Zig when others zag – Rich Harvey

Zig when others zag – Rich Harvey

 

Are one of the people who has stopped doing things because we have an election on the way? Well think again. This is the time to zig when others zag. Rich Harvey, FROM Real Estate Buyer’s Agents Association of Australia, will explain.

 

Transcript:

Kevin:  It’s a strange thing, but whenever an election comes around, people decide to do nothing. They stop doing a lot of what they do. They stop buying houses and they stop buying cars. You only have to talk to a car dealer to find out that that is in fact the case. It’s very strange that they actually do also stop buying houses, but it could be a great opportunity, according to the Real Estate Buyer’s Agents Association of Australia. Talking now to that Association’s president, Rich Harvey.

Rich, it is an unusual thing, isn’t it, that people would just stop doing a lot of things when even a change of government is not going to make a huge difference.

Rich:  That’s right, Kevin. Good to be on the show again. Yes, it’s interesting to see the perspective of how people respond to change in political circumstances. It is an interesting phenomenon that a lot of people think that the world stops for a number of weeks – or in this case, a month – before we have an election, but in my view, it’s actually a great opportunity for buyers to take advantage of a slowing market and have a bit less competition on their property purchase.

Kevin:  Let’s talk about that for a moment. In this particular election campaign, this federal election, there’s been a huge issue made out of negative gearing, which has probably spooked a lot of people.

Rich:  Absolutely. I think negative gearing has been one of the sacred cows of the tax system, and a lot of people from moms and dads up to very high-level, wealthy investors have all taken advantage of negative gearing benefits – not just in property but in other mechanisms too for investments. It’s been a great way to increase the supply of housing and incentivize ordinary investors to get into the market who perhaps otherwise wouldn’t have been incentivized to do it.

I think people are quite afraid of what might happen if either party gets in, because one party is saying “We’re not going to touch it,” and the other is saying “We’ll just have negative gearing on new properties.”

Yes, I think a lot of spooking of the market goes on during election campaigns.

Kevin:  Putting that issue aside for a moment, putting aside the negative gearing issue and the debate around the current election, it is true though, isn’t it – and Roy Morgan has proved this – that people will stop doing things like buying houses around things like budgets and elections. Why is that, you think?

Rich:  It’s purely confidence. The property market is driven a lot by interest rates, but very much by confidence. If people are not feeling confident about the economy, then they’re not willing to necessarily go and borrow large amounts of money. Even though interest rates now are at record historical lows – it’s just incredible how the cost of money is very cheap – it’s just that confidence factor. And when there is – like I say – a change in the wind, or something is going to be coming, then people just decide to sit on their hands and go “You know what, I’ll just wait and see. I’ll just sit it out and see what’s going to happen.”

Kevin:  And that leads us to your message, which is this therefore creates a great opportunity for smart investors maybe to get out there when there’s less competition, Rich.

Rich:  It’s incredible. We see the market week to week. We’re out there every week with our clients looking at properties, bidding at auction or negotiating private treaties, and I can tell you, you just have to be some other Johnny-on-the-Spot. You have to be out there every weekend. Buying property is not a part time occupation, it’s not a part time thing that you can just hop in and hop out of. To understand a local market, you have to look at 50 to 100 properties, attend lots of inspections.

If one weekend you might see ten bidders on a property, and then next weekend because there’s an election campaign, there might only be four or five, gosh, there’s a better chance there of securing that property at a better price – perhaps getting some more competitive bidding going and getting out with a good asset.

Kevin:  Yes, I think it’s called the herd mentality, isn’t it, where people tend to go in groups. It does actually take courage to swim against the tide sometimes, but there are great opportunities in doing that.

Rich:  Indeed, but it doesn’t mean you just go out and buy any property just because there’s a lull in competition. It means that you pick an area and pick a property that’s a good quality property, well positioned in a suburb that has constantly high demand for both owner-occupiers and for tenants.

If you go out and buy in a suburb where it has a very high vacancy – 5% or 6% vacancy – and the owner-occupier market is very sporadic, then it’s not necessarily going to be a good investment despite what’s happening from the election perspective. My message to investors is choose carefully, choose wisely, and constantly research the market to understand where it’s at at each stage of the cycle.

Kevin:  Yes, it makes a lot of sense. Some really good advice there from Rich Harvey, who is the president of Real Estate Buyer’s Agents Association of Australia. I think I got that the right way around this time. I said it the wrong way around before, but it’s REBAA.

Thanks for your time, Rich.

Rich:  My pleasure. If anyone wants more information about how to access buyer’s agents, you can just go to the REBAA website, rebaa.com.au, and there’s lots of information about how to engage a buyer’s agent.

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Kevin Turner
kevin@realestatetalk.com.au
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