian economy, I strip it right back to the really, really basic stuff when we’re looking at an economy. There are some very basic leading indicators and the metrics that you look at that pretty quickly tell you what sort of shape the economy is in.

Kevin:  What are the indicators that you look for to measure the Australian economy and how well we’re going?

Ian:  The key one that I’m always watching is business confidence. There are a couple of surveys of business confidence. And that’s a leading indicator, because it’s telling you where the economy is likely to be in the future.

Our politicians know deep down that to get an economy moving, you can’t just tax it more and you can’t just talk it up. You can’t do those things. Businesspeople have to be making investment decisions, and they will only make that when they’re feeling confident.

Now, when you keep changing the rules or threatening to change the rules… The point I’ve made even about simple things like negative gearing, we’ve had so much oxygen wasted on what the changes should or could be and all of that. But there hasn’t actually been a change to negative gearing for a very, very long time, but it makes people very nervous about making investment decisions because of the uncertainty.

The same thing applies to business. If you keep changing the rules and creating uncertainty, businesspeople will sit back and wait until they’re confident to make big investment decisions – buying capital things, employing more staff. And when they do those things, when businesspeople make decisions, it’s what drives the economy.

Kevin:  Just your view now on the likely impact of what’s happening overseas, with America and the machinations there with China and so on. How much of an impact do you think that will have on Australia and our economy?

Ian:  I think it all does have an impact. It’s probably very hard to measure very directly how much that is. But I think, again, it’s one of those confidence things. Whether you have particular world leaders in place and whether they’re pushing us down dangerous paths and all that comes into the equation, but it’s probably been the case for many, many years that that’s always going on. There are always those risks.

One of the things we have in our office is a chart with the economy and where it’s been over the last 30 or 40 years, and it has little dots on it for every crisis that’s come up over the last 30 or 40 years. These are just another dot in the history, and you see markets react to those things, and then they recover from those things.

Now, albeit that’s much more about the share market, that particular graph, but property markets work in similar ways.

Kevin:  Talking about the property market for a moment, just to close off our conversation this time, Ian, what impact do you think the government’s pressure on foreign buyers will have on the property market?

Ian:  I think the government is trying to do some things to impact the property market, and I think they’re also working out that it is very hard to control markets. There’s a very good argument for why markets should be a little bit free and a little bit left alone, but I do understand why they would want to control foreign investment. There’s a whole range of reasons for that. I think the things that they’ve announced and that they’re thinking of doing might end up having quite a limited or less than the impact they’re expecting.

But I do think the thing that is having the biggest impact on the property market at the moment is the banks and their position with increasing rates of interest to investors in a number of different ways. It’s been driven by market forces and regulation, as well. I think that’s actually the single thing that is happening that’s probably impacting markets the most at the moment.

Kevin:  I look forward to your contribution to the shows in the future. Ian, thank you for joining us. Ian is the director of Bishop Collins Group. They are chartered accountants specializing in taxation and superannuation.

Ian, thanks for your time.

Ian:  Great to be here. Thanks, Kevin.

 

Duplex development tips – Brook Drake

Kevin:  One thing I do know is that any smart investor is always looking for the highest possible return they can get on their investment property. Have you ever thought of duplexes? Well, duplex development is something that requires a lot of skill, a lot of knowledge about where you can do it and how you do it. A man who specializes in that joins me now. He’s from Duplex Plus. Brook Drake, joins me.

Brook, this does actually require a lot of due diligence – doesn’t it – to find the right site?

Brook:  Yes, it does.

Kevin:  Tell us a little bit about it. What sorts of areas are best suited to this?

Brook:  There are a few. We concentrate on South East Queensland and certain parts of New South Wales. In South East Queensland, probably the best opportunity is in that Brisbane to Toowoomba growth corridor there. There are a couple of shires around there where we can do it.

What we’re looking for is to be able to find areas where we can buy the land and put the duplex on there, and create instant equity, instant profit of $100,000 once it’s built, once we strata title it. That’s including all strata titling costs.

We’re looking for a net gain of $100,000, so certain shires in South East Queensland and also the Newcastle area is a very good area in New South Wales. We’re talking west of Newcastle, a few areas around there.

Kevin:  I’ve had a look on your site, and when we think about duplexes, we think of those old two side by side that were pretty unattractive. But nowadays, they’re really quite contemporary, quite nice in their design. Is one of the other attractions to it that it has some longevity in terms of its design?

Brook:  Absolutely. We use a couple of builders, and we’ve chosen builders that are specialist duplex builders and they do an exceptional job. These are full turn-key packages, and the finishes are superb, probably the best I’ve seen, particularly one of the builders that we use. So, the tenants or the people who are going to move in, they’re moving into a very, very good product.

Kevin:  What sort of investor are you finding is being attracted to this? Is it someone who wants to live in one and rent one, or is it building up a package and renting both out?

Brook:  I think the whole thing about it is to make money. No longer is there the need for negative gearing. This is what it’s all about. It’s not about holding onto it and living in one and renting out the other; I think it’s more a choice of using property to make money.

With these duplexes, what we can do is we can build them over a period of six months. We can work on pre-selling the units before it even settles, or we can settle it and get a local agent to do it or we can do it, sell the individual units side by side as soon as we possibly can, and then move onto the next one. You could potentially be making $100,000 profit within a six- to eight-month period. Technically, you could.

Kevin:  And there is obviously another advantage, too, in maybe holding onto it and gearing up on that because you’re getting an instant growth in equity. You’re talking there about netting $100,000, but you could then re-use that equity as well, couldn’t you?

Brook:  That’s exactly right, but that would depend on your serviceability. Obviously, that would come into play as you’re building up. But if you have unlimited serviceability, then that would be the best way to go, as well.

Kevin:  There’s a button on the homepage on Real Estate Talk that will tell you a little bit more about this. It’ll take you to the site where you can get in touch with Brook and his team if you want to know a little bit more about duplex.

It’s a great opportunity for investors. I strongly suggest you have a look at it. Get the info pack, which is absolutely free, Duplex Pairs, and just check out the button on the homepage at Real Estate Talk.

Brook, nice talking to you, mate. All the best, and thanks for your time.

Brook:  Thanks very much, Kevin.

 

The power of two – Sana and Mona Ali

Kevin:  My next guest – who we’ve spoken to in the show in the past – two young investors who have built a very enviable portfolio, now worth well over $5 million. Of course, I’m referring to the Property Twins, Sana and Mona Ali.

Ladies, thank you very much for your time. Tell me, this passion for property, where did it come from?

Sana:  Thanks, Kevin, for having us. We came to Australia in the year 2000, with the challenge of settling in a new country. We just saw a lot of friends and family living really good lives and acquiring their own homes.

That’s when we realized that property was a more tangible and secure investment that we could hold on to, and if we had the ability to buy more than one property, we would certainly do that when we could do that. That’s when we really got thinking that property would be one day our passion and something we were going to pursue.

Kevin:  Has the power of two – two people – been somewhat of a help to you? Is that what you’d recommend for any young investors?

Sana:  It definitely helps, being two people doing it together. But for us, we are siblings; there could be couples buying property. I’m not really sure if it would work so well with friends, so to speak.

Being two has been our strength, because we’ve been able to bounce off ideas and been able to bring the best to the table in terms of what strategy we’re going to follow and come up with different ideas at different points in time.

We do bring different personalities and strengths as well to the table, as well as our own backgrounds. Me, I have an IT background, and Mona has a tax background, so that really helps.

Kevin:  And you obviously make allowance for each other. You head up those particular areas. Sana, you mentioned about a strategy. What is your strategy, and has it changed?

Sana:  Our strategy is just keeping it simple and stupid. Buying where our cash flows work. We like properties don’t impact our lifestyle too much, so we have had minimal reliance on any negative gearing. The tax has just been icing on the cake for us. Our numbers or our cash flows must work for the properties.

We look for good fundamentals in the areas that we are looking at, so if there is any government spending, any infrastructure coming in, or private investors coming in the area – for example, if there are new Westfields or Costcos, or IKEAs coming in – as well as new train stations or roads. That really influences our decision, because when an area improves, that’s when you have owner-occupies attracted to the area and tenants alike.

For our personal strategy, all our properties have been within a kilometer of a train station or a shopping mall, and what that means is there’s always a future upside – in particular, if it’s a house – for future development purposes. That’s how we pick our assets. Yes, just keeping it really stupid and simple.

Kevin:  Well, from what you’ve told me, obviously, you have no fear about investing interstate. How do you go about selecting good properties interstate? What process would you put in place, or suggest people put in place, for buying in another state?

Sana:  We start off with researching the city to determine where there’s infrastructure going in, if there’s government and private spending happening. Once we’ve narrowed down on those fundamentals, we look at the price points and the rent we’d yield for various areas. If we do spot an area where there are higher-yielding properties than usual, then we focus on those particular areas.

We would suggest to people that they should really be flying up interstate to build rapport and relationships with local agents, because once you’ve met someone, you’re more likely to be able to have a conversation with them over the phone. They’ll know your intentions and what you’re looking for, and you’re more likely to be on their speed-dial, so to speak.

Once you’ve done that, you can look at purchasing over the phone, but you obviously need a team on the ground. That would include someone like a building and pest inspector, a property manager who can walk through the property for you if you do buy sight unseen.

And if those things don’t quite work for you, especially if you are starting out and still learning your ropes, you can always look at hiring a good buyer’s agent on the ground, a local buyer’s agent who knows the area and is able to negotiate and select the properties on your behalf.

Kevin:  Yes, it’s all very good advice. Now, I mentioned at the opening that you have your own mortgage brokering business. That’s obviously helped you a lot, as well. What advice would you have for young people starting out? How can they work best with a mortgage broker to secure their future?

Mona:  Kevin, our advice to anyone young starting out today would be to really look at what their goal is and where they see themselves financially over the next 5, 10, 20 years, and what lifestyle they really want.

When it comes to working with a mortgage broker, the thinking should always be big-picture-focused. Where are you heading? In our journey and experience, we found we were always thinking about our next deal and the one after that.

Start small, but also look at what your potential is. Your broker should be able to work out for you not only your current purchase but the one after that. Of course, that comes down to what resources are available to you and what are the current lending policies, which can always change. But having that clarity, you have more certainty about the direction that you’re going in.

Kevin:  Help me now. Have you ever made a bad investment? And if so, how do you bounce back from that?

Mona:  Bad investment-wise would be when we were starting out initially, we were really attracted to the First-Home Buyer’s Grant that was around at the time for brand-new properties, and we signed up for two off-the-plan apartments. We both put down $1000 each, or 0.25% deposit, at the time.

But fortunately for us, the valuations did not stack up in that case, and what that meant was we couldn’t complete the deal, so we had to pull out within the cooling-off period here in New South Wales. That would be the best lesson that we learned.

Sana:  Just to call out, Kevin, also while talking about off-the-plan properties or new land releases, for example, I think people need to be really wary when registering for these properties, especially in the current volatile lending environment, where the property isn’t settling for the next 18 months. You don’t know what the lending will be like then. If you can afford it today doesn’t mean you will be able to do that and be able to settle that deal at that point in time.

So, we really caution buyers considering that. That was, I would say, not more of a mistake but more of a lesson for us, to not go in that direction.

Kevin:  Yes, it was only today, I was talking to a reporter from the ABC who was telling me about a horror story of someone who had purchased an apartment with a rental guarantee, only to find out that the rent that was guaranteed was well above market. He has a problem coming up as soon as that rental guarantee runs out that the lease will fall back.

There are a lot of traps for unwary buyers or investors, aren’t there?

Mona:  Correct. The First-Home Owner’s Grant is already factored in the price, and you’re already paying a premium. Just be careful what you’re getting into. Look at comparable sales, what’s happening in the area, and what’s the supply like?

Kevin:  What are some of the questions that you ask real estate agents when you’re purchasing a property?

Sana:  We ask a number of questions. These range from just asking about a particular property, for example, things like what’s the block size? What’s the street frontage? Is it on a high side or a low side? And f the property is in a strata complex, how many properties are there? Is it a high-density complex? What’s the strata like for that particular property?

Then also looking at the cost side of things: what is the potential rental return on the property? What are strata costs? What are the council and water rates? That enables us in doing our cash flows for each thing that we consider.

Kevin:  When you’re looking at and asking some of those questions – and they’re great questions too, by the way – the answer to the question about “What is it likely to rent for?” how much due diligence do you put into that yourself? You’re not prepared, obviously, to just take the advice of one person.

Sana:  Yes, we look at RealEstate.com.au or Domain.com.au, look at what the current properties are renting for in that particular complex if it’s a strata property, or what are comparable properties renting for at this point in time?

Mona:  Kevin, also to add, it’s very important to qualify the sellers. Just how there could be buyers in the market who are not serious about buying, there could be sellers who are not so serious about selling.

You must ask how long has the property been on the market? Why are they really selling? What are the motivations? How flexible are they on the price? Can you purchase there prior to an open home? What conditions would be acceptable? For example, can you do a delayed settlement or a quick settlement to get a win-win outcome for yourself and the vendor?

Those are some of the key questions we ask.

Kevin:  Very good advice. Tell me, just before I let you go, if you have any tips for us on negotiations, some that you’ve used in the past that have really helped you secure a good deal.

Mona:  Negotiation, we would say look at what terms the vendor wants. Do they want to rent back the property from you? Do they want a larger deposit so that they can complete another deal? Should you offer a quicker settlement, or even a cash settlement if you have the ability to do so?

Sana:  In terms of our own journey, we’ve always had clarity whenever we’ve gone and purchased a property, clarity on what will make a good investment property. So, when we have found that right opportunity, we have been willing to have a win-win situation, whether it would be from a price point of view or settlement point of view. And we haven’t shied away, say, from paying a little bit more – say $5000 or $10,000 – because over the long term, in the property investing world, that won’t amount to much, especially in a rising market.

You need to balance the negotiation side with what’s the upside? For example, if a market is rising, will you miss out on the opportunity? Will you come across a similar property? Making that quick decision is important.

Kevin:  Ladies, it’s been fantastic talking to you. Thank you so much. If anyone wants to reach you or work with you, how can they do that?

Mona:  We are contactable via phone on 1300-97-60-60 or we can be reached via e-mail, info@propertytwins.com.au.

Kevin:  Property Twins, that’s the name of it. Is there a website as well that goes with that, Property Twins?

Mona:  Yes, we can be found on Facebook or on our website, Propertytwins.com.au.

Kevin:  Wonderful. Lovely talking to you, Sana and Mona. Thank you very much for your time.

Mona:  Thank you.

Sana:  Thanks, Kevin.

Property Investment Fundamentals Email Course: www.propertytwins.com.au/property-investment-fundamentals/

 

How to attract Chinese buyers – Barry Li

Kevin:  In the last 30 years, China has transformed itself into one of the world’s leaders in political, economic, and social relations. With Australia a hotspot for Chinese immigrants, understanding the cultural nuances – both from an Australian and Chinese perspective – is more important than ever.

In his book The New Chinese, author Barry Li has written an essential guide on the history, culture, and mindset of Chinese migrants in Australia. He joins me to talk about the book and the influences on Australia of having Chinese investors.

Barry, thank you very much for your time.

Barry:  Thank you, Kevin, for having me. It’s a pleasure.

Kevin:  That’s okay. Barry, how do Chinese buyers feel about how we discuss their buying Aussie property impacts on our prices?

Barry:  Well, to answer that, Kevin, I need to divide the Chinese into two groups. One is the group who works here and lives here, permanent residents like myself. We make Australian salaries, so it’s as difficult for us to compete with overseas buyers as any Australian. We would feel the comment is unfair, but we totally understand why – because typical Australians can’t tell the difference.

For the second group, the Chinese from overseas, they don’t care about these comments. These comments won’t stop them from buying, because they don’t read our media or our social media.

They only look at things from Weibo and WeChat, which are largely controlled by property developers, and there’s probably only positive news about investing in Australia, which is the reason they buy here. So, that’s the situation.

Kevin:  It’s a very interesting point you make, Barry, about when we look at buyers and we someone who’s obviously from Chinese descent, we naturally think that they’re foreign buyers when, in fact, as you just pointed out, a lot of them are in fact Australian citizens.

Barry:  Yes. Let me tell you an interesting thing. When I bought my first property with my wife, we went to the inspection, and the thing I said to my wife is “Wow, I think I’m going to get this one, because there’s no other Chinese here.” I’m as worried of Chinese buyers as any Australians here.

Kevin:  That’s a great story. Are you sensing that Chinese buyers are put off by regulations introduced to slow down Chinese investment? I think you already discussed that and said that you didn’t think that that’s impacting overseas buyers.

Barry:  Yes. Personally, I believe the regulations already [2:26 inaudible] wouldn’t stop them, because to them, it’s still the same calculation that it’s better to buy property in Australia than in Beijing or Shanghai.

What’s really going to stop them is the enhanced foreign currency controls by Chinese government since the 1st of July. I think from the 1st of September, they are hyping it up that any transaction with UnionPay card – which is a Chinese payment card – over 1000 yuan will be reported to the central government’s bank.

They are trying to close every loophole to transfer money illegally from China to Australia, which would impact the settlement of properties bought earlier, as well. This has more use for controlling investment, rather than our regulations. That’s my personal opinion.

Kevin:  That’s interesting that that impact might actually come from the other end, as opposed to from Australia.

What type of property is popular with Chinese buyers, Barry, and why?

Barry:  Well, it depends. For example, if you are looking at a typical middle-class family from China, they are probably interested in a large family house. But Chinese have also been living in apartments and small units in large cities for the past 30 years, because having a standalone house is very much a luxury in China.

So, It depends on the family. It’s not common… Ten years ago, where you have a family of five or seven living in a two-bedroom unit in a city in Shanghai, so to them, a three-bedroom unit was a pretty good lifestyle for a lot of them.

And for the super-rich Chinese, it’s not about the property itself; it’s about the price. If they had a friend who bought a $1 billion mansion next to – I don’t know – the Opera House, then they will be thinking, “Okay, I probably should have something that’s more expensive,” to fit into the circle, if you know what I mean.

Kevin:  Yes, I do. Interesting insight. How important is community – that is, other Chinese nationals – to their buying decisions, Barry?

Barry:  It again varies. It depends on the age group and their background. For example, if we’re looking at older migrants who are not very good at speaking English, they will stay in the Chinese communities, like Eastwood or Hurstville or [4:37 inaudible], as well, to be very convenient. They don’t need to speak English to navigate around shopping and do everything.

But a younger generation, we don’t care much because we speak English. But we also look to the convenience of shopping and dining, so the places with a lot of Chinese restaurants and grocery shops would be a good choice.

But the most important decision is probably driven by education. You see lots of areas with good schools – good public schools or private schools – are priced up recently, because education is a very important thing for all Chinese migrants. For example, over time, these suburbs develop into Chinese suburbs, like Carlingford, where there is the best high school.

Kevin:  You can probably answer this question for me quite well because you’ve had the experience on both sides, in Australia and in China. What are the big cultural differences between Chinese and Australian nationals?

Barry:  Well, there are actually quite a lot of them, but if we focus on the topic of family and property, then I would say our traditional view of family is different. For example, when I had my children, their grandparents feel obligated to come here and help, although we tried to stop them. But we can’t, because if they don’t spend time and look after the grandchildren, they will be judged by their family and friends, which is very rare for traditional Australian families.

This will lead to a large-sized family. And we can’t send our parents to a retirement village, which is very bad in China, so they are probably going to be living with us or will have a unit very close to us. This is a different size, compared with Australian family traditionally, I believe.

Kevin:  Yes, I’ve spoken to a number of real-estate agents who sell to Chinese, and they reflect that view that the size of the house is important, to allow many different generations to live there, but also the amount of land. It’s almost if you have a large portion of land, that’s almost a measure of your wealth, Barry.

Barry:  That’s true. That’s true, because we don’t own land in China. All the land is owned by the government, and all the purchases are leasehold purchases. The fact that we can actually own land indefinitely in Australia is very attractive to Chinese buyers.

Kevin:  Just in closing, Barry, what tips would you have about successfully preparing and marketing a property to appeal to Chinese buyers?

Barry:  Certainly, I’m not an expert in this area; I can only speak from personal experience. I would say, for middle-class Chinese people, we prefer timber floors to carpets, because they’re more easy to clean than carpets. And we probably don’t have the desire for a swimming pool, because everyone knows they are hard and expensive to maintain.

We prefer south-facing rooms, as many as possible, because most of the older Chinese don’t like dryers for laundry; they like to sun dry or air dry. And big kitchen separate from the living room is better, because a lot of Chinese cooking is very smoky.

Also, importantly, the street number. If you have a property with the number 4 in the address, you need to consult a feng shui expert about how to convert that disadvantage into an advantage – for example, putting a Taiji or Buddha statue there at a certain angle would solve the problem of the misfortune brought to you by a number.

Unfortunately, a lot of Chinese are still very superstitious these days. But it’s a generalization. Please don’t quote me on that.

Kevin:  No, I understand that. That number 4, is that the only number that’s unlucky for Chinese?

Barry:  That’s the most obvious one, but I’m sure there are differences. Depending on which province you are from in China, they will have different superstitions or traditions there.

Kevin:  Very good talking to you, Barry. I appreciate you giving me your time. Congratulations on your book, too. It’s called The New Chinese. It’s available now, and it’s quite a good read if you want to get to understand the Chinese culture.

Barry, thank you so much for your time.

Barry:  Thank you very much, Kevin.

 

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Kevin Turner
kevin@realestatetalk.com.au
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