Episode 157 | 2021 predictions & 2020 review | Host Special

As this year comes to an end, what does it bring for 2021?
No one could have expected the economy, let alone the property market, to be flipped on its head this year. New restrictions and cases were a daily occurrence with all industries having to pivot rapidly or succumb to the down turn. Seeing with 2020 vision, we look back in hindsight on the property market, and how it performed, changed and adapted to market conditions. Moreover, we look at how 2020 has laid the foundations for the years to come, with all time low interest rates, changes to stamp duty and most importantly what consumers are looking to buy.
Here’s what we covered:

Will investors come back into the market?
What allowed an uptick in consumers taking out mortgages?
How Labour losing the election had a massive impact on the property market.
What are banks trying to accomplish with high advertising budgets and refinance wars?
Have the grants for new homeowners been beneficial or detrimental
What will the stamp duty changes look like and how will they impact the overall market?
How has Covid altered what consumers are looking to buy and will this possibly translate to what developers build?
Will the access to super be hugely beneficial or will it compromise individuals futures?
Will there be a third wave of Covid with relaxing restrictions and the introduction of the vaccine?
What will happen at the end of payment holidays and jobkeeper?

RELEVANT EPISODES:
Episode 150 | Meighan Wells
Episode 126 | Stuart Wemyss
Episode 120 | Michael Yardney

Articles/Links:
Good Deeds: THE EMBARRASSED BUYER SYNDROME
Good Deeds: SYDNEY HOUSE PRICES HAVE STOPPED FALLING
Good Deeds: IS IT A GOOD TIME TO BUY PROPERTY IN SYDNEY NOW?
Home Buyer Academy - Free Course
Suburb Trends

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 on 15 December, 2020.

Veronica Morgan: Hasn't 2020 been a year of surprises. Not all of them. Great. Of course, but the property market has, for the most part defied all of the dire predictions that were made around a quarter of the way through this rollercoaster year. In this episode, Chris and I will take a look at what lessons we've learned, not just this year, but the bumpy ride we've been on extending back to the end of the last boom, what can we expect in 2021 will more money flow into the market through EES lending restrictions, will it all go so crazy that opera and or ethic will need to intervene at the end of 2021? And one thing that's really worth sticking around for today is the elephant rider bootcamp in a rising market where you have to move fast. How on earth do you work out what to pay and then avoid paying too much.

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 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 forecast report, which experts can you trust to get it right? The elephant in the room.com did I, you,

Veronica Morgan: We are recording this. What date is it? The 10th of December? I do believe the year almost everyone in real estate is pretty much saying, look, I want to hang up my boots right now with big. I just want to take all that I, right now, I think everybody's shutting up shop quicker than they normal earlier than they normally do. Let's go back because at the beginning of the year, I have to say that the end of this year in some regards actually feels like the beginning of the year when it was gangbusters and clearance rates were over 80% in Sydney. You know, we were definitely looking like we were on the crest of it another huge way,

Chris Bates: Right at the start of 2020s, feeling like the end of 2020, I think it's funny. You say you want to go on holidays. Now, the 10th of December I've seen over the last few years, clients have actually bought really well in this next Christmas run up vendors. Want sort of certainty going into Christmas and deals can be made, I guess, is that we usually say this time?

Veronica Morgan: Absolutely. It's funny. I was talking with Megan Wells last night doing at one of our Facebook lives. And she was saying how, how many deals they do on Christmas Eve? Because it's like at that final moment when people say, Oh God, yeah, yeah, I want it sorted. I just want to, into the holidays, knowing it's done, knowing what, what, I've got a clean slate for moving into the next day. And that is the normal sort of December last minute run at it. And, but I think people are just, you know, the fatigue. There's so many people that just agents have been saying now for quite a few weeks. And we were always contacting agents looking for off-market properties. Obviously you've gotta be vigilant in your pursuit of those and just beyond the case all the time. And so weeks ago, my team were feeding back to me to say, look, the agents that some of them are just saying, we're just given up and we just listening for next year now. So, and that's really unusual. Normally agents would just go full pill lists, sell list, sell this, sell what they can. But to, for them to say, you know what, it was shattered

Chris Bates: This year, Ron's, hasn't had the holidays, they haven't had the break. And they're just trying to get themselves through to Christmas. But I guess if you are in the market, this is probably gonna come in after that any bite, but hopefully you've got the deal before Christmas because a lot of sellers you know, don't want to then have to wait until February to then release, especially if all the agents go on holidays. So I guess the really interesting thing w before we talk about 20, 21, I think it's valuable and go back in time and you know, we've been doing this podcast. I think it's now three years in, in may. I think it is you know, 2018 was a really interesting new, you had the Royal commission Sydney, Melbourne were coming off the 2012 to seven, eight, boom. That's when all the doomsday talk was rife, you know, 30, 40% falls.

Chris Bates: You know, a lot of that was driven by the tightening of credit. And you know, because banks were freaking out and borrowing capacities were much tighter. And yeah. So when we went into that, so the early 2019, you know, Sydney and Melbourne were down like 15%, a lot of that was the fear around the sort of election and who was gonna win and labor would likely to win. So I think, you know, if you think about now 18 months later, I think it's interesting to even talk through what's happened over that period because you know, the next few years it seemed more things are gonna happen. You know, things are gonna pop up and April are going to be war over worried about this or that. And yeah, so that, that sort of pre-election time was really interesting. Wasn't it?

Veronica Morgan: Absolutely. It was. And look, I get really frustrated because in this business, you know, I've been in real estate now for 20 years and I watched these cycles go up and they go down and they go up and they go down and people sit on their hands when they're down. And they all rushing and climbing over each other to buy. When it goes up again and each time the market slows down, I said, people, don't you get it? This is not the end of the road. And if you find good opportunity, now you're in a, in the box seat because you're not competing for it. You get to choose, you get to take your time to properly evaluate the property properly, work out what it's worth, properly, negotiate for it. And why are you waiting to see what's going to happen? I can tell you what's going to happen.

Veronica Morgan: At some point, everyone's going to get off their hands at the same prices are gonna rise. So it's like, this is inevitable. That is inevitable. When that happens, no one knows how much the increase in over what period of time. No one knows, but we all know what the cycle does and what human beings do. And so I find that incredibly frustrating and it's the same deal at the moment, you know, everyone's panicking. And so they're paying whatever for anything. And it's like, don't, this is what people were doing in 2016 and 17. Some of them had their pants around their ankles when the markets suddenly hit the skins, you know, and they're very uncomfortable. And, and that's the moment where you look anything, what did I buy was on really thinking clearly when I bought this suit me and even forget the price you paid for a moment, does this really suit me?

Veronica Morgan: Is it a good asset? Is it really the property I want to live in for 10 years or whatever these questions are not, what's going through your head when it's FOMO. You know, these are not the logical questions that should be going through here. They're not going through your head. And instead in 2018, everyone's sitting on their hands and I'm like, Oh my God, I just give me your hand. Let me lead you to water. Please take advantage of these conditions. I don't want to do it. You know? So I think what is interesting though, is all the economists and you and I, we do this bullet forecast to report every year and I can't wait to do 20, 20 one's version of what I've been compiling. Some very interesting reports and predictions throughout this year. You know, we do this. And just to point out that anyone who thinks they're predicting what's going to happen in the market at any point, you know, is, is really just basically trying to get headline because there's really no other point to it.

Veronica Morgan: However, obviously big businesses and banks or whatever do do their modeling, and they have to have these scenarios so that they can actually make their decisions, but then they will chart out and make these, these scenarios public. And I've got this theory. I, people will do what people do. We all shape, you know, where it's running rampant and you know, all the predictions and all using the big data and all that sort of stuff. It can only go so far because at the end of the day, human beings, reacting on mass is really what drives the property market.

Chris Bates: Yeah, it's interesting. I worked beside we've mocked a yard and we had a really good chat at the heart of sort of the fear around COVID and you know, that the wiring around you know, even just human health was a huge worry there, right? Let alone the property market. And he made an interesting point where he just said, at some point I commented to the lawn. He said like, it was like an invisible line where things will flip the other way. People confidence will come back. People who've stopped. Transacting. People will be, you know, jobs will be opening up, et cetera. We don't know when that line is, but it's going to come at some point. And you know, obviously we've crossed that line. I think pre-election in 2018, you have to argue that our 2019, that was arguably one of the best times to buy, right?

Chris Bates: Because you had obviously they were going to win negative gearing changes. CJT whole Royal commission, responsible lending was wrong. There was a worry interest only cliff. But then as soon as literally they were won that election, I guess it was kind of like a trick triple sort of assault. You had the upper changes, reducing you know, assessment rights, which increase borrowing capacities. Then we had a double interest rate car, all the lenders relaxed because they were like, well, we're not going to get into much trouble about the Royal commission. And then process thought arising and finally kicked in. So, Oh, late last year. And I think process probably Rose pretty much back to what they were in 2017. So like about 15%. Is that what you saw in front of her, in that sort of late last year?

Veronica Morgan: Yeah, absolutely. I mean, I think what was interesting as we headed into the end of 2016, the market went gangbusters right up to Christmas in much has done this year, but I think what led it to go gangbusters really was it was overheated and there'd been two interest rate drops that year. And I think that they really spurred the market along and continued that boom. And then of course you're getting into 2017 and I think that was a natural end to the boom. But obviously underlying, it did have opera, you know, pulling the strings when it came to lending. So that was all happening, but it was, it was quite slow and protracted in its actual impact. But there was a bit of that warning sign at the end of 2016. You know, when, when the markets overheated at a time, when an even in a hot market, it usually slows down, then you think, Oh, do what's going on here?

Veronica Morgan: And, and markets do get to a point where they get ahead of themselves and then they, they will correct. Cause that that's sort of that whole premise of that. Right? So that in, and of course it re we felt it and I felt it in what we were seeing on the ground. And we always feel it before it's reflected in the data we felt in my, and I've got all my notes because every month we write notes for our clients, when we're doing our pricing research, we accompany that what's happening right now. How does that fit in the bigger picture? And certainly we felt that in May, 2017, the official figure is that the end of the boom is July, 2017. So we, we effectively felt it on the ground. We felt that retract our interests. We felt that change two months before it actually is reflected in the data.

Veronica Morgan: And so then of course it's like some people say like trying to catch a falling knife, you know, it sort of peaks. And it's like, Whoa, I don't want to buy now because you know, if I wait two months, it might be cheaper. Then I'll wait, six months might be cheaper then. And then vendors that are caught in the crossfire because the people that listed in one set of market conditions trying to sell on a different set of market conditions, it's that sudden. And so they're all freaking out. So there's this period of weakness in the market. Then you get people taking the listings off and then you get, and we had all this at the beginning of COVID

Chris Bates: A hundred percent.

Veronica Morgan: So those that had to sell were under pressure and agents would honestly, agents would just hammer them. You know, this is going to get, it's never going to get any better. This is what we're seeing in fifties. And this said by people in their late twenties, you know, really when there was a recession and you know, there's all this fear mongering going around and, and gathered some of this stuff, you know, it was like, Oh my God, you, people are not experts in this area. You really need to stick to your knitting and just do what your job is to do. Find a buyer seller, probably stop predicting because you don't know what you're talking about and all this stuff going on. And so you see this flax is weakness. You get some good process, some really terrible prices, lots of people taking the property off the market. And then of course vendors, aren't going to put their property on the market because they're not confident they're going to get their price.

Chris Bates: Well, that's exactly what's happened, right? So you have like lost G you know, prices are rising fast, you know, FOMO is King. And again, people were getting frustrated you know, early this year, it's a hot market. You know, we had a low interest rates, you know, they're much lower now than they were, but we talking, you know, home loans around, you know, low threes twos, but that was driving the market. And it was, you know, people were going well, you know, we've got to get in, et cetera, all that sort of FOMO was there. And then bang, COVID hit confidence, crash, massive increase in fee unemployment spot. The thing that was really interesting at this point in time, I didn't think it would ever happen, but I knew that it was possible was the payment holidays. That was a real key. Yes. Job keeper, you know, kept the incomes going, you know, yes, job seeker you know, small business sort of cash back, all they sort of stimulus things. But I think this pirate holidays is a key thing in COVID that really protected the property market. I never, I'm getting, you know, six months off pioneer mortgage and plus the ridiculously low fixed rates that were on offer. You know, we're talking, we choose, which kind of led into that. So the thing you just spoke about there, where, you know, there was a low, low listings already, you know, the last few years of quality assets, that's just inherent on the supply of good property.

Veronica Morgan: And I've said this before, though, but if you look back on, I have these graphs and Kent Lardner invented them. And he said in severe trends that he's got these graphs, which is the, Oh, no, he does have these graphs on Subu trends, which shows, but sales volumes over the years. And, you know, you can clearly see. And we felt that back in 2016, that volumes in 2006, 17, over 16, we're a third down across the board. Every suburb pretty much volumes were third down in 2017, over 16, and then recovered from that. That's been four years. We've had that fairly consistent. Even if you look at now transactions through that time, even through COVID that transaction is largely a pretty consistent. Now I can only talk about Sydney and inner Sydney, but I think that goes in the face of, like you're saying there were used to low volumes, but we're still talking about them.

Chris Bates: We didn't get any for sales really, like because of the payment holidays, because of people couldn't really move. So they were like, well, I can't transact here. I can't downsize or upgrade. And you know, don't have to sell my investment property because of other payment holidays. So, you know, the, all that raw fear, if there's going to be this, everyone's going to be selling their property. It just didn't happen. If anything, people were in the opposite, they actually, you know new homes hours with home builder went through the roof. It was a very successful property for the liberal liberal government, even though we don't think it's successful for the people taking that offer. And you know, there's huge renovation, boom, right? Like, you know, you can see it around all the tradies are flat chat and everyone's renovating their homes, you know, low rates spending a lot of time at home.

Chris Bates: But I think the lockdown in 2020, the big learnings, obviously this work from home and when you can see it in the search data, right at the heart of the boom of COVID where, you know, everyone was, you know, surge social was really high on REI. You could say, now they do amazing charts. And so I think that that sort of work from home thing. I don't think it's going to go away. And I do think it's changed by preferences. Long-Term, what's your, what are you seeing, I guess, Veronica, is that something you think is going to snap back to like old times or did he just kind of stick in,

Veronica Morgan: And I think one of the things that we've found through interviewing so many people on these podcasts this year, in particular, obviously over this then COVID has accelerated things that would have taken a decade to happen. And that's come through so many of our guests in, in all the different areas of expertise. And so that's a, that's a really interesting thing. And I think the work from home moving, if you want to call it that many way movement, certainly embedded itself. Now just generally, it's an expectation that we will have more flexible working arrangements. If we go into the office, it will be less than five days a week and you can choose to live in Brisbane if you want to and work in Sydney or however it works. So, so there's that flexibility. And I certainly you know, when we did, I did the episode with Megan Wells a couple of weeks back talking about Brisbane.

Veronica Morgan: For instance, there's obviously been massive demand for family homes in Brisbane. A lot of them from Melbourne have to lock down, but Sydney saw does as well and probably from elsewhere and returning experts for that matter. And because Brisbane prices have always been somewhat hampered by, by the lack of, I guess, the big employers and the big jobs being up there. And so therefore big incomes. And now there's that that's opening up that flexibility for people on big incomes to actually live there and work flexibly. So changing that dynamic if places like Brisbane, and it's also changing the dynamic of places like Newcastle and, and not, not even in these cities, it's actually changed the dynamic in, in Southern Highlands, in the upper bar and Bay. I mean, people are now taking advantage of the long Hill dreams through the sea change and tree change.

Veronica Morgan: And you know, and so this is, it's a dilution in a way, but the weird thing is that I'm finding is that quite often, you know, we'll look at a property that's coming on the market for a client and they'll say, well, you know what, what's the vendor story. What's why, you know, why are they upgrading? What's what's the deal? Oh, no, they're moving out of Sydney, but there's plenty of people to fill their homes. You know, there's this demand for people cooped up at home with their kids, with their partner working, everything's going at home to just burst out of the Gates as soon as lockdown ended. So I need more space. It's like spaces, the currency, like that's the big thing that's valuable, but I just, before sort of Hannah you again, the issue with this is it, we've got a two tier market, you know, we've got family homes and larger homes, a larger apartments doing very, very well across the board and got small one bedroom apartment.

Veronica Morgan: So agents are telling me they don't even want to list them. Property managers are telling me nobody wants to rent them. So one bedroom apartments, and this comes back to that space is what people do. Well, nobody wants a one bedroom apartment and then it's a two-bedroom apartments. Well fine. Somebody previously would have rented, say a one bedroom apartment now can afford a two bedroom for the same. I get the space. That's great, but there's a massive supply of two bedroom apartments in a lot of areas and a problem with oversupply. And now it's coming home to roost that there's been too much really poorly thought out and poorly built stock in concentrated in areas. So these, I mean, when you look at the listings numbers back to sales volumes, the listings listing numbers in some areas of apartments is through the roof in the rental and the sale side. So we talk about the boom. We talk about FOMO. We talk about this, this process rising you know, clearance rate rising across every capital city. Basically there's this demand for houses. It is not the same for apartments. And it's also going to be out outer rings when there's loads of supply and high levels of debt.

Chris Bates: I think, yeah, I think the work from home sort of change the flexible work now becoming you know, much more confident that if you swap jobs, your next job is going to offer you flexible work. Cause that's the big thing. You can move further away from the city, but if you want to change jobs or you have to change jobs, can you get another job that offers flexible work? And before COVID, I don't think that was, you were confident to give you that. So you would ultimately have to stay around the city because of that future work change. But I think that's really been the best thing for housing affordability to take the pressure cooker out of the rings of our city. And for the first time buyers, it was becoming a real negative to living in Sydney because there was not a real solution that people were working towards.

Chris Bates: You know, I can't live in the central coast cause I can't commute five days a week and have a good work-life balance. I just can't see it happening. So then I can't leave the CD because they don't want to lose their employment, which is important for their family. Right. So it was a really problem that was just kind of growing. And I think what we've seen is a lot of our first-time buyers. And now, you know, they thought about moving to say the central coast or North of Wollongong or other places, but they just didn't have the confidence to do it, but we've a complete shifts. I think that's going to definitely stick around, but it's not going to be the whole of central coast, the whole of Newcastle, et cetera, lonely, be the stuff that people are going to willing to leave Sydney for.

Chris Bates: You know, you're not going to move to central cars and then leaving a, you know, suburb nowhere near the beach, not in a great place and then still have to commute. You want something nice if you're going to make that move. And I guess the interesting thing is that there's been very low stock in these areas as well. So it doesn't take much for an increase in demand to start to really push prices out, which you've, we've already started to say. So then that, you know, reduces the block mood. If you're going to move to the central currency processes, aren't that much cheaper. You know what I mean? So I think ultimately the people thought that because of now work from home, the inner ring and the good properties that going to not be as desirable, but I can tell you that even more desirable now, because there's so much people in apartments and their life is demographics.

Chris Bates: You know, people are getting older and people are having families and they need more space. And there's been this sort of people have been stuck in things that are too small and ultimately they get an opportunity to upgrade in something a bit bigger. They'll take it. And so all the houses that aren't compromised in the inner rings and along the beaches will still do really well because ultimately all the lifestyle benefits of living in Sydney. And a lot of people who aren't, who aren't from Sydney don't want to move outside of Sydney. So, you know, people moving in from all over the world, that's why they're living in Sydney as I, you know, the lost benefits and they want to leave around that sort of water and the city and where it's all happening. So they don't really want to move to Southern Highlands or you know, Woodland golf. They want to be in the action.

Veronica Morgan: The Northern beaches is, is a really interesting case study on this, you know, because that's always been an issue that has always been an issue. There is public transport and, you know, the, she the pain of the commute has some people have had, the lifestyle has been strong enough or, or desirable enough for them to overcome that pain and other people have made the move and then realize that the lifestyle doesn't make up for the pain of that now that that pain is diminished. And it hasn't diminished because there's been a nice new train line or something being built, it's diminished because of the need to commute. And so I think that areas such as Northern beaches where you happen to buy in at a perfect time you know, that potentially that's going to be a sustainable change in terms of how buyers view that area, because it's, there's been a lot of over the years, I've spoken to so many buyers.

Veronica Morgan: I would Murph moved there, but I only, but the problem is of course the commute. So that's gone that our obstacle has gone. I would think that their continued demand for those areas is going to be there. And I think to certainly within sort of the two K sorry, the, to take the, our drivers, the CBDs across the board, you know, that, that sort of overcomes that, that tyranny of distance it's is enough to put up with for a couple of days, but certainly not a five day commute. And the lifestyle will outweigh, you know, we'll certainly though the importance of lifestyle I think, has really come to the fore as more important than the commute. And so that's, that's a shift

Chris Bates: It's interesting that it's not is going to be set locked in though. Right. Because I think it was just this week, I was reading about a law firm that is trying to make it 60, 40, 60 at work 40 at home. So that's still three commute you've got to make of an hour and a half. That's two, 10 hours a week of commute. I know,

Veronica Morgan: I agree. I honestly think even for me, I would not want to feel like I had to do it even two days a week personally. I think that that might be more, more palatable than say, five days a week. Let's face it. So, you know, let's, let's see. But I do think that that will be a more of a systemic change or structural change. The other thing that I think is really pointed out, if you do go back and look at sort of the rising peak up to July, 2017 as officially recorded, and you see the down the decline, right until the end of 2018. And I, I retrospectively just before the election in 2019, which is in may, if anyone's forgotten, I retrospectively actually did some research on properties are bought and sold between the last six months of the peak. I think it was.

Veronica Morgan: And then within that downturn time to look at the proportion that it sold at a loss versus at a gain all the same money, et cetera, et cetera. And I could see the tipping point had happened actually in really bang on December, 2018, you can actually see it in this data was the bottom of the market, but of course we never see the bottom until it's in the rear vision mirror. And, you know, and I did this analysis, I think it was in April and I did I wrote a piece on it and then the next thing is the election happens. And then we had a surprise outcome and bang, it takes off again. So, but I could already see that things were changing. So therefore it's hard to know what would have happened. Had labor got in, certainly we've had a market change that we had, it would have been more gradual, but we were already experiencing a change in a turnaround.

Veronica Morgan: It just, it was a very slow turnaround. So I think what, so the consistency, and if you think back to the messages that we were getting from our guests, and obviously in partying, when we did the podcast in the beginning of 2019, was that quality property and good locations, the importance of those two things, right? So, and the location on its own is not enough. The quality property is really, really important. They are the properties that stand the test of time. They're the properties that don't fall in value as much. They are properties are still in demand in a market like in 2018. And so that's, that's the stuff that never changes. So right now we see people fighting over stuff on mine roads. Again, 2018 people wouldn't touch something on a main road. I take forever to sell, you know, these principles they play out and people do the same things.

Veronica Morgan: I make the same mistakes, every single, you know, cycle. There's nothing new in any of that. And listen to a podcast, Stewart Williams on his investor podcast. Recently, it was based on basically how to prepare for 2021. And he was basically saying, change is inevitable. We keep talking about unprecedented. Well, you know, the GFC was unprecedented and September, you know, nine 11, the towers falling was unprecedented and this is unprecedented. Everything's unprecedented, you know, whenever a crash in the stock market for instance is unprecedented, but what is never unprecedented is the reaction. You know, we all experience change. The magnitude varies the cause of that change varies, but the human reaction to that change and uncertainty is pretty predictable.

Chris Bates: Yeah, that's right. Exactly. He goes through the same sort of emotional cycle. And I guess it's trying to just not be, you know, that the things is always a better day coming, I guess, and not act irrational. I think at that when the fee was that as high as we had a couple of clients pulled out you bought before they sold. And so maybe they bought in January or February, and then they were planning to sell in March, April, and they'll just getting local offers and they were both good assets. One was a place in need, you've run a in Roselle. And the other one was, you know, a good, a pop in and bond off of, you know, nicer, really quite straight and nice outlook. So yeah, I remember it brought me through the ice, but probably solved, I guess, as a percentage turn in 15 or 20% higher than what the offers they were getting in the middle of COVID just a few months later probably wished they held onto those properties a bit longer. They couldn't really digest the big mortgages on both of them. So,

Veronica Morgan: And that's a big, it's a big coal, isn't it? You know, that's, that's, you got pressures coming from all, all sides and you can understand why some people chose to take those offers. And you can also equally understand why people who didn't weren't in that position with a hat too, was it said not I'm going to wait.

Chris Bates: Yeah, that's right. And if you could have waited out through that fee SoCo yeah. You would have been much better. And if you could have got to, when it's the market's hot again, like it is sort of getting there. Yeah, I think obviously you get a better result. I think that the last six months, I don't think it's going to be like next year. I think there's going to be a bit it's not probably good news for first-time buyers. I think you know, a real opportunity for them was in that last six months where a lot of upgraders weren't in the market, a lot of investors weren't in the market. And so the only people really out there willing to buy was a lot of it was first-time buyers. You know, a lot of upgraders had to sell their property to then get ready and buy something else or they wanted to wait til they could see good quality properties on the market. There's been very little investors in the last six months. We've started to taking the last couple of months. But you know, and, and that's been a good thing when, when there's low investors in the market, it means that, you know, there's only other two real key markets where there's, you know, upgrade isn't downsizes and first-time buyers, you know? And so there's less competition when you're out there buying, but I think that's going to really change next year just because of, you know, which we'll talk about all the things going into 2021. So,

Veronica Morgan: Well, it's interesting you say about investors because obviously that the last boom was heavily fueled by investors. They you know, they were the biggest pressure on first home buyers was investors because often the same property they were going for. And that was hard. That was hard with this home buyers and ideating flight process beyond where they should have been. And, you know, I'd spoken to a number of agents in, and some of them like one in Bondai beach for instance, was saying that, you know, at the height of it, you know, she was saying she reckon 90 to 95% of the property she was selling was to investors ridiculously high that's that's unsustainably high and that's dangerously high. So, you know, that's a sign for people not to pull out white, you know because this popular theory that investors don't overpay, but, you know, just as emotional as anybody else, really

Chris Bates: Not even center properties that probably have pangs, that's how you win it. I think you're right. And that's what caused appar to really, that didn't rarely target home buyers. What really targeted home buyers was the Royal commission and responsible lending. And that's what really, and and also affordability because you know, when you're buying a house at 1.5 million and the rights were much higher than they are today people like, well, I can't really justify buying a two bedroom Terry's at 1.6, you know, like I think there was a natural sort of which you spoke about the slowing down the Meyer to let wages sorta catch up till things are a bit more affordable. But I mean, I think if investors do come into the market with a lot of steam next year, I think that's something that opera will look to target, but you know, a loader investors you know, they can't borrow anywhere near what they could buy borrow in that. Boom, you know, you could have borrowed 10 times salary in 2014, which is just crazy. If you're on 300 grand a year, you could borrow $3 million a day. That's probably closer to 1.8. Maybe, you know, if you go to a few lenders, maybe you could borrow maybe 2.2, 2.3. Like if you know what you're doing, but it's not 10 times salary. So investors haven't got that sort of same borrowing capacity like they did back then.

Veronica Morgan: Well also the rents down. So therefore that does impact on their cash flows. So that's, that's a change too, but it's funny. You just reminded me that I did write a blog. And I'll put the link in the show notes if anyone's interested in going back in time, because I wrote a blog at the beginning at the end of 2016, and it was talking about the embarrassed buyer or something, the barest bias syndrome, because what we were finding is that agents were coming to us and saying, I think it was in 2006. It might've been 2017, but anyway, I'll find it. Agents were coming to us at auction and saying I don't know what happened, but I suppose my three best bites and it was happening across the board. And they had no idea why I'd laid off these buyers. Whereas we've been dealing with our clients and we've been finding that our clients thought they were ready to buy and then we'd find a property.

Veronica Morgan: And one of the first things we do is let the broken, I look, this is what we're looking at. This is where the auction is. We might be making an offer, blah, blah, blah. This is what, this is our plan. Do you see any obstacles? And it, one by one, every single brokers are, hang on a minute, we've got to, we've got to lodge a whole heap, more paperwork. And, and that would slow down their approvals. So these are people that thought they were approved how to price. And it slowed down pretty much across the board. They all slowed down by about a month until we could, they could get back in proper shape to actually buy. So we had to sort of cool edge hits on these properties. But when we were ready, we'd go to auction that Asian sort of bit, like, I don't know what's happening.

Veronica Morgan: It's like, I know what's happened. They've gone at the last minute because buyers usually get stuff out of order and they go and at the last minute go, Oh yeah, but just check with my broker. That's all good. And the broker said, Oh no, you can't go and buy that. You won't get that much money. And they got and they've pulled the pin. Right? And so I actually put together this presentation and I went around to some of these agencies and said, look, you know, I've got a little secret for you. This is what's going on. See barest buyers syndrome, try asking a few different questions and they've come back to me and go, are you kidding me? Like this is it. The buyer doesn't want to admit. They haven't been able to get finance and they're sort of, they scratching their heads. They didn't even know why this was a really interesting thing.

Chris Bates: What was that year again? Sorry. It was that

Veronica Morgan: Good. I actually, while we're talking, you use chat, I'll just look it up the blog and I'll tell you exactly when I wrote it.

Chris Bates: Yeah. It's I mean, it's, that is a hundred percent what's happening now. It's it's you know, w we're busy as a business, but I think the, you know, and we're trying to, but the thing that's really chewing up our Conda, our, you know, our hours of work is dealing with banks and the banks have all got flooded with work because there's been a refinance war going on through COVID. I mean, everyone probably was saying cash back offers. They've all sort of, you know, marketing the banks and marketing through the roof. Every time you turn the TV on, when you look at ads everywhere, you can see the banks. And so all the banks are trying to steal each other's customers. They're offering ridiculous deals, fixed rates that are, you know, the lowest they've ever been cashback would say, don't even need to do, but it's like $4,000 to come, you know, swap to us.

Chris Bates: So the banks are flooded with all these refinances. Then you've got a triple C just released a report. And there was this loyalty taxes in the pipe. And the RBI is said, you know, you've got, you know, millions of Highline customers really reconsidering to refinance, and that's been, so that's flooding the banks, credit teams. And then a lot of the way that banks assess these loans is they offshore it. Now they go to India or they go to Philippines and all those areas aren't able to hire and they're losing staff and then not able to sort of process anywhere near amount of loan. So it's a real nightmare at the moment, especially with pre-approvals. If you're thinking about buying, a lot of banks are saying, no, we don't want to do any of them. They're just not going to convert for us. You're going to have go somewhere else for pre-approval.

Veronica Morgan: If it's a purchase. Yeah. We'll take you on as a customer, but potentially, you know, we we've just started doing a lot of work with NAB and it was, we went there because they were much quicker. You know, Ben has just sent this morning. It's like, whenever there's a bank, there's a bit faster. People just swap. So you are thinking about doing something next to you, definitely get your finance sorted and stay very close to your broker because you know, things will change, you know, policy, bank offers, et cetera. So you're going to, it's a key element to be buyer ready. When the market's hot, you want to be able to push the button when the right property comes on. Totally. I just found that at night, I wrote that blog in November, 2017. So that was obviously as the market had past its peak. And that's when the agents were like, what the hell is going on? You know, and that's falling and et cetera, et cetera, et cetera. So that sort of explains, yeah.

Veronica Morgan: If you like what you're hearing here, please share this episode with others, you feel would benefit. And while you're at it, why not leave us an iTunes review five stars, please. Every review helps make it easier for other people to find us and hear what our amazing guests have to say. We love hearing your questions and we're planning more listener Q and a episodes. Please send your questions in. You can send them via the website, which is the elephant in the room.com.edu or directly via email to questions@theelephantintheroom.com.edu. Sorry.

Veronica Morgan: Yeah. So I guess moving into 2021, you know, this there's lessons in history, you know, and, and I'll have to dig out one of my other blogs as well, which is basically tracing all these brands, always bustle all these brands, all these buses is nothing new in this, you know, so it's like, well, what is new? It sorta does get a bit boring. And we just said the same thing over and over. And so if we head into 2021 and it's going to be booming, then we have to still focus and keep focused on what is the right property to buy? What is a good asset? How do we work out? What to pay for it? How do we not get completely caught up in the emotion and the fear and all that sort of stuff that's going on? How do we just, you know, get Zen about this?

Veronica Morgan: I think you're exactly right. Like I think in a hot market, it's so easy to feel FOMO and pain because you can miss it at auction. You can get all excited. Something can wait three or four weeks planning your furniture and getting quotes on renovations and all these sort of things. And you go to the auction, you get blown out on the first offer. And so you just don't want to go through that pain again. And so I think two things, one get professional in that market that you want to help to make sure that, you know, you're acting not as emotional as you should be, and you're ultimately getting a quality asset and you're getting the upper hand at the negotiation, which, you know, property the bootcamp today. We'll, we'll kind of go through that in a bit more detail. But if you

Chris Bates: Look at just the, I guess the data, I mean, consumer confidence is through the roof. And I do like these surveys, you know, Westpac do them now do them Emmy bank. And I really, you know, survey people and say, how are you, how confident are you about the economy or business confidence, et cetera. And I do think that they really show the roller coaster of people. I think the interesting one at the Westpac where it says the Tom Dubai index and that's kind of the highest it's ever been, I think from when I last looked at it. And so that showed me that Australians think it's a good time to buy, which obviously encourages people to go out and look at property, et cetera, et cetera.

Veronica Morgan: And it just shows it, Australians don't know anything about property because a good time of I was in 2019, not now means all of them to think that it's a good darn to buy for the prices to rise. It just nuts,

Chris Bates: Not exactly wrong. So it's not something you should wait for that to be high. And then you count the shape falling full, you know, that are kind of excited, I guess, interest rates. Without that, you know, I'll be, I used to say for years, interest rates don't affect property process. It was just their fraud common sense that it did. And I had to admit in a report a couple of years ago that they do. And when you've got, you know, variable interest rates at like 2.4, 2.5% when you got fixed rates for five years, at 1.99 investors can borrow for five years at 2.49 interest only. So injures rights without doubt drive a lot of behavior. But I think by preferences, we'll, we'll be driving also, you know, people will be not willing to compromise like they did prior to COVID, I don't think and that we're willing to go a bit further than they would if they can get a bit more land, it'd be more Hass.

Veronica Morgan: Yeah, I think, yeah, there's definitely some behavioral change that has come about and it, I think we can expect to continue into 2021. And I think too, I would encourage anyone. Who's got a bit of time over the Christmas break and maybe we should put in the show notes here just to at hot links, if you like back to all our coronavirus episodes. Cause you know, all the a good beginning of lockdown, you and I got a whole bunch of guests on to talk about. We had Shane Oliver, Eliza Rowan, we had Stewart Weems on, we had who was, we have a mock, a Mark [inaudible]. We had origin, we had heaps of really good thinkers in this space and people with amazing access to data that it came on and gave their ideas and, and predictions and what they thought was going to happen.

Veronica Morgan: So I would say, as I said, we'll put a list in there so that you've got easy access to them, but, and I'm going to do that myself. You know, it's great to review this and say, well, what did we think was going to happen? And what did happen? What were the crew asking back then? What were the fees that we all had back then? How has it played out? And obviously COVID-19 is still playing out. But, but I think that, I guess the whole, the whole market's going to fall off a cliff, everyone's going to lose a job type thinking certainly has proven not to actually transpire

Chris Bates: And the opposite now, as well as you know, every day it's like Ari. I was reading this morning, you know, it was all over the IFR last week and a price is going to be higher than 2017. And so the positive feedback loop is definitely starting. And you know, market's gonna fall 30% now flat is going to rise 30%. And so everyone just that's going to create an overconfidence. It's going to bring a lot of investors back. And you know, if you're a, got a say, you've got arm, you're in a pretty strong position from an equity point of view and you've always been quite conservative. So you paid down your mortgage and your mortgage is very low right now, even those clients are starting to come to us and say, well, maybe I should, Boston investment property thought the super conservative people being conservative, they're starting to come.

Chris Bates: So that to me is kind of like a scientist say, well, if they're thinking about taking action, what about the people who are a bit more aggressive and a bit more sort of always stretching their borrowing capacity? And so if you've got to save a couple hundred thousand dollars in the bank, you're only getting 1% on that money. So low rates force people to, to invest. And that's what happened all the way through the, you know, the, after the JFC that really, you know, was one of the reasons why markets went through the roof, it's because the right to lie. And so, yeah, 20, 21 is going to be a tough year. If you're not on the ball, you don't, you know, you get potentially buy the wrong property. You might be overpaying, you know, you might be all sorts of things because I think it's going to be pretty hot where people get quite desperate.

Veronica Morgan: Yeah. And it's, yeah, just that keeping calm in these conditions is really quite difficult at list of potential policy changes that we could quickly run through. You know, we've talked about responsible lending and obviously there's talk about change legislation early in the year there in new South Wales, there's there's and we stamped you the potential of stamp duty to be removed or an opt-in opt-out system and to broad based land tax. And of course, we had that conversation with Brendan coats back in episode one 53, not too long ago, if anyone's interested in that foreign stamp duty, what's on the cards there. Do you think Chris?

Chris Bates: Yeah, we, we put a huge penalty on foreign money in the boom, because it was a really a way to sort of get some brownie points with first-time buyers because first-time buyers, Oh, it's all the foreigners that are buying the property. That's why I can't afford to buy a property. So that was sort of a, a story that was out in the marketplace in the media. So the government said, we'll put a big cost stanchion into United set of 4%. It's 12%. So I can imagine that that's going to go because they won't change it. They can buy established property, but they don't have to pay this beat surcharge because they're going to want something to sell to foreign investors, right. Because no, one's buying the new apartments on the buy new house and land package, but no one's buying a problem. And so if they get rid of that foreign stamp G2, I think that'll create a bit more demand.

Chris Bates: This, I reckon something like that will happen. You already saw a home builder, 2.0 got extended. So I reckon that's going to keep continuing access to superannuation. It's going to be a really big, you know, a big report came out, that's potentially going to happen. These are all positives in terms of creating more demand at a time when demand is already sort of and you've got QA to which, you know, they don't really want to do, but ultimately if the world, you know, is struggling at a global level with chronic training for economic growth rates around the world, or stay low, the government has to try to keep our exchange rate, you know, competitive. And the only way to do that is probably to print money, quantitative easing sort of you know, they did a hundred billion, the another a hundred billion, right. The budget probably, you know, there's always that saying don't waste a good crisis and it's really an opportunity for the government to spend a lot of money. And so I reckon the next budget's going to be pretty big, you know, in terms of spending on infrastructure and all that sort of stuff. So, because we thought what unemployment's at 7%, we've got to get that down. That's why we've got a huge, you know deficit. So

Veronica Morgan: The government need to extend the home builder scheme because, you know, they might have, they might run into a shortage of trades innovating anyway.

Chris Bates: Yeah, it's a good problem to have, but I think that ultimately, you know, trying to create jobs is, is going to win votes at the moment. But it's interesting. We might always sound positive and there's always no risks, but always big risks. I can go back every year. At least Trump's not on that list.

Veronica Morgan: We still have Reese coming to this stage digress just for a minute. He's not out of that oval office yet. And I'm until burdens and all grad. And even after, I mean, it can be a mess with one on the side, but I just was checking out world this morning. It's one of those, those websites that I sort of check out every now and then 295,000 dead in the U S that's, you know, and the predictions are that the forecast off of 400,000 dead before bonds inaugurated. And that's just

Chris Bates: Not just the deaths, it's really the cases. I mean, I'm not gonna say I'm a Corona expert, there's enough of those out there. But I think the real, the amount of cases per days is, you know, and there's zero control the vaccine as well. I mean, we're not going to go there as well, but you know, do people who don't have the anti-vax is you know, they're not just the only people not willing to take a new vaccine because no one really knows. So I think that's gonna be interesting. Is there a third way, you know, that's why we're freaking out

Veronica Morgan: As, so, as we record this, the vaccine, as I think of yesterday is being released in the UK so far. So yeah. How that plays out. We don't know how effective that's going to be. We don't know this. Yes. You know, normally there's what 10 years spent developing vaccines. And this has all been done in 10 minutes. So it's, there's a hell of a lot of unknowns as to how that's going to transpire. And does that send us back to normal or what, you know, who knows? We just got to just do what we do, know what we know today?

Chris Bates: Well, that's right. If we get a third wife then we get to go to another lockdown, you know, I, I think that that will be what happens, you know, they don't want to get this far and then not lock down again. And so,

Veronica Morgan: And Europe, you know third lockdown, so yeah,

Chris Bates: Exactly. And then the impacts of that really, we're not going to get the tourism from global, you know, our CBDs I'd family visiting from Melbourne. This week actually, you know, there've been a tough year down there for them, but, you know, we went around so they offer half, it was dead, you know, for the place that you're in the middle of December. Usually it used to get nothing's the number one tourist attraction started, but no, there was not a one, you know, you could actually get a say to upper bar and have some launch, you know, like it's just pretty crazy, beautiful day as well. So you couldn't even say it with the weather, but you know, the CBDs, you know, getting people back to the CBD and the tours, and that's where most overseas travel hits, you know, the rural travel that's going to be going crazy.

Chris Bates: You know, you look at places. And so the tourism, you know, in the rural locations will go through the roof because I was able to travel around the home. So there's no real problem to our economy. There, it's just the, our CBDs and all the businesses that thrive off that tourism. And I think the Chinese relationship, I'm not going to write too much comment on that one, but you know, it is something that, you know, ultimately you know, we've got to be careful with. And I think that what we're already seeing with a lot of people the media loves to write articles and say, you know, in September they said that the market was going to crash because of payment holidays and job cake was going to end well, that all got extended. And so even if we get to a point next year, when payment holidays at finishing that last four months, so six months possible months CBI have already said that they are going to extend it. So, you know, they're trying to get a a re if you didn't have problems paying a mortgage product COVID then you can potentially get even longer. And so I don't think the payment holidays is really something to be too worried about. It's already falling dramatically. And the same with stroke, you know, there is there's rules around getting joke paper from a business revenue point of view. And who's to say the government just doesn't extend it to those businesses that are really struggling still. So

Veronica Morgan: When, when that rolled out and that was, it was great and Swift in, and we needed that feeling of the government's got our back and we're supported. And so we don't have to really freak out and panic. And I remember that feeling myself, you know, back in April and you know, and, and yes, we qualified for the first quarter, but we certainly don't qualify now. And so it was, it was, it was really good to just know that, okay, we're, we're okay for the moment we don't have to panic. And I think that's probably one of the eject objectives of it, but of course, because it had to be so swiftly rolled out it, they can't put red tape in early on, you know what I mean? They, to basically get that money out there and into the economy, and now I guess they can finesse it and fine tune it and actually, and, and direct it more to where it's needed and hopefully they do so, and totally, you know, those CBD businesses. And obviously hospitality has been so hard here. And you know, there's certain industries that or certain certain industries that, that have ongoing need because you know, the businesses will be viable once we're no longer in the grip of a pandemic.

Chris Bates: Yeah, exactly. Right. So I think now going into next year, it's all about buying quality assets, which are the only things that any different to last year for these different today. It's always going to be about that and so quality over quantity. But I think the hot pot is we probably more likely going to see more quality properties come on. I think you'd probably agree with that Veronica. That's what, you know, when prices rise, we generally get more supply and better quality assets. Do you think that's

Veronica Morgan: Yes, it does. Yes, it does. I think that the problem is when prices are rising is a buyer's ability to discern between a good asset and a bad-ass. It is diminished. And I think that's the challenge for buyers. And I think also an interestingly enough, I've been having conversations with number agents as well. I love the sort of on the ground, you know, what's happening. Cause there's all the rumblings of if what's ahead or, or what's about to happen. And, you know, one is the vendor's expectations on price. Stratospheric. Now what happens when that happens? Right? So the vendor's expectations rise and for a period of time, buyers may rise to meet them. And some of these vendors, then they quite disappointed because they didn't get their ridiculous price, but then they got an amazing price, but they can't see it. And then there's a point where the vendors just get just a little bit out of reach of the buyers.

Veronica Morgan: The buyers just go, no, you're kidding me. No way. They're not. I've been in nearly every boom. There's a point at which things happened. You can go to watch and they can be competitive. And then you, you just go and you're kidding me. Wait, haven't hit reserve yet. You joking and biased. Nah, I'm not doing it anymore. And so when that happens here is rates start to fall. And then there's this sort of commentary around our process, pulling that market's done tanking, blah, blah, blah. It's actually not necessarily the market tanking link, clearance rise, brilliance rates fall. It can be very much a reflection of how out of control the vendors are. So, you know, and I already, we're getting some rumblings of that. And of course these, these owners, a lot of these stock is off market stock. That's coming on the market now because the agents, some of them agents that haven't got her holidays mentally, still quite as to working and they're putting these properties on and we're going through them and it's like, yes, clients keen. Let's, let's see if we can work a deal or hang, hang five. They now want an extra couple hundred thousand. That's a shame because my client was prepared to pay fair market value. That's not fair market value. And then not one of the agents said to me, they'd not feeling the fear of 20, 21. You're not fearful that they're gonna to taking a risk by waiting. And so that's also going to hold, that's going to keep listings down.

Chris Bates: You're right. Actually I think that everyone varies what they own more than it's actually worth. That's just a behavioral bias and something you want to buy. You think it's worth less than it's worth. I mean, you want to get a bargain. You want to get a good deal. As soon as you buy that property though, you think it's worth more than what you paid. So easy to think your property is worth more than it is. And you know, you say [inaudible] just up the road and I'm like, Oh, I saw it for that. And I'm like, Oh, that means I must be worth this. And you know, like, and I'm just laughing at myself thinking, and the reality is you start trying to justify or months got that. And you know, and it's so, you know, and then you think, well, I'm not going to sell them on. If I was thinking of selling, I'm not going to sell mine for anything less than this, because that's what they got. And, you know, ultimately you starting to look powerful, the reasons why they ultimately got that price. It was a really competitive at the time it sold what was else was on the market. And yeah, and so you can see vendors can easily get overconfident based on sales and just what they read in the papers.

Veronica Morgan: And before we get into the bootcamp, which we've promised you, there's some good juicy tips in that such as whole five, I'm going to give you a quick Dumbo. So this really, I guess the theme of this episode is that there's nothing new in the world. It's all happened before. And if there's different stimulus and different macro things happening at the end of the day, what translates into the property market is the way people react to it. And that's where there is nothing new and in time. And this is a little story from when I was a sales agent and the market was hot. This would have been probably about 2002, maybe 2001 hot, hot, hot, crazy, crazy, crazy, great time to sell property. And in fact, in 2001 just before September 11 hit, as in literally the towers came down, I had a hundred percent clearance rate up to the September 15 that year.

Veronica Morgan: And you know, and then everyone's did the same thing. Well, my God, what's gonna happen in the end of the world. Price is never going to rise. Gains really gonna impact us. What's this going to happen? I'm going to go home. We're going to have a God. And then, you know, we sort of limps to the end of that year. And then the next year it took off again and the boom went right through to September, 2003. So there's a good case study, right? For, for big unprecedented things, immediate reaction by people sitting on their hands and going, Oh my God, I'm a God. And then it's like, Oh, let's get on with business. So around about that time, there was this, there's a show on television. It wasn't location, location, location, Australia, but I think it might've been location location. You know, that one with Michael Cape and it was an auction or one of those shows anyway, and there was this case study of a, of a couple, had a house in Balmain.

Veronica Morgan: And of course I was selling in Belmont at the time. And there was this hapless local agent, and he didn't stay in real estate, very long. This guy failing new agent and he got this listing and it was going to auction and this, the people that own the house had ridiculously high expectations. And it was quite funny because it was, they'd had friends for lunch, you know, on the balcony at the back of their house. And it was an awful house actually, because one of my colleagues ended up getting the listing after this guy didn't get it. And we all went through it. It was horrible. Had a cave for a bit. It was a terrible house, but, you know, definitely see. Great. But anyway, so it struggled, of course it struggled because they had these things wrong with it, but they're all sitting out in the deck, having lunch with the friends and shoddy and all that sort of stuff.

Veronica Morgan: As you do talking about the auction, Oh, of course it's worth it. Might've been 800,000 back then or a million dollars, whatever it was, of course it's worth that, that much it's in Balmain. And it's like this, like it's sort of attitude by these people and their friends that look, people will pay whatever in Belmont, right? So the guy is tasted to auction. It's a total, fizzer, you know, there's a few buyers on it, but they're not, they're not really that active. The event, those expectations are off the Richter scale. And you've got this, these lonely, you know, in shock this guy, the agent walking up the lane, carrying his signboard, he's head bowed or dejected anyway, when those people sold, because it was sold by a colleague of mine subsequently, but they'd had offers in that campaign. There were a lot more than they ultimately sold for.

Veronica Morgan: And that's where the Dumbo is. They convince the market was so hot that people will pay whatever they wanted. You know, it seemed bear main. Don't you get it buyers it's I think it's worth this. And so therefore you should just be prepared to pay it because, and it was a pretty unattractive sort of attitude on a vendor's part. And sometimes they have that attitude. And it certainly, as I said, there were, there were probably, I don't, I don't remember the exact figures, but I know that they, they solve for significantly less than, than offers that had through that campaign. And so that's a danger. And particularly if you've got a C grade property. Yep.

Chris Bates: Yeah, yeah, exactly. If you've got a property that you're getting great offers on versus a great a property where it's super hot and you, you know, you probably can't have that mentality that it will get be hot on auction day in three weeks time, because of all the open homes, et cetera. People are dying to buy into your streets, see the local buyers want to, you know, out of town, you know, et cetera, everyone wants your property. Then maybe you can talk a little bit more risk with a good office. And that kind of leads perfectly into a real problem that I'm seeing at the moment with clients that, you know, it can already feel that sort of FOMO, maybe it's the time of year, a little bit as well, but it's definitely something I've been noticing for the last couple of months where clients are coming that, you know, that really found a property, the potentially not doing the due diligence on that property, which is a side issue, but let's say they've done that.

Chris Bates: And they go, well now let's, let's go, I'm ready to make an offer. And what do I offer for this place? You know, and, you know, can you help me with this? And my answer to this is, well, not really because to do that properly, there's a lot of time involved to do it properly. And a lot of knowledge you need on that local market. So how do you think buyers should go about this? Let's say they don't use a buyer's agent Veronica works or some of the thought process that people need to go through when they're, you know, really trying to evaluate a property and make an offer.

Veronica Morgan: Well, for start is what I'll say. Is it in the show notes, I'll put a link in there for homebuyer Academy's free course and how to price the property. So I'll tell you, you don't have to take any notes because you can actually download that free mini course and do it yourself. And this is basically the process that we would take as buyer's agents in that. And I'll run you through what that is right now. Now as buyer's agents, there is a process. Absolutely. But local knowledge is so important to give insight at every step through that. And we've got to understand each sale that we compare with the current property we're looking at, you know, there's, there's a story behind each one. So the more, you know, the bit, I want to be informed to be able to make a call as to whether you should push yourself or not for this particular property you're looking at.

Veronica Morgan: And so step one, you need to become a local expert, right? So this is our bootcamp for today, right? You need to become a local expert. So two things, I see people do wrong. If I don't see a lot of people do a lot of things wrong, but two things I see people do wrong. One is that they say, Oh, the market's hot. I'll just have to pay whatever I have to go to my limit, you know, to buy. And they, they failed to then consider that some properties. Yeah, you might need to go to the limit and others, you shouldn't, you know, so there's this lack of discernment, as I think I mentioned that word earlier. And the other thing that they often don't do is that they add also is that mistake that they make is they add a percentage onto whatever the agent.

Veronica Morgan: And that's really dangerous because agents have different methodologies for how they quote yeses legislation. But at the end of the day, different agents, different methodologies, some of them might, some of them actually deliberately unquote. Some of them try to quite really simply and others actually accidentally quote high. So there's no rhyme to it. In fact, I keep a spreadsheet as tracking where properties that sold with what was quoted. And also when we went on the price research, what our upper limit work on that and in a rising market, as I said before, there's the price of properties that you might pay a premium for those properties, recent sale price might be X. And really for those properties, we look at putting a 5% premium on top of that.

Veronica Morgan: Whereas some of the quote over the agents, up to 30% higher, anything from 4% to 30%. So if you just go in there and say, right, I'm just going to slap 10% on every property. Well, you can see automatically where the problem is with that. So those are two things that we see buyers do all the time. So how do you get around that? Right. Well, you get around that by, as I said, becoming a local expert. And if you're not prepared to put the groundwork in and do that, you need to hire someone to do it because you can't easily throw away so much more than the fee. You would pay a buyer's agent purely because you don't get it. I know what's going on. And you just think it's all about the price. It isn't all about the price, not all, all the time.

Veronica Morgan: And so what we do, we end the process. You're getting the free course. If you do, it is to actually spreadsheet this, go through line by line, looking at recent sales and assessing them against the property you're looking at, is it better than similar, less than, and really going through, and then you need to adjust them for market movement because you know, this is something quite scientifically, and it's a very difficult thing to do, but you do need to say, well, if it sold three months ago, would it sell for the same price today? All a bit more, a bit less. And so you need to adjust now value is don't actually do these adjustments. This is more than a value Odets evaluate recent sales. I don't actually make a call in terms of what's the market doing. They just looked at values. And so we need to adjust them because we need to be prepared.

Veronica Morgan: Is the market falling, in which case we don't want to be paying too much by relying on something was three months ago rising. We don't want to miss it. You don't want to run the risk of missing out because we're not paying attention to a rising we're anchoring our limit onto something that's sold three months ago. We're going to miss that and to keep missing out. So, so by going through this process of literally going through line by line, looking at the links and we do it online, but also if you've been active in the market, you've been out there inspecting these properties, you know, which ones are better, which ones are listening, right? So you track that all out spreadsheet that then you've got to say, okay, well, that's all good. I can pretty much see where this property should sit, unless you've got a really, really unique property.

Veronica Morgan: In which case you really should go and get it because you make properties are very tough to negotiate, sorry to to price. And you do need to come at it from various different angles. And we always, we've got a number of different ways and ways that we look at property, but most properties you can use the comparable sales price. Now, when get to the end of that, you've got your spreadsheet. You're looking at all that. Some of the questions to ask yourself is how common or how readily available is this sort of property, anything over the last six months and try to keep these recent sales within six month period as well. I mean, you can go 12 months, but, mou know, the further back you go, the harder it is to really adjust the prices. And sometimes you need to go further a field.

Veronica Morgan: If you don't have enough recent sales, you might need to look at the next suburb, but you of got to adjust that as well. You might have to adjust up or down, according to how that suburb is in terms of popularity, as long as the properties are similar, right? So by doing all these adjustments, you think how likely is it that I will find another property that will suit my needs based on this evidence of what has actually sold? How likely am I going to find something else? And because if it's a low probability, then that's a good argument to start thinking, okay, I need to push myself a bit harder on this. If it's a high probability, good argument for not pushing yourself too hard. Okay. How good is the property really? Like how popular is this one that I am always going to find a future buyer for?

Veronica Morgan: Or is it one that's a bit unique to me? And I want it because it's got all these features, but really, and truly how light me, that sort of scarcity scarcity can be a really good thing in property. And it can also be a death now. So scarcity and popularity, those two things go hand in hand. Yep. Consider paying a premium scarcity uniqueness to your needs. And nobody else's needs don't need to pay a premium. And this is where a lot of buyers get in, get so unstuck and they pay massive overs. I say so many clients, hundreds of thousands of dollars in this part of it because they can't divorce themselves from the rest of the market. They love it and they can't understand why everybody else doesn't love it. And they make offers prior to auction quite often. And they're ridiculously high and unnecessary offers and agents will play on that, Oh my God, that will sniff that out.

Veronica Morgan: And they will say, if they're trying to get an offer out of your price, you might be one of those buyers, you know? So, so understanding and looking at it through these various lenses is really important because you have to try to be dispassionate. And then, then once you've sort of worked out what you think it's worth, then you got to say, right, well, what am I prepared to pay for it? And, and pressure test yourself before you get to the auction or before you start making offers, because if you don't test yourself and so, okay, what if the buyer pays 10 grand more than that? Would I pay it or no? Not at the answer is, Oh, well, yeah, I don't want to, but I would, then you're limit has to be at least that. Then you go another 10 and then you get to the point where you go, Oh God, no way.

Veronica Morgan: I feel sick. If I paid that or I can't afford it, there's another one. If I can't afford it, can't afford it. But that's the time to go to your limit only then when you really know that it's a good asset, it's a scarce asset. Other people will also be wanting that asset. And you know, you are at risk of not being able to afford it when it comes up next time. Those are the reasons that you would you would push yourself. And, but you have to consider that with evidence, not just because the rest of the market's going up and it's fine. And so those circumstances is when you would push yourself. But the problem is that people push themselves when they're feeling FOMO and they feel it's out. But the reality is actually not quite the same. And so you've got to divorce yourself from how you're feeling in the fee.

Veronica Morgan: You're feeling from actually what is going on. And what's more probability w what's more probable. And once you sort of do that and you pressure test your limit before you went to negotiations, then you know, and really push yourself beforehand, really? Because when you're in the middle of the auction, E's not the time to do that. And when an agent is pushing you to make an offer, because they've really ramping up that FOMO, look, someone else is going to buy it. Someone's, you know, et cetera, et cetera, but they will do. Then you gotta be saying, okay, am I willing to call their bluff? And if I am that's okay, but I have to be prepared to let that property go.

Veronica Morgan: Do I go in hard? Because I know, and I'm confident that this is the right property. I confident that I will have to wait too long for another one. And I'm confident with the pricing. And when you know those three things, you can go in hard and you can, you know, you can act decisively and hopefully knock your competition out. So, I mean, I'll give you a little example. For instance, we were processing a property at the moment for a client to be honest, your client really liked it, but I've never really, there's always been something niggling at me with this particular property. And I couldn't really do it. So we kept digging, digging, digging, and it w what it turned out has been renovated. And some things haven't been finished. And I kept saying, where's the approval for this renovations and apartment? Where's the approval.

Veronica Morgan: I can't see the approval. I'm not confident with the approval as you kept saying, but it's only monitors any monitor. I'm like, yeah, well, the waterproof balcony, that's not minor. It looks like they changed some doors. That's not minor, they've changed the flooring. Have they had approval. These things really it's sort of just batting, batting me away. And I'm like, I'm not happy with that. The strata report was insubstantial. I've gone back asking for more. So we kept going back and asking for more, more, more, we'd done the pricing on it. Look, you know even then there was, it was a bit wishy-washy because there's, there's comparables with parking couples without parking. It was a, quite a hard one to pin down, but I wasn't, wasn't gonna land on a final figure until I could be certain about the approvals of out on the property.

Veronica Morgan: So that's sort of sitting in the wings, got a sort of vague idea about really where it's going to sit, but I want, I want more information before I find it. In the meantime, the agent starts the dialogue around, or there is another buyer on it, and it hasn't been accepted, but contract changes have been made and all these really vague stuff. And I'm like, you know, how are you going to bring us to a close and all very vague. So I said to the client, look, there's a risk. That really is a buyer. But this is also dialogue that we use to try to get agency, and they're getting annoyed with us because we put off asking for more, more things and we give it, and the fact that they don't want to give it as a warning sign for me. And I'm not in a rush to get you into that property. And in the meantime, they'd managed to manufacture an offer out of a buyer. Now, I doubt that it was the buyer telling me about, because I think they use the same dialogue with anybody that was interested in the property

Chris Bates: And they

Veronica Morgan: Went out and get someone to buy it and they've done it. So same person or inverted commerce, because I don't think that first person actually existed one buyer has taken the bait.

Chris Bates: Yeah. And so, yeah, exactly. Say that, you know, it looks like, and that's pretty interesting because the buyer in that situation said, well, they weren't, they weren't lying to me because I didn't tell it. Well, no, they were lying, but someone thought, I think what's really interesting about that whole process. And it's a process and that's the key thing here. It's not just, let's just have a crack at it and let's just pull out a magic 10% above the God, or let's just speak to the, I think there's a few things. The story around the comparer was, it's really hard if you're just new to the market. And even then you don't really know the story about why did someone overpay, you know, why was that a really good deal, you know, motivated vendor or, you know, there's lots of different. So that story element, I think you can probably get that from the agents a little bit easier because they probably, you know, express things that they wouldn't say to the punter on the street.

Chris Bates: And then just trying to adjust it to market. I think that's a really key point as well, which I'm sure a lot of people don't do. But then ultimately the scarcity, you know, how likely are you going to be able to find this property, you know, is it going to come up every month or is it going to be maybe once or twice a year? And the hugest guest, the, I think is really cool as well, because, you know, if you, if it's scarce today, that doesn't always mean it's going to be scarce. You know, things can change new developments. You know, three beds at the moment are quite scarce, but as a three beds, apartments can be scarce in 10 years time. We just don't know. And you know so yeah, the future scarcity is also so much gold in there and hopefully, you know, buyers can realize that they need a process and get ready before you make offers. It's like, get your finance ready before you make offers. Do your building and pest before you start in a negotiation, don't say subject to the subject to that subject to this. I think, you know, it's not that costly. Yes. There's a bit of time just get your docs up and ready, and then going hard knowing what, how to play, how and how you want to apply it rather than buying the games that the agents want to play with you. So,

Veronica Morgan: One thing in there though that you and I are based in new South Wales. And so the process in new South Wales does differ from other States and certainly in, in new South Wales, because you do have an exchange process. And that means that you, you can either get a cooling off period or you do all this stuff before you exchange and actually you know, and weigh your cooling off period. Right? But the reality is that I, 100% agree you need to do as much as possible before you actually negotiate. Now, if you're buying in Brisbane, for instance, or Queensland, then you can actually make your offer conditional and all these things. But the big issue there is that you need to know what you need to make it conditional on. Otherwise you get yourself shot in the foot. And honestly, after really, after working with Megan on homebuyer Academy and going into detail in terms of the process in different States, Queensland is probably the most risky for buyers.

Veronica Morgan: And I'm actually shocked anyone, anybody box without a buyer's agent there, because you can easily wave your cooling off period. You don't need a lawyer to do that. You do need a lawyer to do that in new South Wales. You, the contracts and the disclosure from vendors in new South Wales is a lot a hell of a lot higher than it is in Queensland. And to some degree, Victoria is quite similar to new South Wales, but there's some differences there as well, but certainly in Brisbane in Queensland, you can sign an offer. You can sign a contract, you can waive your rights to cooling off period. You can, you can basically commit yourself and then, you know, realize all the stuff that then gets discovered through the actual settlement process that you could have got out of that property had you known. But if you didn't put your, all these terms on your contract in the first place, you can't get out of it.

Veronica Morgan: And so you can discover that you're in a flood zone, you had no ID, right? You'd have no ID before signing that contract. And you can discover in a flood zone and you can't get out of it. If you did not put that as a clause place, the place has been eaten alive by termites. And you can't get out of that unless you had a subject to, you know, on a clause. So these are really important things that people need to get in the right order and pricing is a massive part of it, but this is why it's so important to slow down rather than speed up because people are rushing in and they buy stuff. And then you're stuck.

Chris Bates: Yeah. I mean, that's funny you say that was one thing that's guess a little bit tough at the moment is a lot of people subject to finance cause or they have a 10 day cooling off. Cause I think in the head that that's when they would get the finance sorted then they'll go to a broker or a bank and they'll say, look, yeah, I've got this finance course in two weeks now trying to turn over an application from, you know, no decision on what bank and getting documents ready. You know, haven't had any issues with the credit, all those sorts of things. And then all of a sudden expecting that that broker or bank is going to turn that around in, in one or two weeks when banks are dealing with things the way they are at the moment, it's just impossible. And so even a subject to finance is pointless because you won't get the finance back in two weeks. And so you, you know, you might wanna make it subject to phonics, but that's off. You've already been pre-approved prior and you know, that you buy and where within your preapproval, you know, it's a good property. So it's really a tick the box exercise for the bank. But even then I, I really struggle at the moment just because banks are just pretty awful. So

Veronica Morgan: Cause without even having a pre-approval turned around in that time. Yeah. The process, the order, right? I mean, it's, it's sort of underpins that. It's just one other example of, you know, what we do in the home buyer Academy course for your first time by a guy, because people get stuff in the wrong order all the time. They just don't know that they're costing themselves money or they're getting seem to real hot water. So but anyway, we don't want you to get in hot water, which is why we did this episode. We want you to be well-prepared and you know, happy new year, thank you for listening. And we really appreciate it and look forward to the conversations in 2021. Absolutely.

Chris BatesJanuary 4, 2021de-index

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Episode 157 | 2021 predictions & 2020 review | Host Special