Introduction and Thoughts for 2018
Welcome to our very first episode of our new weekly podcast series.
HERE’S WHAT YOU’LL LEARN FROM TODAY’S EPISODE:
- What to expect in the weeks ahead;
- Introduction to each of us and who we are;
- Our initial thoughts for 2018; And
- Much More
LINKS OR ARTICLES WE MENTIONED:
- None
SPEAKERS IN TODAY’S EPISODE
Michelle May – Sydney Buyers Agent
Marcus Roberts – Mortgage Broker
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Please note that any views or opinions presented in this podcast are solely those of the speakers, and do not necessarily represent those of any business. These views and opinions are general in nature, and do not take account of your personal objectives, financial situation and needs. Please consider whether it applies in your circumstances and seek professional advice wherever appropriate.
Transcript
| Marcus Roberts: | Hi, and welcome to the Sydney Property Insider podcast. This is a weekly podcast series with my host, Michelle May, a buyer’s agent located in Sydney. Our purpose is really to help you navigate the ins and outs of buying property, holding property, and really helping you get grasp over the issues that affect property ownership in the Sydney market. To start off, Michelle, maybe a bit about yourself. |
| Michelle May: | Hi. My name is Michelle May. I am a buyer’s agent working in Sydney. Previously, I worked in Brisbane. I have been a buyer’s agent since the early 2000. Prior to that, I used to flip properties. I used to buy a property, renovate it, do it up and sell it again, but then I realized that my true calling really was in helping buyers through the whole property purchasing process. I’ve been doing that ever since. |
| Marcus Roberts: | You were doing that in Brisbane as well, let’s say? |
| Michelle May: | I was, yes. I was. Then I moved to Sydney in 2009. I’ve been here and recently set up my own agency, so I have my own business helping clients navigate the Sydney market. |
| Marcus Roberts: | I’m Marcus Roberts. I am a mortgage broker and I run a mortgage broking business, Brighter Finance. I am a member of both the MFAA and PIPA. I have been working with people for the last 15 to 17 years in both bankrolls as customer-facing, helping them purchase property, helping them finance property, as well as even in credit roll, so looking at the ins and outs of what makes a good finance decision for a bank. Now, really, and I focus on helping people finance their homes through a number of lenders, making sure that we find the tailored approach for them. What we thought we’d do to start off with for our very first episode is talk through some of our predictions for 2018. Michelle, what do you see coming over the next 12 months? |
| Michelle May: | Well, it was really interesting. I just did my first round of inspections for a client this last Saturday. I was really pleased to see there were lots of people out on the road ready, fresh for a new year of property buying. Lots of young couples, as parents, empty-nesters looking to make their next move in the Sydney market. Some properties I had to queue to get in. End of Jan that’s pretty promising. This weekend, obviously, not that many properties went for auction, only 81. Realestate.com produced a result of 57%. That’s obviously a continuation of what we saw late last year. I’ll be watching really more closely the auctions that will come February, mid-February, end-February, because that’ll give a much better indication because the stock levels aren’t there yet. A lot of buyers still on holiday. Agents are still on holiday. From February 10th that’ll sort of be really the first weekend from which we’ll see a little bit more of a real result. I’ll be interested to see the numbers then. |
| Michelle May: | Traditionally, the open home attendance and clearance rates are always the highest in this first quarter of the year, February and March. That sort of sets the tone for the rest of the year, usually. The confidence that they’ll display then will be a good indicator of what’s to come. I think also a large number of apartments will be due for completion this year, so I think there might be a slight change in that apartment segment of the market as I think, you know, that obviously that increased supply of all these new properties will give the buyers a bit more choice. |
| Marcus Roberts: | Absolutely. |
| Michelle May: | More choice means that they can think about what they want a bit more and potentially negotiate better. A lot more first home buyers are confident enough to come into the market. ABS reported lending first home buyers 18%, which it hadn’t been since 2012. |
| Marcus Roberts: | That’s huge. |
| Michelle May: | Yeah, but nothing like 2009 where first home buyers were making up over 30% of the market. We’re still not there yet, but I think for investors it’s been made a bit more difficult. Hopefully, the first home buyers will get a little bit more of a chance. In terms of property itself, I think quality property will retain its value. There’s always constant underlying demand for those really beautiful properties in the right location, the right size, the right width. The compromised properties, I think that’s where you’ll see there’ll be more continued struggle as we’ve seen in the last six months of the year. I think 2018 will be interesting because I think there’ll be more of a segmentation of the market. |
| Marcus Roberts: | Yeah, absolutely. What I’m really interested in is … we’re starting to see, at the beginning of 2018, how that plays out over the next 12 months being the bank policies that were put in … the investor lending policies that were put in force over the last 12 to 18 months are really stifling that growth of investment lending for many banks and some of the APRA guidance around that. We’re starting to see some of those old policies coming back and we’re starting to see banks having a much larger appetite for doing business and really working with investors in financing their needs. I’ll be interested to see if that continues to play out, as I believe it certainly will, over the coming months and through the second half of 2018. |
| Marcus Roberts: | Certainly, the other thing I’m still seeing, which was certainly the case in 2017 and continues to be, is that competition for quality applications, quality properties is still really fierce. Banks are still very much keen on getting the right customers and getting the right applications in, and looking at doing the right thing by the client, so providing the best possible facility that they can for both owner-occupied as well as investors. If we look broader over some of the RBA guidance that’s come out over the last couple of months, their expected underlying inflation rate in that 2% range through the end of 2018 is still really at the lower end of their band, which they’ve always looked at being 2 to 3%. |
| Marcus Roberts: | What that would suggest is that if rates rise, which the RBA says gradually they expect them to rise, those rate rises will be really sloped on a very gradual curve, so you won’t see huge rate increases next month, the month after, and so forth. What we would expect to see based on the RBA guidance is that you’ll see, yes, you’ll probably see a rise over 2018, maybe a couple, but they won’t be in quick, successive hits as they have been in past years. For your own lending purposes, what that also would suggest is still have a look at fixed rates as opposed to just looking at the variable rates because those fixed rates can still be really attractive, especially if we were in a rising interest rate environment over the 2018 and beyond. |
| Marcus Roberts: | The last thing that I’m seeing and have seen over the last couple of months, but still expecting to see further of in 2018, is banks really looking at evolving their credit policies to suit more and more of the workforce, which is doing more and more share type economy things. Driving Uber either as a second job or as a primary job, if you’ve been doing it for a number of months and if you can provide documentation that shows the level of income, I really expect that many banks will look more favorably on that than what they have in prior years. |
| Marcus Roberts: | Michelle, so that’s certainly what we’re expecting over the 2018. Talk us through the last few months. What have you seen over that last four to five months in the Sydney market? |
| Michelle May: | Well, the market every year is very seasonal, so you get the spring market, February and March, and then it sort of tapers down again in June, July where there’s less for sale. It starts up again come August, September time. What I saw July last year was really quite a sudden shift. Previously, anything would sell. Clearance rates over 70% week after week for a considerable amount of time. It’s considered as a “hot” market, hot sellers market. The seller really dictates what happens here. Pretty much all properties were running to auction. It was not unusual to see 20+ registered bidders to get in and put their hand up. The vast majority of properties were selling on the day, on auction time. What happened in June and July was that it really changed in terms of buyers looking at properties more clearly and really seeing the difference between what we call an “ABC” market. |
| Michelle May: | You have the “A” star properties, the best, the goody two-shoes in the class, that continues to see constant demand and competitive bidding at auction. These are the properties that are in the best streets in the suburb. They’re nice and wide terraces, high ceilings, not necessarily all done up and high-specked, but good quality, good bones, good floor plans. Instead of now having 20 registered bidders, you see perhaps three to four serious bidders. What people don’t realize is, of course, that you only need one other person there, bar yourself, to have a sale and to have a good selling price. People still need to put their hand in their pocket and be serious about what is this property actually worth. |
| Michelle May: | Then you have the “B” properties, they’re the ones that also have good bones, but need a bit more work, and perhaps don’t have that mass appeal to all those buyers in the area. It could well be the case that they haven’t been styled. You know, the vast majority of properties are styled nowadays, which makes a big difference to the easiness on the eye, I suppose. Properties that aren’t styled do struggle a bit more in that respect. Sometimes “B” type properties can be renovated to make into an “A” star properties, but buyers don’t necessarily see the value here or just put them in the “too hard basket,” and so they struggle a little bit. They get passing at auction, but afterwards they do sell relatively quickly as long as the vendor is willing to meet the market. That’s the key here, really. |
| Michelle May: | With “C” type properties, these are usually the under-performers when it comes to capital growth, so they usually have compromised floor plans that cannot be fixed, or very narrow type properties. You know, terraces that are less than three meters wide, for example, or are on main roads. Buyers can see much more clearly what these properties are really like now, and they’re not really ready to pay top dollar for that anymore. Sellers really have to be realistic, and hopefully a good agent will do that and just give them good, solid advice on what to do. Rather than, perhaps, have an auction campaign, they would be advised to have private treaty selling, which is what’s happening much more now. Then the agent can really do their best in talking to the buyers and see who is really interested in this property and get a reasonable price. Obviously, they’re not gonna get the top dollar that they would’ve gotten say a year or six months ago. |
| Michelle May: | I think it’s much more about distinguishing or being able to distinguish, is this an A+ property? Is this a property that I can live in for the long term and is really gonna give me everything I want? Or is this a property that is just, “I want to get in the market, so I’ll buy anything?” You really gotta think about that, and how much is it worth to you. |
| Marcus Roberts: | Absolutely. That’s really interesting, the ABCs, because if you can go in with that mindset when you’re inspecting property and saying, “Okay, let’s take the emotions out of it and really look at objectively. Okay, well yeah, maybe it’s not on the best road, so maybe it shouldn’t be at a premium of where many buyers were looking at six months ago when just anything that was on the market seemed to just be being snatched up.” Really important to take the emotion out of your purchasing decisions, which is something that we’ll certainly talk about in the weeks ahead. Really looking at … If you are going on a Saturday morning and you’re seeing six properties and having five coffees in between, and every 15 minutes driving to another suburb, really looking at … looking at almost creating a spreadsheet at the end of the day and saying, “Okay, these were the things that we liked about this.” Taking photos along the way, so getting a good idea of what is exactly what you’ve seen, which will help strengthen your, I guess, your approach in finding the right one for you. |
| Michelle May: | Absolutely. |
| Marcus Roberts: | My observations certainly mirror a lot of what you’ve said, Michelle. I don’t attend as many auctions or open homes as you do on a week by week basis, but certainly observing through walks down the street or driving through suburbs, that quality properties in the inner suburbs, that band of five to ten kilometers outside of the [CBD] that’s still really strong, so you’re still seeing good quality properties being snapped up as quickly as possible and for good prices. Stock levels are still pretty low. Yes, we’re coming out of that Christmas period, but we’re still seeing very low amounts of stock that’s on the market. That will change over the months ahead. Something that we’ve mentioned, being that we’re not seeing the same number of auctions that we did, so a lot more private treaty, a lot more for sale rather than auction this Saturday and having five auctions on the same street. |
| Michelle May: | Absolutely. |
| Marcus Roberts: | Really seeing a change in the market. From a bank perspective, many of the valuations that I’m seeing are coming in on a conservative side compared to last year, so banks have spoken to the valuers or valuers have taken it upon themselves to look at, “Okay, well, let’s not look at the euphoria that has been present over the last 12 months, let’s look at the fundamentals and the overall, and the underlying property that’s in place.” We’re seeing valuations coming much more conservative than where we would’ve say in even August, September last year. |
| Michelle May: | Yeah. |
| Marcus Roberts: | Yeah. That’s all for us for this first episode. We thought we’d just do a very quick 2018 prediction podcast. As a general wrap-up, to give you an idea of what we’re looking at over the weeks ahead, looking at providing guests and guest speakers from various fields related to property, be that people that are involved in Australia, people that are involved in MDA, property stylists, I know you mentioned earlier, Michelle. Looking at getting some real experts in the field in to have a conversation about what it is they do and what part they play in both property purchases as well as maintaining property, and then eventually selling your property down the track. |
| Marcus Roberts: | Larger topics that we’ll go into will be things like a buyer’s guide to surviving your first auction, recaps on Sydney’s last week, last month’s result, as well as any legislative or government type issues that may affect property owners or property buyers in the years ahead. Most importantly though, this is really about you. It’s about your answering your questions and answering things that might be on your mind that you haven’t asked someone else, you haven’t Googled yet. |
| Marcus Roberts: | On that note, we do have a website that’s currently under development, sydneypropertyinsider.com.au, but our email address does work there. If you do have a question we’d love to hear any and all questions. Send them to ask A-S-K @sydneypropertyinsider.com.au. If you have a question, then 20 other people have that same question. We take all and any, and we’d certainly be happy to answer any questions that you have on air. That’s all from us for this week. Have a wonderful week, and we’ll be with you same time, same place next week. |
| Michelle May: | Until next week. |