29 Mar The real facts about the market – Michael Beresford
We are seeing a lot of negative press at present. One of those is that the property values are going to collapse. Is there any foundation to that? Michael Beresford from Open Corp is an investor and has some strong views.
Kevin: Recently I caught up with Michael Beresford from OpenCorp and had a good conversation with him. There’s a video currently on the site, on RET, and we’re sending it out as a special broadcast for you next week as well. So, tune into that.
It’s a video where I talk to Michael about lots of things, about whether or not the property market’s going to collapse, how he’d help a young couple maybe earning $100,000 and renting to get into their first property, what’s the ideal path forward for those who wish to get on to the property ladder, and what are the telltale signs of a trustworthy operator in the field?
It’s about a 10- to -15-minute video, well worth watching. Here’s a small portion taken from that where I talk to Michael about the current state of the market.
Michael, one of the things that I did want to ask you about is we’re seeing a lot of negative press. One of those is that the property values are going to collapse. Is there any foundation to that?
Michael: Have you got two hours, Kevin? Look, being serious, I’ll try and distill it down to a few key points for the listeners here today. The first is if we think about what drives price growth – and vice versa price collapses – in anything, it’s the simple notion of supply and demand.
So, there are definite steps that investors can be taking to mitigate those risks and maximize their chance of obtaining high-performance properties. The best way to do that is to invest in the major capital cities, because we have the most amount of people, the most amount of jobs, and the least amount of land supply.
We have a bit of a saying here in the office that “Get rich quick equals lose money fast.” Properties in mining towns are a property example of that. Bitcoin is an example of that. I’m amazed on a daily basis that people would be putting significant amounts of money into this hype-driven investment and following the pack when we have a proven performer here in property that they choose not to invest in.
And the only difference is that one can make you a return overnight but can lose you a lot of money in the process, and the other one just takes a bit of patience and focus over the long-term to be able to get results.
With respect to the negative press in the articles, I’d just encourage people to take everything with a grain of salt and understand the motivations of anyone they’re obtaining information from. Whether it be a company like OpenCorp, whether it be the media, the newspaper, the nightly news, all of those media outlets are aiming to play to your emotions.
It’ll be boom one day, it’ll be bust the next day. And to use a Sydney example, I read recently that the median house price has come down 0.5% and all the headlines are “Crash, the boom is over, doom and gloom, property prices dropping,” etc.
Now, if I said to you five years ago that you could invest in something that went up 79.5% in a five-year period, I’m sure you’d be pretty happy, right? It’s gone up 80%, it comes back 0.5%, but that’s what the media outlets talk about. It’s heightened emotion through boom or bust.
The property market, first of all, there’s not one property market in Australia. The property market within capital cities is even different, far less the different property types and geographical locations. So, that’s the first thing to remember: there’s not one size fits all.
And really, the second part is that the fundamentals of property don’t change overnight. The population growth data and the government strategy around jobs and so on does not change from 4:30 p.m. on a Tuesday to 10:00 a.m. on a Wednesday.
Kevin: I want to pick up on that point you made about Bitcoin, because I think that highlights where a lot of investors go wrong, and that is that they look for this quick fix, this quick buck. And even the media play to this. When we talk about boom and bust, the point you made there about the Sydney market dropping 0.5% yet there’s “The market is going to crash.”
It’s almost as if we expect there to be a boom-and-bust market when the property market over the long term is really quite stable.
Michael: Yes, it is. And one of the things that I get very passionate about – so much so that in our presentations, I dedicate a good five-minute section to what we call white noise. And white noise are those distractions that can impact an investor’s ability to achieve their goals over the long-term.
The big one is social media as well. The way that I describe it to our clients and the people we talk to is that social media is opinion-based and it’s instant, and those two things are the polar opposite to what it takes to be successful with this investment game.
You need to have focus and you need to follow a process and you need to be patient. And remember that the reason why it can be a daunting process to undertake is because it’s something different to what the majority of people are doing. There’s not safety in numbers. Only 10% of Australians invest in property outside of their own home.
Yes, it takes a bit of a thick skin, especially in the early days, but I’ve read just a couple of days ago that Harry Dent – the U.S. demographer – is out in Australia. I was reading paragraph two of this article and I said, “Harry Dent must be about to launch a new book,” and she said, “What do you mean?” I said, “Well, I’m reading this crap about how Australia’s property market is going to crash, and he only ever has something to say when he’s promoting a new book.” Lo and behold, in paragraph five, Harry Dent has got a new book.
Some people call that genius, but when you’ve been doing this a while, you see the patterns and these things tend to unfold .But the reason why I get so passionate about it is that Harry Dent had a lot to say around the negativity and the potential market crash in the Australian market in 2012, and I’m sure anyone who owns property in Sydney and/or Melbourne since 2012 is glad they didn’t listen to him.
You’re right; it is a long-term, stable beast underpinned by the supply-and-demand equation that is working in our favor and the government’s commitment to population growth. Again it’s not get rich quick, but I think we’re in for a stable and high-performing ride over the medium- to long-term as always.
Kevin: Those sorts of people are never held accountable for those claims. We very rarely go back and check on what Harry Dent said, and if we did, we’d find that even though the fact they promote that he is a guru and he picks all these things, we’d find that he doesn’t really pick them at all. He might pick them in certain markets, but certainly not in our market.
Anyway, don’t get me started on Harry Dent. It’s not one of my favorite subjects.
Michael: You and me both.
Kevin: Thank you very much for your time, and I look forward to catching up again soon.
Michael: Thanks, Kevin. Enjoyed the chat. Cheers.
Kevin: That’s just a small portion of the 10-to 15-minute video that you can see on the site now. Just go to RET and have a look for that special video. You’ll find it on my channel, my chat with Michael Beresford from OpenCorp.