Episode 90 | Melbourne Market insights, what's hot right now? | David Easterbrook, Elite Buyers Agent

The post-election property market - what suburbs are holding strong?

We get the inside scoop from David Easterbrook, director of Elite Buyer Agents in Melbourne.

They operate two offices, one in Hawthorn & the other in Brighton. They help both owner occupiers & investors buy quality properties in the inner suburbs of Melbourne. David walks us through what’s happening on the ground in Melbourne, including:

• Similarities & differences between Melbourne & Sydney property markets

• Lack of quality listings right now in Melbourne, when will it change?

• Why so many developers are going underground?

• Has the apartment market started to recover or are prices dropping?

• How prices & competition have been impacted by Chinese buyers exiting the market?

• Signs that show the downsizer market culture in Melbourne is changing.

• Rentvesting - capital gains tax issues & why it’s hard to make the numbers work.

• The dangers of being lured into house & land packages.

We hope you enjoy listening!

WEBSITE LINKS:
Location, Location, Location - BLOG

Domain article - Apartment block attached to semi in Lewisham

GUEST WEBSITE:
David Easterbrook - Elite Buyers Agents

Work with Veronica? info@gooddeeds.com.au

Work with Chris? hello@wealthful.com.au

EPISODE TRANSCRIPT: 

Please note that this has been transcribed by half-human-half-robot, so brace yourself for typos and the odd bit of weirdness…

This episode was recorded on10th September, 2019.

Veronica: You're listening to the Elephant in the Room Property Podcast where the big things that never get talked about actually get talked about. I'm Veronica Morgan real estate agent buyer's agent, cohost of Foxtel's location, location, location Australia and author of a new book, "Auction Ready How to buy Property even though you're Scared Shitless"

Chris: And I'm Chris Bates, financial planner, mortgage broker, and together we're going to uncover who's really making the decisions when you buy a property.

Veronica: Don't forget that you can access the transcript for this episode on the website as well as download our free food or forecaster report, which experts can you trust to get it right, theelephantintheroom.com.au.

Chris: Please stick around for this week's elephant rider bootcamp and we have a cracking done by the week coming up!

Chris: Before we get started. Everything we talk about on this podcast is generally nature and should never be considered to be personal financial advice. If you're looking to get advice, please seek the help of a licensed financial adviser or buyers agent. They will tailor and document their advice to your personal circumstances. Now let's get cracking.

Veronica: Regular listeners will know that we're a little Sydney centric on this podcast and it's only natural because we live in the Harbor city. So every now and then we know we need to get out and see other places. So today we're going to find out what's been happening in Melbourne. We're recording this episode in September, 2019 and we'd been watching the recovery of the Melbourne property market alongside Sydney's, of course with interest. Now the market, he peaked a few months after Sydney's peak back in June, 2017 although surely the signs of what was coming must have been there at the time for anyone who cared to look. Now the timing of the bounce appease to match Sydney's, although not quite the same intensity.

Veronica: In this episode we'll get the inside scoop from David Easterbrook, Director of Elite Buyer Agents, which he established with his wife back in 2011 his wife, Kim, I meant to say they have two offices, one in the inner East suburb of Hawthorne and the main office in Bay side Brighton and they help both owner occupies any investors buy quality properties in the inner suburbs of Melbourne. Sort of similar to my remit in Sydney. David and Kim also own a property management company, which I don't. Very bright view elite property rentals and the information they glean on tenants greatly influences where and what they purchase for investors. Now, previously David was in the mortgage broking industry for 20 years working as a broker and a banker for companies such as Ozzy, ANZ, Suncorp and Macquarie bank. Now, thanks for joining us, David. We're really looking forward to your market insights and I want to kick it off first with a cheeky question.

David: Fire away!

Veronica: What's a caption of industry industry? I don't know what you mean now. I read everybody's bio before I write these intros. And on your website you see, you've got a typo.

David: A caption of industry?

Veronica: I'ts a Kath & Kimism.

David: I, I guess it's probably, it's probably trying to say that. Uh, and I guess I am the industry in regards to the fact that I love it. I love everything about the industry, the good in the bed as well. And I guess that's why we do what we do. But it is a bit of dull sandals a bit wanky when you think about it.

Veronica: It doesn't say captain it says caption.

David: I was grabbing my phone. I'll tell you what though.

New Speaker: Every listener, goes straight to check for the caption to change it or not. Then you get instant, instant traction.

Chris: Yeah. Sorry. Yeah, you are a captain. So what got you so passionate about the uh, property industry?

David: Probably a whole lot of negatives actually, and then as I every day buyer when we were, when I was in mortgage broking, um, we, we saw a, what go on. And effectively, a lot of my clients were either going to be, well there are they going to be investors have bought a property that was a great property to buy. They're going to be an investor that followed the crowd and father shape. And they followed what their mum and dad told them and they, and they followed effectively the wrong advice. And a lot of times I'll bind just now blind the wrong types of properties. Rubbish to be honest. And from all that, so that, um, whereas other people were buying great properties in an as a, as an inexperienced person, I was looking at the two data and going, why is this guy buying these beautiful single front in Elwood? And the property's doubled in a few years time. This other person has paid the exact same amount. They've gone out 50Ks out from a suburb and born in a new estate for almost assignment matter of money with three or four years later. Did the value differences that would come back when they'd come back to buying all the property was so significantly different. I was lucky enough to, um, I guess, uh, have some of these older investors take me under their wing and go, hey Dave, this is how it works. Yeah. And so that's where it all started.

Chris: Interesting you say that around broking because um, you know, we do see lots of clients, you know, and probably more than say, you know, in terms of beds or service, it's more of a, you know, you know, higher volume service and you also see a lot of clients that you don't work with. Right. And so, you know, if you actually take a bit of interest in this situation, you learn, you know, through just what their, you know, what worked for them, what has, what's their mistakes. Um, so it seems to, cause that's pretty similar to me, I would see, you know, clients and I think, well how they done that? When did they buy that? How did that perform? Or they bought that place that doesn't gone up for 10 years. And so that's how you get a lot of, you know, learnings and I guess, you know, figure out what's to do and what not to do.

David: That's where you're curious obviously because I don't think everyone's just curious. Is that they just dont even question? Yeah, me looking cute. Curious as one word. I'd probably use the word care to be honest. I mean most of my clients are really nice people, but they weren't, they weren't like high flyers and mini multimillionaires. I'll just, if we die normal Joe blows, but they just weren't getting the right information. Um, and there's no way to get information, by the way. I mean, even our data down here in Victoria is controlled by, you know, the REOV and so forth. And so there's no way they can get data that's a problem. There's no way that I can get advice. They don't learn it in school. There's real courses they can take and effectively that realistically where people are getting their, their information or their ideas is from their social groups and they, they actually don't even know where they can go and get any information.

David: They think the real estate agent is the person that's going to give them all the information. But for some reason they sort of forget that the real estate agent doesn't work for them. Um, and it doesn't matter effectively, um, where the real estate agent is. But wherever the real estate agent is, of course, that's the base to buy. Um, and a, and so, and, but a lot of times these, more than that though, it is cultural, is it? It's a, it's a, it's a Cauldron of a whole heap of reasons why people buy these type of properties. And even the prices they spend, how much they spend, why they buy them, how long they have, what they, the, the goals are and what their plans are. And so once you actually take a little bit of care and you sort of put yourself into their shoes and you go, well, hold on. I've been down this path before. Um, and you actually care about what their outcomes are. Well it's amazing? What happens after that?

Chris: Oh, me, you're so true. I mean, you, you, you only need your only opportunity as you can see is what you know. Right? So know if you've got family there that are giving you ideas, they're only giving to give you ideas of what they know about. Right? And if they think, you know, you shouldn't spend more than a million dollars, that's too expensive, and you get advice from them, then you go and buy something that's cheap or you know, et cetera. All they, what their stories are.

New Speaker: Or across the road from mom and dad, yeah.

Veronica: Or even their parents' house. Absolutely.

David: I, I had a client who called me up only probably a few weeks ago, the house next door her mom and dad's, he's come up, should I buy it? And then this place was literally the worst property in the whole entire world's an investment you could possibly want to buy by an hour conversation with them. And then literally it was probably seven kilometers from the train station in the middle. Absolutely not really, no where. There'd be no reason what to buy at whatsoever except for to mum and dad's house.

Chris: Your mom and dad's house has gone up recently, so it's good investments. So you should buy it as well.

David: Sort of.

Veronica: Yeah, maybe even think about that far.

David: It's actually this particular locations is actually significantly gone down since the Chinese buyers have left Melbourne. And so, so this particular we can all be careful, but it has, I mean a lot of these areas have gone down significantly and because they were artificially increased and effectively I guess Melbourne is a multicultural area. Um, and I guess if you're looking for a safety and if you'll want to buy a property, which is going to be, you know, ongoing flow long term and you know, we're talking 20, 30 years and hopefully we never have to sell them. We can rent it out when we're sort of retired. Um, then again, we're, you know, are these are the type of locations that all people who can afford properties in the future, whatever price they may be, are they more likely to be there at point? A or point B, um,

Chris: So what area is Point A out of queriosity?

David: Point B out in the suburbs and point A nice and close to CBD.

Chris: Chinese buyers. Like where.

David: Glen Waverley, Mt Waverly, Box Hill and thereabouts. And then there's a different type of, um, Chinese buyers as well. Then of course you've got the more wealthy who of course is Canterbury queue. Um, and effectively they are very, very different, but it's a very different world today, like 2016, 2017. Uh, I'm not exaggerating when, I can probably tell you that I don't even remember winning against a Chinese buyer in 2016, 2017 by literally, I don't even remember it now. I'd almost have to go to a client and say this property is worth three point $3 million, but you need to pay $4.3 very hard to get a client to say yes to that.

Veronica: Funny, isn't it? Because I mean we had the same thing in certain suburbs in Sydney as well and you'd go to the the auctions and you watch the way they bid and they just bid differently because the value to them is different than it is to say, you know you Australian born and bred. Yup. Family is trying to buy the house. They're making judgment calls on a bunch of whole different criteria and so therefore the value is different.

David: and I actually think they're quite smart. We have a lot of people actually, I guess who are scared of Chinese buyers and then they sometimes also I personally think don't, haven't really assessed their, they style very well at all. I think they bid brilliantly. I mean in your, in your podcast with Damien Cooley, what did the first thing you said, stop momentum, get momentum at an auction. What does the Chinese buyer? Do they pour the momentum out of the auction them? I mean to they do it brilliantly and they do it frustrating.

Veronica: Do it differently down here in Sydney I definitely did not observe that. I observed them bidding and bidding with a lot of FOMO. Oh yeah, yeah. Really different type of bidding. And it was just literally sort of using their fingers to try to calculate, you know, a strange sort of behavior and you're looking at them thinking, how are you working out what this is worth, you know? Yeah. But there was definitely that. We saw some properties go, I remember going to an a to an auction in Northride we want to talk about Melboune. Anyway, um, that, you know, there was 22 registered bidders. I remember that two gwielo one other and us included. Um, so 20 of Asian descent are where we're making generalizations. Obviously if we think they're all Chinese, but they just went nuts. And this particular property we had thought would have been look top dollar for it would have been a little bit over a million and it went sailing over that for another couple of hundred grand, you know, and it was just nuts and now we're fighting it out against each other. And there was like ego involved. You could just see this craziness on the phone, getting more money from somewhere else.

David: That's it. It's the strategy as well. I mean, we used to have a lot of Chinese clients at that time and literally they would actually tell us what their strategies were like and it was literally, they would all talk to each other in Chinese. So of course we'd hire some Chinese speaking people who can stand behind and listen to exactly what they're saying. And they were listening on the phone and going, okay, we know exactly what they're doing. Um, you know, you just got to go to beat up their own game. But at the end of the day, now it's different. So we really stickly in this particular market. Now Mark and I, I call post election versus pre election. Yeah. Our post election, um, market is absolutely so different to our pre-election, like we literally remember it. Yeah. It was like that Sunday after the election A, after I'd woken up from a party die after from that third Sunday to that Thursday, we would have signed out maybe somewhere close to some of between 12 to 15-16 clients and that time all waiting and in any of your, and talking about an elephant in the room, I'd love to have that one assessed because we see when markets are going down, that's when they should have been buying and wouldn't be ringing them because then of course when the market is changing, of course he has liberals got in and uh,

Chris: IT was a but upselt though it wasn't, Oh,

Veronica: still people are all sheep, you know what I mean? It does. We are, we're all shaking really. I mean it's just that, that whole idea of what is different other than, yes, it was an upset, but at the end of the day, if you wanted to buy something, well when you bind before because everything was really quite depressed.

David: The smart buyers were. Yeah.

David: This is the whole thing. What proportion of investors to owner occupiers would you say of that bunch that sign up with you within the next week? Okay. I would probably say that the vast majority of those people were investors, right? Yeah. Vast majority were investors. However, I would probably also say from that point to now, we really do run on about a 50 50 ratio, if not maybe even 60, 40, 60% owner occupied in the moment, 40% investors. Um, and what's on what suburbs are you really specializing in?

David: Predominantly Bayside integration in suburbs, in a, in a Northern suburbs, which there isn't many by the way, like you say in the Northern suburbs or in an Eastern suburbs, there's actually not that many suburbs. When you look at a train line, you go like, I want to be walking distance from a train line and you follow a train line out or what have you really got? You've really got hawthorns and from Hawthorne's you've got your Canterbury's and you've got your Mount Alberts.

David: And then of course you go out to your, um, eh, Blackburn's, et cetera. If you then follow different train lines up in Northern suburbs, you also didn't have to add in tramlines as well. But those inner inner suburbs with a beautiful little period homes, which are irreplaceable, is where all the young professionals want to move in, the ones who've got the incomes and those incomes will continue. And, and, and I guess it's those, that safety of that type of asset which can't be replicated. Um,

Chris: And what price points do you mainly working at anyway?

David: Probably. Look, it don't get too much in Melbourne. Listen, $1 million. If it's less than a million dollars, then realistically you sort of have to blur between, are you really an investor or a speculator on the investment side as an owner occupier? Well, everyone has budgets. Um, you know, whether they're budget is, you know, X, Y or Z with a site, a hundred thousand or seven 50 or $1.1 Million.

David: Realistically, is it a real budget? Have they actually come up with that number and they just popped it out of their head? Or is it because they've gone to the bank and actually got a real preapproval and, um, and even that can be another conversation. Like, you know, we'll, are they trying to limit the LVR 80% and so they won't go past X. But of course they have a whole host of, of non negotiables, but maybe they do need to go into mortgage insurance. Maybe they do need to go to an 85% lender or 90%. And like, I don't know about you guys, but I definitely did.

Chris: Yeah. I mean I have very like, uh, I mean it was just very recently your client was, you know, hell bent and not gonna pay a LMI. We're saving for 20% deposit. And then we kind of ran the numbers and said you can afford something at, you know, $850. Yep. Um, you know I'm in said, well why don't you consider paying mortgage insurance? We'll look at it. What is it, 88%. Yup. Cause that's kind of the sweet spot oh actually you can spend 1.25, Oh actually we can get a house, but you really want long term now.

David: Um, and the transaction costs and by the time you work at your four or five year plan over that property, is it worth paying that little bit of mortgage insurance and is it better off buying a better quality property? Yeah, it's also safer. And so I guess it just comes down to, but it's not for everybody. I mean

Chris: I feel safer too. I say for the, you're probably getting a better asset know because you're getting either something a bit more scarce generally and safer also. Cause you can buy some, you can grow into as a family and not have to sell in three to five years time where you might buy an apartment for example, that might just suit you. And then you've got to pay stamp duty again.

David: It's funny you mentioned apartments. I guess cause that's probably where, where we as Melbourne, I'd said the big difference between Melbourne and Sydney. We see that as probably one of the biggest differences. And then we'd have a lot of Sydney investors come down to Melbourne cause I go one on, I'm out of Sydney. Um, uh, and what happens is I come down here expecting a bargain and we sort of feel like, well, well, maybe, maybe I lied, might be more, quite a few. What do you Tim bark. I don't turn anything a bog. And to be honest, it's words I don't use. I don't think there's any such thing as a bargain. I think if a property sells for $1 million, that's market value. I don't believe in.

David: What there is though. When you, when you say they want to buy, I want the feeling that they've won.

Veronica: Right. A lot of people feeling that.

David: The feeling that they won. No, it's not actually a price. It's not a number. It's, I think it's a feeling. Um, yeah, it is. And I think it's what happened and what a lot of people are really expecting also from people like us as buyer agents, yet they're employing us to go, we'll I'm after, you know, if I'm after a bartaing.

Veronica: Something noone else has got access to is like the myth of the off-market.

David: Correct. Correct. And realistically, you know, I, sometimes I tell my clients, wonderful, I haven't bought one off Mako property, um, button. Again,

Veronica: we bought a few but not that many. We were actually talking about this in the unknown a bit myself, myself personally like is, yeah. You know, and realistically, it doesn't make a difference whether it's off market, on market, it comes down and what it's what it's worth, right?

David: What you can negotiate, accept what it's worth.

David: Yeah.

Chris: So you might want to win in the right property. That's, that's what you definitely want to win. You don't want to lose their, you don't want to be like, I bought the wrong. So you know. But I think on price that's sometimes hard to win, right? That's the, you know, you can definitely get a good property, but if you're trying to get it for a bargain price, that's where I think you've probably got to admit that you're going to have to pay a good price.

Veronica: Yeah but that's when people that, I hear what you say about the wanting to feel like, they've one quite often they're buy crap. Yep. A really cheap price. And feel like they've won. Whereas I've actually lost

David: when I want. I mean, jump on a YouTube, putting an anchor in sales and that's real estate. Um, I, it's not that difficult. You know, this is a bargain of 900 because all it for a million, Oh, I'm going to give to you for 850 buy when realistically it's worth seven 50. And so, I mean, we get some really bad and really unfortunate stories too. We have a lot of older people who might come to us at our, I mean, our name used to be advisory, so used to be Elite Property Advisory that we used to get so many phone calls on a Monday. I've just bought a property at, in a Dock Lands, uh, having the laws, um, and they've just had valued at and evaded at $400,000 less. And these were people who couldn't afford a $400,000 loss when they're 75 years old. I've got one asset, it's heartbreaking. And unfortunately I didn't have the knowledge or I didn't have the resources or they didn't have the people around them to say there's people who can help you out.

Veronica: Well they realize too late that they were making them that it's easy to make a mistake and then it's just easy. It's tragic. Yeah. So when you talk about, you know, the, uh, the interstate investors coming to Melbourne, but in terms of, well, you know, overnight you've got to pre auction the, sorry, pre-election market post-election market. Has it been uniform? I mean back to the apartments for instance, you know that Melbourne has been pretty, pretty well known for being oversupplied and apartments. Um,

David: have apartments recovered the crystal bullpen of rule. I recover. I think eventually one day Melbourne ions are going to have to come to the realization that apartments are going to be necessary. The issue, which, you know, and you guys spoke about this before, is that the developers in our building and because of profitability, I buy a lot of development sites for a lot of developers. I develop myself. Um, when you're talking about profitability, well, at the end of the day, if there's no one out there buying four bedroom, three bathroom, two living area apartments, they're not gonna build them. But it's the egg. It's a chicken or the egg type of scenario. But eventually it's going to have to happen when, I don't know, might not be in our lifetime, but it will eventually happen. Um,

Chris: I think it's almost getting there in Sydney. I don't think it's there yet. Like I think when first time buyers completely give up on owning a home in an area that they want to live and I feel like theirs, they've got an opportunity right now. They feel like they can get something in the inner West. I feel like they can get something down more towards Cronulla or than on the Northern train line and they're happy with those, but it wants to, those kind of go up in value. I think that that's when, you know, the apartments would probably take that real. next kick.

Veronica: Um, because also the stop gap of townhouses. So that's quite popular with them. Young families, you know, you've got a bit of outdoor space.

New Speaker: Are they building, lots of those in Sydney, in the, in the, in the good areas, probably not,

David: I wouldn't say lots, but there certainly, we certainly started looking at townhouses as an option for young families that couldn't afford a house some years ago. You know, when really when the house has just tipped the scale and became unaffordable for a lot of people. And quite often they get, they might get three bedrooms and parking as opposed to the same sort of money. They might only get a two bedroom cottage, you know. So in terms of value and longevity for them, there's some options in those in the area. So would, it's not so much that developers are building them, it's that they have been built older ones. Yeah, exactly.

David: We're similar man. Look, you know, six or seven years ago we wouldn't have probably looked at them We would say. No. You know, you can just push a little bit harder and an extra $50,000. You can buy a house, you know, and go back, get, go back to your bank and go back to your broker and you done increase your loan. Um, you're, you're, you're only a tiny bit away. Well now, now it's $500,000 difference. It's just not possible. But I guess our culture here is really, it's just not that apartment, but their culture is starting to change. It's starting to change in the older demographic sign, changing the downsizers, but we don't call them apartments, we call them residences. So you'll see a lot of times, well red, the residence is, is, uh, is really his eye top pain. You know, we're talking $3 million type purchases for 202, 300 square meter.

David: It's a beautiful downsize. You look at the beautiful three D rendering pictures and you go OMG. They built it the same as what the pictures looked like. You would be gorgeous and amazing. Like Albert Park, East Melbourne and Melbourne, East Camberwell, Canterbury, Dina suburbs. Most and most downsizes. And, um, they, realistically in Melbourne, they, they want to retire where they live now, if they live in Eastern suburbs, I don't even mean Eastern suburbs. If they live in Melvern, they want to retire in Melvern. If they retire, if they're living Kew, they want to probably retire in Kew. That's where their friends, their family, they, their social networks are, they know the local coffee shops are, and there's a few companies who have done a lot of research around the fact of how far they want to be and the average distance is 500 meters. Imagine there's a client you're gonna be looking for a long time,

Veronica: but I guess if you have spent 30 years there everything's established. I mean, I mean I guess there's, I don't know, I've, I'm not 100% certain about this, but I would imagine a fairly small percentage of people are prepared to completely uproot. They're life at that point and say. Kids have flown the coupon outta here.

Speaker 2: We see it all the time. I mean, we, we literally just signed up. A client is looking for a beautiful residence in, in Brighton and it's going to be bar right behind church street where everyone wants to leave in this particular strike called Wells street as complete, nearly change all the houses.

Veronica: It's always at your search. Your search area is one street.

David: I wish it made it easy and not at the same time, but um, but it is one particularly Strait, which every single house has been knocked down and I are building for downsizes and the, the population is aging and the, those type of people are selling homes with uh, let's call it three or $4 million, which realistically that don't get too much change when they then go and buy an apartment for $3 million. And the benefit in them doing so is the reason why they're holding on to those houses and not moving. And this is, I think, you know, again would be a really interesting sort of, you know, conversation to have around or how do we fix that problem. And I know there's been a few people named talking about those extra rooms that are, that are in these houses. But you know, at the end of the day, um, eventually they get to a point where they have to move, not wanting to move, having to move.

David: And when I do move, they sell, sell the developers, the developers at the end of the day right now, uh, they've gone underground in Melbourne as well. You know, there's the, if you speak to most of the developers, they, they're sitting back and waiting. They're smart, they patient. Um, but most of the actual purchase that we sort of do, our effective laser sign before is mainly by side and that Eastern suburbs, but also in a Western, in a North, I mean that's really Stickley's itself specialties in inner. So we, that little egg shape putting out towards Brighton apartments. It's, it's down here. It's, it's really difficult. People just don't have that same cultural acceptance of apartments.

Chris: So with the, uh, inner ring suburbs, like the brightens and the Cambellwells. Um, yeah, the premium suburbs, they're like kind of your milestones or your double bays or.

Veronica: Do you call Brighton Inner ring?

Veronica: Yeah, it is. How, how close is it?

New Speaker: 12Kms, but it's on the Bay.

Veronica: That's why I call it an egg because for me just what we call Bay side.

David: all the way down to Mentone. So find the Frankston funny Frankston and again, Frankston might be a lovely place one day.

New Speaker: Um, well technically it is technically easier. It's just, it just has some gentrification to go and I guess that gentrification has been taking place for a long time. When it does take place, I think it would be probably a lovely place to live. Um,

Chris: I was talking to clients in Melbourne and um, you know, there's two train lines down the Bayside, right. So you've got the Sandringham line. Yup. Which um, you know, that's what everyone wants to be on because it ends in Sandringham beautiful spot. You've got Hampton, all the other amazing spots on that line. Then you got the other Bayside train line, which is the Frankston line. Um, and that's not as good. No, but it does track the by further down. And that is gentrifying though along that train line suburb by suburb though, isn't it like Aspendale, Edithvale,

David: Bonbeach, Chelsea. I mean we were buying to give you, a bit of an idea. If you went back to 2012, we will bind little, little three bed, two bath feelers or even one bath villas in places like Chelsea for sub $400k. Um, today you would be looking at around $800,000. I have the same type of property. Um,

Chris: is that on the good side of Napean highway or the bad side?

David: Well, I actually don't do Bayside is good side.

Chris: No, no. Is, I mean this is my observation and you know, that'd be interesting to get your thoughts on it. But you know, if you go down that train line and there's this really big road cord and a pain highway and a pain, I always think maybe eight lanes. Is it six or eight? Not down there. It's not, it's only really four lines, two on all of them. Both sides. A small glass of train line plus the train up and it's like about, well if you're on the left side, which is the bay side, then you know, everyone wants to be on that side. But on the other side is they've got across the train tracks and it's a bit awkward cause it's level crossings and things and um, you know, you find that the growth on that side is much stronger than the other side.

David: Subjective opinions depends on what you're after because on the beach side of the, the road is what we call it. Um, it's a different type of, property a very, very small little blocks, a lot of townhouses, a lot of apartments. There's a few multimillion dollar properties. I give you an idea like, you know, seven or $800,000 parcel of land on the water and I'm in on the beach and on the water. So that was probably gonna be a bit less. But on the beach, um, is going to be maybe, let's call it three, three and a half million dollars. Yeah, there's not many, three, three and a half million dollar buyers down there. When you're looking at the townhouses that are on that side, you still might be, let's call it one half, $2 million for a townhouse or you can go over the other side of the train line and the streets are actually quite nice.

David: And then in the areas are nice is beautiful schools there for kids. A lot of young families are moving into that area. You have a lot of um, um, uh, I would probably call it, they're very similar type of buyers that are buying down there and they are gentrifying. So those young people are saying, well, hold on, I can have, not only can I have great school, good schools, I can also have beach and I've gone coffee shops and I've got shops and yes, I might have to be on a train for an extra 15 minutes. But yeah, I also get that those, uh, those house attributes that are been after, I think it's a smart idea. You've also got scarcity. So you also have properties going up in value. You can't build on the water. So there's, there's only certain amount of land available behind Chelsea in Bombay.

David: Chait is our last McDowell down those areas. Not only is there a huge, big massive freeway, but there's also huge, big massive Parkland which are effectively wetlands. So the actual amount of land that's available down there is minute, absolutely minute. And that's the reason why those areas are going up just purely because of scarcity. Yeah. Then you add a little ability and also the people I link, I think the people, so I look at people movements probably more than I look at numbers and so forth. And if you look at numbers, if you look at people and you actually go to the local shopping centers and local coffee shops and you see the type of gentrification it's occurring, it's a sign of what's to come. What sort of people you're looking for. Young families, young families nicely like young families have got white collar jobs. Um, that stopped probably necessary, but effectively young, young families, um, they take care like a, a usual young family that's got a great job.

David: And as you know, a good member of society and not going to leave the house in a mess. And therefore as a, as a, as a, as an investor, you're not going to have a property. It's been ruined. Um, they're gonna have pride in their home, they're gonna look after their home, um, and they're gonna be, make great neighbors as well, so therefore attract more people to come down to those areas and they're a little bit more affordable. So down there, again based on numbers, um, you'll find that people will start moving down to there because they sort of, almost the word forced is the right word to use, but their options are limited because what happens is in Melbourne is you, you have this big gap between Bayside and Eastern suburbs and that, that gap, that train line, I don't even know what the train lines called because no one buys on that. This particular little gap in between, they sort of jump over that gap and they go straight over to the Eastern suburbs

Veronica: So when you say a price gap. Is it a price gap or is it a geographical gap, I. E. that it's not accessible, that area, it's sort of a bit no man's land. Is that what you mean?

David: The difference in the train lines and those type of different things as well. I mean the, the problem we also have is that, you know, buses are acceptable in Sydney. I know, many, many people from sitting there. So they take the bus to work for us in the elements and this is to take the bus to work. We sort of all have a bit of a giggle and say take that. Don't kids, take bus. Um, it's, it's very unusual to take a bus in Melbourne unless you're a school kid. Um, and so sort of winery tool or winery tour you correct. Um, but it's, it's, it's just probably just not a widely accepted. It's, it's cultural. I think. Um, the difference between your Melbourne's and your Sydney's? Um, I mean we have so many buses that I think recently or any few months ago, they had a, a, um, a report run on how many people were actually in each individual bus.

David: And there's literally like no one. Um, and so now a lot of the buses are stop runs and so forth. Um, which is a waste of our money. I think they could be spending money elsewhere.

Chris: Well they are over flowing in Sydney. Yeah. The tutors from wallets, we're trying to build trains always. So it's a bit, we're going a bit old school.

New Speaker: Yeah. Yeah. Whereas, whereas I think at the end of the day with us down here in Melbourne, it really is, it's trying, try and try and, or trying because the vast majority of people who've got good jobs or working in CBD or life type locations, yeah. We really don't have any satellite cities like Sydney does. Um, we've tried and we're trying. And in the future that might happen. Well, I mean, no regional cities, I mean, but even, even, even just a satellite area, like a, we've tried to have Danny Nong as a, um, you know, they call it a central business district and done. Yeah. And certain areas like that where they've tried to increase the, uh, the livability of those particular areas.

Veronica: Once you're a matter of Sydney, that ride North Ryde where they've got all the pharmacy you go, yup, yup.

David: So we tried all those things. Realistically it's still, I think it takes time and I think it's all about gentrification.

Chris: well there's this massive plan isn't they have to site governments of this $50 billion on a city outer ring train loop that they think they're going to build before 2050. Uh, so it's a big lecturing, lecturing promise that he made last year, but that was the idea behind that was all these hubs around the city. But you know, that's a long, long time away. 30 40 years.

David: Well, there's actually a document, it's called the 2050 planning policy. So we actually have a document and you can actually read it and it's really, really interesting reading. You want to read about 28,000 pages. Um, but um, but I actually said it gives you a bit of a, a, a plan in regards to, well, what do we want Melbourne to look like? Because we do have unlimited land unlike some you need. But we do have unlimited lane. It does keep going up, but we just can't have the resources and I guess, but there's more than that. Culturally we've changed on it and not so much we've changed. I think the people are changing, young people are changing. Most of our millennials that will come into our, our office and we do look after a lot of millennials and we, we sort of Pat them on the back and try help them out wherever possible. A lot of times their mum and dad will sort of bring them in and go, Hey, do you know, we don't know who we know. Who does know? Um, and so I think those, they, they're the lucky ones, but at least push them into the right direction to say, well, maybe get advice on where you should be buying, get advice. And they're starting to understand that advice model, which is just, he's so clever. You know, I wish I had somebody who very direct us in my young age. Again.

Veronica: Well, so do you find, what's the stock levels like at the moment?

David: Absolutely. Natalie appalling. Um, yeah, I mean, who's going to sell right now? It's near the bottom of the market. Yes, we have gone up one and a half percent last month and my percent the month before that. But why would you sell? You're selling because you have to sell why. But as I tell most of my clients, it's generally speaking 90% death or divorce, 10% other, but literally it's death or divorce. You'd need to work out which one it is.

Veronica: And so you're not seeing people taking advantage and grading.

David: We aren't seeing that much. They may be that 10%. Um, we were seeing a few people doing that. Um, and we actually have but, but very few. Most as of the time it is death or divorce. Um, they want to say death. It could be affected going into a home or something to that effect. But generally speaking, it's death or divorce, whether it's death or divorce, I don't care which one it is. As long as it's selling, it's selling, they've got some stock and buy it.

Veronica: So, well, typically with divorce it might be a more recently renovated property maybe, and we've with death or retirement retiring into a retirement village, it might be the sort of property that gets demolished to be turned into downsizes

David: and young people are also buying those properties. Depends on where they are. So a little bit further out. So in the Northern suburbs for instance, you can go half an hour by train, which has really only about 12 or 15 Ks and you can buy a house out there, $700,000 on 650 to 750 square meters. And effectively the young people of all demographics, all gentrified. They're all, they're all gentrifying areas. They buying these older 1970s, maybe, 1970 times. Um, and they renovating them, which is great. They're not looking down and rebuilding them. No, they can't afford. If I can break looking houses, right elbow grease, they ain't done it. Some love and care. Um

Chris: yeah, pre-war postwar for the brick. Sort of nice looking houses with a bit of a, yeah. A Reno. When they are hugging the train lines though aren't they?

Chris: They're all hugging the train lines. And this is the, this is where the young professionals checking onto them or, wow.

Chris: That is a bit of a problem to be honest. Because you do, when you are buying in mobile, I think that um, because they're all aiming for the train lines, a lot of them are buying, you know, very close to the timeline and they go for big prices sometimes don't they? And they're not factored in. I think sometimes you can hear the triangle. Have you noticed that as well? A lot in Melbourne?

David: Well i mean, look there's, there's always people are going to be buying on trying lines again, I guess they have what we would probably call a bag bargain hunters. Yeah. Um, and, and I guess at the end of the day, you know, realistically they'll probably learn the hard way of why was I bargain then cause we'd be in a bagain when they got to sell it to. Um,

Veronica: that's a good point. Did the trains run all night? Uh,

David: I know they sort of run well back in the day. I think they ran to like 12. You're to that effect that I'm proud of.

Chris: Well pretty late note at seven o'clock. Do you know?

David: But, but most of those areas up there that you can still buy those houses and it just depends on what type of per person you are, but the young professionals are moving and what they're saying. And I saw it on the news yesterday morning. I was talking about the fact that some of these outer areas, which generally speaking were blue collar sort of areas are now having their train stations, you know, rejuvenated. It's been in multiple, multiple millions of dollars. And the, the increase in some of these train stations are, uh, doubling. Um, I mean they used areas such as like Chicana and Broadmeadows, which in Melbourne literally probably, you know, number one and two of our least favorite suburbs, most likely depends on who you ask. Um, but those particular suburbs are literally bursting at the seams in regards to young professionals. Now taking the train into the seat CBD, which from those locations only takes less than half.

Chris: So the elephant in the room is 100% for you.

Veronica: The reason that Chris and I do this podcast is because we passionately believe that property buyers can do it better. We really want to help all of you understand all the risks, but also the ways in which you can avoid your elephant making the decisions.

Chris: But what we would love for you to do is just to share this episode and share other episodes with people around you that are going through the property process.

Veronica: Give us a review on iTunes a Firestar please will be very appreciated because this is about making sure that we all benefit from the wonderful information that our guests have been sharing with us.

Chris: yeah. Usually you say about, um, young millennial coming in and new, helping them buy the right thing. Um, when I've looked at Melbourne, there's lots of people going out and buying the wrong things because there's lots of ah, things that they shouldn't be buying. What are some of the things you've seen that a lot of young people have been buying? Um, that, you know, probably aren't great investments,

David: House and land packages and apartments in the city and apartments cost, but generally speaking, I'd probably say more house and land packages out in the middle of absolutely nowhere.

Chris: Can you just explain exactly where are these and how much land is available.

David: Uh, there is an infinite amount of land available. Like when I say infinite, I really do mean as close to infinite as possible, literally from here to A's rock. And it's, and it just keeps going in. It's flat and it's volcanic and, uh, and it's, it's, it's bad to grow stuff on, but of course they're doing these house and land packages. And back in the olden days, you know, a house and land package in the outer suburbs used to be 600 square meters, bigger fence, three bedrooms, two bathrooms, two living areas. Today. It's 250 square meters. Yeah, it's shocking isn't it? And it's, it's an it's Lego land and they're all the same.

Veronica: and unfortunately no backyards.

David: I haven't. So they've moved all the way out there for a house but then a house with no at Dory or, anyway, it must be hot. it's just cheap construction. So, so I guess those things are, again, it's a learning lesson. I wish the whole world would, would, would, would be out of listen to podcasts like these and actually understand that, you know, what is that really the right thing for them to buy because they don't know any different.

Veronica: No. they don't and there's that sort of social proof that goes with it as well. Their friends do that and that and then they think, Oh they must be what you do and someone's successful. Cause they finally bought a home and they've made it. Um, Oh I want to do what someone slows down. And

David: there's a great story of that. I, I have a a, let's call it a group of friends and I'm about 27 deep in regards to looking after one after another, which is my, my, my, my record and all these particular honest group of friends all bought in places like your point cooks and your town H and you wouldn't advise and so forth because they were passing my end. And that's what they would call true toward the yes, the I buy land, land goes up. Well they probably didn't understand this. So it's about land value, not land, you know, size, as in content. Um, and effectively they've all been grown up and they've all in now being in Australia or in Melbourne for four, five, six years and now their kids are all turning six, seven, eight, nine and 10 and they're going, where do I want to send my kids to school?

David: They've got double incomes, they've got really, really good incomes and they've paid off most of their houses. They bought for three and $400,000 and trying to get into the Eastern suburbs into, you know, some of the better schools zones and they really paying for it. And I uh, they are literally borrowing the most they possibly can. They're trying to at least get and they're smart enough to get advice and smart enough to at least say, Hey, look in I've got somebody who can help you out. Um, or, or people who can help you out. Yeah. Um, and I think this is a good thing, people at least getting that information out.

Veronica: So how has say, I remember doing an episode of the show in point kook and um, I have a visceral reaction to S like outer suburbia. It really bothers me mainly because I grew up in outer suburbia and I remember being with a producer and spending an entire day doing full reccy of the area. And I actually wrote a blog on it because I really about how to get the best out of if you're going to buy an area like that had to really pick the best property. And it was really interesting too because what I learned about the first subdivision had bigger blocks land and they continually shrink and shrink and shrink. And so there's a whole bunch of stuff and maybe I can dredge out the, um, the blog I wrote about that and put in the show notes. But so the people we bought for that were happy and they ended up selling and they made a bit of money and they ended up buying closer in. But how is that capital growth wise? So over the last 10 years, so, so have you got, I don't know if this is off the top of your head, I get it, but what, what would be a typical growth of a house say in point cook over the last 10 years versus something that they might want to move to if they bought in the inner areas 10 years ago?

David: Well, strangely enough is probably about the same, to be honest, and the reservoirs for the ripple out of fate, but that doesn't mean that's going to be the same in the next 10 years. So effectively that ripple out of effected places like we just say point cook talking or not picking on point cook mini particular erasion areas. Actually really nice parts and points cook NOthing wrong with it. And if you actually really want to be specific or not specific, you've got, if you want to be even made a bit more technical point of Cook's actually got a little area called SA sanctuary, like $2 million for a house in the middle of golf or city, $2 million in like a $2 million. You know, it's amazing what you can buy for $2 million, which is not in that particular location. Um, so, but again, personal choices and they can, they can buy whatever they want to live wherever they like.

David: Um, but you are right. They, they started out in and the developers that bought out there, they're allowed to build them with those other sizes and they could sell them for those sizes as they had to pay more for the, for the Viking green wedge land. They then of course were able to employ the right barristers and get the right barristers to allow them to re subdivide these blocks. The counselors were allowing them to do it as well. Um, and of course now they're re subdividing these boxes, these tiny little tiny in the layers, which realistically are they, are they appropriate for, for those areas? No, they're not. Um, will that change in the future? I really hope it does for, for, for their sake. Um, do I think it will? No, I don't think it will. I really don't think it will. At the end of the day, you know, we roughly 30% of our GDP depends on construction. We need construction to keep happening. Um, yeah. Is that good for the investor or the owner occupier? Well, what's not really relevant to

Veronica: big macro environmen. Yeah, exactly.

Chris: It's interesting around these kinds of outer suburbs because there was so much FOMO in the market and so much that just brought off everyone who could possibly bought, just bought in 16, 15, 17. You know, you were saying a lot of 'em Oh, people are online or say, Oh Melbourne land prices were not 50%. Right. And you know, some of these house and land packages, they were not 50% cause they could sell them for 50% more because they was such a scarcity. They couldn't release them fast enough. But they've also kind of now done a big factor. It isn't some of the

David: Data is lying.

Veronica: this is about rezoning isnt it?

David: No, not reszoning. Like I know you guys, I rezoned a lot of incident or a lot of innery Sydney late. They rezoned all of areas and they and I had automatic and instant change in values. We've had that too. Yes. But that's low main roads and so forth. We called residential growth zones. At that particular situation happened. It was for completing all the different region. The data said that we had doubled in value. I'll give you an example. Mernda that. So I did a humongous study and I did a blog on Mernda and murder itself. And it's not because anybody matter, but just on data. So we had um,

Veronica: If you want to share it. We'll put it in the show notes.

David: We had a peak, we had a peak body come out and say, Mernda has got the highest cap of growth rate in Melbourne. Now that is a lie. That is a biggest lie in the whole entire world and it's pretty simple. If one Oh one main street murder sells for $200,000 today, then they go and put a Metricon house on for $200,000 and sell $400,000 in 12 months time. It sells for $400,000 it's gone. A hundred percent increase in capital growth, isn't it? But that's the way the numbers work.

Veronica: True because there's not, even when you renovate a house, there's no little, I'm put a house on.

David: Look at Toorak has that as well. And when they say Toorak, I grew in the peak 20,30 40% it didn't really grow 20,30 40% because the people who are buying six and $7 million houses and then, and then building six and $7 million houses on top of those six and $7 million houses and selling them for $15 million might either a million or I saw $14 million actually lost a million. So yeah. So it's, it's, it's one part I guess of our data that's really lacking.

Veronica: it's a really good point. Cause we do talk about the median all the time. They have misleading it isn't that we talk about compositional bias and, and what actually is sold and how they can distort and skew the data. But yeah, we haven't really touched too much on this idea of the improvement costs that don't get taken into account. And it can, it's really important. Yeah. Yeah.

David: Can be a, really can be a when, when we look at data, I'm sure you'll assign, when we look at data, we look at, well what has sold yes, but what's also been spent on that property. And after you sort of been around of all you can, you can get a bit of a rough idea how much they've spent on it,

Veronica: but that's on an individual property. But when you're looking at aggregated data, no one's generally thinking about that.

David: Well you really, the only way that you can do it is by pulling apart if you're single solitary sale. And it's possible. Yeah, just takes all the time. And

Veronica: Were it comes down to the market knowledge is, it's the shortcut to that. But actually you mentioned earlier about all your data comes REOV now I

Speaker 3: know it's different down in Victoria versus you know in many other States like your ring to actually know how our vacancy rates comes from the REI Rew South Wales as well. There's some particular data that comes to the REIV that's quite unique from what I understand.

David: Well, Or if you're a REIV as a, as a real estate agent in Victoria, you must put yourselves on within 24 hours. And they do it for many different reasons as well. They want to make sure they've got market share in their area and so forth. So 99% of the time and everyday normally establish houses on there, but of course off the plane or different things. And you has an estate, of course they're not on there. They're only on the retrospectively after they said all, then of course it goes to state revenue on just state revenue office. Then of course it gets reversed, engineered, put into the data and you could look at data three years later, but who really cares about data three years old. So, so again, in those outta areas, problem in any areas and not so much a problem, 99.9% of the data that you need is on these is in the REIV.

David: But data is only as good as he gets put in. So for instance, you know, um, it's amazing how many times you have a look at data and it says it's a house and you look at it and clearly not a house, it's clearly a townhouse. So it's really a villa, um, it's, it's, it's not a house. Um, and side data again is, is a, is a big part of our, our world. And I guess we try to look at that data and make sure that that data is actually is correct for our clients and making sure that they, they, they not lie to their told the truth. This is exactly realistically what this property is most likely going to grow up. But if you go up or for or grow at, if you look at the same type of property that hasn't had any improvements, et cetera, et cetera, um, or if they do, if you do two improvements, he's another example of, you know, other properties that are so sold in those sorts of areas. Um, yes, it's not really good data.

Chris: Yeah you sit down around the people moving? I think it was a really interesting point how you said people in the, you know, the hustle land packages pockets and then when their kids get a bit older they start thinking about schooling and then I think actually you want to send them to, you know, more established areas where there's potentially, you know, better schools. Um, that's kind of a movement of people. It's kind of like a brain drain, right? It's also an income drain. Yes. So the high incomes in that area leave, which means that the growth in that suburb kind of starts, and this is what happens a lot as Adelaide, as a suburb, as a city for example, a lot of high incomes leave and go to Melbourne or they go to Sydney and that's, you know, slows down the growth there. Where are all these high incomes kind of flowing in Melbourne and you know, how like, you know, what sort of pockets do you, cause I, they would probably gravitate to a few pockets because of affordability and where are they going?

David: Okay. So 30% of our income comes from building, 30% of our income comes from medical services. So when you're looking at medical services, hospitals, doctors, et cetera, et cetera, um, those particular type of areas, there's actually restrictions around how far they can be away from a hospital. There's actually rules around it and how long it takes them to get to a hospital. Like obstetricians for instance. So when you're looking at, um, those areas, where do they want to be, where they want to be as close to those hospitals as they can? Where are they? Well, they're on the city, East Melbourne, they're in Melvern. Camberwell they're there, all those, those suburbs that are a few Ks out from the CBD. If we go bayside, we started in our parks and middle Parkinson killers by same as our hospitals further out there are you giving our hospitals for further out, but it's probably in regards to price wise where people would prefer to live and whether they can means on their income. Um, but those inner suburbs also have scarcity. There is just no more land around. There is no more lane going to be produced. Um, they're also now have restricted in regards to how far they can break land up. So we've recently had some laws changed here in Victoria where you know, you permission to do whatever you like. Now you have to have 35% garden space. You food land is over, you know, exercise. Um, and so we're our, our appetite for everyone breaking up land and building townhouses has restricted to a degree.

Veronica: sort of funny isn't it? Because you're talking about increasing density and yet there that the government does have to, whether it's local government or state government has to put in place those development control plans that actually make sure that you don't actually ruin all the housing stock that you have.

David: They have. And if they've done that, but they have then gone the complete opposite around train stations and jobs and effectively again, but building the wrong stock.

Chris: Cause that's one of the other question I had in Melbourne is that, um, you know, a few years ago I was um, my power was at Box Hill hospital, right. And I was just, you know, got out of the hospital, was there all day, kind of went for a drive and I was just like, there's a beautiful house. And then there's an apartment block, there's three levels up next door. And I'm thinking, how has that got through council? I mean you wake up one day and you go to a three level apartment block behind your back. And then I finally came to trial. That's a bit weird went to next street and it happened again and I was thinking something's going on in these council. And then I kind of switched onto it and then every time I drive around Southern the Melbourne you can just see that the council rules were just so relaxed and people would just building whatever they want.

Veronica: But is that because the state government has put in place imposed a requirement cause like in new South Wales for instance, the state governor's imposed, you know, density planning. I would, I don't know the exact name for it. So the councils have to comply by allocating which parcels of land and which areas are going to be sort of medium and high density. Is that what's there today?

David: So it's in the process of all those houses ultimately get knocked down. Is that basically what transission is. The favorite word that you give a lover. If you talk to any developers and you use the word transition is the, it's the word they hate the most, but every, every rezoning has a transitional period from date X to date Y and you've got some poor bugger that's holding out and it's like playing monopoly. It's like playing monopoly and they've got the little red one in the middle and they, and someone else owns the other two, but, but effectively those areas have been rezoned and they're called residential growth zones. Those residential growth zones are a tradition is a, is a transitional zone. And a sort of says, okay, well as of 2013 you can build three levels. If you've got a Box Hill right, now you'll see that they're 33 and I are humongous and it's, and to whether it's appropriate or not, I guess he's probably subjective opinion. I said did your opinion may be different to others? Um, but I personally think that what they're also building their, you really going to work out well. Is that appropriate for Melbourne as a whole? Um, it may be in the future, but right now they are building apartments in areas where realistically they now can't even sell them. Um,

Chris: one of the townhouses though, like I noticed that, you know that I agree that was actually around hospitals. What you said about hospitals made a lot of sense because that's actually where it was. But the townhouses also noticing those in places like Brighton. Yep. In places around kinda, um, one turnout and you know, in a sort of thing or outer East. Yup. Um, or they did, they kind of let the rules go a bit too relaxed on building townhouses and now they've kind of tried to scale it back.

David: Yes, they have. And that's what happened in 2017 that we want some garden space. We don't want you to be putting five townhouses on a 700 square meter block of dirt in, you know, a, an outer suburb. Yes. In an inner suburb like a Brunswick. Do whatever you like. Re gentrify the industrial areas, make them residential. Go as highs you like, we want people there but we want to be in places like a Brunswick who wants to be in places where it's uh, literally, you know, ride a push, bike to work type of thing. Um, but when it's in the outer suburbs, we were finding that there was, we're not finding they are a lot of construction was taking place yet day which is just inappropriate and inappropriate is the right word to use. Happy for the developer to make some money, no problems. That's, that's normal. But realistically, who wants to buy them? What do you want to buy them and why are they building them? What quality are they building? And that will stand the test of time. Now the, the, the, the um, I guess the litmus testing that is really looking at ones that were built 20 years ago, walking through them. And you don't need to be in property to work out whether the quality is good or not.

Veronica: Yes, it's a long time for some buildings.

Chris: I think the problem with this is though, because if you going back to 2016 and you look at what some of the first home buyers, so they grew up in these outer suburbs and they wanted to live in that suburb because the parents there and their sisters and brothers and um, and they wanted to buy a house in that area back in 2006 to now we're competing with a developer. Yup. And they won the auction and they paid $1 million for this house in the outer suburbs. But a developer was buying there for $1 million because they knew they could get four townhouses on their profit. Now develop goes, I can only get three townhouses on it. And so developers are kind of left the market that they have. And so what you found is that, you know, these first time buyers that were buying in these areas for $1 million, it has a now only worth seven, 800 because they're only competing with other first time buyers. Have you started to see that in some areas?

David: Not, not so much. I mean the price, the prices really strictly in Melbourne for most areas, we probably had a correction of let's say the top end up to bet 20%, the top end, the top, top end. Because realistically if you had a $5 million house wine, earthy selling, yeah. Um, most people had a $5 million house wasn't selling cars. There's no reason. So yeah, on the lower end, um, that was selling because I had to sell. But generally speaking, most people also, I mean we didn't really have dire consequences. We didn't have people losing jobs. We didn't have interest rates of, you know, 18%. There was none of that happening. Um, but these younger people that were buying these houses in those outer sort of suburbs and sort of competing against developers too, to a degree, um, it is good that they've changed over some of the rules. Not so much about the first time buyer versus developer. I think at the end of the day, the market will worked that part out. Um, realistically and I also think that our, as a, as a society culturally we're changing to no longer do you, what do you do? Are you born into this society? And all of a sudden your, you know, your mum and dad lived in beautiful suburb like Camberwell and all of a sudden when I grow up, I'm going to have a house in Camberwell as well. That was almost a God given, right? 25 years ago and we were all, that was just normal and they live. Ever thought that I can't, I had to buy an apartment first and I had to buy a villa and I'd buy a town house and then I had to save up lots and lots and lots. I have three kids and then get a job to any me $500,000 a year and then I can buy a house.

David: That's probably what's going to happen in the future. Yeah. It's just a matter of how far, um, the difference between having a property and renting. I think there's going to be within the next in 1520 years, we're really gonna see the difference between, you know, the difference of people renting and the difference of people who own property. Yeah. Because the transaction costs are so huge. I mean we talk about housing affordability. We talk about the fact that we have a lot of people living in houses with five bedrooms and any one of them being used. Well, the problem is is because as we're saying before, if they sell the house and they move into a home, need to have $1.5 million bond and move into a home, they, granted you might be at a borrowed one, you might be to get 807 50 or 500 and et cetera, et cetera. But for the nice ones, they're about $1.5 yeah. But you're selling it to me and all the house for $1.5 million and it's just a bond and you don't own it. There's a problem. Now there are businesses out there that are actually taking advantage of the fact of that. And this I more nodes. You can buy and build your own. Um, but I do think that that's, that's, that's a more of a cultural change that will happen.

Chris: Yeah. Yeah. I mean the whole going, renting and rentvesting which was all the rage, you know, two, three years ago is a risky strategy because you haven't got a home and one day you might want to own a home or that's family reasons or health reasons or work reasons. And then how do you transition back from a rent vesting strategies to home ownership in. So if you haven't, he just the, I'm just going to rent forever and yet circumstances change and you want a home that'd be really careful.

David: So do your numbers really good to do your numbers because you're paying tax on that property now as well. If you actually do your numbers and you start working on gains tax and thanks God land tax didn't change in May we don't want to get in that conversation. But if, if, if they do go and rent vest, you know, realistically it, they really have to be a really smart invested in that because they really have to be gone in a bloody good location and you really do have to time things. Well, and that's hard. I mean, you know, as professionals you can't really, no one's got crystal balls. You, you see things after it's happened, not before it's happened. You can guess all you want and that's really all you're doing. But rentvesting I don't disagree with any way, shape or form. I think it's very hard to write. The numbers work really, really well when you start adding in capital gains tax.

Veronica: Yeah. I think it's funny, I was talking about Uber driver on the, where the airports morning and um, he was saying it, the idea of buying a property really scares him. And I'm saying, why is it the amount of money? Is it the commitment? Is it, you know, what is it w cause you know, he might lose money. What is it that scares you? And he's like, um, basically it came down to he didn't want to commit to living in the one place for that long. And so, you know, from a millennials point of view who actually want, he doesn't have kids and you know, and so until he gets kids, that might all change, you know, that that surely will change. Yeah. But until that point, you know, the idea of rentvesting is actually probably a really good idea because it gives him all that flexibility. You can still get bounce around doing whatever he wants. He knows that he's got himself an asset that's doing something, albeit not an as favorable tax, um, situation. But, you know, it's better than doing nothing I think.

David: i agree I, I completely agree. And in the milennials are different. I mean the, I think the millennials, um, I think sometimes they get a bad rap. I love the millennials. I think millennials are quite smart. I think they, they've taken a different view. They've taken a completely different view. I don't think there is property obsessed as what, you know, sort of versus downsizers. I think that also like they, they started to change around the why they think like the millennials go lifestyle first. It's lifestyle, location and you mean it like you ask people what's your most important thing and the absolute first thing they come back they come back and they say, well I need three bedrooms, two bathrooms, you're a house person. And no matter what they say, Oh, but locations, the most important thing, the first thing they said was three bed, two bath has got two living areas, you know, their in house person. Whereas most millennials you ask the same question is the shops beach walking distance? I have a little dog

Veronica: i have a theory on this. I mean we, you know, like I'm obviously gen X and, and when I was the equivalent of a millennial as even I was the age the millennials are now, they were my priorities. Like I actually think we all forget that when we're younger and we don't know kids and everything and we, and that's all we want, you know? So I just think that the sick human condition in a privileged society in which we live, you know what I mean? Because the old smashed avocado thing. Well you know that's, that's the whole macro privilege.

David: Yeah. But it's also cultural areas. Some you go to a culture and tour as well. I mean that's, and it's also what you were just saying is, is very Australian culture, but we do a very multicultural city and so those different cultures all mixed up together, all have very different belief systems, very, very different belief systems and say really it's almost impossible to sort of, you know, put them all into one, one bucket. However, what you do realize is that even though they may have different belief systems to start with, after a period of time, you'll find that they all become one culture. Yeah. And that caught, it really does. So the great australian dream is alive and well.

Chris: Every week we hear incredible stories of the dumb things, property buyers do, dumb things that end up costing a whole lot of money and or creating a whole lot of stress mistakes that can be avoided. Please. David, can you give us an example of a property Dumbo? We can all learn what not to do from these stories.

David: I have a great. I have a great Dumbo in it. It took me about one half seconds to come up with it. Um, without naming names obviously. Um, as a buyer advocate, we, we, we have, you know, a lot of people call us, give us a call and make inquiries. And so for your recorded adviser, this is actually back when we were advisory, but we would have them, um, have a lead come through and this one particular person would down, which gives a call and the first time that they called us back in 2000 and back into multi, multi offender.

David: So we probably talked to this person, let's call it Ralph, maybe five or six times between 2011 and 2018 and eight particular people were waiting for the market to crash. Everyone was waiting for the market to crash and they were absolutely convinced the market was gonna crash too. To put things in perspective. In 2011, you could have bought a beautiful little house in a suburb like Melbourne, you know, Bay side suburbs, beach side of the highway for probably, let's call it sub five would have needed to work. Yeah. But you could have bought a house for sub $500 and they budget means I would've been almost been out by Hass cash. Yeah, no, no, no loans, nothing else. Cash. But I keep waiting for the, for the property market come. Yeah. We'll keep calling them up. They keep calling us up a year or two later and Oh yeah.

David: What's happening right now? And it's expensive. I had to refrain from saying, has the market crashed yet? So put your hand. Um, and of course then come 2018 market moved. Um, they finally signed up and of course, um, when they finally signed up, um, they're always waiting for that, that bargain and the bargain to come. But of course their budget went from $400,000 to over $1 million for half the property that they could have purchased. So, whilst a lot of people try to sometimes say, I'm gonna white for crashes, white for movements, wait for this, white for that. We're not talking about stock, this isn't shares. We're talking about hollows and people want a home and we are talking about owner occupies buying some stuff. I mean don't look at um, stock, you know, apartments or whatever it might be that the for investments, but for these types of homes, they're always in demand by the owner occupiers. Um, and so unfortunately, you know, prices and those of areas that have traditionally gone up and up and up and up and up and unfortunately this was one, one property Dumbo that, um, uh, instead of paying $400,000 when they really could have back in 2011, would it paid over a million dollars for half the property in half? The conditioned, uh, in 2019.

Chris: Sad. I think you're right. When it's the home, it's a bit different. You know, you've, you've, you kind of would be very careful gambling with that because the consequences are huge from a lifestyle point of view to the family and renting and et cetera. So you've got to be really careful, you know, investments. You might want to say, I want to gamble with it, right. I'm going to take a bet that in 12 months time it's going to be true. But you know, it could be lose, you could win. But, um, from a home point of view, really dangerous. I'm getting that quite a lot at the moment. Yeah. Way. Uh, you know, there's been, uh, everyone's calling it the dead cat bounce. Um, and so, you know, like the, the market's crashed but it's recovering and it's not gonna survive and it's going to go further down, lower cause in shares. It does this, you know, it, um, you know, when it hits the bottom, um, everyone thinks it's the bottom. And so then everyone come on, jumps in and then you know, there's a man runs out and then it goes back to like it was, and a lot of people and you know investment. Well think that this is a bit of a dead cat bounce in the property market and um, you know, it's gotta be really careful because, you know, it's not like investment markets. You know, there are home buyers entering is pent up demand. Yeah.

Veronica: Oh I think also the interesting thing is that this is definitely not this dead cat bounce or the the the V we've got a bit of a V curve at the moment. You know, in terms of Sydney has a very pointy bottom. Um, it's not being propped up by investors. Yeah, no, it is still that pent up demand is coming from our occupies, which is that desire for a home requirement need for a home. So, which is a lot more sustainable in terms of a market then if just investors were flooding in being speculative. So, so yes, I'm, I'm sort of,

David: and we're same here. I mean, it is a different type of asset class. I mean, at the end of the day I can't be translated very easily. It cost money, it costs time to transact. Those particular properties. A B has emotion involved in it. And I guess it's one of those basic necessities. Everybody does need a home. And I guess as people, um, in society do get a little bit more money. They want to live in the nicest suburbs. It's normal. And they also do, they do make movements. It isn't just simply one purchase. Then we lived there for 30, 40, 50 years like they did back in the 1950s they move and they, and they're moving up and if they're not moving up, they're not moving at all. And I think what happens, he's in those cases and the people that we see with those owner occupiers, it's local owner occupiers. Yes. All local owner occupies a really control those markets. The investors can come and go and they can come in and I can come and go. But realistically the owner occupies one to say, well, if I have to pay a little bit extra to live in a place I want to live. Who cares as.

Veronica: Its the people trading up within the same suburb. Exactly. Yeah. And that and that not wanting to leave and all those things are what, what, what sustains and area. Yup. Well David, that's been great insight into what's happening in Melbourne at the moment and we definitely appreciate that. And also the detail in terms of sort of a lot about that base size, some of the, some of that, you know, East, you know, some tips around what's happening in the East inner East as well. Um, there are similarities and differences between what we talk about all at all. What I talk about all the time because I'm so familiar with Sydney so thank you very much for that.

David: Thank you it's been a pleasure.

Chris: We want to make you a better elephant rider and this week's elephant rider training is

Veronica: Well following on from what we talking to David about, you know those houses and people that are living in places that are in transition. You know when the local government has changed the zoning and you start to see these apartment buildings going up and you still got the old houses sitting in between, well as a buy, definitely don't want to buy one of those houses unless you're actually thinking about redeveloping it yourself. But also if you are only one of those houses and and you've been approached by a developer, then there's some real soul searching that you need to do before you decide whether you are either a going to sell or not going to sell. Because I think what, you know, I should be doing a little bit of research on this and read stories about people who've held out when a developer has come along and they're brought up the surrounding properties.

Veronica: And often these people are so stubborn, they don't think about what's going to be like to be the only house left behind when you've got apartments, you know both sides and that back over the back fence. And then your house is on a single block that's undevelopable, if that's even a word. So that its value has gone down significantly. So it was in inflated because a developer can do things with it and then it ends up being worth less than it was in the first place before it even got rezoned because nobody wants to buy that tiny, little parcel of land. So I think that whilst, um, and this is not a compulsory acquisition, this is if you happen to be in, you know, owning a home in an area that has changed and has become attractive to developers, you know, obviously banding up with your neighbors is one thing. Um, but holding out comes at extraordinary costs and I think that quite often people don't, well, people that are inclined to hold out may not actually spend the time really considering what life is gonna be like afterwards if they do hold out.

Chris: Yeah. I mean, if you get it pretty silly offer for your place, you've got to always consider it. Even if you don't want to go through the hassle of moving or you don't like the whole idea of having to sell out to a developer or something like that. I mean, um, it always reminds me of those picures on, on the internet where you've got a house in the two freeways built around the house and it's kind of like, you know, that someone was being stubborn there, but I mean, who wants to buy that house going forward? So we want to be careful, I mean, in these areas around these density zones, um, yes, you would have got an uplift if he sold, but if don't sell you may, you kind of shoot yourself in the foot. So, um, you know, you wouldn't really want to own a property in these areas where they have changed the rules if you're looking for a home, unless you're gonna want it to sell it to a developer because over time, um, you know, you really the liveability of those suburbs gonna decrease generally because of more people and more cars and um, you know, more apartments and things like that. Your privacy and all sorts of things. Shadowing. Exactly. So yeah,

Veronica: And construction is the whole process. I think the three examples, and I've been trying to find evidence of this one, but I remember when I was a kid down in Southgate and Sylvania, so there's a whole big shopping center that was built and there was one person, I say guy, I presume it was gone, not that women can't be stubborn, but it was one guy who refused to sell. And basically what they did was build a solid, you know, brick wall, six meters high or more at to both sides and at the rear of this guy's house. So you drive along. And as kids we used to, you know, get the parents to drive as long as it would have sightseeing tour to have a look at this crazy guy that held out and ended up living. Basically we surrounded our brick walls. So there's another one in Lewisham that I saw in the paper of a couple of years ago where a semi detached house is attached to I think a five story block of apartments.

Veronica: Seriously. And I kid you not. So um, I'll find the link for that greenhouse user story, but it looks absolutely ridiculous. Sitting. Think how the hell could that have got three absolutely a F like a Federation or Edwardian semi attached to a five story apartment block. And another one that there was a guy, an older guy, you know, because often there is, you know, these are older people that own these homes and it is very disruptive. But I think what they're not realizing is that life is never going to be the same again there anyway. You know? And so these poor old man in his nineties I think, you know, his wife had died through the whole process of if all the surrounding properties being sold and, and redeveloped. And he's basically sitting there one little house, he's backyard and he's, he is hoist overlooked by hundreds of apartments.

Chris: Yeah. I mean I will pass this one on George street every day in the city. I'm the hot next to Wynyard station in the whole, when news stations getting redeveloped, every single building's going, going up and there's these one property, she's like crazy John's is the advertising. And I'm like, why didn't that person own this property, sell it, you know, like, you know, it's a great block of land. I'm sure every other development would have wanted that land at that point. My gut is, I reckon they held out and they've tried to sell it on the private market and it hasn't sold. Um, you can see it's still for sale, big banner on it. And so that a little properties, it's, cause it's not a very good block, um, is going to be surrounded by all these big, you know, beautiful new buildings

Veronica: and it's only actually worth something if it could be amalgamated into a bigger site. Yeah. You know, on its own, it's not really worth that much,

Chris: I don't think because developers are, I don't really get, I'm not gonna make enough money doing now to, to, it doesn't really, you know, there's not enough profit margin. It's a maybe day able to sell it again,

Chris: but you're talking another cycle. So yeah, they missed the boat so they probably got greedy. I think that's another thing in these situations, if you get a good offer, don't look a gift horse in the mouth and say, totally.

Veronica: join us next week when we put a developer in the hot seat. Now, Rod Ferring, I don't think he really knew what he was in for. Rod is the CEO of Frasers Property Australia and we had a very, very interesting and informative discussion all around buying brand new property, building brand new property, the development control problems, the certification problems, their process problems that defects, valuations, settlement risk, all of the above, all the things that are risks around buying off the plan we tackle with someone who has extraordinary experience in this space and insights and we learn a lot, so please join us.

Chris: Don't forget, we're on all the social channels. We're on Facebook, we're on LinkedIn, we're on Twitter,

Veronica: or you can connect with us on the elephant in the room.com today you, the links are all there for you.

Chris: Please connect and send us a message. We'd love to hear from you.

Veronica: Until next week. Don't be a dumbo.

Veronica: Now remember, everything we talked about on this podcast is general in nature and should never be considered to be personal financial advice. If you're looking to get advice, please seek the help of a licensed financial advisor or buyer's agent who will tailor and document their advice to your personal circumstances with a statement of advice.