Episode 154 | Will Perth make a comeback and return on investments? | Damian Collins, Momentum Wealth

What makes Perth different to other capital cities and will make a comeback?
Speaking to Damian Collins, a well respected and experienced property expert on the current state and the future of the Perth property market. Damian is the founder and managing director of Momentum Wealth and has served on the REIWA Council since 2011 and was elected president of the institute in 2018. In this episode we ask the questions: will those who invested in the boom see a ROI? Will Perth be the next hotspot and will it be able to contend with other capital cities?

Here’s what we covered:

• Why has Perth performed so poorly compared to other capital cities?

• What parts of Perth have stayed strong and grown in value?

• Did the top end of the market struggle to move the high quality properties?

• Where is the growth in the Perth market coming from?

• What is Perth doing to get rid of their oversupply

• Were grade A properties having a hard time to sell or were they always flying off?

• How many new builds are being built every year?

• How will the Perth property market change because of Covid?

• Is the market owner-occupied dominated or investor dominated?

• How has the rental stock been affected?

• What types of clients are developing or in syndications

RELEVANT EPISODES:
Suburb Trends October 2020
Episode 143 | Martin North
Episode 133 | Alice Stolz

GUEST LINKS:
Momentum Wealth

HOST LINKS:
Looking for a Sydney Buyers Agent? www.gooddeeds.com.au
Work with Veronica: https://linktr.ee/veronicamorgan

Looking for a Mortgage Broker? www.wealthful.com.au
Work with Chris: hello@wealthful.com.au 

Send in your questions to: questions@theelephantintheroom.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 in November, 2020.

Veronica Morgan: Up until recently we were feeling pretty sorry for anyone with a Perth property in their investment portfolio. Year after year, quarter after quarter, we saw tiny growth percentages or negative growth rates, which looked particularly painful when compared to Sydney and Melbourne in those boom years. But it seems like the tide may have turned all the patients of those investors be rewarded is now the time for opportunistic investors to jump on in

Veronica Morgan: Welcome to the elephant in the room. This is the podcast where we love to talk about the big things in property that never usually get talked about. I'm Veronica Morgan, real estate agent buyer's agent co-host of Foxtel's location, location, location, Australia, and author of auction ready. And I'm Chris Bates mortgage broker. Before we get started, I need to let you know that nothing we say on here can be taken as personal advice. We always recommend you engage in the services of a professional. Don't forget that you can access the transcript for this episode on the website, as well as download our free fall or forecast to report, which experts can you trust to get it right? The elephant in the room.com did I, you

Veronica Morgan: Today, are we going to learn about what causes Perth property to perform so poorly for so long and what makes it so different from the other capital cities we're joined by Damian Collins, a very well-respected Perth property expert, and he's going to share his local insights and help us understand what factors contribute to growth in that city. Damien is a founder and managing director of momentum, wealth, and chairman of mayor property funds, and having been an active investor himself for over 25 years, Damian continues to apply his extensive experience in property to help fellow investors make successful investments through direct and syndicated property. We will talk a bit about that too. He has sued on the REI iwi council since 2011 and was elected president of the Institute in 2018. I must say this episode has been a while in the making and in a way made possible due to COVID since we've had to stop insisting on doing person. So thank you so much for joining us today, Damian.

Damian Collins: Great. Well, Hey guys, Damien. Absolutely.

Chris Bates: I guess we've been like Veronica said, this has been one we've been keen to do for a while, but can you use an example, a bit of a history lesson on the Perth market over the last decade or so, or, you know, the rise and the fall, I guess, and where we are now?

Damian Collins: Well, I think Veronica hit it on the head. You probably feel sorry for people who've been in the Perth market over the over the last decade. It's, it's just been a a very, very challenging time we had prior to the decade, we had a big run-up in Oh three Oh seven. That was, and that's where we got ahead of ourselves. And and so since 2010 we've really had two parts of the market. So we had a reasonable runner from about 2011 through to 2014, and that was driven by the mining construction boom that we had. If you're maybe your listeners will remember back, there was a hundred billion or so projects. There was a couple of big guests projects to go. And and so that brought a lot of people in, at one stage in Perth was growing at 3% population growth per annum, really, really strong growth.

Damian Collins: And and, and things were on the up, our medium price went up about 15, 16% over, about to, to use or not not boom time, but it's very strong conditions. Then we saw after the construction, boom, we saw a lot of people leave the state. So we went from a population growth to 3% down to about 0.6% coming in 15, down to a 2016, 17, 18, and all that was pretty much a natural growth. For everybody came in internationally. We had a we had someone to effectively leads the state and go over each. So we were always say to people babies don't buy houses that might, might make people shift a house, but it doesn't make a new household formation. And sadly, on the other side, when you've got natural growth in the short run, it's also a desk actually, what brings the state so well?

Damian Collins: Population growth, natural in the long run is great for property in the short run. It doesn't do a whole lot. So we had a massive building over boom. We had built 30,000 houses a year, right at the wrong time as always happens in a property market. But over the last few, over the last few years, things have changed. The population growth has started to come back and our mining sector is very strong. And if you're wasting the, even if you're not in a regional town, even if you're in Perth, it's still a very much a mining town where relying on or gold nickel as the key guests, as well as that key commodities and, and 10% of paper. When you look over the account and for lawyers, all the spin on services, it's still very much a mining mining based facility. And of course the mining industry is very strong at the moment. Going very well. The government has a budget surplus below the doctor in coconut, these one in the country to have it. You're getting a zillion dollars in royalties and people are coming back. Populations, returning prices are trying to be low, low it's median in the country. And we're now back on the improve, which is going to be a very nice after a really pretty challenging decade that we've had to in the last, since 2010.

Chris Bates: So I guess over that deck guide, what parts of the market kind of really stayed pretty solid and resilient. And what parts really got smashed over there more than others.

Damian Collins: Yeah, the ones that stayed the most resilient worthy were what you would call a and, and having fear that most of the first would have had some level of down to them. But but the, the ones that held their own the most were definitely those established areas, near good schools infrastructure like Trey, like trains freeways saying generally that that that's sort of 500 input to a mill, which in Perth is the sector of the market. And median's about four 70. So in Sydney, obviously 500, you'd be you're in the road at the lower end, but in 500 above is this top half of the of the market. So that held out reasonably well, a got smash where the apartments in the city and anything with our, the supply, that's always the risk and, and and particularly the outer suburban areas, the package market absolutely go up. And they're the people I feel so sorry for there a long, long way down the house and land packages in 2014, cost them four 64, 74 80 they've come back a little bit, but there's still in the, in the mid to high 300.

Damian Collins: That's why you probably read mortgage distress capital of Australia for a period of Thomas Bell divers. That was one of those new areas and a boring 95% just underwater guys, the keys back in some cases. So, so look, it's all, as you guys know, it's about demand and supply and any areas they can bring on a lot of supply, like new house of landlords in the city apartments, when they bring out that supply, the market turns up, they get smashed the most. And that's exactly what happened in this downturn. But what about

Chris Bates: The top end, you know, the million plus, did that really sort of struggle with that last decade?

Damian Collins: Let's say, I would say it's at certainly you certainly didn't see price at rises and you did see some moderate pullback, but we have been in an environment where interest rates have been particularly low for a long period of time recalls for now in this incredible environment where there 3% or even less in some cases. So, so there, there wasn't a lot of the people who who lost their jobs, who were in that mining firefight sector. So they were the ones who and maybe not as well educated about money and you know, they bought the jet skis or the brand new cars, but the house as well, and everyone was throwing money at them, I guess, in the opera and people perhaps a little bit more sophisticated. And so I didn't see a lot of false selling in the in the market. It was really at the bottom end where people unfortunately hadn't planned ahead and budgeted for you know, in 30, 40% drop in incomes, which did happen in, in some, some cases. So, and, and as, as we've come out of the market the top, and it's been the first to go, that is really hard. I'm sure we'll talk about that today as corporate public the month.

Veronica Morgan: Well, I'm finding this really interesting because what we're discussing here or what you've just outlined here is really just a case study in investment fundamentals. Isn't it? I mean, you you've talked about population growth and how that impacts property prices. You've talked about a town that effectively has one dominant employer. You've talked about the areas that are resilient being those established areas, which you need schools and infrastructure, and those that got smashed. I think it was a word where, you know, we were looking at over supplier apartments, house, land packages, endless, you know, subdivisions and outer suburbs, and also these below median fallacy that you hear a lot of investment spruikers bang on about like you got to buy below median and it's like, Whoa, why? You know, because there's no reason for that, that they give a reason.

Veronica Morgan: It just sounds like, Oh, that makes sense. And yet below median, as you're talking about, there's the Perth median house prices in the four hundreds and all the properties in the three hundreds of the ones, you know, getting smashed obviously supply and demand. And then also interestingly enough, that the force sales were not at what a lot of people talk about, you know, that for sales has got to be where the highest value properties is actually no, it's where the debt is and where the more volume that the high volatility around employment. So you just sort of outlined every single warning sign that anybody's trying to predict what the market's going to do as a result of COVID anywhere in the country needs to look.

Damian Collins: Well, I think Veronica you're right. I mean, I think it's and we've certainly without, you know, our business buying agency we've kept well away from the, those areas for the executively at raising dimension. It's it's it's all about supply and demand and people get sucked up into you know, one of the stats often say people that are promoters are look this suburb, or this community is the fastest growing, you know, Wanneroo for example, and developers community in Western Australia struggle, that's horrible, but that means there's lots of land. I want to go on an area that's got very struggling to get population growth, because that means there's no new supply. And that's where there's, there's demand there. You know, there's no new supply or limited supply prices would more likely go up. But unfortunately, our industry, as we know in real estate has been very satisfied, driven, and and people sell the dream and the story, but in reality, it's you know, they'll let new stuff and there where there's a lot of suppliers is the worst investment you can make.

Veronica Morgan: Do you bring it it's easy to areas. I mean, we were banged on about one of our first pet topics that we talk about as Logan in Southeast Queensland. And that's the same thing. It's the growth corridor on growth and what's growing Exactly. Right. So, you know, 2009, you know, read your report, which there you've actually put together a report on the Perth market, which we will include a link in the show notes for anybody who wants to read that report. And, and in that report, you mentioned really that really you saw sort of green shoots if you like, or a turning point happening last year. So in 2019 so what ha what was leading to that? What was contributing to that change?

Damian Collins: I think it was a couple of things. Veronica, we hit the we, we saw the the, the population growth of returning. So in the tour months to March, 2020, we grew 1.5% in in Western Australia. And that's L long run average is 1.8. So we definitely have been relatively high population growth city. And, and the under supplied, we hadn't been building now building starts. And I'm talking as a holistic across the city, then your building starts to drop from 32,000 to 15. So we got rid of all that oversupply or most of us that we, that we had them and people now are looking at it, going to it's cheap to buy. I mean, certainly early here in in Perth, it was, you look at the CoreLogic figures, look at the figures. The median price in Perth was cheaper than hobos, cheaper than Adelaide.

Damian Collins: Obviously half of them Sydney and all lessened, and along the way of Melbourne now, Perth is not a city that should be Sydney, Melbourne levels, or when you got 5 million people in the city, it means that's natural, but we certainly shouldn't be cheaper than Hobart. I think we should be somewhere up towards Brisbane with 2 million people, quite a high income. It should be somewhere closer to Brisbane, you know, around the Brisbane Mark, you know, and and we've, you know, a good 10, 15% below that. So I think people are getting that sense in like 2019. So we certainly saw the high end Western suburbs in Perth on the West coast is the premium into the market because that's the big Melbourne Sydney versus East side. So we found that those markets really started to, to pick up and, and coming into 2020. There was certainly a bit of optimism around the transactions were picking up. People were sensing. You're not, we're pretty much at the bottom.

Damian Collins: We dropped from six or 700 transactions a week in the rest of Australia down to two 84, but it literally lasted six weeks. We hadn't had no COVID community transmission for now it's lost as normal. You wouldn't even know that it was so it's and the mining sector has been, as I say, we're we're certainly is very much based on that. We're not Booman busters port Hedland human towns, where there is still very strong mining element. And yeah, we're going to go the way property values are going to go the way of the mining sector in the medium long run. So, and then I think we're really now in some areas particularly the high price Mark, a bit of a funder, we've got a buyer's agent's hurry up and, and often going up against two or three offers that we're trying to get stuff from when we are getting stuff off market. And I got back on the tools to help a friend. And there was it was in the premium seven Clermont and represent a team and set first weekend, open seven offers and a 10%, 15% over asking.

Veronica Morgan: It must seem surreal at you must like where, what all you people, when there was nobody else around,

Damian Collins: I, I totally get, I just look, but I had I don't think you're going to be busiest cause there's a lot of smart money out there, but there is, I think there's not as much smart money as people think the smart money by you know, 12, 18 months ago. And, you know, maybe they didn't pick the exact bottom where they got pretty close. You know, and look at it's still a good time. I mean, we have our medium price is still 15, 20% below where it was four or five or six years ago. So I think there's a reasonable amount of upside to catch up. But in hindsight, you would have bought 12 months ago, but yeah, they weren't around and now, now they're all around. And I've got staff who were trying to buy houses and and but the confidence was there and then people just doing the math and they're going over the median.

Damian Collins: And if you, even, if you borrow 400,000, whether it be for homegrown investment, the the interest payments are $200 a week now. We've got a a real rent crisis here and our rent to go into FICA significantly. Once this moratorium comes down on the rental market, they was looking at it going, hold on. My rent is three 50 a week is probably going to go to full 50 week on a 400 to four 50 house. I can borrow and spend $200 a week in interest. It's kind of becoming a no brainer. And, and I think that's really starting to push people who can't afford to buy to to get out of renting and start to get into home ownership. And then interesting investors. I'm sure you will talk about that still very thin on the ground, which is surprising over here in the West.

Chris Bates: So with that property, you're talking about in Claremont in the sort of, you know, prior to 28 saying, I mean, I came actually over there and I, one of your you know, Ray who works for you took me for a tour of the city and we went and looked at lots of areas and you could still send, there was a lot of frustration in the city and, you know, surprise really when you went to different suburbs and you're like, what? You can buy that for that amount of money. And it was a great little history lesson, but yeah, in those years, you know, the mid 2000 and tens would that property is still have sold for a decent price. Maybe not with seven bidders, but the premium sort of grade eight suburb, the great eight properties, the best streets where they still getting competition or was where they still struggled, where they even still struggling to sell.

Damian Collins: Look, it, it, it depends on the years. I mean, we've heard like all property markets, you do have some more volatile times. Certainly the 12, 2012, 13, 14 was pretty strong back. Okay. I guess the thing is what I find is if it's a, if it's a good area that has got good appeal, you will, you will eventually sell right. There is, there is. Whereas some of the areas that got, they got smashed, you couldn't give them almost literally could not give them a wake up that, that bed. So I guess it's just probably the risk management as well. If you've got you know, good properties, do the infrastructure where there's good demand the schools or whatever is in demand for that area, you will still sell it. You may not get the price exactly you want, but there will be some underlying demand for those, those properties where, you know, having see what's happening, we can only sell. Now, in some cases you almost couldn't give them away hiccup that they're challenging. So just another lesson about buying in those areas that have got that good demand, got things that people want, but have limited supply.

Veronica Morgan: Yeah. It's funny because like, you know, you talked about one of the reasons that things started shifting last year is because the building starts had slowed right down. And I guess that's the big, heavy it's like trying to turn the queen Mary around. Isn't it. I mean, construction, once the building starts to be built, it's going to be finished regardless of what the market is at the end of the build versus the beginning of the build. And I guess it takes a while for all that to sort of finish and then to slow down and stop. And then also for all that stock to get absorbed into the marketplace. So, you know, but there's still areas that are on the outer areas you say that are still sort of under pressure. How long would you say, you said specifically with the apartment stock, for instance, how long did that decade, the past 10 years, how long would it, would it have taken for that whole slowdown, a building starts and the sale of that stock to sort of finally get absorbed into the marketplace to a point where you start to say right now we've got a shortage.

Damian Collins: Okay. In there's a shortage yet of apartments. So and even the half of the land stuff and the outskirts is, we're definitely not into the shortage where we'll be coming back into a more balanced market, but from a massive oversupply. And you're exactly right. You look at the, you look at the steps that we were building right at the wrong time. We were building 32,000 houses. And that's the thing with property. It's a, as a market overall as a whole local market, it's, it's like exactly turning the, turning around the the big ship takes a long time. And once things are started, I mean, to build apartments for developers, building apartments is looking three years down the track. So by the time they come on stage and even how Finland, it's still going to be 12, 18 months. So things are happening at precisely the wrong time.

Damian Collins: And then as people left and there just wasn't enough people to fill those, fill those houses. And so so that's, that's certainly I think they, they're not they're certainly not in thought and yet they might come into middle of next year. Again, it'll still depend on population growth. And it'll be interesting to see in that kind of an environment how that goes, but they're still not in shortage. I still don't expect the outer suburbs and the apartment market going to see a lot of progress in the next 12 months. They might be 20, 22 story where things finally recovered. But I think we're just getting back to those markets to balance with the established markets where there's not a lot of new supply. I think they'll have a pretty decent 20, 20,

Veronica Morgan: There's always a story behind the property as well. Like it's actually a person who's purchased that property that you know, has a big loss that they have to deal with. If they sell that property, whether they transfer it to their home or they pay it out, like there's a real lies behind these properties. And, you know, they can't really do anything with them. The problem with Perth, from what I can see from afar is that your state,

Chris Bates: Government's one of the most generous out there encouraging people to buy a new property. I think it's, you know, over $50,000 of incentives. So, you know, yes, you had a building boom say 10 years ago, but arguably, you're going to create another one because you're trying to push all your first home buyers and young families into new properties. Is that what you can say as well?

Damian Collins: Certainly putting them on railway as well as our momentum wealth had. I thought it was it was, it was, it was over the top. Now, look, I get all the governments wanted to paranoid about what was going to happen in the economy. And the, the building industry did a pretty good job and convince the government that the Armageddon was coming out for anything down significantly. And the government should throw some money, but the the ones that are particularly it has, it has worked. But interestingly, and this is where you talk about which we spoke earlier about turning around the big queen Mary. The building industry is actually right now in labor shortage because they've come, they've come down from 32,000 bills to 15,000. That's again, real people in there that means half the industry of trades have disappeared and gone into another career, or they've gone onto the mines or they've left the state.

Damian Collins: So now it's been around and all this extra demand, the money, the bills are turned off the tax. We can't take any more orders. The land developers are struggling to get, cause they've hardly been bringing any blocks to market to get the civil contractors. I've got some good friends of mine who are very large builders who are saying they can't get trained. So we're not going to see a massive amount of new supply quickly. I'm certainly going to increase. I think they'll get from 15,000 up to maybe seven, eight, 18, but there'll be nowhere near in the next year or two getting towards fully. They just don't have the labor supply to to do that. So but you know, if it keeps going at least the government has cut the deadline of the contract signed to 31st of December. I think that's enough.

Damian Collins: They should stop it. They've extended the start date, but I think it should go back to normal, but the ones I felt particularly sorry for, and you mentioned there's some of the clients that you've got in those outer suburbs, I feel sorry for the guy or girl or part or a couple of whoever they might be who got a house on for three 80 already, massively underwater, trying to sell it, going to probably lose some equity against their home. Whereas if they've got it cross whatever, and guess what, then the government throws 40, 50 grand at that potential buyers look at yours into a new bill and they will exactly, they all warm it off to get the money. And so that's really just made that difficult situation, even more challenging.

Chris Bates: And that's exactly the point, right? Like the buyers that could be buying the oversupply stuff, that's a, you know, underwater for a lot of people and now they've got to buy it because, you know, news better than out in their minds, a nice new fridge. We're not fridge, but you know, everything else. So I mean, that's the point, I mean, COVID has changed the world on many different levels and each city's, you know, going through a different experience you know, looking Facebook at some friends In Perth that looks like everything's normal, like you said earlier. But how has it changed the general sort of attitude around property and by preferences? Because it has had huge impacts in Sydney on data. I do think in Melbourne post lockdown, what do you think is going to change in Perth? Are people going to look at property different?

Damian Collins: Well, I think the look we're we're, we're being I guess Perth is is very spread out already. So, you know, the, the apartment market is, is so tiny, you know, I think so last year or the year before in Sydney, that it's 50 to 60% of all new approvals of apartments in pers, we'd be lucky to be like, it'd be 10 or 15%. It is a very small component. So people are generally spread out, but certainly you know, lots of people are working from home more and spending more time at home.

Damian Collins: We've already seen people obviously looking for properties. We, we represent owner-occupiers as well. And particularly in that upper end of the market, they're very much looking for something with a decent home office capability to work from work from home. And and so look, will people flee to, you know, there's all this talk that people are going to fleet through regional areas. I still think you're going to need to be, you know, you might not be in the office five days a week, but you'll still be in at least two to three to four, depending on your work. And so you're not going to go four or five hours away out of the town. I think potentially if you're you know, there might be some there might be some satellite areas, but you know, an hour, hour and a half away that might get a bit more demand. But again, if there's all supply there how is that going to get to capital growth? So look overall just been a bit more, we haven't had that fear of density that when I say you have density, we do have people don't want half the neighborhood, but we haven't had that fear of COVID in button congested environment. Cause Perth is very, very low density and very spread out. So we haven't had probably as much of that as you might've seen in other congested cities around the world.

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Chris Bates: So do you think that people will look up the coast a little bit more in terms of, you know, maybe they wanted caught as loud or Scarborough or something like that. Right. But now they're willing to sort of go a bit more Northern North up the beaches a bit more like if a buyer's changing and saying, well, we wouldn't have considered, but now that we work from home a little bit, we'll go, you know, an extra 20, 30 minutes up the road.

Damian Collins: Yeah, absolutely. As long as it's got the amenities. So that's the, so that's the important part and I'm in the you know, cortisone is a, a lovely beach, but, and so Scarborough, but Cardozo's very expensive. It's probably the most expensive square meter, right. Land in, in, in Perth. And you can go up once you get past a trig North beach set in some and so forth.

Damian Collins: It's, it's very, very very much cheaper, beautiful beaches, even burns beach, which is right. Run out. But I think so. I think definitely our people will, will look for the they're willing to travel a bit more as long as it's got the right amenities. So yeah, those beach areas definitely a lot to do pretty well. And look, we've always bought up towards that way, but I certainly think that you will start to see people you know, start at the terminal five days a week, that commute becomes a little bit less important. It's still important and there's all schools and whole raft of other things. But certainly if you, you know, if your schools are less an issue, when you're a room, you get to work from home two or three days a week, well then being near that beautiful beach, even if it's 30, 40 minutes out, it's not that big a deal. Really.

Veronica Morgan: What sort of split would you have in your business, the buyer's agent side of your business between the owner-occupiers and investors

Damian Collins: Right now, we are, I'd say the last two years, we're probably 65% under occupies and very few investors, but probably back to more six more about 40% are occupiers 60% investors in our businesses generally target two investors. But what's really interesting is the is the lack of investor return coming back into the market? There is, there is definitely more interest. There's definitely more investor activity than there was 12, 18 months ago. But I think our vacancy rates plummeted below 1% were 0.9, six and a 40 year, low as 0.8 in 2007. And we are going to hit that. It's a, if it's not November, December, it will be definitely January, February. And I'll look at the investor finance figures every month. We're seeing in Western Australia with the last two years, 20, 19, 2018 with the worst two years ever. And IBS stats, not even again, just for population.

Damian Collins: And even now it's still only about 280 to three 40 mil. I think last month was recorded 40 mil. In the last time we had vacancy rates slowing up in 2013. We at 1.3% in 2007, when we had investor finance was a billion dollars a month. And yeah, so when you, when you analyze it, you go, why are investors not coming back in a significant number yesterday, better than they were? It's, it's two things. The first thing is the, when you've you know, we all we all know people tend to follow what's happening. There's a psychology of recency, and it's been interesting to think what's happened in the most recent six to 12 months is most to happen in the next six to 12 months right now in people in perfect. They're just starting to see some capital growth, but if you've been in the first property market you've been telling us, never grow, Perth prices never grow up and don't go up.

Damian Collins: And that's one of the reasons I think people have been a bit scarred if they've had some properties, their homes have gone down in Vegas and maybe equity. And so that's kept them on the sidelines, but rules also the government over here who look like all state governments, putting some moratoriums and emergency legislation around residential tenancies. And ours was quite quite across the board. And we, we certainly remember lobbying the government to make some amendments, which they did, but one of the ones I didn't do was amend was basically as a rent freeze at the moment, you cannot put rents up and kind of got it made sense. Perhaps in wherever we thought unemployment was going to blow out to 15%. But in September, the end of September, when we had five months of no community transmission, they decided to extend it for six months, which was a really dumb move when we're having so there's lots of people who protected who've actually had pay rises and enjoying life as normal.

Damian Collins: And they're sitting on rent freeze and it's it's. So that's put investors off the going, I can't put the rent up and then it is actually quite hard to evict people and in the process is longer. And so they kicked it down to March. The I met with the ministry of the week and they swear up and down, then I'm going to extend it further, but it has made a difficult situation worse because it's kept investors out of the market. And to some degree, investors are sitting on their hands just at the wrong time. And also when you have a market adjustment to rents, the rents will go up pretty 20%. When the moratorium finishes. If we had that, now the tenants would go, Oh, you know what? I'll get another ramp rented on a 20%. Let's get another friend in or a household sizes.

Damian Collins: The right now, when you're in a rent freeze, you got no incentive. You don't need to adjust your house. So it's really a double a it's kept investors out. This meant tenants haven't adjusted their household sizes, right? At the worst time, we're going to go below our 40 year, low vacancy rate rents on, on the ones that have rent, freeze ranks are going to pop 20%. And I can tell you exactly why, because the ones that do come up for rent when we put them back in the market and we are getting on houses 20 to 25% already rent increases. And because you can put those rents on new leases, when tenants leave for apartments still a bit, patchier probably put a 5%, but if you've got a house in a decent suburb, bang, the families want it and they're going ballistic. So we are going to see some pretty significant rent increases come March next year

Veronica Morgan: In, in, in Brisbane, in Sydney, in particular, we've actually in Melbourne as well. I've heard stories about ex-pats moving back and the family home would have been, was previously rented out and that's removed from the rental market. Have you seen as well Impacting on the actual availability of rental stock?

Damian Collins: Yeah, definitely. We've seen a number of people move back from interstate and overseas, but interestingly you under the legislation, we've got a, you can actually ask the tenant to leave. There's tenants got a guaranteed right to stay there until March, 2021. Now, unless you can demonstrate hardship, which is very difficult. So you know, we're certainly we've managed a pretty large rental portfolio. We've had had people wanting to move back in. We're trying to go through the tenant. In some cases, you know, we've been able to give the tenant a bit of a rent free period before they leave or pay them a bit of money to leave, but you cannot keep them out so that when smart comes, there'll be, there'll be more people looking to move back into their properties who were, yeah, look, we've got a rental rental crisis here and it's not just in Perth, in the in regional areas.

Damian Collins: I've done some stuff in my railway role for in, in Geraldton alternate example, people live in caravan parks in Dunsborough bustled and same thing there. I've had people having to leave those regions because they they can't find a property. It's just been we've gone from over supply now we're going to that period of significant under supply. So how long the last four is? This is the question, but there's a real rental challenges in the Western Australian market and not enough investors buying and putting houses in the market to provide for tenants.

Chris Bates: So people were moving back to Perth because I mean, it's one of those cities where people will kind of come and go a little bit. You know, you said the population was booming when the resources were going nuts and then everyone, it wasn't growing anywhere near as fast et cetera. But I, you saying lots of people moving back from overseas or back into say a little bit, like, Adelaide's the same sort of story, right? They go to Sydney or Melbourne or for the work. And then when they get to the stage of life for families, they come back. So are you saying quite a lot of people coming back?

Damian Collins: That's, that's, that's been very prevalent in Perth over many decades. So they, people grow up in posts, a lot of the beautiful, but then they want to see generally go and experience the big city. So they often went to Sydney, Melbourne, or even internationally Hong Kong, Singapore. And then now, as you say, that would come back in their thirties, not always, and some of them wouldn't come back, but they come back in their thirties with a family and like the, you know, the bigger blocks and what they can get for their for their money. But we're certainly selling people are re assessing life. And is it, is it to, we've certainly seen some quite significant demand from international who want to buy back in a purse with a plan to come back in the next year, what might've been a five or 10 year program, and suddenly they're coming back in one or two years to make sure they got a job to come back to.

Damian Collins: They come into Western Australia where, how far board is coming down. I've heard there's potentially upwards of 10,000 people coming back between now and Christmas, which will put real pressure on the rental market if they remember. So I think you know, how long it'll last for? I don't know. We, we used to have that big calling out to 24 to 34, 25 to 34 year olds. And whether that will be just a short term trend or not, I don't know, but I think people are reassessing life and is everything about the career. And you know, we could all get over it if the vaccine comes early next year, as they're talking and in middle of 2021, we're all back to their block, goes back to normal. Perhaps it won't have as, as lasting effect that it lingers on for years.

Damian Collins: And I think it might have a more, a longer term effect of both has been a fast growing city. It's a long run. Average is 1.8% population growth, but it's been very much a it's a job growth video. That's what tracks people here, the lifestyle fair, because I'm from Melbourne. I moved here 20 years ago and it's beautiful on, you know, by blocker and the river. And I just think, wow, it's amazing. And it's but when I grew up in Melbourne, people left Melbourne. If they were going to leave for lifestyle, they went to Queensland, West Australia, almost another planet rockets over in the Western. It's so far away, it's almost like another country. And so you generally don't get people moving full of Barstow. You get them generally for jobs and economic opportunities. So, and then that a lot of people do end up staying. So so there'll be a look. We've got a reasonably strong economy at the moment with the mining sector and construction picking up. So I suspect that'll bring people in and I, at the moment there will be far, far less people leaving. So that will be something that will certainly watch in the years ahead as to whether and how, how much people are going back to the old patterns of going to the big, bright lights in their twenties and thirties, or whether that changes. Now, that's interesting trend to watch.

Veronica Morgan: I guess it's always a risk though. We Perth, isn't it because, I mean, like you said, you know, mining is still the number one driver of the whole economy there. And there's all the, the knock-on industries or the cling ons that are the do well, or don't do well on how well the money industry is going in. So I guess that's the risk, isn't it? That things are going well, start these taking off again. And then what happens when there's another you know, slow down the mining sector.

Damian Collins: Yeah. If you're investing in, in the West it is very much a mining based economy, if you're lucky for the U S if you're in Houston, it's it's basically an oil and gas town. There's not much else. The only thing I would say about West Australia, we are fortunately we are a definitely a commodity-based town and a lot of things were along the commodities. We are fairly well diversified. We're not a one trick just one industry on was definitely our biggest, but we do have a lot of oil and gas, or right now actually the oil and gas sector is suffering. So when one of our big employers here at Woodside has actually put some people off because they're all prices getting down. No one's traveling on planes. And, and, and so also, so that sectors, Arnold's very strong gold nickel.

Damian Collins: So there is a, there is quite lithium as, although that's getting back to the moment. So you've got to be a, if you're investing in the West, you've got to have a positive outlook on, on on demand and certainly commodities. I'm still fairly you know, one of the reasons I moved over here was lost style and economic opportunity. And my partner wanted to move over here and she loved the play. It, it was very much about but I saw the long run, the future of Asia. The growth has China's growing and that'll start slow down, but all those other, you know, we look, we probably pay more attention right here in the West to it then perhaps overreached, but certainly Vietnam, Thailand, India it's all the, you know, those countries get their act together.

Damian Collins: There's another 2 billion consumers and a 2 billion people looking for a good life all within a, you know, very close to our region. So, so if you, if you've got a lot, you will have to, if you'd miss in the West, you're going to have to have some ups and downs. And won't go in a straight line, 7% per annum or anything silly like that. Or it might go some years 20. These are these, am I going negative 10? You just got to ride out the waves, but you gotta take your position. Is that commodities in mining? Was that not going to do well in the next 20 years where you wouldn't wanna invest to the West, you've got to have that fundamental position. And if you get, so that would be a big call, if that would be a big part of your decision making to invest over here.

Chris Bates: So if you were investing in Perth, what what, so, and you've got that confidence around the long-term sort of commodities, and you know, that the population's growing strong because the more people that are in the city, you get this pressure cooker effects, right? If the first population was 4 million or 5 million, you'd have a lot more people needing a lot more services, a lot more industries a lot more corporations would be having offices there, et cetera, that needs stuff. So it kinda is a chicken and egg problem, but if they say you do assume that population growth is going to be, you know, quite decent, you know, it's a great lifestyle. It's you know, not any Australians moving over there, but also from overseas. How do you think that the city will just grow, like like a Sydney, Melbourne and onion, the inner ring suburbs will grow a lot stronger than the middle ring and then the outer ring, or do you think it's going to spread a bit more up and down the coast? Or how do you think the prices are going to sort of shift? I guess the most,

Damian Collins: I think it will fan out look it's been interesting because I grew up in Melbourne knowing what happens to property prices there as the cities get bigger lessons, lessons over here. So you are definitely going to have that in a ring, but because we're on the coast and we pretty much have beautiful beaches, it'll fan out a bit further. So as we spoke a bit about earlier, the and now in a post COVID environment, people might not come into the city every day or for their jobs. They might stay at home a bit more. It certainly does fan out. So we, we basically stuck in the elevators and we don't buy all the inner city rings for, you know, for a whole variety of reasons in the suburbs. But certainly it'll fan up along the coast, but I think it'll also end down South along the coast, but also one of the interesting things in, in Perth is that the train thing close to a transport is not yet as big a deal as I would have thought.

Damian Collins: You know, and I grew up in Melbourne. I used to work as an account in the city. I'll get the train every day and being near the train line was a big help for me because goodness, mate, you didn't want to drive into Melbourne pick out peak traffic, you got the train. I went to uni in the city and got the train every day. And there's people in first Caroline's it's getting better. It's getting more. I think. So we've fought for a lot of our clients a lot of properties within that walkable catchment to train stations in the Northern and other corridors. Cause I think that will be the ones that you'll get to the point of like this congestion is out of control. I want to be, I'm going to get the train to work and and I'll pay that premium to be near a train line that you do see in Sydney Melbourne.

Damian Collins: So I think that's, that's something that we will see as the city gets bigger. The forecast by 2050, it will be four and a half million people. Whether that comes true, I guess will, who knows, but but certainly the more it expands that pressure cooker pressure cord dissolve you guy. Absolutely. And they would just be, people will pay that premium for access to important things like being near the city, being near the transport. And, and perhaps it might be a little bit different now in a post COVID environment that that lifestyle component might be a little bit more important because they're spending more time at home and having that opportunity to use it. But but nonetheless, certainly if I was buying in Perth, the further North, you go the closer to the beach,

Veronica Morgan: It's pretty much the same sort of as Sydney in a way, you know, we've got a mountain range, it also blocks development on the Western side. But you know, we've, we're close to the coast and we've got the beaches running up and down and, and the beaches do become an in fact, Chris, you're benefiting from this right now. Aren't you? I mean, you and we crap public transport, but in the COVID world, it's everyone's saying right, I'm prepared to put up with a bit of crap traffic, maybe two days a week, but I wouldn't do it if I had to do it five days a week.

Chris Bates: I mean, a hundred percent, I guess that the interesting thing with Sydney is the South beach is probably, it's probably sat a little bit like Perth as well. It's all the nicer beaches, a bit more to the North. Is that trying to correct over there?

Damian Collins: There's a bit of a North South dividing it like people sort of once I grew up in one side of the river and we call it is a river, but it's, it's pretty blue. It's like you know, the ocean river, not too, not as deep as Sydney. Yeah,

Veronica Morgan: Yeah. Not that, not like the, or the Brisbane river.

Damian Collins: But yeah, the Northern beaches, the injustice of industrial area on South side Granada. So that tends to within that region and there's a Northeast area certainly, but anyway, they've put the heavy industry is so people tend not to be one of these sort of more 5k North or South of that. So that's sort of block the life and you can get up. And and they're doing a little big development on the South side of the beaches, but it's not. So you really get to that devalued, Rockingham and stuff to be a bit more. So the Northern beaches are definitely more popular. We spread 60 K North up on the beach coast. So it's a lot more fast in where people are living on the beach.

Chris Bates: And if someone was like a successful person or successful is the wrong word, but someone who's you know, financially got stopped money, I guess. And they don't need to come to the city that often. And they want a pure lifestyle with anyone to live, you know, an hour to two hours out of Perth. Where would that they most likely go, would they go down maybe as close as sort of Margaret river? What are their areas? Is there sort of on there sort of a hot list, I guess?

Damian Collins: Yeah, it's interesting. Again, having grown up in Melbourne and the my playground in the summer was the morning to furniture that was only an hour, hour and a half hours. Our, our our lifestyle here that a lot of the weekend is, and it's been down to that Margaret river region, but it's familiar, it's three hours away and it's just not a weekend. I think what we're starting to see now is the managers, who've had a bit of a rough trot there because of, for for unemployment and not a lot of jobs down there. But I think with now that post COVID lifestyle, you can get in from manager and enter in 10 minutes. So if you're only coming in two or three days a week yeah. Would you want to do it five days a week? Probably not, but as long as the canal blocks and a good lifestyle down there in the North, we're starting to see that Lance was more at holiday spot, but so I think, yeah, and you can get them incredibly cheap and mean you can buy, or you can buy properties in those locations, third or a quarter of what you would pay with equivalent in Sydney and, and pretty, you know, at least half offer from Melbourne.

Damian Collins: So, so I, I suspect, you know, the entry of these sort of regions lands and up North and, and manager and and you know, down in the coastal region there around the peeling Lake. And there's, there's, there's a chance that they could do particularly well, but again, if you're going to be in those areas, once you get out of the back blocks, there is supply. So you, if you're going to go to those areas, you want to be in a, in a premium spot, right near the water, because you don't want to be in the suburbs, turning out house and land for 400 K,

Chris Bates: Is that if it's the premium end of those pre potential premium one day. So yeah, you're literally on the water or very close to it, not in the fringes where there's lots of supply for, for years and years and years to come. Exactly. Right. Chris,

Veronica Morgan: I'm curious about your syndicated property investments. You know, certainly something I've often thought about it in Sydney, you know, it's expensive and people like to invest, and quite often they don't have enough money to invest in a quality asset. And I think to myself, you know, would you do it in residential? Could you, could you syndicate? And I think some people have, what's sort of what's, how do you do syndication?

Damian Collins: The vertical we've been doing it, I've been doing for about seven years now in development. And we, we, we purchased another business five years ago, so we've got about half a billion of assets under management. And the reason for it is I don't generally do it in, in residential standalone residential because most people want to touch it and feel it, and they kind of, they can borrow and generally do it themselves. So you only can do that. We've actually thought about 10 Hedland Karratha that a year ago, because that market got, got smashed 80%, that was way below replacement. So that was a bit of a by but predominantly it's in the space where and that was Fingal residential. So that was unusual. But most of the funds that we do developments or passive commercial commercial assets these days, and I've still got one in loose around my neck, which is my old office.

Damian Collins: You know, you got to spend a couple of minutes and it's very concentrated. So if you spent, first of all, if you had the capacity to spend half a couple of mill in the first place for a decent commercial assets for most people, that's, that's hugely concentrated part of their portfolio and their wealth. And he's sitting there vacant now two years later. Now, luckily it's only a small part of my portfolio. And so I've had that asset for 15 years. So what I wanted to do is to be able to enable investors who, you know, my philosophy on properties, residential is a great place to start, but it's not generally where you want to finish up in, in residential, because as much as I love it, and it's been great and made a lot of money for me, it, the yields, you know, when you get to retirement phase, those use just a great low inflation environment.

Damian Collins: That's a lot better than money in the bank, but it yields on Rezi in Perth. You're probably going to get net three and three in a bit, perhaps, which is certainly better than 1% the bank, but nonetheless, it's not that great. Whereas in commercial, you do get, you get a high yield premium, but that's because it comes at high risk. So what we've tried to do is put together diversified portfolios, assets, six to eight assets, maybe 12 to 20 tenants nationally across the board. And people put in a hundred thousand, 200,000 but 50,000. So they got some better yields, but the exposure is spread across a variety of asset classes, such residential development. We do a development space again, targeting our target returns. It's very hard at risk, and I just do developments in in my younger days. And for, I set up the mental health and you know, again, you can make a lot of money in developing, but you can also lose your shirt.

Damian Collins: And so when a lot of people to do a decent development, we certainly have clients to do develop and hold and build a duplex and get some better cash flow and appreciation. But generally the small scale developer developing the self predicting risky. So gives those people. If I want to develop in a sale opportunity, target high returns, a bit of an opportunity to take, go into one of those investments, without putting all their eggs in one basket, then it's been really good. The clients have appreciated that they liked those opportunities, and it's not for everybody in development. They only take sophisticated investors because it is just too risky. I don't want to somebody doesn't understand it and understand the risk to getting cause you can make a lot and you can also lose a lot. In the commercial market is that most of our funds are open to retail or water or a range of investors so that, that they can put in their 50 or a hundred or whatever that is.

Damian Collins: They'll get the 7% returns, hopefully get some capital growth. And the retail commercial, passive ones are generally for most of the investors in that space for 60 plus, my parents are in them. They're in their early seventies, that's in their super fund and they put in some money, they get the 7% yield. They're very happy with that. That's the sort of target market for that one generally tends to be high net worth people in their forties to sixties, who who've got a fair bit of capital and take a bigger risk. It's not for the starting end investor. Then people get all excited about development and development. It's too risky for you started when you got a bit of wealth behind you, you might allocate some of your capital and portfolio to that, but definitely you want to be starting in development, sexy, and people love it. You always hear about the success stories. There's plenty of people that lose their shirt in development.

Chris Bates: So it's like everything in property, the good stories. And you took the words, I guess, out of my mouth, I guess. I mean, I guess it's at what stage are you at and what wealth are you at and what position you're at and different opportunities you know, more tailored or better suited to different people. Right? You know, so now maybe when you're starting out, going in down a development is not a great idea. It might be buying your first family. Home is a great idea. I think you're going back to my sort of financial planning mindset and days, those sort of commercial syndicated is a great option for them because I used to go to NSA, but you're not paying any tax. So yield, you're not losing 45, 40, 50% of it in there, if it's in a pension phase in super funds.

Chris Bates: And secondly, it's not that big lumpy asset where, you know, if you've got a million dollar residential property, you can't really sell it down in stages, but you know, your 50 a hundred thousand is not going to be, they've got it's, it's a part of their portfolio. So yeah, if they were at that stage of life, it's definitely a, a good option for people to be looking at those types of syndicated you know, options, your development option. Do they basically putting money in a pool together with a lot of other people and then you go into a bank and getting another block of money and then they only get their returns once you've kind of gone through and sold them all. Is that sort of what you're trying to do? Your development partners almost.

Damian Collins: Yeah. So it's so we've got our for cell and and we yeah, they're all, they're basically syndicated. So the pool of money, for example, I've got one at the moment a waterfront luxury apartment development in Crawley that the apartments will sell for two mil, five mil. We embraced we, right. We raised 10 million 16 or 18 million from the bank. And I'd have to sign my life away on that, but that's okay. I'm running the projects. And then when we sell them, we get a return. Yeah. So it's, it's lumpy, it's, you don't have to belong that as your income with lumpy. And, you know, you can certainly get 20 plus percent per annum risk. There'll be some projects you're lucky to get your money back. And I guess that's what I just explained to people. If you just get into a development project on your own, or in a syndicated one, it's gotta be some money that you're not going to lose because it does carry risk.

Damian Collins: And you know, you, hopefully you get some good piles, but you know, there will be in there's plenty of people in Australia. We know, look at the Bay w top 400 play, but for everyone who's on that list, there's probably 20 have lost everything. So it's something that for the right person, the right phase of their investing career, it might be something that I like had a portion of their capital, but yeah, it's a, it's gotta be the right stage for you. And, and yeah, that's exactly right. Because when we sit down with clients, we, you know, we're trying to look at, for them, what's the right stage for them at that stage. And you know, your homes are probably the first thing you want to get into residential. Residential is start a fairly low risk. Don't get into that other stuff until you're a bit older and got a bit of wealth.

Chris Bates: Yeah. That makes sense. You've drawn for the premium end of the the Perth market. You built what there haven't really got enough of, right. And what people are willing to, to buy. And they're going to go a bit crazy on, like, you're not going to go and build low end apartments when there's already an IVIS supply of apartments. So, you know, duplex is in the outer suburbs when there's already enough of those. So that ends the coolest scout developments you've got, you know, not the bigger risks of the hundreds and hundreds of apartments that, you know, are going to be hard to sell. 

Damian Collins: It's not a market. Generally they will target under occupies and downsizers predominantly you've got a fair bit of wealth and there was a bit of that certainly stole it up. But we've got another one in trig on the beach front year. So very select projects. It's not, we're not we're providing opportunities to our, we're not full-time developers, so we don't have to be doing something all the time. And we'll come in out of the market. As we see those as we see those opportunities for our clients.

Veronica Morgan: I think that leads quite nicely into a Dumbo of the week, because, you know, you talked about for all the good stories is, you know, for every good story, there might be nine sad stories. Do you have a Dumbo for us Alyson that we could all learn from?

Damian Collins: I certainly do running. I remember when I when I got out of my accounting days I had to create an income. So it was one, I'm a big advocate of long-term buy and buy and hold great assets to earn an income. So I used to do a bit of renovate and flip it and sell that is a hard gig, but you can sometimes not for everyone, you could, you could make some money, but I remember very clearly one that I was looking at, you've really got to build and renovate if you're renovating to hold or whatever you're renovating for, it's got to meet the market conditions and I'll never forget. I did one in [inaudible], which is near cities. Perhaps, perhaps you might call it in Sydney or a sort of whole area of Melbourne and very nice.

Damian Collins: And this was back 10 years ago. And and I had this, a lot of character to it. And I went in and did a renovation and on a property. And, but you know, you have to style it, right. Whereas I saw someone else one and they thought they could do it. Now, now trying to flip it and bullet one, and they put in Ikea kitchens, this is something you would expect in a first time buying property. And sure enough, when I bought it to market, couldn't sell it. They lost a lot of money and the person who ended up buying it ended up stripping the place out and doing it again. And just always, always so that that person would have talked to 80 or a hundred grand just doing that. So I just think you've got to, if you, you know, your property, your property has to match the market, whether you're renting it, whether you're selling it, whatever you're doing with the finishes, even the layout, you've got to meet the, market's always be thinking of it. It's not just about how you got to buy land value component, because that's what goes up in value. But it's also that the asset on top is going to be there for a long time and renting it out or trying to sell it later. You might've been to, you'll probably eventually sell anyway, make sure it's got the finishes. And especially it was based on properties, but make sure it makes the market conditions, people, otherwise, you're not going to be at a rental yourself.

Veronica Morgan: It's so true because I've seen situations like that happen where the property has been poorly finished. You know, they just really screamed or they just didn't understand the marketplace and ultimately sold less than an unrenovated version. Same thing. It's like a D values and it doesn't add any value whatsoever. So

Damian Collins: The next person's coming in, they're going to strip this out. So it's going to cost me money.

Veronica Morgan: And it also, it, it also deters all those renovated buyers because they're not looking at that type of property they're actually looking for unrenovated. So you've got to find someone who actually happens to see it, who is prepared to do it because everyone else looks at it because ha what a shame they did that. And then just walk out the door again. Yeah,

Chris Bates: Absolutely. I mean, when you flipping, yeah. I mean a lot of that's a lot of mistakes. A lot of people do make, you know, they'll probably overpay for the B two bullish and they'll overpay for the, the unrenovated place. Then they'll probably try to skimp on the rent now and then not be able to get a good, solid price. And it's been a little bit of a waste of time and stressful. I mean, he's all very true as well for people renovating their own homes as well. While they're living in that, because you know, their life plan changes and they're, you know, maybe not done the bathroom is nice or that, you know, got rid of Obama thought, you know, let's all these mistakes you can make when you renovate your own home where, you know, ultimately when you decide to leave, you, you, you basically wasted an opportunity, I think, with that as well.

Veronica Morgan: So Damian, this has been a great interview. Thank you so much. We have covered, not only we've got a great insight into the Perth market, but also, you know, it's just, just a really great concrete lesson in all the fundamentals and how they play out. It doesn't matter what market, you know, these, there are similarities and commonalities that we all need to consider. So thank you for your time.

Chris Bates: My pleasure guys, lovely to do a chat. Thank you diamond. Really appreciate it. We want to make you a better elephant rider and this week's elephant rider training is

Veronica Morgan: No, I've been asked a lot recently about, you know, what's my view of negative gearing in low interest rate environment and you know, what are our clients doing differently if they're doing anything differently and interestingly enough, pardon the pun? As you know, I would never recommend anybody buy a property just so they can negative gear it anyway, because you have to lose a dollar to get 45 cents back. If you're in the top bracket. However, you know, the negative gearing obviously gives cashflow to investors and it has allowed them to get into the market. But I just thought this would be a good thing to chat with you about Chris, because the reality is that you need less cashflow. If your interest costs are lower, correct. It's, it's not, it's not such an issue. So what are you having these conversations with your clients at the moment and what are, what are you advising them on the borrowing side of things? Yeah,

Chris Bates: So there's a, probably a sort of the right word. It's like a myth it's kind of like something. Okay. You know, a truth, I guess, out there that isn't actually true where people will think, Oh, I buy properties to get a tax benefit. Like that's one of the reasons why I should buy an investment property. And a lot of people think it's one of the best reasons to buy an investment property. And you know, a lot of the time we have to kind of break that down and explain that the reason you're buying property is an investment. You're buying something to grow wealth it's to grow an asset base, to live off one day, for some reason, whatever that might be to retire or to upgrade to home, or to get the kids through, you know, give them a headstart in life, whatever it is.

Chris Bates: But what we're trying to do is grow an asset base and a lot of people are going well, I'm doing it so I can get a, solve a tax problem on paying too much tax, et cetera. And you know, it's not really a quite raising to be buying property. You're going to a lot of people spruikers play on that thoughts and they say, Oh yeah, if you buy this, you can get a lot of depreciation. You'll get a lot back in your tax. And then the person falls for it and forgets what they're even doing, why they're even in the room is to buy an investment to grow well. So we get it a lot, I think. Yeah, even just last week a client was saying, yeah, well, you know, it'd be good if I buy an investment property, I'll have you know, save money on my tax.

Chris Bates: But when I was out, well, actually you won't actually, because we'll get, you know, a fixed rate, probably mid twos. And when you look at your interest bill, plus your strata, or plus the, you know, if not an apartment, if it's the maintenance, et cetera it's going to be very closely to neutrally geared if not potentially slightly positively geared. You may have a little bit of depreciation, even if it's an old build, they have depreciation. And so, yeah, it's, it's kinda almost neutrally geared and that's very unique and that's why I think the investor market's coming back for two reasons, one, because they're reading their interest rates are very low and they're starting to in the last week, we've seen, you know, existing clients come to us who, you know, thought about investment properties for years, but they've all of a sudden just come to us and said, Oh, we want to buy an investment property.

Chris Bates: And the other thing is that so I looked at, I was trying to throw up the interest rates Oh, and the other, and the other thing is that there's already a bit of a positive news spin, changing. Very quickly. It's gone from, you know, a big 30% for was actually the market's not going to fall at all. The market's going to go up because of low interest rates. So I think investors will start coming back where they're been really, you know, kind a run for the Hills for the last three or four years. So yeah, it's an interesting conversation. And maybe also those low interest rates will offset the fact that rental yields are certainly somewhat depressed at the moment. So it's a good point as well. So there's, there's a bit of a fear in the market that, you know, vacancy is a huge, you know, et cetera, but once people get their head around and go, actually, no, there's not actually a vacancy problem.

Chris Bates: So we've houses in good suburbs of Sydney, you know, there just isn't the assignment. No, and there's not a vacancy problems of good located well presented houses in Melbourne. It's not, they're still renting. Sorry. I mean, Perth. Yeah. so, you know, there's not really a vacancy problems with the properties that you know, investors should be buying. And so you'd have to worry about vacancy, right? You have to worry about international students, you have to worry about you know moratoriums and you know, all that sort of stuff. So I think once the investor realized that that's not what they're going to buy anyway, then they're not worried about the, the rental problems. So yeah, I think it's if you've got capacity right now, low rates, without doubt, going to create a bigger appetite for credit, that's what they do.

Chris Bates: And banks are now lending money easier, especially for investors. Maybe even potentially more if responsible lending rules change next year. So you put a flow of credit and you put low rates together. And you think people have got borrowing capacities lifts because you can borrow more money now. Then I think investors will come back and they're not, there's no fears around negative gearing going, like there was, you know, in the last few years.

Veronica Morgan: So yeah, all of those combined to say that if you are going to invest, particularly if you're looking at investing in Sydney I can speak, obviously with knowledge of that market, then you need to start looking at doing it now. Not when every man his dog has decided to jump on the bandwagon.

Chris Bates: And I think I'd argue, say, you know, Sydney, like you were saying already, I think it's you know, and so you're already, you know, probably one step behind it doesn't mean that it's not even in the 2012 to 17. Boom. yeah, I remember saying, you know, it's got to end at some point, but it just didn't end in 2014, 15, even though you thought, wow, you have a process keep going up. So even if you feel like you're a little bit late to the party, I think the party, or have a long, if rates stay low and they're likely to it's going to take a long time for those, the markets get repriced on 2% interest rates. So I think you've got plenty of time, but I get moving well, that's it.

Veronica Morgan: And so the RBA saying really that rates will be fixed slow for, you know, three years. And also, you know, the reality is it comes back to asset selection. You buy a good asset. It doesn't Sort of matter when you buy it. It's time mean net In, not timing. So you are buying a good asset for the longterm. It's just that if you've been sitting on your hands, it's probably time to get off them.

Chris Bates: Yeah. Yep. And I've already said that people are doing that. So the light, the more that you kind of sit on your hands, the worst it's going to get. So yeah, stand up.