Episode 102 | Research data - 2020 Boom or Bust? | Louis Christopher, Founder of SQM Research

An in depth look into Australia’s leading research investment house and their predictions for 2020
Today we pick the brains of Louis Christopher, Australia’s most recognised and respected property analyst and Founder of SQM Research. SQM specialises in providing accurate research and data to financial institutions, professionals and investors. Louis provides his predictions for the 2020 property market and gives essential information regarding factors that shift property prices.

Here’s what we covered:

• What is the primary reason property doesn't sell

• How Sydney's Northwest and Hills district diluted the Sydney property market

• How does a low building commencement rate impact the economy

• Why market forces barely impact the current property market

• Are low interest rates driving asset price inflation

• Why major contractions would devastate the economy

• What are the essential factors to property demand

• What are the property forecasts for 2020

GUEST LINKS:
Click HERE, for Louis Christopher’s Boom or Bust report
Follow Louis Christopher on Twitter
https://sqmresearch.com.au/

HOST LINKS:
Looking for a Sydney Buyers Agent? www.gooddeeds.com.au
Work with Veronica: info@gooddeeds.com.au

Looking for a Mortgage Broker? www.wealthful.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 on 28 November, 2019.

Veronica Morgan: Your 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 Bates: 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 Morgan: 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, the elephant in the room.com. Dot. AAU.

Chris Bates: please stick around for this week's elephant rider bootcamp and we have a cracking Dumbo, the weight coming up

Chris Bates: 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 advisor or buyers agent. They will tailor and document their advice to your personal circumstances. Now let's get cracking.

Veronica Morgan: It's often touted that consumers have access to so much data nowadays and therefore we can make educated decisions. But how do we make sense of this data? How do we avoid information overload? How do we reconcile conflicting data and how do we recognize spin? What I'm getting at is that when it comes to property data, what information is useful and what is a red herring? In this episode we pick the brains of Louis Christopher, one of Australia's most recognized and respected property analysts. Louis is a founder of SQM research and investment research house, which specializes in providing accurate research and data to financial institutions, investment professionals and investors. He's objective, candid, and honest approach to the real estate market is one of the foundations on which SQM research has been built on. So today we're going to find out what data Louis believes is the most important. And why

Chris Bates: did I Louie, how are you doing?

Louis C: Good to be here Chris.

Chris Bates: And I know I did score yourself Louis, but it's not. Louis is it's.

Louis C: no, it's always been Louis solid it.

Chris Bates: How does that all work? Actually, just out of curiosity, I didn't know about that. About the French. Is that the, yeah, it's,

Louis C: it's, it's a, it's how the French do it. I'm not French, but it's how it's what my mother decided to name me, uh, back in the early seventies. And uh, so yeah, Liu UIs, when you ever you see that spelling you, you do not pronounce a women. And I would say the S

Veronica Morgan: just remember the Louie the fly. Sorry. Thank you.

Chris Bates: If you're coming on, um, you know, I've read lots of your reports over many years and I think it's very insightful to kind of think about where things are going in terms of um, you know, to actually build that and to look at where things are going. You've got to look at some type of indicators and some data. And so what are some of the data and indicators that you really folk put a lot of energy into and focus on?

Louis C: Well as part of the report forecast, which we do at the Capitol city level, we take into account leading indicators as well as more longer term indicators and how the forecast are effectively built. There is a bit of a quantitative model that's going on in there and then there is an overlay of a qualitative aspect to it. So there is a bit of Gutfield that goes into it as well, just to make sure that the numbers that come out through the model make sense. And because there's no quant model out there that's foolproof or perfect. Uh, so it's a combination of the two. Uh, we generally release those numbers, uh, all lies forecasts either October or November, uh, for the up and coming year. Uh, so, um, and we, as you've, you've just mentioned earlier, uh, we generally run a number of scenarios to take into account. For example, what happens if we see a change in interest rates or more recently what happens if ACRA would a step into the markets or restrict lending once again or listen lending. Um, and we've, we've run those scenarios for 20, 20, we ran four scenarios. Actually full, uh, the next year.

Chris Bates: So when you were actually building that before building that report though, like you know, as things that like days are tipping over, there's always new data coming in when the, what's the new data that's coming in that you're like, I've got to, I'm really looking forward to December 20 when lending figures get released or some of the things that you think are tangible indicators that people should be looking at.

Louis C: So a number of the indicators that we put more weight on include auction clearance rights. They include housing, finance approvals, they include stock listings and asking prices. Yep. So, uh, we're keen to understand, I just going back to stock listings where the listings are rising or falling and what component of those listings are rising or falling is for example, new listings or is it the old stock that's now being absorbed or not? Which is a big bit of a telling indicator for us. It is more buyer demand out there.

Chris Bates: I think that's a good one there. Just to talk to stop on because, um, I do actually, I really liked this of your research compared to some other research where you go on the suburb level and you kind of them report on listings within that suburb, don't you? Yeah. And I think that's quite hard to take, get that research, that data some other ways. But what you're saying is there, it's not just about combining all the listings together. You're saying some of these old stuff that's been maybe on the market for 60, 90 days. Yes. That stuff selling rather than the stuff that's been on for two weeks or a week, which is obviously hot stuff, is the cold stuff or that the market stale on, is that selling, have you noticed that starting to shift that? That's

Louis C: certainly one of the developments that has happened in recent months. The old stock. So when I say old stock, I'd talk about stock that's been on the market site, Ivan 90 days. Um, we've been noticing that that's been declining in Sydney and Melbourne as well as solely out of city, such as Brisbane. Uh, and sorry, that's actually brought our overall listings down even while we've been registering a rise in new listings. Uh, so despite the rise in new listings, total listings have been falling and I've seen this occur in ancient every upward cycle effectively since I got into this business. Yup. Many years ago. Uh, so for us that was a, uh, particularly confirmation on the recent upturn in the market, a very telling indicator.

Veronica Morgan: It's really interesting isn't it? Because there's so much conversation around there about a lack of stock at the moment and on the ground we feel it, but it's sorta hidden the real true stories hidden in a little way because like you say that you've got property, when you look at actually data that, uh, levels of, uh, should say, when you look at numbers that have sold. Yeah. This year versus last year, it's pretty standard. It's pretty stable in a lot of suburbs that I buy. So we buy in the inner city or in a ring of Sydney. Yes. It's actually quite stable. We go back, you know, for 12 months and we say, well, 12 months ago, pretty much the same amount of property sold and the 12 months part of that as his hold in the last 12 months. That's very common actually. And so that flies in the face of this perception of no stock.

Veronica Morgan: But then again, you've got this stock that's been sitting on the market for a long time and it takes them water absorb, it's still, the transactions is rather the same in many suburbs. But then you've got this all I highly idea of how many properties are going to auction and you see the auction numbers suburb on, you know, in many of these suburbs is a lot higher now than it was a year ago. Yes it is. So, yeah. So it's interesting. And what you talk about there is that sort of the absorption of stock into the market.

Louis C: I think the notion is changing. I think it was, it was a very fair comment aside suddenly MIGI is she, that we, we had very few listings in the market was, uh, it was, it was a very dry winter as it were for property, um, on our numbers and turns off those listings. It started to change, uh, in September, mind due October was a, an abnormal month. Uh, normally you see a rise in listings in October and we re registered a fall. But then the most recent month of November was a big surge in listings, um, and, uh, predominantly driven by newer stock. And so I think that's basically a reaction by sellers who are, how are now responding to the very strong market conditions in Sydney and in Melbourne. Uh, so we, in my opinion, we are now seeing a return to normal and turns of listing activity and sales activity in Sydney and Melbourne and that's likely to keep going throughout the course of 2020. I think. Uh, I think that we're going to see more sellers next year come along and, and selling in what is a good market to sell him.

Chris Bates: Yeah, it's very interesting. I mean on that kind of old stock, just kind of killing that. Um, Heidi, um, is, you know, I guess it's, why would that property sell? And the reason is it's generally there's something flawed about it. Like it's on a main road or it's a bad layout. A lot of the buyers just don't want it all over priced issues. What I was going to say or next is they just want too much for it.

Louis C: You know, that's the really the primary reason why stock doesn't sell is that it's overpriced. I mean, every property has its price. Even, even, uh, the really low quality properties, everything will sell. It's just a matter of what price does it actually sell for. Um, and that's why many vendors become on stock. They of course have a very, uh, bias view of what their property is worth, right. And, uh, you know, that's just human nature for you. Um, and uh, it, it takes some adjustment facilities if I really have, um, uh, listed their property well and truly above the Mark. And especially if the market's falling, it's going to be there for a very, very long time.

Chris Bates: And that's what I think I've seen is that the stuff that has been overpriced, you know, they've sat on their, maybe gone through two or three agents because the agents like calling, you're never going to sell this. You're not going to meet the market. Yes, I over promised you to get the listing because I said you want to? Yes. Now I know that you're not gonna, you're not gonna adjust to market conditions. I'm going to move on to someone else. But fortunately, I think a lot of these sellers of the market's moved, right? And so they're being overpriced now. The market's gone up and now they've sold because they've met the market because the market's going up. The market's finally caught up to them. Yeah, that's right.

New Speaker: Some of them still are outstripping the market.

Louis C: They're still out serving the market. And, and I think, uh, I, as you may be aware, we've got an asking prices index and that has surged in Sydney and Melbourne over the past 90 days. We're recording basically over 5% rises in that time. And it's telling me that your sellers are they moving their expectations upwards in a big way,

New Speaker: which is interesting because that in itself can, can slow things down, can't it? And you know, there's all these leavers that happen where, how do you get the asking prices data.

Louis C: We monitor all online real estate listings around the country.

New Speaker: So it says capturing um, uh, auction price guides as well as as they publish cause they're often not. So it's just what is published in that year.

Louis C: So the, the index itself does not put in an auction price guide. Uh, so we, we leave that at B auction turns into an private treaty at a later point and a flight put a price range on as a private treaty, we will then take lower point

Louis C: of the price range.

Veronica Morgan: How does that work though in say Sydney and Melbourne in particular, where you've got a very high proportion of properties going to auction?

Louis C: There is this perception that um, you know, what do we got as a high proportion? What if I said to you that auctions is a percentage of the overall market in Sydney is still less than 20%.

Veronica Morgan: And so the problem with that of course is that you've got like the inner markets behaving in a very different way to say the outer markets and there's different types of stock that's more likely to be taken to auction versus not taken to auction. So does that then skew the data in some way because you really representing a segment of the market, it's not truly representative of the entire market.

Louis C: It is true that the asking prices index doesn't represent the entire listings market. There's no question about that. But I would argue rather strongly, it's still represents a strong sample, a large sample of it. It is also true that uh, during times or of our burns, uh, less and less vendors actually put an asking price on. So generally speaking, the sample size at odd noticed iPad time generally ranges between 62 a bad ID, 5% of the market. I need stronger tines. That does fall towards that 60% in and out of time, wake times. You start seeing it more 85%. Now what we actually publish in terms of an asking price, it's not a straight out roll median asking price. So we put in certain techniques into the index to basically adjust, uh, to, to ensure that it's not skewed as much as it could be.

Louis C: Uh, so we use what's called as a stratification approach, which is one of the approaches at our my old company, Australian property monitors now known, it's generally domain users with their index, which is published by the reserve bank of Australia. And that generally helps minimize though it doesn't entirely eliminate, minimize this potential skewness that you can get where for example, in one period the medium prize could be skewed downwards because there's a whole bunch of properties at the lower end of the market. If suddenly salt only for the very next period where there's a whole bunch of properties at the upper end of the market selling. So a stratification approach or Piggly smooths that out, it can really minimize that to good effect that to keep that skewness out. But in saying all this, look, you know, that there is no perfect index out there. And fundamentally, the reason is, is because every property is unique. So when it stand right, it's not like the share market where you've got a standardized share. BHP share is a BHP ship. Right. Uh, but not every house is the same as every house. Yep. So interesting. that is correct. And so the challenge will always be there in turns of, um, trying to improve indexes further trying to get it right, but I don't think they'll ever be a perfect index because of this, this issue regarding unique.

Chris Bates: So I think, um, you know, one thing I was, I think interesting at the moment. I had a client, um, just this week and, uh, it's got a nice apartment in Potts point and, uh, you know, it's cracking apartment like it's on, you know, Victoria overlooking the city views quite a big two better parking lot. This thing should rent. It was renting for 1100 bucks a week, but now it's been on the market for seven weeks and she can't rent it. What's happening to student? Can't rent it or she can't rent it at 1100 a week. Uh, she's dropped it, brushing, dropped to 50 bucks, but it's not really a cent. He just stood. It'd be just what, so what was this again? Pots point. Once one. So and, and so you would say that, um, and A's targeting probably the high end market, but I just thought it was interesting. I chatted to her and I had my views on it. But what's your views around what's happening to the rental market in terms of the Sydney market? Obviously?

Louis C: Yes. Well in Sydney there's two contrasting markets right now. We've got a very strong sales market as you know, prices are rising and very few would disagree with that now. Uh, but on the other hand, a rental market, it's actually been weak for about the past two years. Um, and the reason why it has been wake as, because we had a surgeon supply of new dwellings from the last property boom. Indeed completion. So I'd just peaking now. Yeah, right. Just now. Yeah. And so, uh, you may will be aware, we've got a rental vacancy rates index. So at the moment our rental vacancy rates index Sinise is got a rate of 3.1%. It has been as high as effectively just over three and a half percent. And generally when you say rental vacancies with a three on it, it's generally a tenant's market and sure enough rents have been falling. So now asking rental indexes, uh, asking ransom, Sydney fallen over the past 12 months by some four and a half the st.

Chris Bates: um, and so, um, I keep going back to what I sometimes love about your research is that they go down to a suburb level and then you show the vacancy rates in some suburbs. Yeah. Can you explain some suburbs if, for example, in Sydney that you can recall where that vacancy rate is a lot more than 3%. Oh yes. Yes. So

Louis C: Juilliard out Sydney's Northwest right outside where at one point, uh, out in box Hill we were recording a vacancy rate of about 12%. Okay. Now this of course, if you know Boxhill it's been a, um, an area which has recently been opened up and subdivided to have housing estates all used to be, you know, uh, farmland paddocks, right. Um, and now it's all effectively to States like what you see in Rouse Hill and Kellyville so, so forth. So I effectively, in a relatively short space of time, we had a surge of new dwellings entering to the marketplace and this created a, a surge in rental vacancy rates because I went out all taken out and obviously not also to owner occupies, no, no, that's right. That would, many of them were bought out by investors who wanted to rent them out and see what's happening. You can almost consider that the city's Northwest or the Hills district has been the AP, the AP central, the Ivy supply and Sydney. Yes. But the oversupply has been that significant that it's spread out to outer suburbs. Uh, yeah, that's been a bit of a trickle effect. Um, that's, that's happened and say mascot and raspberry and that sort of parameter as well. That, that is correct. Uh, but in terms of the absolute count of dwellings entering into the marketplace, it's been Sydney's Northwest. We've seen the bulk of dwellings, new dwellings come in.

Veronica Morgan: So how long would you say it takes for that to be absorbed into the general market?

Louis C: Well, that depends on the population growth rate. So in Sydney it's been running fairly strongly. it's currently running out about 1.7% a year, which represents Sydney effectively expanding by about a hundred thousand people each and every year. So presuming at that population growth rate keeps going, um, it is very likely we will see this stock finally being absorbed somewhere around 2021 2022.

Chris Bates: My worry with that is I just saw in the, um, and enemies you can get your thoughts on how your view, how you've kind of been able to, honestly, you have to keep trying to do new data comes in, things are always changing. Unpredictable things happen and we have to keep shifting. So we're interesting to talk straight. Yeah, yeah. You've seen the boom and the Boston. How things have changed are dramatic. But what I think the speed of their recovery over the last six months because of the opera and the interest rate cuts, um, and the lending becoming much easier to get access to rather than the Royal commission has been extremely fast. And what developers are now saying, well we can now start selling these things again. And so why you say that stock's going to get absorbed? I was, you know, starting to read that house on the in package is starting to kind of start heating the market again because developers know they can start shifting them because there's demand again.

Louis C: Well they're dead. That's our existing stock that they've got on their books.

Chris Bates: No, like as in new farms transacting with the idea that we're going to turn it,

Louis C: can we going to turn it so they may will be starting to buy more? Well, I'm an,

Veronica Morgan: it takes a long time. It's a long lead time on that though. And that's one of these, I was talking to a, um, an urban planning yesterday around that as, as, uh, that, you know, he's riding with a whole bunch of developers and everything's slowed right down in terms of construction costs. We're talking more apartments there, but there's the subdivision, it's not a quick process and they've got to, you know, buy the land on the land, you know, go through all their de da processes, development processes, et cetera, et cetera. It's quite a long lead time.

Louis C: in a land that hasn't been rezoned yet. So if they buying a land, so I was still designed for farming, they're taking a risk and that takes a lot longer again to do it. Sorry, some of these developers may well be having like a five to 10 year view, buying now with a view of let's hold, let's get this process going. Um, and in, you know, in five years time the market will suddenly be different and then we can, we can release.

Chris Bates: Yeah. It's funny cause I, I just, you know when in the boom like it was pretty crazy and you're flipping open the pages in the property section you would see in a Chinese company or whoever it was, even Stockland it will be lots of big and they're spending 150 million for these farm. That's 45 K sure. In Melbourne CBD and it was kind of like this height of optimism where even the developers were starting to you know, fall for it because they thought the party would go on forever. And I just thought it interesting is that those sales weren't happening and now that all of a sudden they're starting to pop up again.

Louis C: The thing is I would say to that is look, have a good look at the building approval numbers, release body, Australian Bureau of statistics now they only, it was a couple of weeks ago, there were at least the numbers for October and that October eight re registered an 8% decline in one month for building approvals, which is part of a downward train where building approvals in new South Wales are well off by over 30% now the thing I have some real concerns about fall of greater economy is we've got a situation right now where completions as I mentioned before, a peaking in use of Wales now from the last boom that they're peaking now. When we look at the step downwards side a pipeline, we've got commencements well and truly below completions and in building approvals, which is a first stage well and truly below commencements. Yep. Now what this means is this, you're a library.

Louis C: Let's say you're a build is Libre, right? You've been working on these projects. Projects now are completed. Normally you move onto the next one, right? Well, here's the issue. There's no next one coming. Art is this less commencements out there. This means job losses. Okay. Uh, and if you look at the recent unemployment numbers, unemployment is actually rising. We actually had the last month a negative job creation, which is alarming. Giving our very strong population growth rates we've got in this country, right? We should be at least creating jobs all the time given that population growth rate, but we're not right now. So what this means is that this is a rather negative for the economy and it's something that, uh, the pals of Bay are going to be grappling with in 2020 and potentially could create some shortness on this current cycle. There is a scenario that could play out he way the economy tanks, you're not going to see very strong house price growth. That's a short

Chris Bates: no, that's right. I think you're right as all the, it's, it's, you know, if you're looking at these numbers, I do as well. Look at the, you know, the what's coming in terms of the housing market and you just think, you know, that's a lot of jobs. I think it's like 9% of the economy's employed in construction. So it's huge numbers. The reality is they've also, you'd say Australia hasn't been having wage growth. That's probably the whole market, the construction industry is having, has had big wage growth as well, so that they're actually on high paying jobs. A lot of them. So it's not only you're losing your job, but you're losing a lot of people earning good money who was spending money. That's right. Yeah. Okay. So over the last few years, um, Oh, you would have to say that, uh, lots of things have been unpredictable, but every year I'm predictable, but, Oh, what, how do you, how has your view kind of, let's say when you were thinking 2017 you know, your forecast, what was going to happen in 2018 and then in 2018 what you thought was going to happen in 2019 have you felt like things have kind of progressed and what you expected to happen and what did happen?

Louis C: You know, I think one of the developments, um, in the property market that's changed in of my time. Um, one of the major ones is actually the intervention by regulatory authorities in the marketplace. And when I say to, I'm really thinking of apparati Australian Prudential regulation authority, uh, so they started stepping in and having an influence on the market really from about 2015. Their view was that risks were building in the market at the time and that they needed to basically contain credit growth. Uh, and between the period 2015 to 2017, they started ratcheting up their restrictions. And then in 2017, um, they, they input on the big final restriction was, uh, restrictions on interest only lending. And that actually turned out to have a really large impact upon the market. I think it was a combination of factors, but that was like the straw that broke the camel's back in, in 2017.

Louis C: And, uh, that definitely triggered the downturn that we had. Now our forecast in 2018 one, which we actually didn't do so well, it's one year. We, we generally didn't do Wells because we underestimated that impact upon the market. We forecasted I slowed down for that year for 2018. And as we know, we actually had fourth falls in Sydney and Melbourne out of cities. We generally did but the two big ones, I get all the headlines. We didn't do so well on the year, um, 2019 this year. So I gave myself basically a three out of 10 for forecasting for that year. I initiated, I'm giving myself a six out of 10. Um, and uh, we did well last year to having one of our, uh, scenarios are, uh, which was regarded at the time. It's very unlikely our liberal victory and what that would actually mean for the market.

Louis C: So the scenario was if the libs were to win, the market would bottom out and we would see a recovery in a second half of the year. Yeah, of course. What actually played out was yester libs did win, but on top of that we had Ray cuts. We had our primary versing courts, we had tax cuts. Yep. And so not only did we have a recovery, we had a V-shaped recovery where the market's gone as we all know now in Sydney or Melbourne from Buster boom. In a very short space of time. Yeah.

Chris Bates: It's a really, I think what also played into that was the market went further down than it probably would add because people were so concerned that labor were gonna win the election. And so, you know, the bounce back was even further because they were so certain that labor.

Louis C: America was absolutely surprised by the election results and on our indexes. A market literally bottomed out the week after the election. Um, so it, it goes to show that, you know, how much that was weighing on the market. Uh, so, uh, yeah, so it was a, uh, an interesting time for forecasting, but more to the point, one of the things that, uh, concerns me, I guess going forward is how much influence and how much power has become concentrated by so few people in terms of their influence on the market.

Veronica Morgan: Cause it's not a free market anymore is it?

Louis C: Or you know, when I first entered into this game many years ago and know entering this gang was simply doing property data and putting index, it's again, that started to morph into sort of people asking what I thought the market might do. Um, I used to just focus on what interest rates may, will do, what the exchange rate may, will do, what the GDP numbers are, what the employment numbers are.

Louis C: Um, and nowadays I've got to think about what, um, Alvarez chairman is sinking. What his mindset right now. What's the RBI governor's mindset? What's the relationship between Scott Morrison, Wayne boroughs, uh, and uh, governor Lowe. Hell, how did they get on what's going on there between them? Because they, between the three of them, they have a massive influence upon the direction of the market.

Chris Bates: My view is they're probably not getting along rock cause they're all throwing each other under the bus.

Louis C: It's, it's interesting. Well that's, yeah. I mean on the greater economy, you've got the RBA Bay, basically making noises at the federal government should be doing more on the fiscal side. Uh, but I, I do note the change in opera's view of the world because it went from, okay, we got to minimize risks in the banking sector. We got to slow down credit growth and then all of a sudden they turned around at the height of the downturn and say, all those risks is gone. Now you know, everything's great. We're going to now loosen things up. Yes. Um, and it's interesting isn't it? It is. It is a procedure. And you know, the other background behind us as well as, uh, Scott Morrison is a big property guy. That's been his background. He used to hit up a research and policy eyebrow at the property council of Australia. It's not a question. He's a property guy.

Chris Bates: interesting. And he loves his footie.

Veronica Morgan: So the elephant in the room is 100% for you. The reason that Chris and I do these podcasts 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 Bates: 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 Morgan: Give us a review on iTunes. Five-star 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 Bates: What's your view on appro? You know, you say loosening the market. I was a bit shocked cause I expected rate cuts. I think everyone knew that the world's in low interest rates, you know, economy's installing a little bit. The logical next thing to do is to cut rates, you know? And so rate cuts were kind of already, you know, bill Evans was talking about, everyone was talking about rate cuts, but appar dropping their servicing rate from 7% or 7.25 down to and the banks using 5.3 now. Yeah, that's right. Like this. It's a massive change. Were you expecting that or did you think that they would just hold their position and say, well, let's just think about the broader economy here. Let's not try to kick off house prices again. Yes.

Louis C: So the I far, I've have been surprised by the turnaround in, in operas view of the world. It's almost like they've done a back flip.

Veronica Morgan: It is, it's a reversal. Yeah. It's not, yeah. Um, admission though. Do you think that, that they over overstepped the Mark

Louis C: potentially, or is it that someone's leaning on them?

Veronica Morgan: let's say you're a conspiracy theorist as well.

Louis C: Well, I don't know. This is, this is the, I have to consider all these factors. It's fine. I'm trying to, I'm trying to work this out. I don't know for sure. I know the chairman of app RA is, um, brains and Scott Morrison. I'm not writing any more into that than what it is. Right. But that, from my understanding is true. Uh, and so, you know, it just goes back to in terms of forecasting, it becomes even more complex and more challenging when I'm trying to have to think about what's the mindset of these particular key people.

Veronica Morgan: This is really great elephant in the room stuff. Thank you very much.

Chris Bates: I'm on Louis side here. I think that is definitely, I think it's what I see is the conspiracy theorists reality is property is which is Louise already spoken about, um, is such a big part of the economy and new construction. Um, is that even be a part of the economy because of all the money they make on taxes and land releases, et cetera, et cetera, so to speak.

Louis C: But here's the issue we've got now. So we've got a housing recovery in Sydney, Melbourne to a lesser extent Brisbane, but it seems to be based on what we've just discussed before, it's a jobless housing recalibrate. So yep, we're getting high house prices. Is that really going to translate to greater confidence in the economy as what the authorities are currently hoping for now? And I've got some questions about that.

Veronica Morgan: Real estate agents stay in work?

Chris Bates: Well, one indicator proving your point is um, so one of the things we would usually do if we get lower rates, um, is what they hope we do is we go and spend it. But reality is if you speak to any of the banks and what I see is people are paying off their mortgages faster. Um, rather than seeing lower rates is a good thing. We go spend more money. So consumers are stimulating our economy spending, they're just trying to save. So then being more conservative.

Veronica Morgan: I was actually talking to someone the other day just on this here we talk about retail figures cause that's obviously something that that comes out. And um, you know, and I was, like I said, I don't think too much about that per se. I know that confidence in terms of, you know, the wealth effect and obviously if we're confident in the value of our property, it's not going down. We more likely to go out there and spend money and in shops or on white goods and housing improvements, all that sort of stuff. So I know it's all linked. And I know that that bricks and mortar retail as being falling, you know, and uh, and, and I've always just thought, Oh well that's because it's been replaced by online. Well, I was talking to somebody who's in the online space. It was basically saying that online retail is also falling.

Louis C: Yes, that's right. So it's on retail all sides. It's, there is a component which has been a structural change from people buying the shops versus buying online. But there's also been a cyclical element as well in the sense that yes, even online retail has been fulling, which signifies that look, there has been weakness in the economy. Uh, I suspect in all this what's been going on as, okay, while we don't have real on underlying flushing occurring in economy, we've got asset price inflation occurring.

Veronica Morgan: And is that a lot driven because of low interest rates?

Louis C: Yes. Low interest rates. Uh, the fear of missing out, the fear of if I do not buy a hone now, no matter what it takes and turns or taking out that mortgage, I am going to miss out on buying that home in the future, will not get as good a home or might not be able to buy a home at all. Yeah. And so every on Paul's into buying a home or you know, an asset, um, but in terms of, uh, what is left over for their discretionary income after I have to pay off each. Yeah. Um, monthly mortgage, which represents an ever increasing component of the income. There isn't that much leftover. Uh, and so this is the issue. So what did, how did I respond to this? Of course, as women, we have a huge mortgage debt. They want to pay that down as quickly as possible.

Chris Bates: Yeah, that's true. Yup.

Louis C: Uh, so this is, this is the issue we've got. Um, it's, it's, um, being, building up over a long period of time. Uh, we know private debt levels are quite high in this country compared to other countries. Uh, fortunately governor debt levels are relatively low compared to other countries. So, and it's so, it's not just an Australian phenomenon, it's a bit of a worldwide phenomenon.

Chris Bates: It's interesting you say, because we've got Australia's very heavily dominated to investing in property, then the other asset classes. And so even when we do well property, we pay that mortgage off, we build equity, some points we sell it. And then human nature is just mental accounting. We take that profit, we go to the bank and borrow more money, and then we buy a bigger property. So we, we don't ever take those profits and then go spend them in the economy. So all we're doing is just reinvesting the profits back into property and not spending the money, which is what drives the economy. So it's a great, what are some of the things I sometimes wake up in the middle of the night, which I did last night. Um, and thinking about things. What are some of the things you wake up in the middle of the night thinking about in terms of the property market that you know, keep you up?

Louis C: Oh, look, God, I'm, I'm, I, I, yeah, I, I'm generally reasonably good. I'm trying to separate my professional life to my personal life, um, except when I go on Twitter of course. But, um, look, um, yeah. Uh, I often wonder whether is there an endgame to all this? You know, uh, I call some of the housing bears would believe that. Look, you know, the great crash is just around the corner and look in truth, they don't have much of a great track record. They've been saying this for many, many years is 40% comes from the, keeps coming just keeps coming back. That's, that's, that's true. I mean, I'd first heard of back in 2008. Um, and of course the truth is that if the market were to fall 40% now, we'd be still well and truly above those 2008 levels. Right. Um, it's a matter of how far can the authorities that be, how far can I kick the can down the road?

Louis C: Can the world and our country get out of this increasing debt cycle riddle relative to incomes? What is it going to take to do that? What does this mean? Is it going to be a very painful affair where we muddle through it over a long period of time? How's it all going to play out? And I don't think anyone really knows. The answer is there's, we're in unchartered waters when it comes to this issue. Um, and, and you know, I find that concerning. I also find it concerning for my children's future in terms of their ability to buy a home. Yup. Um, and you know what that means, but at the same time, um, we, you know, did this whole issue that we've got in terms of overvalued markets, which I believe Sydney and Melbourne are definitely, I've a valued markets now, despite the correction that we had when we consider out of good cities in this country.

Louis C: Um, they do know they do not have such problems. Uh, you know, Brisbane is actually very close to fair valuation right now. Yup. Perth is well and truly undervalued. Adelaide is undervalued. Hobart's probably looking a bit toppy right now. Canberra is just a bit over valued, but it's not too bad. Uh, so, you know, why are we having this situation and why is the topic always on Sydney and Melbourne? Yeah, I mean, I know it's our two largest capital cities, but let's consider that as well that there are other cities here which are doing okay, which offer a good standard of living.

Veronica Morgan: This is interesting too, because like, you know, so well you've got these, you know, the regulatory powers government, however, everything they do affects the nation as a whole. We keep talking about Sydney and Melbourne booming and busting. Um, and you've mentioned, you know, like we're overpriced. Sydney, Melbourne, Brisbane is right on the money. Perth, Adelaide, under price. Would you save about camera? Um, how do you determine what's on the money and what,

Louis C: what's, what's I the value? Okay. So one of the valuation metrics that I like to use, because I've found it has been a reliable indicator in the past, is looking at total dwelling prizes to total incomes represented by nominal GDP, the national level, uh, and or state underlying demand, right? And so, um, the view is that, uh, housing prices compared to incomes cannot accelerate iron above incomes for Reva. Sooner or later. There has to be some type of reversion point. Otherwise, uh, housing prices become unaffordable for everyone and no one can get in, right? That's right. And the history does show that there we do have these revert to means revert to fair values based on this metric. So Sydney last had this back in 2011, uh, way the market had a correction. It was all part of a, a longer period of price stagnation.

Louis C: It really started from 2004 all the way through to 2011. And funnily enough on our numbers that actually brought Sydney back to fee value. Well, some of the best valuation points that I had actually ever seen since the 1980s. Um, and sure enough, uh, the, uh, when we had some rate cuts, uh, in 2012, it started to fire up the market combined with the fact that Sydney's population growth rate actually started to accelerate at that time. And I think this is the thing was Sydney and iron above the attic capital cities is that Sydney and Melbourne are experiencing the easy credit conditions we're getting right now. Same with the other cities, but the other cities are not getting this very strong population growth rates coming through. And the reason why Sydney and Melbourne get these really extraordinarily strong growth rates, I mean Melbourne's growing at two and a half percent per annum right now. It would have to be the fastest growing city will widen if you looked at developed cities. So, um, is that okay? That creates very strong underlying demand. You combine it with easy credit and sure enough you get big price rises.

Chris Bates: Yeah, I mean I, I, I think that under Weber's is over though. But if you use that same methodology, there's lots of countries, lots of capital cities and global cities around the world that would be ridiculously overvalued. The reason is, I believe is, well, one, you're Christopher joys who would love to get on this podcast, but he just keeps on saying, yeah, maybe, but he uses a very interesting thing where, you know, if you then add in interest rates into that, you know, 10 times salary on interest rates of 70% is just not going to happen. But you know, 10 times salary, the interest rates at two and a half percent, you know, it's doesn't, it's not that bad, right? Because you can afford the monthly repayment. The other thing is that the total value of property, a big portion of properties are paid off.

Chris Bates: So they're not transaction, they're a store of wealth. And, um, it doesn't matter whether they're affordable or not because they're just profits. They're just profit retained profits in the company. And so a lot of the housing market, let's say is worth $7 trillion. Only $2 trillion of that is actually mortgages. So that's the stuff that people have to, that's the people who are borrowing. So $5 trillion is kind of just retained profits in the market. Do you want, I mean, so it's like, yeah, it's the, what's a F like, and when people are going to PR, somebody will say to me, Oh, well, how's someone affording her a three, $4 million house? Well, how are they getting a mortgage for that? Well, the truth is they're not, they're actually going in there with two, $3 million of cash and borrowing one or two, and at the higher end of the market, they're borrowing less because they're genuinely re-investing or got profits from some things. So it's that middle market that wanted to where they're borrowing the highest percentages. But it's, and I think that's, that's why prices keep going up is because it's not based on income. It's based on what people have.

Louis C: It's based on service ability. Um, it's, yes, it's, it's true that, you know, if you, um, lower interest rates and enough serviceability, w will improve. But if the outcome is that, um, we take out more and more debt because debt is cheaper, which pushes up prices, your underlying affordability is becoming quite atrocious. Mm Hmm. Um, and, um, the, the risks start to increase. If we were to have, so on top of my major credit contraction of veins, um, this would be a pretty devastating for our economy. Um, because housing is tied to the hit with the economy and everyone's taking up mega amounts of debt compared to their incomes. Um, so Chris has rod to uh, point out that yes, serviceability is still okay because of all these rate cuts, but I, I am personally concerned about what, what it means longterm for the amount of debt in the system. Yeah. And the risks are there for that. That kind of negative credit event. And w w we've seen a touch of this, I'm an old apprehend to do was just put on some restrictions in terms of interest only lending service ability buffers and what do we have? We had a pretty big correction. We had a 15% decline in Sydney and it just goes to show how sensitive the market is to credit.

Veronica Morgan: True. Although let's pull that apart a little bit because you've got one of the big issues with the boom was the sheer volume of investor, um, borrowing or people borrowing to buy investment properties versus their own home. And so I can't pull the figures off the top of my head. You might be able to, but I'm 50%, which is out of balance, out of whack. And obviously looking at increasing the interest rates on investment loans, um, you know, resist a reducing interest in lending sector is pretty much more targeted at the investor end of the spectrum. And that had to happen. And so anecdotally, you know, talking to agents out there and they to be saying in some areas we were selling like 90% of our stock to investors and now we're selling five. Yeah. So when you see that massive decline, that's one of the, one of the things too in terms of the investors just evacuated the market.

Veronica Morgan: Now what we're seeing is invested numbers. A star or investor borrowing is starting to slowly increase. Yes. Um, but it's certainly had no any that level and it's certainly the investors aren't reentering the market at the speed to match the bounce back. Um, and so I'm looking at this thinking, okay, well I know that I knew occupies anecdotally as well cause I don't have the ACMA access to macro data, but we want to think how, how deep is this pool? So I know anecdotally spoke to a lot of owner occupies, you bailed the property market in the last two years of the boom. So sort of 16, 17 hour out. So you've got maybe two years where the pent up demand from them, then you've got another two years because nobody was doing anything. So in the downturn, so it all sitting on their hands waiting for things to change. So you've got potentially four years of pent up demand from owner occupiers so that the demands or the behavior around and what's happening in the marketplace now is quite different then to what was actually happening to in the last two years of the boom. You know what I mean? Because the players are different. Yes, that's true. That is true. And then on top of that we're going to likely have in Sydney, and to a lesser extent in

Louis C: Melbourne, I shortage of accommodation relative to the population we've just talked about, the fact we've got a current Ivan supply, but we've gone through the fact that that's going to be absorbed fairly quickly. I haven't an two years. Uh, so yes, I think, um, one element it's so far in this recovery is there has not been a lot of investor activity, but it is likely that investors will start coming into the market in Sydney and Melbourne at a Rite of nots. Um, over the course of 2020 and maybe 2021. We'll see. Um, you know, one of the things that's going on in the market, just going back to this notion of serviceability and very low rates, is that if you compare the current gross rental yields of a number of capital cities, um, versus a lending rate, we're now seeing the majority of capital cities offering cashflow positive properties.

Louis C: When you take into account these two different, uh, rights that are out there. Uh, so you know, for example in Brisbane, uh, you could buy a unit fairly easily enough on a gross rental yield of, of probably just under 5%. Yep. Okay. And if you can borrow the money in the low threes, you're doing pretty good. You've got a cash flow positive property there. Uh, and that's in the capital city of Brisbane. Okay. So this is the first value, but you know, yeah. Well that's it. But, but the thing is your point's the same. Yeah. The thing is that, uh, it's the first time I've seen in my career so many capital cities offering cashflow positive properties and if they were to cut rates into this, then that gap even widens further. And I, I think investors will eventually respond.

Chris Bates: Well, I think that's bang on. I um, cause I've been watching as a broker watch mortgage rates. Um, and there was a mass, you know, always to be one rate. Then the, uh, Apple came to the banks and said, look, you've got to charge more to investors. Troffer was not pretty fair. If that makes owner occupy rates cheaper overall, then you know, the investors can deal with that, uh, you know, interest only versus paying eyeball. I think, you know, probably maybe you should charge interest on and a little bit more to kind of disincentive for people not the overleveraging. Um, but that gap went out quite big and now it's almost becoming the same. So we can get this like five year fixed rate investor loans, like five years interest only under three and a half percent. And so you're talking about owner occupied P and I rate 3.1 roughly. So you know, 30, 40 basis points for the next. And so you're going to be right. Like a lot of investors are saying, well I can buy a good property, maybe not an apartment in Brisbane. I'll say park that one, but maybe more of a house in Brisbane, you know, on yields of low fours. And why don't we buy that because it's going to be cashflow neutral. And as soon as you get the spruikers we'll be back for a cup of coffee or week, year two, you can be a property investor.

Louis C: Yeah, there there is. Um, there is definitely an element of that. Uh, we, I think, uh, well as I said before, I think investors are going to respond, especially once I start, well now we're seeing the price rises. I think it's, it's, yeah, we're going to sit in 2020 for sure. Unless of course we'd see regulated stops jumps in again and tries to stop it. Oh, shape.

Chris Bates: Essentially you say that around about they want to see price rises because that's exactly what investors want to do. They don't, um, you know, they only want any investment. Other people are invested in.

Louis C: They've generally been my, you know, investors are generally momentum operators. They want to buy when the market's going up and they want to sell stay well and truly why when the market's going,

Veronica Morgan: growing them investors is really the wrong word, isn't it? They, they like to see themselves as investors, but they're not really investing. Um, you did talk, you mentioned early on we talked about, you know, what's the element? So what do you look at when you're forecasting and you did talk about longterm fundamentals. What are the things that you look for for the long term?

Louis C: Well, it, it, it does population growth rates are a major factor. Um, no question. So I, I generally like to that, that forms a fairly large component, uh, because, uh, of course it manifests itself in terms of a calculation of underlying demand for real estate. So that's probably one of the biggest factors that I take into account long term. Um, medium term, definitely. Uh, GDP numbers, what the economy is doing, employment growth is another factor that I like to take into account. I also attend to take into account what is in the pipeline in terms of infrastructure activity and this matters most particularly for say the mining related towns. Yeah. Um, so, you know, we, we, we attempt to take that into account as well, but yet a longterm factors are generally full for me. Uh, the population rights in, in, in income through the, the, the overall economy.

Louis C: Yeah. Yeah. The infrastructure is a big one now, right off through the state government trying to spend as much money as they can. They're trying to bring that infrastructure spin forward. And this is one of the responses from the government and the authorities and turns of the job losses occurring in housing construction. But um, if it feels like they're going to be a bit late to the party and I, I, I question whether we're going to see it.

Chris Bates: Yeah. I mean you, you can't offset, uh, you know, big beef and a Tam doing hundreds of thousands of dwellings with a couple of roads. Um, yeah, not really an ad. Maybe a tunnel that's going to be built over 10 years, like manpower required. Yeah, that's right. So I agree with you. It's not going to be anywhere near as offsetting and they might be able to build it cheaper. They, because their labor are very big and.

Louis C: we might see a mining investment recovery in 2020 and 2021. So perhaps a combination of the infrastructure spin coming forward plus a pick up a mining my do a better offset. Yeah, I think the reserve bank is certainly hoping that that's going happen.

Chris Bates: It depends what these activists get through without a Dani mind. But believe that one 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 a whole lot of stress mistakes that can be avoided. Please, Louie, can you give me an example of a property Dumbo? We can all learn what not to do from these stories.

Louis C: You know, what can I share with you? An early experience of mine, which actually got me into this game to begin with. The amazing thank you. All right. All right. So, um, uh, just some share some personal stuff with you. I'm actually an orphan. All right. My grandparents raised me in the 1980s. My, uh, my grandfather passed away and I was just living with my grandmother. We had an investment property on the gold coast that my grandfather bought. My grandmother, uh, wanted to sell assets, so she had some cash. She was retired. There was no income coming in, so she attempted to sell this apartment and, um, something very dodgy happens through that whole transaction. The property manager was in a service apartment on the gold coast. Uh, she couldn't sell. It's, uh, easily enough. The property manager, I eventually found a mate of his to buy it. I put lots of pressure on my grandmother to sell and, um, basically sold it at what I estimate now to be looking at the data at the time at about 40% below where the market was.

Louis C: Right. And, uh, we knew it was bad at the time my grandma was getting on a bit, so perhaps she just was feeling a bit panicky about the whole situation, just did it. That spurred me on to get SQN research going over the longterm and just screwed me on to get more information out there. So people want to get sucked in, they want to get Jutes. And I have had a great passionate belief in terms of trying to provide good, transparent information out there. And I know there is an issue right now where we've got lots of conflicting information. It's difficult again for home buyers, but I strongly recommend people still seek information, the data and go off what perhaps are, you know, um, what I spruik EMA will tell you for like a Biddle woods, okay. That they do their own research and that doesn't mean, you know, I want them to come to my website. Yes. How to come to my website. They can go elsewhere. They want, they can rely on the government data, like get yourself tooled up with the information so you don't get burnt because it can, uh, you know, has significant consequences. He be, gets a property transaction. Rome.

Chris Bates: I mean, that's very, that's, I love people's wives. Uh, and so that's a very strong why on what got you into it. And it will last you for obviously your whole career cause you know, is, uh, it is a big issue, right? Where people, um, you know, there's misinformation and if you trust the wrong people and problem with properties unregulated. So no wonder you can't go back and say, the real estate agent told me this or that. Spruiker told me that. And you know, and so I think you're right due diligence. That's the whole purpose of this podcast is to great compromise, uh, information. People can rock

Veronica Morgan: correct confirmation bias and that's our 40 in sleep. But it's absolutely not the purpose of this podcast. Yeah. Thank you so much Louis. You know, you actually nailed it. That is exactly what the point of this podcast is. We're all on the same page here, which is fantastic. Your, the insights that you've given us has been fantastic. We really, really appreciated that, particularly that going into the psyche of who the big players are and who's making decisions and what are they thinking, you know? So that was a great insight and really appreciate your time.

Louis C: No, thank you.

Chris Bates: And I may just, before we finally wrap up, obviously you've got your boom and bust report yes. Which we'll put the links, put the link in for that. And I think, um, just a quick overview. You know, I know we've got listeners all over the country, but let's just go for the big two. You know, the big beasts. What do you think in terms of Sydney, Melbourne, it's basically, let's call it Christmas now. What do you reckon, uh, you know, the medium price growth over the next 12 months? So you had to pick one, sorry.

Louis C: Well, the forecast is at our base case scenario that we put our head on is that a Sydney will rise between 10 to 14% for 20, 20 and Melbourne 11 to 15%. Uh, so, uh, and we're also forecasting the peripheral finally record some price increases, um, in 2020. Uh, and if I recall a numbers, I think we had Brisbane down by pre-training, four to 7%. Uh, so, uh, yeah, big price gains, a forecast, sorry, increase it or we create it on your list to increase increase. Just to be clear. Thank you.

Chris Bates: So for our listeners there, you know, you know, double digit price growth in Sydney, Melbourne, um, you know, based on a lot of those things we discussed, um, you're not the only one starting to say that. Oh, right. I you like it. You'll probably one of the first probably putting your hat on it, but I think a lot in the last couple of weeks of, you know, CBA and a few other people have started to also say that they're thinking the same thing.

Louis C: Well, yes. Uh, I made the, the reality is right now as we speak on an annualized basis, Sydney or Melbourne are doing these numbers as we speak. Yeah. Um, but that's, that's the reality.

Chris Bates: But actually doing it for doing it for an annual period rather than a month or a day that I'm starting to see. Um, yeah, it's, it's bit different story.

Louis C: It isn't, it's a different story. Um, so some of the assumptions were w w we're working on would be our forecast next year is that appro will not step into the market, so I'll, I'll stay away. Um, so, uh, we spent a lot of, I spent a lot of time looking into what appro may or may not do. Uh, and my conclusion was based on their communications was a day will stay out of the next year. Um, it also assumes that a right interest rates will actually stay stable, that we will not actually see another rate cat. Now we were to see another ride cat that could actually inflame the market further. If, on the other hand, uh, we were to see situation where the reserve bank panicked because the economy is tanking and they were rude to reduce rates to zero and stop quantitative easing. Well, we actually forecasted it. What we would see in the second half of the year would be that prices could start to fall again despite those cuts because the economy, uh, will be in such a state. Uh, so we're hoping that that doesn't, that doesn't play out because I was old enough to see what the last recession his country looked like and it was a pretty terrible fade. Um, so we, we don't want to see that, um,

Chris Bates: in there about the Westpac, the ACIC case. Um, I mean this is something that we thought we was resolved, um, main astic this week, which is, you know, December. So this will be your release in January next month. So February, um, ASIC and Westpac are back in court. Um, and you know, ACIC you've already released guidelines this week saying that, you know, lending needs to look at actual living expenses for home loan applications. Um, and you know, it is a bit of a war that was happened all through 2019. If ASIC are successful in that appeal, we'll probably send shockwaves across the whole lending industry because it'll go back to like it was in the rock ignition. Have you forecasted that? Are you including that into your data?

Louis C: I have assumed, uh, that ACIC why when the case? Yup. Right. And that the wheel will not see a major restriction of lending occur again. Okay. For 2020. So potentially if ASIC way to win the case and, and I don't think it could be any further appeals on it. Um, then, uh, you would see potentially in the second half of the year banks scrambling to putting more restrictions, which could be a damp now on the market. So that, that is the, the potential, um, uh, let's see how applies out. Uh, of course, uh, very, very interesting times. Uh, assets on, on these funds. Haven't had a great track record of victories in the S in the courts. So we'll see what happens.

Veronica Morgan: Yeah, that's right. Well, thank you for that. Thank you Louie. That's great. Appreciate that. Thank you.

Chris Bates: We want to make you a better elephant rider. And this week's elephant rider training is,

Veronica Morgan: you know what's always interesting when we interview these sort of brains like Louise, right? I mean he was great because he did talk about all of those big macro data and the things that happen, the big end of town for argument's sake, that do ultimately trickle down and factor into what the market does, what prices do, et cetera, et cetera, et cetera. But you know, fundamentally said what it comes down to is that no two properties are alike and there's differences and then there's human behavior and there's all of that that goes on. And I think that that as property buyers, we always need to remember, and I guess it's the premise of this whole podcast is that humans are guided by the elephant more than we go out of buy the little rider on top. So this bootcamp is, you know, once again being the rider on top is understanding that you know, humans respond and react to all the big stuff that happens, but they respond and react on individual basis to individual properties in individual situations.

Veronica Morgan: So it's to I guess have that clarity is just a reminder to have clarity around looking for property that is scarce, looking at quality property, reminding yourself that if you buy a property, it is a longterm commitment. All of that stuff I guess is a bit airy fairy. This bootcamp, it's not as practical as a lot of the other ones, but it's just an absolute reminder that all this stuff goes on. We still have to make clear decisions for ourselves. So therefore we need to be focused on what we need. We need to be focused on what we can borrow, what we can afford, we need to be aware of what's going on in the market and not be dragged along by FOMO and, and, and, and all that sort of stuff. We fundamentally have to make a decision about our own requirements and choose the property that suits those requirements.

Veronica Morgan: And be very clear and deliberate and intentional in the way in which we go ahead buying property. I think that's really the boot camp for this one.

Chris Bates: Yeah, I think timing Marcus is just really tough. Um, and so if you're constantly looking at, you know, the optimal point to enter, um, and you know, trying to invest in time things with based on all this information, it's always changing. It's always shifting and so you just never really know. But the good thing is once you buy pro, you know, bought a good property is you don't actually have to sell it. You just ride the wave right? And the less you actually transact, generally the better if you bought a good property. So you know you can basically switch off. So it's kinda like just getting, get a quality asset if it's the right thing to do obviously. And then all this other stuff don't really worry about it cause noise, just noise. Just just kind of worry about the other things more important. I become listening to podcasts all the time. Like us.

Veronica Morgan: You can still listen if you find it entertaining. Join us for our next episode when we have a return visit from strata lawyer, Amanda Farmer. Now the reason that I asked her to come back on the podcast was because we had dinner one night and she said something very interesting to me about the liability and obligation of strata owners, something that I didn't know and something that I'm guaranteeing 99.9% of strata owners don't know and they should say tune in if you want to find out what that is.

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

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

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

Veronica Morgan: The elephant in the room property podcast is recorded at the Sydney sound brewery. This week's podcast was recorded by John risk editorial by Gordie Fletcher.

Chris Bates: Until next week, don't be a Dumbo

Veronica Morgan: 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.