It was a good year in 2017 and there are signs that the good times will continue this year. What are the indicators pointing towards this? Miraim Sandkuhler from Property Mavens looks ahead.
Listen to the interview now:
Kevin: As we continue to have a look at what’s likely to be ahead for the property market in 2018, it’s always good to look back at 2017. Miriam Sandkuhler from Property Mavens joins me to do that.
Miriam, thanks very much for your time.
Miriam: You’re welcome, Kevin.
Kevin: I’m looking forward to your input into this chat. What lessons did you learn out of 2017?
Miriam: Gosh, there were so many. Certainly supply and demand are really the strongest drivers of price escalation in a number of cities around the country. That’s really been evidenced by the fact that Victoria’s capital growth ended up at the end of November around 10% for the year, Sydney’s was double that and second only to Hobart, which had 11.5%.
Kevin: Do you see the growth in Sydney and Melbourne continuing into 2018?
Miriam: Certainly, if I talk [0:53 inaudible] Melbourne, I absolutely can, and that’s largely driven by the fact that we’re having approximately 100,000 people migrating to the state every year, and we have done for a number of years. So, there’s no sign of that slowing down.
Kevin: What are clearance rates at auctions? How much of an indicator are they going to be for what’s happening in 2018?
Miriam: They’re definitely something to watch. Clearance rates have been dropping towards the end of last year, and things did start slowing down a little. Interestingly enough, there were a lot of agents who weren’t reporting auction results, which was skewing the results probably a little bit higher than what they probably should have been in reality, because of course, every agent wants it to look like there’s a continuing boom that’s never going to slow down.
So, it’s definitely something to keep an eye on, but it’s also important to understand that not every state… Certainly in Victoria, it’s not compulsory for agents to report auctions, so there’s always a percentage of agents who don’t, and so we never get 100% of what’s going on in the marketplace.
Kevin: Yes. One of the things that I picked up out of 2017 was that affordability was a key driver for a lot of people in many, many areas – not only investors but homebuyers, as well. Do you see that having an influence on the types of houses that people will be choosing? Townhouses and units as an example?
Miriam: Absolutely. Overall, townhouses and villa units will continue to be in strong demand this year, and that’s due to the price point. And particularly properties that have been built 10 to 12 years ago, that are a little bit older. They have more space and they’re generally better built than what’s more recent, and so they’ll very much be attractive to homebuyers and investors alike.
And certainly pricing, as well. They’re a critical market-drivers for first-home buyers and first-home upgraders, and so anywhere in the middle to outer ring suburbs where you can buy for $1 million or less – especially houses – will continue to perform due to demand from these buyers.
Kevin: In the event that we do see a bit of a slowdown in some parts of Australia, what do you think will be the triggers for that?
Miriam: Certainly interest rates going up will always have an influence, and depending on how many interest rates go up – I’m hearing projections of at least one to two across the year. Unemployment rates, depending on where they’re at. We also, I think, have record years of little to no increase in wages growth, so that’s something that could start pinching a bit more in terms of people spending, as well. So, it could be a combination of any one of those individual things.
Kevin: Miriam, we’ve already identified that last year, affordability was a big driver of the market. Is that going to be another driver this year? And if so, how important do you think it’s going to be?
Miriam: Affordability is always going to be an important driver, particularly for people trying to get into the market for the first time. What I am seeing more and more of, however, is where we get first-home buyers who can’t get into the areas they want to be in for the budget that they have, I’m actually seeing a lot more rentvesting coming into play. So, they’re renting where they want to live, they’re buying where they can afford to live, just to ensure they have their foot in the door.
Affordability is very much – and will always continue to be – a very strong driver.
Kevin: And negative gearing, of course, raising its ugly head again, or talk against negative gearing. What’s your view on that?
Miriam: It’s interesting. Interestingly enough, I was speaking to one of the Labor backbenchers yesterday about this exact issue, and we had an interesting conversation, because if they start fiddling around with negative gearing… And we talk about first-home buyers trying to get into the market where they can’t buy their own home and they look to rentvesting as an option, well, if they suddenly have those gearing benefits removed, that could have a substantial impact on them and may actually prevent them getting into the market at all.
I also use that philosophy or that attitude in terms of, say, single-parent families, so where you have a divorce, people are ending up with a lot less money or equity than what they had. A lot of those people are rentvesting.
Kevin: Yes. I guess the point that’s lost in a lot of cases when we talk about negative gearing is that they’re not wealthy investors who are using negative gearing; it’s mom-and-dad investors.
Miriam: Absolutely. I’m seeing people who only have the capacity to spend $350,000, and they want to be in the market. Most of them can only afford to be in the market as a rentvester, and they’re heavily dependent on any negative gearing benefits they can get.
So, while this attitude is perpetually that it’s rich people investing all the time, it just simply isn’t. It absolutely is mom-and-dad investors, it’s single parents who are divorced who can’t buy their own home but they still want their foot in the market.
It’s a lot of single women over the age of 50 where they have certainly inadequate superannuation, so more and more women are trying to get into the market through rentvesting and investing to compensate for the fact that on average, they’re retiring with $173,000 less than the average male.
Kevin: Miriam, I started our chat off today by asking you your thoughts on the lessons out of 2017. Fast-forward now 12 months, and I ask you the same question about 2018. What do you think you’ll be telling me?
Miriam: If only I had a crystal ball, Kevin. Nice try, though.
Kevin: You’re not going to tell me?
Miriam: I can tell you now if I had that information, I wouldn’t be sharing it; I’d be going out and doing it and telling you in 12 months’ time.
Kevin: I think we’ll leave it on that note. Miriam, thank you so much for your time. Miriam Sandkuhler from Property Mavens.
You can’t win them all, but you can’t blame me for asking, can you?
Miriam: Absolutely not.
Kevin: Good on you.
Miriam: Nice try, though. Thanks, Kevin.
Kevin: Miriam Sandkuhler there from Property Mavens. Thanks for your time, Miriam.
Miriam: Okay. Bye.
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Kevin Tuner worked in radio as General Manager of various east coast radio stations. He started in real estate in 1988 and was ranked in the Top 10 Salespeople in the state until he was appointed as State CEO 1992.
He operated a number of real estate offices as business owner and was General Manager of several real estate offices in Christchurch.
He now hosts a real estate show on Radio 4BC and a weekly podcast at www.realestatetalk.com.au. He is the host of a daily 7 to 10 minute podcast show for real estate professionals at www.reuncut.com.au.
To hear more podcasts by Kevin Turner, click here
Disclaimer: while due care is taken, the viewpoints expressed by interviewees and/or contributors do not necessarily reflect the opinions of Your Investment Property.