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YIP Investors Forum: Rich Harvey of propertybuyer

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Sara Terrill:  We have got to keep on moving straightaway.  So I would like to introduce our next speaker, Rich Harvey.  Rich is a Buyer’s Agent, Economist and CEO of Property Buying – sorry, Property Buyer, Sydney’s leading Buyer’s agency.  He has bought over 1,000 properties for investors and home buyers and has won more than 20 major awards including the prestigious National Telstra Business Award in 2007.  He also serves as Chairman of the Buyers’ Agent chapter of the Real Estate Institute of New South Wales and the Real Estate Buyers’ Agents Association of New South Wales.  Please hand over to Rich.
Rich Harvey, CEO, Property Buyer
Rich Harvey:  Thanks very much, Sara.  You have come here today to get some really good information.  I can guarantee that 50% of you do nothing with it and other 50% will do something with it.  So I want to talk to that 50% that are going to do something with it.  
Who am I?  I am a Buyers Advocate.  I run a business for property buyers.  We are independent buyers advocates.  We don’t take any commission from developers, we are just on your side and we perform a tailored search for our clients.
So let me talk about some of the mistakes, the what not to do’s.  So who has made a bad investment decision before.  Put your hand up, I am in that category too.  I have lost money.  So I teach my clients not to do what I do.  But I am going to give you 7 themes and from a unique perspective of doing thousands of transactions, we get to see what a lot of clients do wrong, well not our clients but other people do wrong.  
So these are things we often see as major mistakes.  One is, he will do inadequate research.  They might go out on 2 weekends, attend one or two forums and look online a bit and they call that research.  That’s not research, that’s just information gathering.  Or they will just be a hopeless negotiator.  I don’t know how to negotiate well.  I think that we are offering a hundred grand less, that that’s a good offer.  Well they are never actually going to buy the property in the first place.
A lot of home buyers we see do that the frustrated purchase mistake.  You know they go to a lot of auctions, miss out and then the wives say or maybe the husband, c’mon you got to bid another 20 grand for this one.  And they’ll end up paying more than they need to for the property.  I am seeing smiles and nods in the crowd here for that one.  Or buying for tax deductions only.  Not crunching the numbers correctly.  And the biggest one we see is procrastination, just not taking action and not doing [things].  But you guys are not in that category, so we are here today to make decisions which is great.
So let’s have a quick look at where we are going in the market at the moment.  Alright so over the last 10 years, you can see the colours I put on those graphs, it will be hard to see, I hope that they are in your notes.  You have seen the, obviously Sydney has been the leader of the pack. 
Melbourne has been catching up quite rapidly with Sydney and so is Perth.  Perth obviously buoyed by the resources demand in the resources sector has had a big catch up.
Last year we just saw, I guess a bit of an unstable market around Australia, but this year in 2013, we have seen consumer confidence rebound quite strongly.  Share market is really picking up, so that’s filtering through into a lot of sectors.  So we are still going to see this year, higher auction [clearance] rates, we are going to see a lot more activity.  
Just in our own practice, some of my buyers agents attended an auction on Thursday night for a simple 2 bedroom unit in Merrickville.  There were like 300 people in the room for 3 properties and it actually ended up going for a ridiculously high price like 20 grand or 30 grand more than it really should have gone for.  So there is a lot of demand out there for particular price points in the market.
Alright what’s happening in terms of supply and demand imbalance across Australia.  This is a national chart, so it shows that basically in Australia we have undersupply situation.  Not in every city, but nationally we do.  So this gives me the confidence to invest in the property market.  
A lot of people say, “Rich why would I invest in property”.  “Isn’t there just too many properties”.  “Aren’t we going to be heading like America and crash”.  Well no, because we are not building enough.  
If you look at the, I don’t have enough time to go into detail, but typically New South Wales and Queensland have the shortest, the greatest amount of deficit.  You can see the gap between what we are actually building this line here and what the demand is, you see that the charts here accummulating at the time.  But at the moment we are heading to a deficit of around 400,000 dwellings by 2014.  So that’s putting it for I believe underpricing in the market.
A lot of people also say, “Rich the market is unaffordable, you know, we just don’t have income to pay for these properties”.  Well there is some great research has been done by Rismark International.  The average home price to income ratio is around 4 ½ times.  Obviously in Sydney and Melbourne, it’s around 8 to 9 times average income to buy an average dwelling.  But that’s still considered affordable.  And actually because interest rates have come down so much in the last 2 years. 

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