Inspire & Inform Show – Episode 7

In episode 7 of the Inspire & Inform Show Andrew & Colin be discussing the impact that Covid-19 is having on the property market & tackling the difficult question ‘Is now the right time to buy?’ Andrew will also be sharing the actions he has taken within his own portfolio through Covid-19.

Please see below for the full transcript of this video

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Transcript:

0:09
Good evening, everybody. Welcome to Inspire & Inform episode number seven. My name is Colin Lee and I’m the founder and CEO of Inspire Realty. Joining me tonight is my esteemed colleague, friend. I would even call him my coach and mentor on many different things, particularly when it comes to marketing and messaging and content. So Andrew Koleda, has prepared this wonderful presentation. It is very timely. It’s funny, because this week I’ve met with at least five clients all in the in the space of looking to invest in properties, but also looking at their finance. And I’ve been getting a lot of questions about whether now is a good time to invest in property. What’s the market like how’s it going to perform, what the future is going to be? what the future holds for us, but by the looks of things COVID is coming back. So that’s not improving the situation. But I’d like us to take a long term view, which is always my message to take the long term view of it. But I’m excited to have a look at the bigger picture. And tonight Andrew is going to walk us through different statistics on what’s happened in the in the past, and how we can prepare ourselves for the future. and answer the question is now a good time to invest in properties. So Andrew, please take it away. Thanks. Thanks for everything.

1:32
Thanks. Thanks very much Colin. Yeah, it’s obviously a really timely topic to speak about. It’s on the lips of pretty much everyone that I speak to, whether it be in my professional life here at Inspire or in my personal life, obviously, a lot of friends and family know that I’m in the property space. But it’s an interesting question because a lot of people are asking, you know why What’s happening with COVID? How is this going to impact the property market? Should I buy now? Should I sell some of my existing assets? is a good time to exit the market? Is it going to go down further? But the reason why it’s an interesting question, it’s a never ending question. So regardless of COVID, regardless of what’s going on in in the world, there’s always going to be a reason not to invest in property.

And some of the insights I want to share tonight, I guess, is my logic or my own personal rationale as to why I’ve chosen to go down a different path personally. And hopefully, it’s serves to everyone that’s listening as a really good framework, in order to be able to make their own decisions around what’s best for them and their families. So that’s what we want to cover tonight. And just as a reminder, if there’s any questions, feel free to whack them into the comments on wherever you’re watching, whether it be on Facebook, or YouTube, and if we can’t cover them during the live session, we’ll definitely keep an eye out for any comments that come along and try to get back to you just to add as much value as we possibly can. So without further ado, let’s, let’s jump into it.

So tonight I’ll put together a presentation, as Colin has said. And what I want to cover is, I guess what people are saying about the market, what our news outlets and I guess sources of information are actually saying about what’s going on in the property market. And I guess the key message that I’m going to talk about amongst that is, we really need to be careful who we listen to, in this day and age. I guess we have a different problem. Then years gone by we have an excess of information thrown at us from all different angles, and all different opinions and perspectives thrown at us a million times a day on every topic with property being no exception. So we really need to work out a good way of filtering information out and and basically listening and working out who we listen to. And obviously, which information we use to take action and move forward. I’m going to be talking a little bit about the property markets, I guess from both a historical sense, as well as I guess some of the things that we’re seeing and some of the things that we’re looking at and taking into account and talking to our clients about during this COVID period. So I’ll make it nice and relevant there. And I guess I’m going to be comparing it, I guess what we’re seeing in the property market against what we’re seeing in the share market overall, as well as in the bond market, because and the reason why I really wanted to focus in on those three markets is typically for the majority of us, that’s where our excess cash or investable income gets dedicated or, or directed towards one of those three areas. So we want to have a look at what’s going on in all of those three areas. So that way when we’re making a decision about where to put our money or to park our money during COVID-19. We have we can make an informed decision.

I’m going to talk about some of the assistance packages that have been made available for the property market. And I guess pose some of those assistance packages as being some of the reasons why we’re seeing what’s going on in the property market. And we’re going to delve into why the governments and the banks are actually putting in place those assistance, assistance packages, what’s the rationale? What’s the logic behind it? And then what impact are they having today on the property market, so we’re going to sort of dive into that. I guess one of the other key messages I wanted to put out there today is with that plethora and abundance of information and data and statistics and analysis that’s thrown at us each day. I think that most people get so caught up in that so swept up in the minutiae that they focus on the wrong thing. And many of you out there would have heard of the perato principle or the 80/20 rule. And we’ll delve into that and how we can apply that that mindset or that, that logic to the property market today through COVID-19.

And then, I guess we’re going to have a look at a what if analysis and for those of you who have who have watched our previous sessions, you’ll know I’m very much a lover of the data and the numbers in a good spreadsheet. So I promise today’s one is going to be very simple, but we’re gonna have a look at a case study and it’s completely hypothetical. around what happens if we got it wrong? So let’s say we chose to invest into the property market today. And it’s COVID-19. And the doomsday Doomsday sayers and the negative nancies got it, right. What happens if we got it? And we made our wrong investment decisions? What would it look like? So we’re going to delve into that. And I hope that that adds a lot of value.

7:26
Thankyou Andrew, I’m excited.

7:29
So I wanted to I honestly, this was a five minute Google search, and I said, property market COVID-19. And I grabbed some of the top news articles that I saw there. And I guess a message that I’ve been talking about in the past sessions has been around the negative slant of media around not just property but just just news in general. We need to remember that media or news is a business in itself. And over time, they’ve learned that I guess a more negative slant or the markets going to crash, gets more eyeballs gets more clicks and gets better advertising dollars. And I guess the other thing that I like to sort of view or the lens I like to view media through is, I guess, where do these people come from? Where are their backgrounds? Because I guess a lot of the time we do see people that don’t have a track record in in property talking about property. And more importantly, we see people that don’t have property investments, talking about why the property market is going to suffer. So just reading through Harry Dent, a famous forecaster, I think he’s, I think that the same goes he’s forecasted 15 of the last two recessions. very negative. He’s doing the rounds again, interestingly enough with Robert Kiyosaki at the moment, talking about, you know, I guess the Australia’s property bubble bursting the Reserve Bank coming out and suggesting that they might need to pause transactions in property amidst property crash fears. house prices falling profit, the Reserve Bank asking a economist to hide data about slumping property prices, Great rental property price crash begins. And the interesting one I wanted to focus on in on is the Reserve Bank forecasting a 7% fall in house prices. And when I do the what if analysis that’s the example I’m going to use, what if the Reserve Bank is right and house prices fall by 7%? We’ll see what impact that has over the long term.

9:59
Can I Just say Andrew, it’s very interesting. I read the news quite regularly. But I somehow I kind of missed some of this from time to time. But it just proves the notion you know, you get what you focus on. And if you’re always looking for negative news, and unfortunately, negative news is what sells. But thank you for pointing this out. Because this actually gets me very excited. When I hear news like this, I know there’s always going to be an opportunity in the market to, to look at what’s what you can do to capitalize.

10:29
And that’s a perfect segue to most famous saying around that what you were just talking about Mr. Warren Buffett himself be fearful when everyone’s greedy and greedy when everyone’s fearful. Now a lot of people will read this quote and go Yeah, that obviously makes sense of you know, I’m going to buy when the markets at its worst so I can ride the wave up to through the next cycle, and that’s how I’m going to make my money. But let me tell you, it’s something that’s very easy to say very easy. easy to understand, very difficult to do in reality, and it’s evidenced by this negative feed that we’re getting in from the media. And the other point that I’d like to make about the, I guess the media itself is something a good friend Tony Robbins talks a lot about is the what is it the reticular activating system. And basically, that’s the part of our brain that basically goes out and whatever we think we’re thinking of, it makes it more focus more in focus around it. And the point of that, when it comes to the media is, no matter what your opinion is, you’ll find something some sort of evidence, whether it be an immediate data statistics or research that supports that opinion. So once you start festering a negative mindset, it’s very easy to go down that cycle and continue and it’s probably the worst time in the world if you’re going to follow that mindset.

So the other thing that’s very important, and I guess I’m willing to share with you all tonight is my some of my own personal journey, it’s very important who you are listening to is actually practicing what I preach. And it’s very easy to form an opinion on any topic and tell the world about, I think this is going to happen or that’s going to happen. But the question I always ask myself, when I look at any research or any news article is, I wonder what they’re doing, for example, all those negative Nelly’s, you know, are they buying shares and what are they doing with their money, and I’m much more likely to follow and believe and trust in something if the person that I’m speaking to is doing it themselves, and so just wanting to share my own personal journey amidst COVID-19 at the end of month or potentially early next month, I’m going to settle my second investment property throughout COVID-19. The first one was in Queensland. I settled that property in April 2020. And then my second property in New South Wales will be settling, as I said, either late this month or early next month. So what I’m sharing with you tonight, I’m practicing what I preach. I’m taking action based on what I’m sharing with you tonight. So this is not just something that I’ve cobbled together to share with you tonight. This is genuinely the information and the logic, the mindset, the framework that I’m using to shape my own investment decisions. And as an advisor, I would never ask someone to do something that I wouldn’t do myself.

13:51
That’s right.

13:54
So, onto the onto the property market. One of the things I’ve been telling myself Throughout COVID-19, is I need to lift my eyes. It’s, you know, I guess a quite a famous saying in the property investment space is don’t make 15 year investment decisions based on the last 15 minutes of news. And so what that’s referring to is we need to lift up our eyes and look at the long term outlook for property, which is backed by a long term history. So I put together this, this chart for you here, which shows the median house price in Australia since 1980, and some of the economic situations that we’ve factored in there and how the Australian property market has reacted to those to those crisis. So you know, in 1985 through 1987, we had negative gearing that was removed and that was quickly done. We had some proposals As of that, in 2019, and that’s obviously didn’t get through. We’ve had the 1991 recession, the Asian financial crisis, September 11, the GFC. And in amongst that, there’s a there’s a million other economic events and crisises, which if you narrow your focus, and you focus in on that 15 minutes of news, oh, during those times when the GFC hit, oh, my goodness, you know, the world was gonna end. It’s the only one that I’ve lived through in my investing career, but that that is what is happening now. So we need to lift our eyes and look a little bit longer term and over the long term, it’s a well known statistic that the average growth rate of Australian property has been 7% per annum, which means it doubles every 10 years, not saying that doubles in every 10 year period. The other thing I really take out of this chart is and it’s not something I’ve spoken to a lot, a lot. But I can really see the different Australian cities here. And sorry if this is a little bit small, really operating in its different cycles. And the one that I draw my eye to is the Brisbane market here from 2010 through 2020, has been quite flat, during which the same period the Sydney market, which you can see here, as we all know, went through the boom, the big boom so you can see the markets operating in different cycles. But if you look at this particular period here, so that’s 2002 through 2009, Sydney property market was flat, but that same green line which is the Brisbane property market had quite a large boom during that time. So we can see the property markets working in different cycles. So we also the point of of going through that is when you see these headlines out there saying look for property market is doing this. Always ask yourself the question which property market he we’re looking at states, within the states, we have different LGAs, and also different suburbs. And each of these are operating on their own independent cycles. Sure, there’s an underlying trend that we need to be considerate of, and we need to be aware of macro factors. But which property market are they talking about? And we’ll delve into that and break it down a few different ways, a little bit later in the presentation. Anything you wanted to add on that hColin?

17:34
Well, it’s really interesting. Incidentally, I was born in 1980. So I’ve just turned 40 this year, and I’ve, I’ve lived through all this. I mean, I can’t remember when the negative gearing was removed and all that in the beginning, because I only migrated to Australia, just just about 20 years ago. But I lived through a lot of that. And it’s interesting, you’ve mentioned that you’ve got to take the long term view of it. You can’t make long term decisions based on short term. You know, media, it just doesn’t work like that. So it’s very interesting. I’ve seen this graph a number of times. And I always remind myself that when I’m investing when I’m, you know, I’ve invested in a number of properties, I’m always investing for the long term, never for the short term. So it’s, it’s probably a, I wouldn’t say it’s the best question to ask is now the right time to purchase a property. Because if I had to guess, and spent all my time thinking, when is the best time I just would never do anything. You want to try and pick the best person to ask and look at the right opportunity at the right time, but never to ask, you know, when when is the best time to invest in properties because property tends to perform really well in the long term. If you have that mindset.

18:48
Well, I can I can actually try and tackle that question and one of our mentors actually gave us the answer to that question, when is the best time to buy property and the best time to buy properties is in 1963 that’s the best time. Do you know when the second best time this is one lesson that still rings true. best time to buy property 1963 second best time today. I never forget that lesson.

19:16
Yeah.

19:17
But moving away from property let’s have a look at the share market. So the share market suffered quite a steep decline once COVID-19 this is the Australian share market, just looking at the ASX 200 had quite a significant decline. So somewhere in the vicinity of about 20 odd percent following the first case of COVID-19 and since then, we’ve had a bit of a rocky road here. But the interesting thing about the share market I think the share market is much faster to reflect any fear and greed. You know, always the old adage goes when it comes to share investing. It’s all driven by fear and greed because of liquidity of shares, it’s very easy to jump on your trading platform and hit sell or buy. It’s so much more responsive than property, which is a much slower thing to sell, etc. So that’s one of the reasons why we see a lot more volatility because of that liquidity. And the other thing is, when it comes to shares, it’s heavily dominated by investors. Whereas as we learned in a previous session, 70% of the Australian property market is comprised of owner occupiers. So it’s a very different market. So the point I wanted to share on this chart is I think that going back to the question of where do you put your money? I think that people are a little bit scared and a little bit unsure as to what direction the share markets going to take. And obviously there’s some exceptions to that. And there’s some definitely some knowledgeable, knowledgeable people who know what they’re doing that can make some money in this type of market. But I think in general, the average Joe Blow Australian, is a little bit trepidatious around what’s going on in the share market. So I think the inclination and the natural, I guess, movement of that money that potentially can end up in the property market, which is still in the Australian psyche seen, you know, bricks and mortar as a safe investment. And I think that’s what’s underpinning the Australian property market at the moment and why we’re not going to see the wild volatility that’s been predicted. And we see evidence here in the share market.

The other the other asset class is is bonds. So for those of you who are not aware, Australia, over the past well since 1991, as we can see he has been in a downward cycle when it comes to interest rates, interest rates, as we know, are at a record low at the moment that was driven initially pre COVID by I guess, the the low inflation rate and trying to stimulate some spending in the Australian economy. And I guess the the RBA has been very transparent who sets these rates that it’s we’re likely to be in a low interest rate period for a significant period of time, we must be mindful as long term investors that at some stage, I think the long term interest average interest rate is around about that 6% mark. So at some stage they will go back up, but for the foreseeable future, we’re likely to see these kind of interest rates remain. And what that means is if you’re investing in long term government bonds we’ve just seen to be, I guess another alternative to keeping your money in cash. backing on the strength of the government, you’re getting a very, very low return at the moment, you’re getting a 1.5% return. So again, with people questioning, I guess the volatile volatility of the share market on one hand, and knowing Well, I can’t put my money in the bank or put it into bonds to keep it safe during this period over the over the short to medium term. Because I’m getting such a low return, where do I put my money? And again, that leads me to have some strength and some confidence around the Australin property market in general.

So we’re getting a lot on a couple that we’re getting a lot of assistance when it comes to supporting the property market, from both federal and state government levels. Obviously, we’ve got the job keeper and job seeker program, which is trying to guarantee some income coming in for people throughout the pandemic. It’d be interesting to see what move the government makes on the 23rd when they release their review into the job keeper program. potentially some changes there. But we’ll wait and see.

24:16
It will be worth noting as well because I speak to a number of banks on a on a week to week basis. When when the job keeper or job seeker was first announced, there were a number of applicants that were asking whether they could use the income coming in from job keeper and seeker as part of their serviceability for loans if they wanted to buy properties. And most banks just didn’t know how to react to it. And in fact, actually said a blanket rule No, we cannot accept Jobkeeper and job seeker. But now I’m starting to see a number of second tier lenders starting to ease up on that and they’re starting to accept more and more job keeper and job seeker because they know that that’s temporary. So it’s really interesting. That you talk about the assistance in the property market, that’s definitely having a bit of an impact in the in the loan market. But we’re seeing banks starting to ease off on that.

25:12
Which is, which is interesting. And I mean, you can’t really blame, blame the banks, admist through, you know, all the mayhem that was as all these regulations came in place, for being a little bit slow to sort of really want to get a good understanding around what it is and how it works and how long it’s going to be around before using that from a serviceability perspective. And I think that really speaks to, I guess, the Australian banking system in general, being a highly regulated industry. And you compare that to America, for example, which has a lot of deregulation of their banking system, which is one of the contributing factors to the GFC. I think we have a really stable banking system. Here in Australia, and yeah, sure there’s some banks that float around the edges that we saw in the Royal Commission. But overall, I think that really speaks speaks to that and banks are not looking to take advantage during this crisis.

And further Further to that, obviously, the banks are offering the mortgage pause. Now it’s really important for anyone listening, this not this is not them foregoing interest, the interest is actually that you would have been paying is actually capitalized into your loan. But it does offer some, some I guess relief for those that really need it. Early Access to Super. So you could ask for those that I think there was a couple of criteria, income dropped to 70% of pre COVID I can’t remember the exact numbers, but you were able to access $10,000 out of your super last financial year and now that we’re into a new fund antral you another $10,000 into their super out of your own super. It’s interesting the numbers that we were seeing were actually quite high a lot of people accessing that be interesting to see what their intention is to use for that money, whether that goes into retail spending or, or they, you know, simply use it to pay off debt. I’m not too sure. It’d be interesting to see what the fallout is there. Lots of first home buyer schemes that we’re going to cover in another session in detail, you know, first time buyers are far outweighing investors at the moment in terms of the amount of loan applications that we’re seeing go through the market. Obviously, some support through for renters through the eviction moratorium that came into place, and then looking to both on a federal and a state level, which I’m sure will do a presentation about at some stage bring forward a lot of infrastructure projects to help stimulate the economy and keep people employed.

So why is there so much assistance for the Australian property market? Well, this is a really interesting chart that I found. And there’s a couple of key points that I, that I take out of it. So the dark blue section here is the total amount of of mortgages that you can see on the on the left hand scale here with that without rmbs. And I actually had to admit, I have to, I had to look up what that meant, but it means residential mortgage backed securities. So basically, they’re not traded. These are, these are regulated mortgages out there and then potentially some more on unregulated mortgages that are on top of it. So that’s one thing I noticed and that, again, goes to speak about the strength of the Australian banking system that they’re doing what they should be on the whole. But the other point I take out of this is that banks, Australian banks have through lending have the largest stake in Australia and the Australian property market. And one of the reasons that they’re offering this rental assistance out there on not rental assistance, sorry, the mortgage freeze out there is they want to protect their investments. It’s not in the bank’s interest for the property market to have a significant downturn and start panic selling, etc. So that’s one of the reasons why they wanted to, to actually offer this the mortgage freeze. But the other thing that I found very interesting is as of June 2019, the average or sorry, the amount of mortgages out there was about $1.8 trillion. 1.8 trillion dollars or 1800 billion worth of mortgages out there. But in last week’s session, it was interesting, we shared that the Australian property market is valued at about 7.2 trillion. So it has, you know, the amount of loans against the value of the Australian property market is about 25%. And I think this really speaks to the stability of the Australian property market as a whole, and it’s one of the reasons that I’m putting my money out there in the property market. And the other interesting thing that I looked up was the, the property multiplier effect. And this speaks to the last point from the last Speaking about infrastructure. Why is the federal government so keen to pump out money when it comes to infrastructure to put out these first homebuyer assistance plans to try and stimulate the property market, they’re targeting new builds, they’re trying to target construction through either infrastructure or new builds, why are they looking to do that? And the interesting statistic that I found from the ABS was $1 million of spending in the property industry leads to about $3 million in economic activity. So 1 to 3 every dollar spent equals $3 of stimulus to the economy. And that’s the reason for that is there’s so many associated industries or types of businesses within the chain. For example, someone goes out and buys a new home. The next thing that do is well, I need the couch to go and feel fit in that home. I need a fridge I need to put on foxtel or whatever it may be. There’s so many associated things that people buy when it comes to the property market. That’s why we see such a stimulus or $1 spent $3 of economic activity, but the other interesting thing is every million dollars Equals 37 jobs created for the Australian economy. And amist COVID-19 one of the main focuses in simulating the economy is keeping people employed. And so that’s why I think we’re going to see a lot of infrastructure brought forward which adds to desirability and and basically keeps property up keeps a cap on any, I guess negative effects that we see in the property market when it comes to COVID-19. Sorry, we’re going over again, but I think this is a pretty cool stuff. So if you just indulge me for a little bit longer if you have any questions, again, I invite you to comment wherever you’re watching this, whether this be Facebook or YouTube, I’m very happy to tackle it. Or if you have any difference of opinion, very happy to hear it’s not out here professing that I know everything.

So what have we seen so far? So these are a couple of charts that I found from Cole logic and they talk about About the quarterly change in suppose dwelling price in both Sydney and in Melbourne. And the interesting thing that we see here is we don’t see we don’t see in the COVID period in Sydney, at least any negative growth. And we also see only a little bit of negative growth. But it’s interesting that it’s very focused on the the upper quartile. And this is not this is another way to kind of break it up. Basically what that means is, we look at the lowest 25% of property prices being the lower quartile, so the cheapest properties within any market. Then we look at the middle class, and then we look at the upper quartile, which is the 25% most expensive properties, and it’s no surprise for us to see the upper quarter being a lot more volatile and COVID having a lot more impact on the upper quartile a little more expensive properties. Now. The reasons for that Well, number one, we’ve seen a significant downturn in the share market. So people that are purchasing in the Upper 25% of property prices, are more likely to have a little bit more exposure to the share market. And the second, the second thing is, if the income streams for these people, obviously, they tend to be people on higher incomes that are purchasing in the higher property price bracket, tend to be a little bit more affected by a downturn in economic activity. So that’s why we see the upper quartile lower property prices having a little bit more fluctuation or a little bit more sensitivity to things that are going on in the economy such as COVID-19 than we do in the middle and lower quartiles.

And the other thing to to be cognizant of, or mindful of, is that when it comes to I guess, quarterly price changes, etc. This is what we call a lagging indicator. So basically the data we don’t get the data fast enough to today. So this is data of the past. So be interesting to see when the new data is released. And if this trend is still going to continue, are we going to move further into negative territory. The other thing that is a little bit more leading data or real time data that we look at is the clearance rates and volumes of excuse me volumes of auctions. So what we can see in the Cova period is there was a significant reduction in both the clearance rates as well as COVID hit, as well as the supply of property. And it’s very, it’s very important to view these two things together, not as standalone figures. And the reason for that is what we see of recent times is the supply of property. So the number of properties listed has started to increase. But that has also been met by the clearance rate continuing to absorb a lot of that new supply that’s coming onto the market. So what that means is we’ve had a reduction in obviously supply, but the demand is still there. And that was obviously caused by things like not being having access to open homes, etc. Being a little bit more difficult to transact in the property market that reduction in supply. But when supply has started to increase, the underlying demand is still been there to absorb that. That’s that additional supply. And so that really speaks volumes of the fundamental strength of the Australian property market still being there, despite all the challenges that we’re having as a country from a both medical and an economic perspective caused by COVID-19

So I mentioned also that people tend to look at things the wrong way around. And so that’s probably a good segue to say that the fundamental base is still there within the Australian property market. And 80% of property selection and timing, selection, etc, is based on the fundamentals. What are the fundamentals of property, simple population growth, infrastructure, employment, and also the demand and supply and we won’t delve into what that all means right now. And how do we calculate that, but 80% of our focus when we’re choosing whether or not to invest in property, and where to invest in property should be focused on the fundamental side, and 20% for the rest of it. The current auction clearance rates, vacancy search demand time on market rental yields, development potential quarterly Price Index, discounting proportion to renters, the number of stock on market All those things that we hear reported on the media on a daily basis, which is shaping our investment decisions are really the 20% that we don’t need to be focusing on. Once we once we establish our 80% based on the fundamentals, we use that 20% and these some of the things that we look at for our clients of when and exactly where to buy. But always, the starting point is based on the fundamentals.

I like that, Andrew, I mean, having said that, I think you’ve really helped us to look at a lot of those very important figures, you know, the auction clearance rates, the vacancies, the supply and demand that you’ve just spoken about. I think that’s important for you to make an informed decision. But I think like you said, it’s not about spending all your time trying to dissect and, you know, analyze it to the cows come home and then not be able to make any decisions out of it. I think for me, something I’ve learned from a lot of very, very successful property mentors and investors. As they always look at that 80% it’s looking at the fundamentals, what’s really important, and looking at the bigger picture, so I like it. But having said that, I think it’s also, you know, I think it’s your responsibility. And I think we have to take it upon ourselves to look at the bigger picture and and also make informed decisions based on what’s happening in the marketplace, we cant just close a blind eye. You know, now that there’s so much negative news in the media about property, I think now is actually a really good time to see some good opportunities. So that tells me that now’s a good time. Anyway, there’s never going to be a perfect time to buy property. But but it’s an in 1963.

That’s right. All right. So quick case study. What if we, what if we get it wrong? So I’m just putt together a couple of quick figures for you and this, I think is the last slide. So I said, Okay, if we take the case example, the Reserve Bank, put to said there’s a 7% fall in house prices.

40:03
So is that for the next year or

40:07
I think so yeah.

40:08
Okay.

40:09
Yeah, I have to have to look at the article. But let’s say 2020, we bought a $500,000 property, it declines by 7%. And then let’s say we have a slow recovery. So, you know, zero percent growth in 2021 3% growth starts to get a little bit better at 2022 2023 5% and 2024. For example, let’s say we find that it takes us that long to find a vaccine for COVID-19 or whatever it may be, and returns to the long term average growth rate of 7%. So a decision that we make in 2020 is equal to you know, a $500,000 property 754,000. So there is I guess property is an interesting asset class because it’s rather forgiving, providing that you are into it for the long term. Absolutely. And then we compare that with our other option today, we could invest in 10 year bonds, if we had $500,000, which we may not do, because in the case of property, we can actually borrow and leverage, you know, we might put in $100,000 deposit to buy a $500,000 property. But let’s say we had $500,000 cash growing at one and a half percent, we ended up with $580,000 after our 10 year period. What if we get it right? Well, if it grows consistently at 7% never happens like that. In reality disclaimer, I’m not suggesting that it does. And that’s probably a good segue that, you know, obviously what we’re sharing tonight is general information and doesn’t constitute advice. I probably should have thrown that in a little bit earlier. But it means that we end up with 983 so it roughly doubles every 10 years growing at a 7% growth rate. So the opportunity cost of getting even if we got it Wrong. Or even if you look the other way to look at the Reserve Bank or right? The opportunity cost is not that significant, providing that we give it enough time.

And that’s a perfect segue is there’s only two paths that we can go if it’s the right time to buy property. Are you an optimist or a pessimist? Is the glass half full, the glass or glass half empty? And generally what we find it’s people that are more optimistic, particularly over the long term that ends up with success in any type of investing. So I guess the third question that most people don’t ask is, what if you do nothing? What if you take the pessimistic view? Is our property markets gonna crash and you do nothing? Are you going to be in a better position than you are today by having made that decision? That’s for you to answer. I can’t answer that question because it’s going to be different for everyone. But By, I guess doing nothing, you’re still making a decision. And there’s always going to be a reason out there to not take action, there’s always going to be a Corona virus or removal of negative gearing, a GFC, that over your investing journey, there’s always going to be a reason. So you need to balance that multitude of reasons against the reasons to do it. And when you know, again, as we always say, beginning with the end in mind, and I guess creating a plan and taking action towards that point. The other couple of final points. The best way or the easiest way or the quickest way to success is to not forge the way yourself is to find someone that’s already done what you’re looking to achieve, and following the same path. There’s lots of paths towards achieving goals, particularly when it comes to investing, but it’s very difficult to make that journey alone. Because regardless of whether or net or whether or not now’s the right time to buy the property, you need to be able to hold on to it and have that intestinal fortitude. What if you were in a position like me, for example, with already multiple properties, now Coronavirus hits, you need to be able to remember of why you’re doing this in the first place and not simply sell out at the first sign of trouble and you need someone there to hold your hand to coach and mentor you through that. So I think that’s the final couple of points that I really wanted to touch on anything to add. I know I’ve gone over.

44:43
That’s right. I just wanted to thank you so much, Andrew, you lived up to your reputation of being a data nerd. But what’s really, really cool is that you’re able to simplify the information and help me even myself, me, and I’ve taken a few pointers out of this. It’s to simplify the message and make it relevant. For us today, so I want to thank you so much for helping me also look at the bigger picture and not be too. And to make more informed decisions, I think that’s going to be the key. So I put it out to you if you want to have a chat, as Andrew said, if you want to be successful, you talk to someone who’s successful, and has a long term view on property, but also a successful property investor who’s gone through a lot of the ups and downs in the property market. But you know, someone to mentor you to coach you through this and to hold your hands and to say, Hey, you know, you got to stick with it. Because too many times, property investors give up a little too early. Or they just, they live in a land of inaction and they just don’t do anything and they want their situation to change. So if you’re interested in having a discussion with us, it’s going to be a very relaxed conversation. You know, we we offer a free 45 minute consultation just to tell us a little bit about what your goals are, what you’re trying to achieve. And also it gives you an opportunity to ask you know, questions, that is personal And to your own person, your situation and we’d like to help and answer as many of them as possible based on our experience and our knowledge. Seasoned property investors. So, want to thank you so much, Andrew, you’ve been you’ve been fantastic. Visit our website www.inspirerealty.com. If you want to have a chat with Andrew, just just say I want to have a chat with Andrew, if you want to have a chat with me, let us know you want to chat with myself. Thank you so much for your time. And we look forward to the next episode of Inspire & Inform episode eight. Next week I’m going to be in Brisbane visiting my in laws and visiting a couple of my own. That’s right, hopefully the borders don’t close by the time I get there. So Andrew would be taking over the Inspire and inform episode eight. I’m certainly very excited to see what he’s got to share next week. Thank you so much and have a good night.

46:53
Good night, everyone.