Australians are once again living in the wealthiest nation in the world. True wealth is much more than how much money you’ve got in the bank or how many properties you own, Michael Yardney tells us the true measure.
Flongle is an Australian website that offers the world’s first crowd-sourcing style mortgage contests. Instead of teaching us how to get the best deal on a loan, the site will do it for you according to site founder Michael Lee.
Speaking of learning, we tell you about a service that will help you become a better renovator. Bernadette Janson is from the school of renovating and she tells us about her experience at finding and keeping a good trade”
We can can easily become confused with so many experts and talking heads providing widely different views of the housing market and its likely direction. But John Lindeman sums it up beautifully today in the show as he explains how to sort the wheat from the chaff.
We catch up with two WA experts about the disturbing news out of that state about falling property prices.
And Pete Wargent looks at the trends in the property market that seem to be pointing to a good time ahead for at least two Australian states.
Transcripts
Michael Yardney
Kevin: Each year, Credit Suisse produces an annual global wealth report. We’ve talked about it in the show before and we’ve spoken to Michael Yardney about it. Michael, I know you’ve written a few blogs on it as well, but it’s just been released again.
What’s the news for Australia?
Michael: Kevin, it’s actually good news for us over the last couple of years. Interestingly, it suggests there’s going to be some good news in the future. Once again, we’re the wealthiest nation in the world if you take into account our median wealth.
Kevin: Do you think this is because a lot because we have such a focus on property, Michael?
Michael: Interestingly, that’s one of the conclusions, Kevin. What it shows Australia’s wealth is heavily skewed to what they call real assets (in other words, property). On average, Australians have about 60% of their assets in property, while the rest of the world has got about 46% of their assets.
Kevin: We seem to grow up with that, didn’t we? That Australia feeling that you have to own your own piece of land and your own property. We were brought up with that. Michael, do you think that’s really what’s leading to all of this?
Michael: It’s partly that. It’s partly our generally well-performing economy. It’s partly that we’re situated geographically in a part of the world that is growing faster than us, all those developed nations dragging us with it.
Kevin: So what’s the average Australian worth, Michael?
Michael: The report is the average Australian is worth $430,000 US dollars. That’s second place to Switzerland. But when you take median wealth, we’re the highest in the world at $225,000 US dollars.
Kevin: What’s the difference there, Michael?
Michael: I think median is a better measure. It shows the spread of wealth. Let’s look at it this way. Imagine we were all at a crowded bar and James Packer walks in. Obviously the average wealth of the crowd is going to soar, but the median stays the same. Packer’s presence brings up the average wealth, but it does little to change the spread of wealth, what that middle person is going to be.
What the report therefore shows is that the spread of wealth in Australia, there’s not that much of a difference between the highest and the lowest. We all pretty well see 62% of Australians have somewhere between US $100,000 and $1 million.
Kevin: I guess, Michael, we’re lucky we don’t have too many poor people in Australia.
Michael: The report suggested that only 6% of Australians have a net worth of under $10,000. That’s a very, very low proportion compared to global standards. We’re a very lucky country. The median wealth of Australians is high. Interesting, the top 1% of wealthy people in Australia own 21% of our assets. The top 5% own 39% of our assets. Compared to other parts of the world where, in fact, the top 1% own over 50% of assets.
Again, it just shows we have very wealthy people, but wealth is reasonably evenly spread. It’s easy for us to say, I guess. I’m sure there are some people who are going to say, “This isn’t fair. I still haven’t got a job,” or “I haven’t got much income.” But I think the bottom line is we are really a very, very lucky country and we shouldn’t forget it.
The news is good because it’s unlikely to change. With the report predicting Australia is going to keep the top wealth spot for probably the rest of this decade.
Kevin: So, Michael, how much money do you have to have to be amongst the most wealthy people in the world?
Michael: It’s been shown that if you’ve $3,650 net US dollars, you are amongst the wealthiest half the people in the world.
Kevin: Wow, is that right?
Michael: That’s it. The average person in the world is worth $56,000. Global wealth grew 8.3%, but it is the old story of the rich do keep getting richer, Kevin.
Kevin: How much wealth is there in Australia, Michael?
Michael: The reports suggest that there is a total wealth in Australia of $7.2 trillion.
Kevin: And how many dollar millionaires do we have?
Michael: We have about 1.25 million millionaires. So yes, we are a lucky country, but we’re also lucky because we’re expected to live longer. The latest United Nations data figures show the life expectancy in Australia has reached 82.5 years, the fourth longest in the world behind Japan, Hong Kong and Switzerland.
Despite all this is an interesting lesson. We haven’t made it as the world’s happiest place.
Kevin: Why not?
Michael: The latest United Nations report suggests that we’re only ranked number ten. Why not? I don’t think we appreciate how lucky we are. I guess it goes back to that true wealth has nothing to do with how many properties you’ve got or how much money you’ve got in the bank. It’s what you’re left with when they take all your money away from you, Kevin.
Kevin: Well, Michael, one thing I appreciate is your contribution. Thanks again.
Michael: My pleasure, Kevin.
Michael Lee
Kevin: One lender in particular, Commonwealth Bank, has raised its commission rates for brokers as the mortgage market heats up. A consumer survey, which was commissioned by a new mortgage contest website called Flongle.com.au, has revealed that despite significant variances in financial incentives being paid to brokers to sell Australians into their home loan, more than eight out of ten (about 86%) of Australians have no idea how much money brokers stand to make from advising them on their home loans.
I mentioned that research was done by a website called Flongle.com.au. The founder joins me, Michael Lee. Hi, Michael. Thanks for your time.
Michael: Good day, Kevin. Thanks for having me.
Kevin: Was that a surprise to you, Michael?
Michael: Yeah, I think it was. And in some ways, it isn’t. I think that if people really understood the way the industry worked, they’d perhaps be a little bit more cynical. An interesting thing has happened over time, Kevin. If we go back to ten years ago (2004), I think people were really cynical about how mortgage brokers earn their crust, because there’s a lot of focus on that stuff. It’s not such a focus anymore. People are just maybe looking for easy, quick answers, not necessarily think about it.
Kevin: Michael, tell me about the research. How many people did you talk to and where did you get them from?
Michael: It was an online survey done sourced through an independent survey group. In total, there were 1,464 respondents, so it’s not entirely tiny. They all had a mortgage or had taken a mortgage fairly recently in terms of the parameters of our scope. They had either gone directly to a lender or via mortgage brokers or used comparison websites. We’re looking right across that spectrum.
Kevin: It goes on to say that 24% of mortgage holders who used a broker were not even aware that a broker earned commission at all, but I understood it was meant to be disclosed.
Michael: Yes. I think that’s the challenge with this. The more you disclose, the more confusing it becomes. Let’s remember why people get mortgage brokers in the first place: to simplify it.
What happens is the consumer hands the decision over to the broker as a person of trust, and then the disclosure papers are really sign here, sign here, sign here. If you’ve ever taken a mortgage yourself, Kevin, you’ll know that the process is pretty paper-laden, even in this day in age, so it’s very easy to miss a single line in terms of disclosure. There’s no requirement to say, “Here it is, folks. This is how much money I’m making.”
Kevin: I guess any borrower, when they’re wanting to borrow, will tend to overlook lots of things because of the need to have the money to do whatever it is they want to do. They will overlook things.
Michael: I think that’s a fair comment. I think that’s more so when a person’s going through the process for the first time. It is a bit of a confusing and overwhelming process the first time around, which means that you’re looking for lots of different answers. The ultimate answer, though, is yes you can have the loan, so I can go and buy that investment property or my home.
This is one of the classic things about this: the purchase of your property and the loan that underpins that, which really is usually much larger in terms of costs on the property itself in the first place.
Kevin: Just to give us a bit of an idea about how big this is around Australia, how much commission is actually paid to brokers?
Michael: The disclosed commission that we can see, according to an IBISWorld report is $2.1 billion a year. That’s excluding the commissions that are paid to the lender staff themselves. So under the regulation, while the brokers are required to make commission disclosures, if they actually work for the lender – if they’re branch staff that are getting bonus incentives or anything along those lines – they don’t have to be disclosed. So there’s a bit of a black box there on those numbers.
But mortgage brokers themselves are $2.1 billion.
Kevin: Typically, how are they paid, Michael?
Michael: What you’ll see if you go to any of the big broker websites is brokers work for free because they are paid a commission. I think that’s one of those confusing points for people. What happens is they get an up-front commission, which happens as a percentage of the loan balance or draw-down at settlement.
Within six weeks or so of your loan getting done a big cheque will go back to the mortgage broker business. Typically, that’s somewhere around .6 or .7%, which if you put it across a $400,000, you’re talking a few thousand dollars. But the one that everybody often misses is that every month after that, the broker is also getting what’s called a trailing commission. It happens for the life of the loan. It means that, if you’re talking around that $300,000 or $400,000 loan mark, the initial commission might seem like $3000, but within five years, it’s probably $7,000 or $8,000 or even $9,000 and continues to accumulate.
Kevin: We’re just about out of time, but there are a couple other important points I do want to cover. How does Flongle work and how do you actually earn any income?
Michael: A really good question. Flongle is fully independent. In other words, it does work for the consumer. In the whole transaction, we keep our hands clean. That is, there’s a relatively small fee: $389. The website does its bit. We also have human help that works all the way through, so there are no kickbacks in the system at all. That’s the only way we make money.
Lenders and brokers are free to bid on the business free, which means the most competitive businesses are in there doing their best because they don’t have to pay to rank.
Kevin: So it’s a competition site, really, where people are bidding to get business?
Michael: Absolutely. It’s more than that, though. We call it a mortgage contest, but the first prerequisite is that same thing that people want to know. “Can I get the loan?” Yes. “Does it actually do what I want it to do?”
Once we satisfy those criteria, and we use a thing called Smart Match to do that – the software does it all for us – we then get down to talking about pricing. But there are pricing concessions in there. There are deals that are not being advertised. I don’t have the exact stat, but somewhere in the vicinity of 75-80% of the deals that are coming into Flongle right now are discounted on what you’ll see in the retail space today.
Kevin: Just to make it clear, you’re not out to do brokers out of business. As I understand it, you’re here to highlight which are the good brokers.
Michael: Yeah. The most competitive lenders and brokers. What this does is bring together good borrowers with good lenders or good brokers. That’s what Flongle does.
Kevin: Excellent. The website, check it out for yourself. It’s Flongle.com.au. My guest has been the founder, Michael Lee. Thanks for your time, Michael.
Michael: Thanks for having me, Kevin.
Bernadette Janson
Kevin: As any renovator will tell you, probably one of the things that’s going to make your renovation even more successful is to make sure that you’ve got the proper tradies on. And when you find one, it’s a matter then of also keeping them, but finding them sometimes it’s the hard thing.
Bernadette Janson runs a website that is called TheSchoolOfRenovating.com. She specializes in teaching people how to go about the renovation process. A very important part of that, Bernadette, of course is actually finding and keeping the right tradies, isn’t it?
Bernadette: It is. In actual fact, the trades really are the key to your success. If you get that right, you’re well on the way to a successful project.
Kevin: Do you find that as you move from renovation to renovation, you change your tradies or do you have a bank of them that you’ll pick on for certain areas? They’re not always available, the ones you want.
Bernadette: No. Basically, I use a builder for the bulk of the work and I have trades that come behind for the finishing off. The structural work, I get a builder to do, so he has to worry about the trades. But then when my guys come along, that’s when I kick in.
What I find is that you do need to have a couple, because often the timing doesn’t work. So you’ve got to have a couple that you’ve got all primed up ready to go, so that once it comes time to start, you’ve got someone available to do it.
Kevin: I’ve heard some very seasoned renovators tell me that even though you’ve got your favorite tradies, it’s always still good to get quotes. Not so much to keep them honest, but just to make sure that you’re on track.
Bernadette: Yeah, it is. That’s exactly right. I always get three quotes on any trade on any decent amount, if it’s just a bit here and there, that’s not so important. But for that very reason: to make sure that my feasibility is on track.
Kevin: Due diligence is a very important part of that in making sure that you’re on top of what the tradies are telling you.
Bernadette: It is. That’s probably the biggest part as far as engaging tradesmen are concerned. It takes a bit of time to do thorough due diligence on a tradesman, but I always say once you’ve done it, you’ve got them ongoingly.
Kevin: Tell me about the types of contracts that you have your tradies on.
Bernadette: Basically, there are two types of contract. There’s a simple contract, and that’s for work between $1000 and $5000, and then there’s a more complex contract for anything over $5000.
A simple contract basically just needs to have a basic scope of work, the contractor’s license number, the details of both parties, the agreed price and date and signature. That’s all.
But once you get into the bigger contract value, then you’re talking about there’s lots of things to be covered – things like how variations are going to be dealt with, whether you’re going to be retaining any money at the end to manage defects. Basically, covering off all the things that could go wrong.
You hope that you don’t ever have to use that contract, but it’s there in place, firstly, to get things straight up front so everyone knows where they stand, but also to protect you in the case that the trade doesn’t perform.
Kevin: Do you use fixed-price contracts, Bernadette?
Bernadette: As much as possible, yes. It’s a big risk to go with a cost-plus with a trade or a builder, because you’re relying heavily on your trust in that person, so that’s certainly something I wouldn’t recommend.
Kevin: Just to close off, what are some of your tips on hanging onto a good tradie when you get one?
Bernadette: Really basic stuff like paying them on time, so don’t have them hanging out for money. Making sure that you communicate clearly with them, so you’re not messing them around. Try and make sure that you don’t change your mind too much, and if you do, that you basically broach that with them and don’t expect them to be doing a lot of extra work for nothing.
Feed them occasionally. Often just bringing down some morning tea. It’s just really treating them like you would like to be treated yourself.
Kevin: Some great tips there on making sure that you get and keep good tradies.
Bernadette: Yes.
Kevin: Bernadette Janson has been my guest. The website is called TheSchoolOfRenovating.com. Some great videos on there, too, where you can actually watch where Bernadette has done a number of renovations herself and she takes you through the day-by-day process.
My guest has been Bernadette Janson and the website is TheSchoolOfRenovating.com. Bernadette, thank you so much for your time.
Bernadette: Thank you, Kevin!
John Lindeman
Kevin: I received an e-mail during the week that I want to acknowledge. Also, award the writer a 12-month subscription to Australian Property Investor Magazine. Craig Cameron, thank you very much for sending it in.
It says, “There seems to be a lot of titles thrown around when it comes to the real estate game: property agents, buyers’ agents, property analysts and property strategists, to name just a few. My question is what are the primary differences between these titles and do they fall under regulations and require licenses and insurances to assist in the protection of the consumer?”
It’s a great question, Craig. I think there are a lot of experts around and you’ve got to be very careful whose advice you take. It reminds me of a blog article I read recently written by John Lindeman from UnderstandProperty.com.au who joins me.
Hi, John.
John: Hello, Kevin. How are you?
Kevin: Good. It can be very, very confusing, and I think you’ve got to be careful who you take advice from, don’t you?
John: Indeed you do, because the property market is largely unregulated when it comes to people giving information or advice. I think the very first step you should take when you’re offered information about the market from anyone who says they’re an expert or analyst is to check their bonafide. You can do that easily by just Googling their name and checking their credentials on the Internet.
Kevin: A lot of what they pick up and talk about generally could be put in terms of just being simply gossip or something they picked up and taking their own slant to it, John.
John: Yeah. And a lot of times you’ll hear things like people saying “selling like crazy” or “the market is hot” or claims that people bought in an area and doubled their money. I hear this all the time.
The problem is that it may well be true, but it bears absolutely no relationship to the future performance of the area for investors.
Kevin: Is it really buyer beware?
John: In this case, it is. I think in order to be aware, you’ve really got to know who you’re talking to or who you’re getting information from. Be sure of their credentials.
Kevin: Tell me how you would go about checking? What advice would you give to someone who’s looking for the best type of information about where to invest?
John: I’d look for experts who have had books published on the housing market. Have a look to see what the reviews say about them. If they’ve written articles about the market, what they are. You can Google this quite easily. What media statements they have made about the market in the past and how accurate they’ve been . . . or not if the case may be.
Also, because it’s such an unregulated industry, you’ve got people there who are wolves in sheep’s clothing and they might pretend to be on your side . . . but in reality they’re getting kickbacks or commissions or finder fees, some sort of financial incentive to push you down a certain property path direction.
Kevin: It’s interesting to note, John, hearing you talk there about these so-called experts who make claims and statements. If you go back and check just how accurate, you might be horrified. There was one in particular whose name I won’t mention who had been trumpeting mining towns for quite some time, and has recently come out and said that those who invested in mining towns can probably understandably be quite concerned about their investment. Yet, it didn’t stop him some time ago from recommending to people, “Look at these great returns.”
John: That’s right. The thing about the Internet and Googling is that you can quite easily check how accurate people have been if you go back and see what they’ve said a few years ago about the market, just to make sure that they do actually know what they’re talking about.
Kevin: So how do you go about doing your research, John?
John: My research is based on, of course, we have our own database. We analyze the sales listings and rental information for every suburb in Australia. We do this on a regular basis, and it enables us to provide fairly accurate predictive information. But we also say to people do your own on-the-ground research and go and have a look yourself.
We spend a lot of time traveling in Australia researching housing markets and look to see what the dynamics are and why people are moving in our out. The more information you can get about a market, the better the decision you’ll make about it.
Kevin: Very good advice. If you want to contact John or read more about what John has to say, the website is UnderstandProperty.com.au.
My guest has been John Lindeman. John, thank you for your time.
John: It’s been a pleasure. Thanks, Kevin!
David Airey & Damian Collins
Kevin: The Real Estate Institute of Western Australia’s latest figures have Perth’s median house prices lifting 1% over the September quarter lifting up to 548,000. However, we REIWA’s president, David Airey, warns of a downturn and is predicting that it could happen as soon as 2015. He joins us.
Hello, David. Thanks for your time.
David: Hello, Kevin. Good to be with you.
Kevin: It’s a bit of a sobering view. The possibility of a downturn in WA. How likely is that, David?
David: Well, Kevin, we’ve agonized over this message and I think it’s better to bring the news out sooner rather than later. The fact is we’re in our eighth quarter in the Perth metropolitan market, slowing sales transactions. Strangely, the median prices remain pretty tight in the band between about $530 and $550-odd. It’s certainly in that $540 mark, which is mainly stabilized at that level, because there’s plenty of activity under $600,000 and around that median price level, but as you get up in prior sales, transaction numbers have wanted.
We’ve been particularly hurt since first-time buyers started to fall away as a result of changes by the state government and the first homebuyers grant in West Australia, which came into effect in June.
Kevin: A couple of the key performance indicators (or KPIs) that could be leaning that way: number of listings growing and the number of vendors having to drop their asking price has actually increased as well, David.
David: Vendor discounting is significantly higher, Kevin, yes. Typically in Perth, most sales 90% or 95% are made by private treaty. That is, offer and acceptance negotiation. We’ve seen asking prices and the discounting figure on that is being dropped in order to get a deal.
The other factor you just mentioned is to do with the number of listings. As we speak, they have moved over the 12,000 mark to 12,105 listings currently on the market on REIWA.com at the moment.
That’s back to, most would say, traditional levels, but it’s up about 2,000 listings in three months. When you’ve got a 20% listing stock for sale, you’re inevitably going to have a market tilting in favor of the buyer.
Kevin: Do you see any downturn coming, as you say, in 2015 being long term, David?
David: I think West Australia is going through a reorganization of its finances as a result of the resources downturn. And whilst the state economy is very strong, there’s less confidence in the marketplace. We’ve got less investors, less first home buyers.
I also think that people’s housing needs have been satisfied. They’ve bought their investments; they’ve bought their home and they’re staying in houses a lot longer. People used to move every two, three, four or five years. That average is definitely moving. People are preferring to stay in a home for longer, and I think our members’ real estate agents have got to prepare for less sales. Maybe that’s going to result in some consolidation in the real estate market.
I guess from a buyer’s point of view, there will be more choice. And from a seller’s point of view, you’ll want to be very realistic about your asking price.
Kevin: Well, it’s certainly time to trim the sails. David, thank you for giving us those facts. I’ve been talking to REIWA’s president, David Airey. David, thanks for your time.
David: A pleasure, Kevin. Thanks.
Kevin: To get another view on the market, I’m going to talk this time to Damian Collins from Momentum Wealth. They’re buyers’ agents in Western Australia. Damian, thank you for your time.
What are your sentiments about the WA market right now?
Damian: Kevin, we’ve certainly seen an increase in stock available. We’re up around the 12,000 market, which is a balanced market. We’ve also seen that the number of properties selling has certainly started to slow down a bit.
After a couple of years of reasonable growth, the last twelve months has slowed down a bit. Our forecast is that coming into 2015, we’d see a relatively flat sort of market, anywhere from 1-4% growth. We certainly don’t see any of the signs of a significant downturn that some have been predicting.
Kevin: There are reports of that downturn, which of course is quite alarming. It’s a pretty big call I would’ve thought to say a downturn. Do you think it’s creating good opportunities for investors to look at the WA market? If so, where should they be looking, Damian?
Damian: With the general market, I have no doubt it’s looking relatively flat certainly for 2015. Our advice to investors is you’ve got to be looking at a property that has got some way you can value add yourself or the market is going to rerate.
The properties that we’ve been buying have been in areas that we are aware are likely to be rezoned or proposed rezoning areas, and also properties that you can renovate or add value to yourself. That’s the way you’re going to get market outperformance.
We bought in some suburbs last year that the properties have done 12-15% even though the market as a whole only did 3 or 4. There are always still good opportunities in a downturn. You just have to be a lot more selective.
Kevin: How are the banks looking at the WA market right now?
Damian: No change at all. They’re still very positive. The mining towns have been quite selective for a period of time, and I’d expect that to stay. But generally the Perth metropolitan area is just the same as any other metro city around Australia. There are no problems getting funding.
Kevin: Okay. We’ll continue to keep an eye on the WA market, and our expert on the ground there, Damian Collins, from Momentum Wealth buyers’ agents has helped us with that. Damian, thank you very much for you time.
Damian: Thanks, Kevin.
Pete Wargent
Kevin: From time to time, we get so engrossed in just looking at the weekly data figures to try and work out what the market is doing. I read a very interesting blog that was written by a regular contributor to our show. We welcome him back in, too. Pete Wargent. By way of introduction, Pete is a Chartered Accountant. He’s a Chartered Secretary and has a financial planning diploma.
He achieved financial freedom at the age of 33 as detailed in his book “Get a Financial Grip: A Simple Plan for Financial Freedom” which we’ve discussed with Peter on a number of occasions.
Pete, at this point in time, we actually catch you in the U.K. Good morning and thanks for your time.
Pete: Good evening, Kevin, from Brisbane.
Kevin: Good evening for you. Good morning for us. Let’s look at how you’re looking at the Australian economy. In particular, the housing market at present. Pete, what do you think are the trends?
Pete: As we know, the Reserve Bank is aiming to rebalance the economy away from the mining construction boom, and particularly towards dwelling construction which impacts the housing market.
Building approvals may now have just passed that peak, but there was a peak of more than 195,000 dwellings on an annual basis. That’s not just building and construction that’s now in the pipeline.
There’s a slightly different cycle, though, from previous cycles that we’ve seen and developers have sought approval for record numbers in apartments, though some areasand regions could get over-supplied with units.
Kevin: What about rental growth? I read that you were saying in your blog that rental growth is actually dead.
Pete: It’s related to that first point, really. The data shows that creditt growth for investors is growing much more quickly than it is for home owners in this cycle, largely thanks to low interest rates.
The big picture, especially in the capital cities, is that there are huge numbers of properties being acquired as rentals right now and that’s putting downward pressure on rent and vacancy rates in some areas are rising. Of course, there are always pockets and areas which bug the trend. Sydney, for example, is seeing its rents up by more than 20% for an apartment over the last five years.
The big picture is rental growth in most cities is now stalling.
Kevin: Let’s talk about some of the cities. Of course the growth in Sydney in recent times has been somewhat astronomical. Do you see that continuing?
Pete: I think forecasts for the next year are still pretty good for Sydney. Supply is generally coming on line. I think it’s been a fairly ordinary five or six years for the Brisbane property market for one reason or another, but housing, finance and mortgage data suggests that good times can be just around the corner for Brisbane, particularly home owner finance commitments. They’re heading towards around 50% higher than they were during that 2011 low.
Investors are likely to be tempted by a more attractive yield in entry prices, too.
Kevin: I know you take more of a global view on real estate. I’d be keen to get your thoughts on affordability. We hear a lot in Australia about how unaffordable property is. On a world scheme, how do you see it, Pete?
Pete: Our office is based over in London, because London property is certainly no more affordable in many cases, and less affordable over here, particularly for detached housing.
It’s difficult to give an overarching viewpoint on that. It largely depends on the city and the suburb, particularly the type of dwelling that people are looking to buy.
Kevin: Let’s look around the country very quickly. Where do you see the major growth centers around Australia in the next year or two?
Pete: I think as we already covered off there, the Sydney market has still got the momentum behind it. Probably looking towards Brisbane would be one of the outperforming cities for the next two or three years.
That said, Queensland does have some headwind as the mining construction boom unwinds. Interstate migrations are slowing down a bit in Brisbane. And also, the unemployment rate is ticking up little amounts towards 7%.
You need to be cautious. I think assets will be particularly vital in this cycle.
Kevin: In Western Australia, even in this show, we’ve had some concerns expressed about the WA market and how it’s in for a bit of a rough patch over the next twelve months to two years. Do you agree with that assessment?
Pete: It seems to be the general trend. Most of the data seems to be suggesting that the economy in general is slowing down. Job growth is slowing and unemployment is ticking up. I think, for the Perth market in particular, it largely depends on the type of property and the location that you’ve got. Generally speaking, houses are the favored asset in Perth as opposed to the apartment stock. If you’ve got a property in good land located close to transport links, you’ll probably find that the market holds up surprisingly well.
Kevin: Pete Wargent, thank you very much for your time. And the book is called “Get a Financial Grip: A Simple Plan for Financial Freedom”. Our guest has been Pete Wargent. Pete, thank you very much for your time.
Pete: A pleasure, Kevin.