Did you pick the hidden surprise in last month’s ‘horror budget’? In Michael Yardney’s view there was some positive news for property investors buried amongst all the spending cuts and tax hikes and he’s not taking about the fact that negative gearing was left untouched. Michael tells us what those nice surprises are.
Land appreciates and buildings depreciate! If you simply follow that rule, you would always buy a house. But is it really that simple? Host of ‘Your Property Empire’ on Sky News Business – Chris Gray says deciding between a house and unit mostly comes down to affordability and suggests that less land but more growth could be similar to more land and less growth.
Bryce Holdaway the star of Location, Location, Location Australia says the great Australian dream has changed. There has been a generational shift. He explains what that means and how understanding what this generation is looking for will help you shape your portfolio.
Josh Masters works in the hot Sydney property market but says, even in a hot market, many investors go about investing in property the wrong way. He gives some great tips on leverage and shopping around for the best financing package.
The key to unlocking property investment is an ability to buy like a value investor. Quality over quantity is now the name of the game according to Gavin McPherson who reveals some of his greatest investor traits and tricks.
Did you realise that Brisbane City Council and many other Queensland councils, are charging more to investors for rates than owner-occupiers? Margaret Lomas is passionately fighting for this cause and has started a campaign called equal rates for property investors.
Transcripts
Chris Gray
Kevin: Land accumulates and buildings depreciate. Well, if you simply follow that rule, you’d always buy a house. But is it really that simple? Buyers agent and host of “Your Property Empire” on Sky News Business, Fridays at 6:30, Chris Gray, says deciding between a house and a unit mostly comes down to affordability. He suggests that less land but more growth could be similar to more land and less growth. He joins us. Good day, Chris.
Chris: Hi. How are you doing?
Kevin: Good, mate. Thank you for your time. Chris, just expand a bit more about what you mean in this debate between buying a house or buying a unit.
Chris: It certainly makes a lot of sense that, if you own a lot of land, then that’s going to go up in value, because obviously we’re not creating any more. But I guess where the rule falls down is when you get close to the city. So if we take Bondi Beach, which everyone knows in Australia, you try and buy a house in Bondi Beach, and it’s going to cost you anywhere from 2 to probably 5 million. It’s unaffordable for most investors, first of all, to buy that property. But even if they do, the rental market for luxury properties isn’t that much. Because everyone says, “Oh, it’s only poor people that rent.” It’s the wealthy people that want to rent, so the rent returns go from 4 or 5% down to literally about 1 or 2% on those expensive houses.
Kevin: That executive rental market too, it’s a niche market, but it’s also very fickle, isn’t it?
Chris: It’s great. My whole portfolio … I’ve got about 12 million in property. All of the properties are sub a million dollars, so they get lots of demand. But then I go and rent these 3, 4, 5, 6 million dollar homes and I rent it for a third or a quarter of the price that it costs me if I was actually buying it myself. So it makes a lot of sense.
Kevin: It probably comes down to more than to buy the best house or unit. It’s more between capital growth and rate of return. Is that correct?
Chris: Yes, it is. What I believe is you really need to buy what the locals buy in that area for that price. So if you say, in Sydney or Melbourne for instance, the median price is around 6 or 700,000, most people that work in the city are going to live in a unit for that kind of money, especially the young professionals. That’s what I typically buy in those areas.
But as soon as I was moving away from Sydney and Melbourne, for the average price, most people live in a house. So for Brisbane, we just opened a home buyer show last weekend. For around 5 or 600, if you get maybe 5 or 10Ks out of the city, then you can get a small house. That’s the kind of thing that I’d buy in that particular area.
Kevin: Okay. So it’s really different in different states.
Chris: Exactly, and suburbs to suburbs as well. You’ve got to buy what 80% of the population wants to live in in that area. Just because a unit’s good in Sydney, doesn’t mean a unit in Darwin or Perth or something like that is going to be the best thing for that market.
Kevin: I guess too, if you’re investing in an up market property, you’ve got to think about the time when you may have to sell it. Your point there of buying what, the sorts of properties people are buying in different markets, makes a lot of sense, because you can then turn it over a lot quicker.
Chris: Exactly. What you always want with property is, you never want to be in a forced sale position. But if you do, then you need to be able to sell it quickly. For instance, in the GFC, a lot of the properties that we were buying around these Bondis and Coogees and Kirribillis, again, all the blue chip suburbs, the price literally didn’t really drop. Maybe in a normal market it gets 5 or 10% premium, but even in the GFC, it was still getting fair value, because none of the people were in a bad financial state. There’s still no properties on the market in the GFC, and there’s still plenty of people that wanted to buy them. That’s the thing that kept prices stable.
Kevin: Just to sum up for us, Chris, if you could. Just tell us what your current personal strategy is.
Chris: I’m long-term, buy and hold, blue chip, median price. Basically I buy properties from 750 to a million dollars, which is median price for the areas I buy in. I don’t buy in the [CVDs 00:03:48], because there’s no limited supply. But I buy kind of 5 to 10Ks out. I’m looking at holding for 30 years.
Quite often, I’m contrarian. I buy when I’ve got the cash to buy. I don’t try and tip the market. Half of my portfolio I bought in the GFC when there was no competition, which meant I paid a fair price and I bought it in the best location I could. Whereas the people that have kind of come in the market the last 6 or 9 months, because the market’s been heated, they’ve had to then take maybe a secondary location, and maybe pay 5 or 10% more, because there’s so many people fighting for those properties.
Kevin: Chris, it’s great talking to you again. Thank you very much. You can catch Chris, of course, as we said, on “Your Property Empire” on Sky News Business, Fridays at 6:30, and contact him through his website, yourempire.com.au. Chris, great to talk to you. Thanks for your time.
Chris: Any time. Thank you.
Michael Yardney
Kevin: Well, in the aftermath of the federal budget which came down last month. There has been a lot of talk about who is going to be heard and how many people will be heard. I guess from an investor’s point of view, it was good to say that negative gearing was actually left alive. But there a lot of really good news inside the budget, and he’s had a look at it. Michael Yardney joins us from Metropole Properties. Greetings Michael. There is a bit of good news in there.
Michael Yardney: Well, there is some good news for property investors. I think we all want to wonder how is the budget affect their hip pocket. Of course there is the big picture question of how it is going to affect people at the bottom, middle and top levels of our society. And that is really a socioeconomic factor on how it is going to affect the budget. But for many investors, I guess they are wondering, what does it mean to property values? And to me the good news I am seeing, Kevin, is that the government is going to be counting on continued low interest rates and more consumer spending to help grow our economy.
You see, what has happened over the last couple of years since the global financial crisis is that government debt has nearly tripled. It has grown faster, given all those European countries that were having their own economic disasters. And this meant that Joe Hawking has to reign in and pay the avenues debt without increasing taxes. And what he is going to be doing is keeping interest rates low and hoping we spend more. And I see that as being pretty positive for real estate.
Kevin: You think there were some surprises there when the new government took over Michael?
Michael Yardney: Well, I think many people are surprised they went in so hard and so as we know it showed that it has been a lowering of consumer confidence and nobody seems to be liking the budget or the government anymore. So, the consumer surveys has shown that they recognize that we do have to actually be more budget conscious and the government has to look after our long-term debt more carefully. But no one likes it when it hits their hip pockets. Of course we have all been affected by it. But the good news is they didn’t touch the other issues, Kevin. I don’t think they ever were going to, it is going to be too hard for them.
So, now we really got to have a look at what the government is going to do to boost our economy. And the way you are going to do that, is encourage people like you and me to spend more. What they have recognized since the financial global crisis. We have been savers. We have actually been stashing our cash. They actually suggested that they expect us to not be saving as much. They encourage us to spend. Not just on housing of course, Kevin, but on all areas. But they are counting on a construction mid-recovery because they know manufacturing is not doing too well. The Australian Dollar is a bit high and that is creating some issues with exports, and they know the mining boom is slowing down. What else have they got left? Well, they have got wealthy Australians and in general, their household wealth is pretty strong. And that means that they are going to, as they feel more confident when confidence recurs, start going out and buying things, including improving their houses and buying new houses.
Kevin: It’s a bit of a balancing act, you have got to keep consumer confidence up otherwise people won’t spend. And then with all the bad news, seems to me that consumer confidence is actually falling.
Michael Yardney: Very much so. So, in the short-term, there is going to be a little bit of, down to people who are not as certain about their future and about their jobs. You are 100% right Kevin, that consumer confidence translates into sales volumes. Fewer people buy properties if they are not comfortable about their jobs and that decreases in the long-term as asking prices and pricing going down. But as we work through all of this, it happens every time there is a new election, Kevin, a new budget. When life moves on and we realize this is the way it is and we just got to get on with it, we see what is going on. But it will affect different levels of society differently, Kevin. Can we just quickly go through them?
Kevin: Yes, yeah I would like to Michael.
Michael Yardney: It is probably going to affect the first home buyers a little bit. There is no first home buyer branch. They are going to probably the people who are just starting off their life and their families. I think it would be a bit harder because you going to have to pay more to go to the doctor, they are going to have a few more tax taken out here and there. And it is going to sure be taxing the upper end of the market. I don’t think the very wealthy people are going to be affected too much by the debt levy. So, I believe that middle Australia is still going to be doing reasonably well while the lower end of income earners are going to suffer a bit more. I think it is middle Australia who are going to be able to keep upgrading their homes, improving their homes, and with low interest rates, recognizing that the government is now saying that you going to have to work till seventy, I am not going to give you a pinch till then. More people are going to get involved in property investment to secure their future and afford-ability is pretty good, Kevin.
Kevin: So, the bottom line Michael?
Michael Yardney: The bottom line is likely that the interest rates are going to remain low for some time to encourage us to spend up. And in general, that is going to be good for property. Now, I know some nay-sayers are going to say Kevin, this is going to lead the next property bubble because some households are going to take on more debt than is prudent. So, I guess we should not count just on the market going up forever. We have got to actually protect ourselves because eventually this cycle will come to an end, when interest rates go up. So, buy wisely, select carefully, and have your financial buffers in place because like every other cycle this one will work its way through and interest rates will go up and some people will find themselves a bit stuck.
Kevin: And that is a very good point you make right at the close there, Michael, about making sure your buffers are in place cause it is very easy to get carried away and think that everything is going to be nice and rosy.
Michael Yardney: This too shall pass. (laughter)
Kevin: Right, indeed. (laughter) And we are out of time, Michael. Always great talking to you. Thank you very much for your time. Michael Yardney from Metropole Properties Strategist.
Michael Yardney: My pleasure, Kevin. Thank you.
Gavin McPherson
Kevin: The key to unlocking property investment is an ability to buy like a value investor. Quality over quantity is now the name of the game. According to Gavin McPherson from Oasis Property, buyers agent, who reveals some of his greatest investor trades and tricks, he did that on stage at the Buyer’s Seminar recently and I caught a hold of that and it was a great session, too.
Gavin, thanks for joining us on the show.
Gavin: My pleasure, Kevin. Thank you for that, as well.
Kevin: No problem at all. I just wanted to know if you could tell us, when you describe someone as a killer investor with the right mindset, what do you mean?
Gavin: I thrive on, obviously, our business being a buyer’s agency. There’s really two components to the investor. One’s buying the product and, as much as possible, that’s a buyer’s agent’s job and duty, but over the years, you do sort of get this sort of almost, it’s something that’s not written and it’s something that you really do have to dig deeper and find the psychology behind it, but you can give the best products to the biggest nut job on Earth and at the end of the day, that person’s not going to be wealthy because they just can’t handle it.
Whether they take that $200,000 gain amount out of a property and go buy another 45 properties, which just undermines the whole plan or whether they just can’t see the forest for the trees and they don’t know how to make the most of that equity. My point being, at the end of the day, I don’t want people to misunderstand. I want people to buy great properties and I want them, obviously, adopt the right mindset over a long period of time, but if I had a choice, I’d rather buy a slightly inferior property with a better mindset. I think in the longterm, that person will win. Obviously, the aim of the game is to nail both of those things.
Kevin: The mindset to you is pretty important. I know you spoke on stage about the top five biggest investment mistakes. Where would you rate the wrong mindset?
Gavin: Absolutely at the top. It’s such a hard thing because, what’s that old saying, if you tell me how to do it, I might forget and it leads all the way to sort of saying if you let me do it, I’ll learn, but it’s one of those things that investing is different. By letting you do it and learning, that can be a seven to ten year punishing cycle and that’s hard.
My biggest [inaudible 00:02:17] to that, Kevin, is read and read everything. There’s so many genres of books in investment genre, but different segments of advice given, whether it’s positively geared, negatively geared and buy a house for $1 and all sorts of things that I would argue if it doesn’t feel right, it probably isn’t right.
There are a couple of books you can almost put your finger on, like A Rich Dad/Poor Dad. Everything tends to start from there and sends people on their way. I can usually get people in my office and I can usually, with what they’re suggesting to me, I can almost tell what book they read last.
My advice is almost to do nothing for as long as you can and read. Then you actually take out of that the authors, or the people or the presenters that mean the most to you and, honest to God, Kevin, without being bold or rude, I still like to point to their wealth and say how wealthy [inaudible 00:03:11] in that direction, you know? I don’t like to put myself out there, necessarily, as that beacon of wealth but I certainly wouldn’t want to be at the bottom of the barrel either.
Kevin: One of the things that I love about what I do is I get to talk to some very successful people and the most successful investors that I’ve met are the ones that take it easy. Quite a few of them will say to me they’ve made more money out of saying no to certain things than saying yes and I think that comes about not rushing in and just having that right mindset, Gavin.
Gavin: Absolutely and I suppose, to take it out of the property genre, they can look at Warren Buffett. Everyone thought he was a pariah, ignoring all the stocks he knew nothing about in the late 90s and the dot.com boom but it didn’t make him wrong for saying no to something. It doesn’t make you wrong, even if it does make money and you might have said I missed out on theoretical $200,000. It still doesn’t make you wrong. If you sit back and you follow your own rules and you set those rules, over a long period of time, you’ll win.
Kevin: Gavin, if having the wrong mindset is the biggest mistake you could make, what are some of the others that you’ve noticed?
Gavin: First and foremost, this is actually also going into what to do as well as not what to do. I always buy counter-cyclical. I buy something where, as much as possible, I like to get an almost instant uptick of above trend growth and in doing so, it keeps your mindset in a very high position to hold on to that seven to ten years because it leads me to my next thing.
The next mistake is they just don’t hold onto it for long enough. People are expecting these results in four or five years to make them $2 million. It’s just not going to work. That would follow to my next point which is don’t buy too many properties. I’ve got a bit of mess, which I think can be taken long or short in so far as it could earn extra or a little bit less in the average wage but $2 million over seven to ten years I think is a pretty decent outcome for what people should expect and to buy two or three properties to achieve that, I think that’s realistic and I think it’s something that’s also, in moderation, should also protect their downside as well.
Kevin: Gavin, it was great to catch up with you in Brisbane at the Buyer’s Seminar and I thank you for giving us your time now and that insight. I’ve been talking to Gavin McPherson from Oasis Property. Mate, thanks for your time.
Gavin: Thanks, Kevin. Always a pleasure.
Josh Masters
Kevin: Well, with property prices all around Australia really starting to lift, particularly in the southern states. I’m looking now around Sydney. I’m talking to Josh Masters, who is a buyers agent. Works with Empire Property. He joins me. Josh, I know you’ve posted a little bit about this but the growth in property prices has given investors and property owners a lot of additional equity in their properties. How should they … Well, tell me firstly what equity is and how can we access and how best to use it?
Josh: Yeah, this was actually one of the great epiphanies for me, Kevin, when I started investing in property. I always wanted to help people build those great big portfolios and I’ve thought, “Well, if I have to save that deposit every time i do it, it’s going to be a very long journey,” as you can imagine.
Kevin: Yeah.
Josh: Look, for most investors, you need to get 2 things clear. That when you’re investing in property, you need 2 components — you need the debt servicing component, which is generally coming from your income and that goes to paying the actual debt on the loan, and then you need the deposit to put down, to get into the property in the first place. Now, if you’ve got a good income, the bank will always consider that, but where does this deposit come from? When you’re first starting out as a first-time buyer, most of the time that’s the really hard yakker and you have to save for that.
After you’ve done that, generally you’ll find that the property does grow in value and you can use that equity to take that out and put in to the next deposit and that’s what most of these property investors are doing — they’re using the equity that they’ve got in their property and they’re taking it out and using it with another lender, or even sometimes the same lender, to put down as a deposit and leverage in to the next property.
Kevin: What are you better off doing? Going to the same lender or going to another one and shopping around, Josh?
Josh: Personally, I found, I actually like using a broker because a broker can be very flexible. He’s got a lot of options in front of him, as opposed to just a single lender, even though that single lender may do you a special deal on a particular line. I actually find it’s best going to a different lender because they will actually be able to maneuver you through the market, so sometimes, if you were with one particular lender, that will allow you to do certain things, and all lenders have different borrowing criteria. What might be okay for one lender won’t be okay for another, and sometimes, you can cross over and you can get things through the market, in terms of borrowing if you through different lenders but I think using a broker is probably the best way to do that.
Kevin: I’ve spoken to a number of people who’ve got properties. Some of them totally unencumbered and they don’t realize that they can actually leverage off of the equity they’ve got in their property.
Josh: Absolutely. I com across that every single day.
Kevin: Yeah.
Josh: Sit down with people who just don’t realize the wealth that they’ve got under the roof in a manner of ways, and one of the things I put in my book was that reference to Robert Kiyosaki and he said, “You’re house is not your asset because you’re living in it.” I disagree because that house is probably built a lot of equity over the years and what people don’t realize is that while that equity is locked up with the bank, that’s one thing, but you don’t have to sell the property to release that equity and that equity essentially belongs to you.
Now, you’re going to pay for the privilege of borrowing that equity from the bank, but you also get the added benefit of not having to sell the asset as well in order to unlock that profit. You can take that profit and you can leverage it into investments and over the next 10 years, or 15, or 20 years, you can actually grow an investment portfolio based on the equity that you’ve generated in your own home.
Kevin: Yeah, but Josh, let me ask you a couple of dumb questions now. Let’s say, hypothetically, I have a property that not encumbered, it’s worth $500,000 in round figures — how much of that can I actually use? How much of that can I pull out and reuse or leverage?
Josh: Good question. This comes back to that component that we talked about, apart from the deposit. It’s called debt servicing ratio. That means that you have to go to the bank and say, “Look, this is how much I earned. Based on my income, what would you be willing to lend me?” Most banks, if you’re on a decent income, they’ll probably be, conservatively, happy to lend you probably up to 80% of that value.
Kevin: Wow.
Josh: On a $500,000 property, unencumbered, you’d probably be able to release $400,000 of that.
Kevin: Okay. Well, say, I get the $400,000 out. You wouldn’t go and put that into one property; you could then split that up, could you, over a number of different properties?
Josh: Exactly. You could do that. Again, depending on how much the bank is willing to lend you because you could say, “Look, I’ve taken this $400,000 out and I might move it to a what we call an offset account, or a line of credit.” That means you only pay for it when you actually use it or when you spend it, but, otherwise, it might be just sitting on the side there, but you might go to the bank and say, “Look, I’ve got $400,000 in equity, it’s sitting to the side here, I’m looking to utilize this.” They might say, “Look, Kevin, that’s great. We can allow you to borrow up to a million dollars or 2 million dollars,” or it might even be something more conservative like $700,000, based on your income and your ability to service that debt, so you can use part of that equity, that $400,000, and what…
Look, what I usually suggest is taking maybe 300 or 200 of it, putting it in as a deposit for the next property, and then using a component of that — it could be $100,000 or $50,000 — and I’d set it to the side in what we call, it’s what we call a buffer account. Now, that buffer account is for the expenses that you will incur on that property over time. What most people will understand is that when you invest in property in Australia, generally, you’re going to be losing money on it in the short term of the cash flow so that’s what we call negative gearing.
Kevin: Yes.
Josh: What we find is that over maybe the 12-month period, you might lose $5,000 or $10,000 out of pocket; even though your asset is actually growing in value, your cash flow, you’re actually going backwards a little bit. What we do is we put a little bit of money to the side in that equity and we use that to fund the negative cash flow, and what that allows us to do is it allows us to basically keep living the lifestyle that we want to live without sacrificing too much, in terms of cash flow.
Kevin: Yeah.
Josh: Does that make sense?
Kevin: It certainly does, and you’ve explained it extremely well, too, Josh. Unfortunately, we are out of time. I want to thank you. Look, if you want to talk to Josh, he’s got a great website — joshmasters.com.au. Go and check that out; there’s a lot of great information there and as I said at the opening, Josh is from Empire Property and he is a buyers agent based out of Sydney. Thanks for your time, Josh, and looking forward to catching up with you again real soon.
Josh: Thanks, mate. Have a great day.
Margaret Lomas
Kevin: Well, here’s something I didn’t know about. I ran into Margaret Lomas from Destiny Financial Solutions recently, who told me that there’s different rates for property investors as opposed to people who are owner-occupied. Margaret joins me. Hi, Margaret.
Margaret: How’re you going?
Kevin: Wonderful. This … It’s a bit unfair, Margaret, I would have thought.
Margaret: Unfair is being quite mild, I think. It’s absolutely ludicrous. It’s profiteering. It’s inequitable. I believe it’s also most likely unlawful, judging by a recent Supreme Court ruling on Mackay Council who were doing exactly the same thing. The judge has now overturned their ability to do that on the basis that you can’t charge rates based on the occupation of the owner. You can only charge rates on the basis of the use of the land.
Kevin: It’s highly discriminatory, I would have thought.
Margaret: It’s not just discriminatory, but there’s no basis for it. They’re charging a higher rate and they’re not the only ones, I might add. It’s not just Mackay. It’s Brisbane City Council, Logan Council, Gold Coast Council, Rockhampton, Townsville, and Moreton Bay. They’re just the ones that I know about, but I’m sure there’s many, many more than that. What they’re doing is they’re charging a higher rate if you’re an investor than if you’re an owner-occupier.
We recently put the question to Brisbane City Council, as to why they can do this. What have they based this on? They actually gave the response that they’ve based it on the fact that an investor can get a tax deduction.
Kevin: That sort of raises a whole lot of different questions as well. If in fact it is going to be overturned, what happens with all those tax deductions that have been achieved?
Margaret: I’m not sure what happens with that. I think it’s not retrospective. I think it’s [got turned 00:01:51]. It’s only going to be going forward. So the tax deductions stay, because you already paid those, right? So you should already have that tax deduction. But if you think about this basis for a moment, they’re basically saying, “Well, you’re going to get a tax deduction and we want a piece of that.” They’re looking for a share of the tax deduction.
But more to the point, as you would know and as your listeners would know, investors all get tax deductions at different rates of tax. Someone in the 45 cents on the dollar can claim 45% basically of their extra rate. But if someone’s in the 15% tax bracket, they can only claim 15% of their extra tax. In fact, the lower the income earner, the higher the relative rates that they pay. If the council is going to say, it’s because you get a tax deduction, then they have a duty to assess each and every individual tax position and charge accordingly.
Kevin: Another annoying point I find is that it’s almost an assumption that if you’re a property investor, then you’re wealthy. I’ve got to say to you that a lot of the property investors I talk to certainly aren’t in that category. They may be risk takers, but they’re certainly not very wealthy.
Margaret: Yeah, exactly. You know something else that a lot of people don’t think about, and that is the fact that, if you’re being charged a higher rate because you’re a property investor, think about what that really means. A property investor buys property in an area because they consider it a good investment. When a lot of property investors buy properties at the same time, it actually pushes up the value of the properties that they buy, and the value of the properties in the area.
Let’s think about that for a moment. Councils actually charge rates on the ratable value of a property. So rates are directly related back to the actual value of the property. Here we are, doing these councils a favor, investing in their area, providing rental properties for their constituents, and also contributing to the overall value and the overall [rate pull 00:03:51], and we get penalized for it. How does that make sense?
Kevin: Doesn’t make any sense at all. I guess, Margaret, is there anything that, I mean, you mentioned here Mackay Council, now that’s … A judge there has said that they can’t do that. So there’s one case on the table. I understand that’s now being challenged.
Margaret: Yeah.
Kevin: But what about all these other councils who are doing it? Is there any class action that can be, that’s proposed?
Margaret: I’m not sure. All I can do at the moment is try to raise awareness and get everybody talking about it, and hopefully put some pressure on the councils while we do that. I’m not sure if there’s a class action, but certainly that could be the next thing that we could explore, I guess, if they get enough of us and we can find a lawyer somewhere who is willing to take us on and not charge us any money for it. Then it’s probably a good idea for us to do that.
For now, what I’ve done is I’ve created a hashtag to use across all social media, which is hashtag equal rates for property investors. So that’s hashtag, equal rates for property investors. I’m trying to just get people to share. If they go to my Facebook page, Margaret Lomas, I’m trying to get people to share. My Twitter is MargaretLomasAU. Just to share all the posts and the tweets that we’re doing about this. The more people who share with their friends and their contacts, the more that we can bring awareness.
I think everyone should do what I’ve done, which is, I’ve gone to the Facebook page of every one of these councils and I’ve asked them to please explain. I think everybody should also be doing the same thing. If we can at least bring some pressure about that way, then we may not need that class action.
Kevin: Okay. Well that’s hashtag, equal rates for property investors. That’s how you can get to that. What sort of response are you getting from the councils? Or have you only just started to post that?
Margaret: We started on Friday, and there’s not a single council who has actually made a comment yet. They haven’t said anything. They’re probably just ignoring us at this point in time. I guess, I don’t know, maybe you should call them, Kevin.
Kevin: I think we should.
Margaret: Get them on the phone and let’s talk to them live on air and ask them to tell us exactly why they’re doing this and in what way they think it’s lawful.
Kevin: We’re certainly going to do that. Margaret, I want to thank you for raising this with us. That is hashtag, equal rates for property investors. You can get to that through any of Margaret’s social media outlets as well. That’s Margaret Lomas. Margaret, thanks for your time. We will follow this up and we’ll continue to talk to you about it in the future.
Margaret: Fabulous. Let’s get something done.
Bryce Holloway
Kevin: Bryce Holloway, the star of Location, Location, Location Australia says the great Australia dream has changed. There’s been a generational shift. He explains what it means and how understanding what this generation is looking for is going to help shape your portfolio. He joins us, good day Brice, how are you doing?
Bryce: I’m well Kevin, how are you?
Kevin: Good as we speak. I believe you’ve been out shooting for the next series of Location, Location, Location Australia.
Bryce: Yeah, I’ve just been in the Blue Mountains for a couple of days. It’s a tough life and back to Sydney tomorrow [crosstalk 00:00:27]. We’re certainly enjoying the filming this season.
Kevin: That’s good, there’s some new, how are you finding the market, mate?
Bryce: It’s different across different states in terms of where I am, so kind of the story I’m shooting now is in the Blue Mountains for half of it and the lower North Shore for the other so it’s just two real contrasts in terms of the market. Definitely different across the country, that’s for sure.
Kevin: Are you able to help the people you’re working with?
Bryce: Yeah, absolutely. They’re looking good at this stage.
Kevin: That’s good, we’ll look forward to seeing it. I wanted to talk to you about this generational shift and how you say that the great Australian dream has changed, because of what’s happening with land. Tell me what you mean.
Bryce: My father was actually born in 1939, so he’s a pre-baby boomer, my mother’s 1948, but she’s a baby boomer. I’m generation X, and my wife is generation Y, so we’ve got sort of a generational sliver, I always find it interesting that when I chat with my dad about property, it’s very quick discussion when it comes to apartments or as he calls them, flats. In his mind, there’s no money to be made, but of course there’s heaps of evidence around that there is a lot of money to be made if you buy the right apartment. My view of in the 20th century is that land content was king, I think it was very valid, largely driven by baby boomers who wanted a detached house surrounded by a garden with a hill [inaudible 00:01:55] and a barbecue and that was their idea of the greatest dream.
As I’ve toured around the country and surveyed different generations types, you ask a generation Y if that’s what their idea of the great Australian dream is and generally speaking it’s not because it’s means they have to go too far out and that’s a move too far away from their lifestyle drivers. So for me, I think land content is no longer king, I think land’s value is king.
Kevin: By that you mean getting closer into the city where all the amenities are, Brice?
Bryce: Yeah, as an example, when faced with a choice of if you’ve got 500,000 dollars to spend on investment property and you can choose more land content, so say a house or a house package that’s a bit further out, or you can get a two bedroom apartment that’s clearly got less distinguishable land, maybe in a small block of eighteen or something, but it is much closer in to the city and the cafes down the road and the train is two blocks away that they can catch to the city to get to work, in my view I prefer to buy the higher land value apartment than I would the higher land content house at the same price point.
Kevin: I’ve heard it said that the current generation because of affordability, are quite willing to trade in their back yards for balconies, which is pretty much what you’re talking about. They wanted to get closer to all those amenities and being prepared to look at, as your father says, those flats.
Bryce: Yeah, that’s right. It used to be that Jack and Jill went up the hill to fetch a pail of water, it’s now Jack and Jill went down Lilly’s to fetch [inaudible 00:03:26] even more families are even prepared to live in apartments. I think that apartments were, in the 20th century, considered a poor cousin, but I think in the 21st century they well and truly should be embraced and I’m certainly not suggesting every apartment makes for a great investment, but I think that well located and investment grade apartments are a very good option for your portfolio.
Kevin: Of course, it’s all about supply and demand too, isn’t it? I think if there’s more demand on those inner city units, they are going to appreciate quite well in value, overriding any demand for what may happen with land.
Bryce: I think it’s a really good point. I think that’s what drove land content in the 20th century, because baby boomers, that’s what they had in demand, it’s what they wanted, so therefore I guess it became a given that land was what went up in value, but it’s not true. Supply and demand is always what drove prices and baby boomers wanted land, but now you think, baby boomers are now moving into the part of their working path where they’re no longer the major dominant player in the work place as they start to retire, so it’s really important as an investor you start to think about the next generation coming through.
My generation X still wants land, but maybe a town house or a land [inaudible 00:04:38] but generation Y, it’s very, very important to think about what they want, and as I said, I’ve surveyed many generation Y’s across the country. I speak at the property events and I’ve asked them that very question, would you compromise your lifestyle to move further out to get more land, and they overwhelmingly say no. For me, that’s a really strong driver and something we need to pay attention to.
Kevin: On that note, Brice, we’ll have to say farewell. All the best for the new series, so watch out for Location, Location, Location Australia. My guest has been Brice Holloway. Brice, thanks for your time.
Bryce: Thank you Kev.