A Positive Outlook on the Market (with Simon Pressley of Propertyology)
| Episode: | E123 |
| Show Title: | A Positive Outlook on the Market |
| Cast: | Aaron Horne, John McGregor & Patrick Berry + Simon Pressley |
| Show Length: | 26 minutes 42 seconds |
The team are once again wowed by the knowledge and expertise of Simon Pressley, Managing Director of Propertyology and REIA Hall of Famer, as he reassures us that despite mainstream media reporting, things aren’t all doom and gloom for the property market… especially right here in our backyard!
For more great info from Simon Pressley, Check out Propertyology here
TRANSCRIPT:
Simon Pressley
Let me set a point, what we mean by the word fundamentals in regards to the property market and make it as specific as we can to Hobart. So that Hobart’s got more people with home ownership or Tasmania’s got more people with home ownership than any other state in Australia going.
Patrick Berry
On going forward. And the utility to the property.
Aaron
All right, guys, welcome back to the Property Board, your weekly engagement into real estate here in the Hobart marketplace. I’m your host, Aaron Horne, and unfortunately it doesn’t give me any pleasure to reveal that Patrick and John are not in their spots at the moment of recording. I have a confession to make. I might have blown it a little bit.
Aaron
I with the excitement of having our guest on today, I might not have done a back up and it’s kind of thrown things through the loop. So firstly, I’ve got to apologize to our listeners for lacking audio quality for some of of what the majority of the show. We had our guest, Simon Presley on. He’s an absolute cracker to listen to.
Aaron
And yes, in all the excitement, I didn’t record it back up, which would have fixed a lot of the problems that I’ve had to deal with today. In the edit suite. That being said, it’s everything he’s got to say is very, very valuable. It’s a really good list. I’m not going to waste a lot of your time here at the start of this show.
Aaron
I’m just going to say that we’ve got a cracking episode. You might see me and Pat wearing our footy cards. We’re having a little joke with the man from this last visit on the show. He was Brisbane Lyon Colors, which were definitely warranted, whereas our teams, the Bombers and the Eagles are sitting firmly at the bottom of the ladder.
Aaron
So we didn’t really have much to crow about. But yeah, we had a little little yarn with him about that at the start with. But in terms of the podcast, the guy is a wealth of knowledge, an absolute expert and a superstar. So we do appreciate him coming on and chatting with us. And again, many apologies for the audio problems.
Aaron
Hopefully I’ve tried to clean it up as much as I can. Yeah, all the content is definitely worth listening to though. So jump on board probably for this week and we will be back next week with even more. Probably, but thank you.
Patrick Berry
That’s right. We are back at the desk of the property thought and we have our favorite guest of all time, the guy who keeps reaching out to us and saying, Hey, boys, I can get you out of the trouble that your back story is. Apparently it is. So I’m a Presley the founder and managing director of property ology and wholesaling dot day of the RIAA.
Patrick Berry
Look at is eBay reaches out to us to say hey I’ve got some stuff to blog about. We better make sure we introduce that. So welcome to the show, Solomon Presley. Great to have you back, my friends.
Simon Pressley
Good morning, gentlemen. Thank you for having me back.
Patrick Berry
Rick, always a pleasure. And thank you once again for reaching out. I was actually excited you sent a text message to me on Saturday just before my team opened homes and you know, it was just putting some context into what’s happening with the mainstream media business reality. And I thought it was going to not only get you on to talk about it, but is there to reinject some confidence in the staff as well as inside of your company marketplace in Australia as a whole.
Simon Pressley
Yeah, I guess I call it people being spooked, Patrick, and it sort of it takes me back. I mean, so much has happened in the world in the last two and a half years, but what’s actually happening in the last couple of months in Australian real estate actually takes me back to the very start of the COVID period.
Simon Pressley
Back then it was different things that spooked people and then quite frankly, you know, it was totally understandable that it spooked people. None of us had been through a global health pandemic before, but what’s being spooked now is been with us. It is in the history of humankind, interest rates and the spooking. I actually put it down to digital media, believe or not.
Simon Pressley
There’s a lot of good things from digital media about that. But the cons of digital media is bad news. There’s not justified going to spread so quickly, and it affects human psyche. And that’s what’s happening now.
Patrick Berry
And I think I’ve noticed as well that the headlines that they use is headline spoil. So you read the headline and the something that we can actually read the whole article and maybe the article not as bad as what the headline implies. However, the majority of people just read the headline and that’s the end of what they read and they scroll along and that mentality just gets pushed down the line.
Patrick Berry
To everyone else.
Simon Pressley
Yeah. Yeah. And because I guess everyone’s got not just one device, these guys have got multiple devices, so when they feel like they’re reading the same message over and over again, if it becomes adopted as truth and gospel without actually pausing to go, well, is that right? It’s just the common denominator. Unfortunately, I think the digital world has made us that it’s suppressed intelligence.
Simon Pressley
We’re getting more information, but it’s poor quality intelligence. And if we just go back to I mentioned this reminds me of COVID, the first thing we heard from a real estate real estate perspective was property prices will tank, they will drop by 20 to 30% because the international borders being closed and you can’t physically have price growth in real estate without population growth.
Simon Pressley
Now that statement’s always been false, but most people don’t know that that’s false, right? So that was the first thing. So all doom and gloom, right? Property prices are going to crash then as we come out of that sort of two to three months national lockdown, they continuation of doomsday reporting continued. First it was job seeker. When that stops, no one’s going to be at all for their mortgage and then property values will crash that.
Simon Pressley
Six months after that, the doomsday topic changed and it become the loan deferral repayments all well. Soon everyone’s going to start paying their mortgage again and they won’t be able to afford that. And property prices will crash. Didn’t do that. So that two years we’ve actually had the second biggest property boom in Australia’s 30 year history despite those doomsday forecasts.
Simon Pressley
Now we’ve got interest rates going from effectively zero to I think they’ll end up back somewhere near where they were when the cut started about six months before code and people got oh what was all the fuss about.
Patrick Berry
Well I guess that’s what we need. That was the property industry and that that is the case. But you know, you point out some cool fundamentals as to why that might be the case that I found quite interesting as well.
Simon Pressley
Yeah. So we’ve got really, really strong fundamentals and that’s a big fancy word that most people say in intelligence. So I lot that sort of, you know.
Patrick Berry
Using that most drones that fundamentally operate.
Simon Pressley
But let me sort of point what we mean by the word fundamentals in regards to the property market and make it as specific as we can to Hobart. So Hobart’s got more people with home ownership or Tasmania’s got more people with home ownership than any other site in Australia. About 75% of Tasmanian population that live in their own home and 25% rent that standard house over the last ten years as increased in value by about 120%, that’s not so.
Simon Pressley
Household wealth is incredible, right? Household cash flows most people. Contrary to the early media reports you read, most people have not actually taken on any more debt over the last few years. Most people haven’t. They’re still in the same home that they were in years ago. Over that, over the years, as interest rates drop, most people before they started dropping were already paying a loan repayment a lot more than what the bank required them to pay.
Simon Pressley
And that’s common sense because no one wants to be paying a mortgage off any longer than what we need to. So when the RBA about three years ago started cutting interest rates, the actual loan repayment that was coming at the household budget stayed the same. People sort of say, Well, I can still afford to pay what I was buying.
Simon Pressley
If so, if I want to charge me less interest, so be it. So they continue to do that often, not people of a direct debit set up. So that means as the RBA drops interest rates, they’re paying more off the principal rather than interest so not only is there an asset value growing at a really, really sharp pace, the reduction of their debt is accelerating as well.
Simon Pressley
So they’ve continued to do that over the last three years. Fast forward to now that their home is worth more than what they probably ever imagined and their mortgage is a lot smaller than what it was. Progressively the RBA will claw back interest rates back to somewhere near where they were three years ago and the household budget for an overwhelming majority of mortgage holders will not feel anything because they’re already paying a lot more than what they require.
Simon Pressley
The RBA about six months ago published a report. They said that the combined sum of everyone in a mortgage in Australia surplus money in offset accounts and regional facilities was well over $100 billion so not only we’ve got all this equity in our house, we are flush with cash, but some strong fundamentals, say our economy. Just this month Tasmania officially broke an all time record, lowest unemployment rate ever.
Simon Pressley
There are more jobs available than people available to fill it. You have the biggest infrastructure pipeline in your city history. These are not bad things. We are seeing the return of international tourism, international students. This will give a further boost your economy. You are a world leader for renewable energy I’m so excited that you will probably have an AFL football team in the coming years.
Patrick Berry
And I know.
Simon Pressley
We’re getting a lot of support. That is a seriously huge thing for your economy. Seriously huge. The wonders it will do for confidence the extra visitor revenue that you’ll get, you’ll get from it the promotion of your great city to more mainland Australians and globally for that matter. That’s that’s huge. So these are really strong fundamentals. Now, importantly, they are real estate stocks, but some official numbers here for you.
Simon Pressley
This time ten years ago there were 750 properties advertised for rents in Hobart and that was a balanced rental market. You vacancy right this time ten years ago it was 3%, which is bang on balance, 750. Today there are 130 dwellings advertised for rent. Hobart’s population over a ten year period. Time is increased by 25,000 people. Your available rental supply about 20% of what it was ten years ago.
Simon Pressley
That’s available to rent retail supply. This is your game. The stock on the market that real estate agents have to sell to someone who wants to buy this time. Ten years ago, Hobart had 4600 dwellings advertised for sale today Hobart has 1500 dwellings advertised for sale. So what does this mean? Supply of real estate and real estate is what it showed us.
Simon Pressley
It’s essential. It doesn’t matter whether we were on a global health pandemic or whether we’re in a rising interest rate cycle, we’re always needed. It’s not four years on the stock market. It’s an essential commodity. You’ve got an all time record low number of dwellings for sale and for rent at a time when your economy has never been better.
Simon Pressley
And will get better. They are not fundamentals for a downturn. All they’ve got at the moment is fewer buyers at open homes. You’ll get guys on the ground. I’ll be fairly confident that your support will be at the side. You’ll have less people going to your open homes than normal. I would be surprised if you saw you’d got a heck of a lot more properties for sale than what you had six or seven months ago.
Simon Pressley
You might have a little bit more, but probably not much more. But you’ve got fewer buyers because there are little properties for sale. You don’t need many buyers for there to be pressure because those who are wanting to buy don’t have many choices still. So it doesn’t take much for there to be price growth. And then in the five months so far this calendar year, Hobart’s median house prices increased by 7% in five months.
Simon Pressley
So you annualize that and you’re still in about 15% per annum category. This is before they start cutting interest rates. So what I think will happen is we’ll continue to see buyers spooked because they’re not cashing in the information I’ve just shared with you. And you’ll see less people at open homes until some point they’ll sort of go, What the hell am I worried about?
Simon Pressley
I’m going to get on with my life and then I will. They’ll come out and they’ll start to transact. In real estate, you’ll see more people at open homes and they will be confronted with the same thing they had directly before Christmas. Right? There’s not much to choose from, and instantly there’ll be all this pressure again.
Patrick Berry
So the savvy guys and the ones that are coming to the open lines at the moment.
Simon Pressley
Absolutely. Exactly. Patrick they’re the ones who are able to cut through the noise and the crap and just focus on that. What’s the truth here? If they focus on that, they sort of go, Well, why would I not make a really important decision to upgrade my home or to or go from being a tenant to a first home buyer or to invest in my future?
Simon Pressley
If you can afford to do those things now, I’d argue that your income stability and your household equity never be in a better position to do it. So do it. If you can afford to do it, those who make the most money, fast forward three to five years from now, will be the ones who transacted first. So there’s probably a small window of opportunity for the composed buyer to get active now because there won’t be as many people who are out and about now as what they otherwise would be.
Patrick Berry
Is an interesting look at it because obviously that’s completely different to what is being reported on the daily. But it makes sense. I think too many people get confused by looking at Melbourne and Sydney where there is big giant waves of interest that go up and down and price fluctuation. But the other cities and the smaller cities don’t see that trend.
Simon Pressley
And so it’s always been a problem. What you just said there, Patrick and Sydney and Melbourne, whatever’s happening in their property markets is always reported that this is the national thing so if we go back 2013 to 2007 time Sydney and Melbourne were booming. Nowhere else in Australia was booming. But the real estate commentary was Australian real estate is booming.
Simon Pressley
Those two cities were 2007 saying to 2019, Sydney and Melbourne were in a significant property market downturn. Hobart was booming and most of the rest of Australia was experiencing mild growth. But because the two big cities are in downturn, it was reported as a national downturn. Right now Sydney and Melbourne have the most fragile property market fundamentals in all of Australia.
Simon Pressley
Property ology is consistently said that throughout the last two years. So what we’re seeing now, price reductions in Sydney and Melbourne is I guess the yeah, the sugar fix there, the interest rate cuts that’s gone now. The rising tide lifts all ships is now left. The markets with the core fundamentals will determine the performance. Sydney and Melbourne have got fragile fundamentals, so they’re starting to see price declines the people listening to this need to be mindful every time they consume information through the mainstream media about real estate.
Simon Pressley
It is dominated by whatever’s happening in Sydney and Melbourne. And often what’s happening in the rest of Australia is the opposite to what’s happening in Sydney and Melbourne.
John McGregor
Well there’s like the follow up signs and the rising tide lifts all cheers, is it? When the tide goes out we soon find out who’s been swimming within the boundaries of.
Simon Pressley
Absolutely. Sydney and Melbourne.
Simon Pressley
Great, great, great. I’ll take that on. So we’re just, we’ve just summarize facts, Hobart’s fundamentals, for Sydney and Melbourne. Sydney and Melbourne officially had negative population over the last two years. Melbourne especially had 60,000 decline in their population in that period time they’ve had and their number of dwellings for sale read regular Hobart, that’s their number of dwellings.
Simon Pressley
Forsale is back at equilibrium. You’ve got about 20% of what you probably should have Sydney, Melbourne A back to the equilibrium. The rental supply in Melbourne and Sydney is at equilibrium. Their economy is a lot more fragile than places like Hobart in the rest of Australia because it has a greater reliance on global events, international tourism, international students, they depend on that a lot and that hasn’t been there for two years.
Simon Pressley
So lots of people have left, lots of businesses have closed and they’ve got a lot more supply. So when you’re reading real estate, media always be mindful that they’re sort of reflecting what they believe is occurring in Sydney and Melbourne. And that’s certainly the opposite of what what you’re expecting. I’ll give you a few more stats, gentlemen.
Patrick Berry
Yeah, hit us with everything. We love stats.
Simon Pressley
Over the last five decades. Luck if we think we’re going through some if if you think it is right, it sounds scary. Goodness, my luck at our ancestors will be looking down on us going, Oh my God, money is just about right. It’s gone to a little bit more than free. And then people are scared. So I love that guy.
Simon Pressley
We’ve had 13 prime ministers, we’ve had inflation for long periods of time, between five and 15% for years. Right. We’ve had interest rates at 17%, we’ve had four recessions over the last five decades. We’ve had a GFC with it. I’ve seen wars around the world we’ve just come out of a global health pandemic. Here’s what Hobart’s median house price has done over the last five decades.
Simon Pressley
All that stuff happened at the start of 1970. Hobart’s median house price was $12,000. Fast forward ten years, it was $36,000. Now it tripled in that decade. At the beginning of 1998 it increased to 83,000 sorry it had increased by 2.3 times over that decade. The next decade at the start of the year, 2000 Hobart’s house was $110,000 the next decade and it increased to $350,000 and we started this decade at $550,000.
Simon Pressley
In the two years since then we’ve added $200,000 to that. So try whatever you want at it. It doesn’t mean that markets will boom every single year. We know that that doesn’t happen. But over the course of time, real estate is very resilient. There’s always never no such thing as a perfect market. There’s always something adverse happening. And the digital world, we tend to focus on that adverse thing.
Simon Pressley
But when we look at the combined sum of all things, it’s usually a much more positive picture than a negative picture. And because it shelter us perform as well yeah.
Patrick Berry
Not as a little bit interesting this time of year, but running through that time frame and it just kind of yeah, it’s pretty stable. It’s just doing what it’s doing. And as you say, shelter is essential. So it’s not like it’s just going to be fall off like Bitcoin and just completely become like, Oh yeah, what were those things that were probably before the monkey pictures that were done over ten years or whatever that comes back in, in a month’s time, people might forget that don’t exist, but that shelter is always going to be shelter.
Patrick Berry
And I could imagine over these 50 years we’ve seen the exact same thing over and over and over again saying the exact same thing.
Simon Pressley
We wonder what we would have done, John. But probably wouldn’t have seen the headline as much because we didn’t have a device in our hand. 24 seven. We would have actually had to physically pick up the newspaper and read it, and most people didn’t read the newspaper, but if they did, once they read it, they put it down.
Simon Pressley
That’s it. Newspapers gone. But now we just keep picking the device up time. We keep reading the same message written by a different person over and over again.
Patrick Berry
Yeah. So just driving you through the middle of the comments of followers. Yeah, it lays out well just yet, like the bad news is kind of that doom and gloom is what everybody reports on, cause that’s what I decide to write articles are going to provide. So yeah, it’s really, really refreshing hearing the other side of the coin, my friend.
Patrick Berry
Yeah, especially in those comments, they’re emotional responses to pull up in an accent like this. You can scroll through a thousand comments and be one really well, little educated opinion like, OK, that makes sense. The rest of it’s almost like slams. Like it’s really true. It ends up becoming more factual like.
Simon Pressley
With inflation and interest rates. It’s important for people to understand that. Don’t fear it. Understand why interest rates are going up. It’s actually a good thing. None of us like paying more interest, but interest rates go up when the economy is strong. We rather a strong economy or would be rather fragile economy where there’s less people in jobs and those who have jobs aren’t really certain how long that hold it for.
Simon Pressley
So we’ve got a strong economy. The Reserve Bank will always going to increase interest rates as soon as they felt it was safe for our economy to do so. Why that’s the case is because whenever there is the next big moment of adversity, the RBA can go. We’re going to provide that community with some confidence without even increasing wages.
Simon Pressley
We’re going to put money back in their pocket by reducing the interest rate so they can go cut, cut costs so you can’t cut when you’re at zero. Two months ago we’re at zero. So the RBA, their strategy is let’s get interest rates back up to a more normal level. And that’s why I said earlier, I think they’ll end up somewhere where they were three years ago when Australian home loan arrears was only 1%, that was it.
Simon Pressley
So I think they’ll end up back there and we should actually be going. How that’s a really sensible decision because you where we’ve got the best economy that we’ve had in 50 years right now and let’s ensure that we’ve got enough ammunition at our country’s disposal in the event that something changes years down the track. So you shouldn’t be.
Patrick Berry
Feeling a safety net into the protocols to be like, look, if we had another pandemic or something else happens globally, we’ve got a safety net where we can move backwards, forwards, not on spot on. If I was to sit on the bench of someone who’s got themselves in a financial situation where the rising costs of living in distress will have a really significant impact, is it a reality that we will see some people that will be affected adversely and have to make tough decisions like selling their house because they can better, longer support those inflationary pressure or low interest rates?
Patrick Berry
I suppose that by then it needs to be one of the questions. It will. I suppose that didn’t really plan enough for any other alternatives. So now that we might.
Simon Pressley
Look every single year, there are always people that fit that description, but it’s always seriously why less than the 1% and I mean as I said earlier, the very hard majority of Australians have not taken on any extra data over the last however many years. They’ve got all those cash reserves, they’ve got equity the smaller percentage of Australians who have upgraded the House will become the first home buyer or something like that.
Simon Pressley
They’ve had to jump through the most stringent finance hoops that any country in the world requires. So it’s a legal requirement for every bank in Australia to assess a borrower’s ability to take on new debt by adding 3%, so 12 interest rate rises over and above the rate that they’re borrowing. So let’s say two months ago loosely speaking, you’re applying for a loan and the bank’s offered you a 2.5% interest rate.
Simon Pressley
You have to convince that bank that you can afford to pay it back at five and a half percent.
Patrick Berry
And that’s a valid point that I reckon a lot of people realized on. But we speak to it’s quite open and they explain that scenario I was talking to one of the Brexit brands last week and he pointed that out. So when I was talking about do you think this is going to cause issues for some homeowners, he was quite confident that if he doesn’t think it will for that exact reason that there are lots of these ideas on lending and you have to provide evidence that you can support that point at the higher right so yeah, I think that’s something to reassure people as well that they are aware that that’s how funding them
Patrick Berry
bank loans work these days. You’re not going to see that potentially huge collapse that gone bubble is about to burst. Yeah, it’s.
Simon Pressley
It’s a naive comment. Those who make that make that comment. As I said, for most people, the minimum required loan repayment will just get back to where it was three years ago. And most people with a mortgage are already paying more than that minimum three years ago. So they seriously want even they won’t even feel it.
Patrick Berry
Yeah. Well, it’s been interesting, though, as always, Simon, thank you so much for taking the time to have a chat to us. We always appreciate you reaching out to us. Yeah, but and can I just say before I’d like I’d really like to follow this behind me, but looking behind you, I just was like paradise. Exactly. Office.
Simon Pressley
That’s the office. That’s all I’ve got to thank David for that. Aaron, we adopted the permanent work from home business model once. We never when we went into that national lock down, we just never come out of it. We’ve been a salesman more productive and a lot more relaxed and yeah, so I’m sitting on the back deck having this conversation made.
Patrick Berry
I love that. Yeah, it looks absolutely divine. We’re coming in so down this side of the mountains, like a big Boston bonsai. Yeah. Look, we appreciate you’re reaching out, and yet you’re always welcome on the podcast. Yeah. Sorry for having you just as kind of get in our corner and come in and help us out. I love. And stay safe.
Simon Pressley
Happy. Great work.
Patrick Berry
Beautiful. Thank you very much, as always. Thanks I.
Simon Pressley
Said.
Patrick Berry
Awesome.
Aaron
Like I said, crew, absolute superstar of property. The guy knows his stuff. Simon Presley, managing director of property ology and Ari, I hold of Famer, absolute superstar. If you want to find him, head to property ology. Accommodate you. You can find him. All these socials. And yeah, those guys are superstars. And he’s always so generous with his time.
Aaron
I can say that he lives in absolute paradise. Very jealous about that. Yeah. Thank you for being on the show once again, my friend. Yeah. Keep listening. And we’ll be back next week with even more property VOD. All right, bye. You have been listening to the property boss recorded and edited by Fool one for Media House in conjunction with four, one for Property Code.
Aaron
This podcast is general information. Only in the thoughts of views expressed is the opinion of our panel and listeners should always seek the news their own investigation into any topic we discuss to ensure they fully understand their own situation. It does not constitute and should not be relied on as purchasing, selling, financial or investment advice or recommendations expressed or implied and it should not be used as an invitation to take up any agent or investment services.
Aaron
No investment decision or activity should be undertaken on the basis of this information without first taking.
Patrick Berry
Qualified and professional advice.
