Century 21 chairman, Charles Tarbey, joins Phil Tarrant to send off 2017 and recap the year discussing changes in the market place, including the changes and progressions of property in Australia’s capital cities as well as 'crystal balling' the future market.
Charles also reveals his thoughts and concerns on specific property markets and how it will impact investors, how he thinks vacancy and auction rates will change next year, how he polices agents in his franchise and why agents are imperative in the buying purchase.
The chairman shares his advice on the best places to buy in 2018, the trends we will see, as well as how to know when the best time to buy is.
You will also find out the importance of culture, the real estate cycle over the last few years and disruptions in the market.
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Announcer: Welcome to the Smart Property Investment show with your host Phil Tarrant.
Phil Tarrant: Okay, well, it's Phil Tarrant here. I am the host of the Smart Property Investment show. Thanks for joining us today. It's smack bang in the middle of summer. Most of you, I hope, are listening to me sitting on a beach somewhere in some far-flung, glamorous location or just somewhere near home or close to family just enjoying some time outside of the office and reflecting on what you're going to do next year when it comes to property investment and how you choose to create wealth.
There's a lot of ways that, as a journalist, we get to these sort of parts of the year and we do a lot of reflecting about, you know, what happened, what's going to happen, top stories, this, that and the other. And if you've been tuning in over the last couple of weeks you would have listened to quite a lot of that sort of stuff about the things that made the headlines in smartpropertyinvestment.com.au over 2017.
But I want to do some crystal balling today and crystal balling is good fun. You're never right or wrong but it's nice to think about what might happen. And Australia's property market's a very fluid beast. Obviously markets within markets. Markets change all the time. The fortunes of Australia's property investors fluctuate in line with the needs and demands of our government and global economies and macro and micro economic factors. I'm not going to bore you with all the reasons why markets change but I'm going to try and give some insights into it, some perceptions on what lays ahead, some observations about challenges.
And I'm not going to do it myself because I'm not qualified. But I have someone in the studio that is. And that's Charles Tarbey. He's the chairman of Century 21 Australasia. Charles, how you going?
Charles Tarbey: I'm going pretty well. Big introduction.
Phil Tarrant: It is, mate.
Charles Tarbey: A big introduction.
Phil Tarrant: Set you up to fail?
Charles Tarbey: Yeah, yeah. And I've got me a nice coffee so I'm all ready to go, I'm all ready to go.
Phil Tarrant: So last time you were on the show was about 18 months ago, back in June 2016. We had a good chat and I think we did a couple of podcasts, by memory, where we spoke about the market but we also spoke about your journey through property. So go and tune in. I really enjoyed it. They were very popular. I think it was about the 16th of June, 2016. Go and enjoy. But today, Charles-
Charles Tarbey: I've got a lot of close and extended family went on and liked it for me so if you got some good response, that's what happened.
Phil Tarrant: That's what you need.
Charles Tarbey: That's right.
Phil Tarrant: Whatever it takes.
Charles Tarbey: It's all part of the marketing strategy.
Phil Tarrant: It is, it is, it is. And something that Century 21 agents do really well. It's one of the reasons why they're some of the best agents in the country. But I want to get inside your brain today, mate.
Charles Tarbey: Sure, yeah.
Phil Tarrant: And before we look at 2018, let's go back to this year. And you're a very vocal commentator on Australia's property market, particularly residential sales but also from a property management perspective. So you're well qualified to be able to talk about what happens in Australian property and you have franchise outlets right across the nation. So I know you're connected in with small suburban markets and also the sort of macro stuff in terms of state based fluctuations, this and the other.
So here we are. The year's past, 2017. What you were thinking at the start of the year versus where your head space is at the end of the year, much difference?
Charles Tarbey: Yeah. I don't think so, actually. It just took a little bit longer than we expected.
Phil Tarrant: Okay.
Charles Tarbey: We expected a change in the marketplace. That change is now upon us. It certainly arrived early in places that are associated with mining and so on. Whether it be parts of Queensland, Northern Territory. Darwin in particular had a pretty tough time. Same as Perth. But those other marketplaces continued to ride just a little bit longer. Sydney started to slow down but Melbourne continued to move forward.
And it is was fairly obvious why Melbourne was moving forward. And Melbourne and Canberra were two areas that we predicted very strongly would grow. But mainly because they had a good, steady supply. Canberra's got suburbs they just keep opening when they need to. And the Victorian Government were very proactive when it came to property release, land release. And when you look at the pricing in Melbourne compared to the pricing in Sydney, it made Melbourne very, very attractive.
So the clearance rate started to overtake Sydney during the middle of the year and continued to most of the time. The clearance rates in Melbourne were the best. And not only were they the best but they were over a significant number of auctions. It's only just in the last week that we've had a decline in the clearance rates in Melbourne, coming in at 67.3% last week with 1,628 auctions. When Sydney had 690 auctions and a clearance rate of 60.8. So you can see that those two capital cities are quite significantly a distance apart when it comes to actually getting those numbers on a weekend and really seeing what's going on. Because if you're doing it over almost three times as many auctions in Melbourne, you're really getting a very strong indication.
So that market's started to come back. We expect that the Melbourne market will settle down now. You know, Sydney has certainly settled down. And it's settled down to a nice place because it dropped into 58% clearance rates a couple of weeks ago and jumped back up. So it's back into that settling down period, ready for next year, ready for steady movement of pricing. There'll be some locations that'll come back in price because they jumped way too high. And I think you'll see what might appear to be negative growth.
But it's not really. It's just an adjustment and we see what we ... We've always said it before, I think I've said it to you before, Phil, there are only two types of markets that we're in. And that's one where we get a buyer up to meet what they think is a vendor's ridiculously high price, and that's called a boom, and the other where we get the vendor down to meet what the vendor thinks is a purchaser's ridiculously low offer. And that's called real estate and that's what we're in 90% of the time. And I think we're coming back into real estate.
Phil Tarrant: And that's okay?
Charles Tarbey: Mm. Great place to be, great place to be.
Phil Tarrant: Okay. What about Queensland? So you spoke about the Sydney, Melbourne market, but just-
Charles Tarbey: Yeah. Look, the Queensland market, there's an ad appeared on a major radio station that said that I predicted Queensland is going to boom, that's where you should buy. Well, I've never said any such thing at all. In fact, the Sunshine Coast is where I picked as an area that would move very strongly and I've been vindicated in both, in Melbourne, Canberra and the Sunshine Coast. They've all moved very strongly.
I've always been concerned about the Queensland market because there has been a significant oversupply in apartment sales. And if you look at Queensland in the mainstream, when you get a lot of investors go running up there because the prices are good, you're invariably going to get a reversal of rent fortunes. And then you're going to have a situation where vacancy rates are high. And so that's always a big concern to me.
And now when looking at the Brisbane market in terms of pricing, in the last five years the apartment prices have only increased 0.9%. Whereas residential house prices have increased over 25. But in the same time, Sydney had an increase of 75 plus. So those marketplaces, I think, got a little bit ahead of themselves when the New South Wales market was slapped with the exit tax on the Carr government and it stopped the prices of Sydney moving. And Brisbane got a little bit too high.
I think Brisbane has got great opportunity but I think it's a very steady opportunity. I don't see any reason to rush in buying. And I certainly don't see any reason to get in there and think now is the time to buy an apartment off the plan, et cetera, because there are thousands, literally thousands and thousands of apartments that are due to settle off the plan in the next 12 to 24 months. And there, I believe, will be a significant number of people who won't be in a position to complete. For two reasons. One, the overseas money isn't there and if you bought something off the plan two years ago and you put down 10% and you're from China, you probably don't care about that 10%. And it's going to be hard to find you in China.
And the other reason is that the bank valuations, banks traditionally in tough markets call for valuations before settlement. And I'm not sure that some of those apartments will meet the bank's expectation. And people will either have to cash up, put more cash up front, or they'll have to pull out.
Phil Tarrant: Yeah.
Charles Tarbey: And so I think that's looming in parts of Brisbane.
Phil Tarrant: And I agree with you. And that dynamic, for our listeners who aren't familiar with what we're talking about, it's when if you buy an off the plan apartment or you commit to the purchase, you put down a deposit and it might take two years for them to build.
Charles Tarbey: Yeah.
Phil Tarrant: So you're hoping that the fancy, glossy brochures that you've looked at, and the slick salespeople who've told you it will value up at $400,000, and therefore you commit to that price. But really the bank only deems it to be worth 300, 350, so it's under what you expected.
Charles Tarbey: Yeah.
Phil Tarrant: But you're committed to still buy.
Charles Tarbey: And you've got a lot of developers now offering incentives. Now, they're not offering you any reduction in price. They can't. If they offer a reduction in price, it's going to devalue the entire complex. So they might offer you some sort of incentive. And excuse me for talking so much. I've been known to talk a glass eye to sleep, Phil.
Phil Tarrant: No, that's why you're here. If you really want to talk, everyone's listening.
Charles Tarbey: But around here, around these subjects. And, you know, it's not a doomsday prediction. It's just be careful. You know, the real estate market in Australia is good, strong. It's a strong economy. Interest rates are going to stay low for a while. Just be careful what you do.
Phil Tarrant: Yeah. Be responsible. So we may as well go around the grounds then. We've covered the eastern seaboard. It'd be remiss of us to forget about Tasmania, which for many people is a vibrant for investors. What's your take?
Charles Tarbey: I always advise people, when they want to buy in regional areas or areas like discretionary spending or Tasmania or Hobart, you wait until Melbourne starts to boom a little. And you give it 12 months and then you buy in Hobart. Because invariably people will get some growth in their asset and then they look for an investment. Hobart's a great city and its building costs are not going to be much different but the price of the block of land is going to be significantly different.
And so all of a sudden investment in Hobart looks great and they start to rise because people have gained equity in other locations and are able to use it. And that's what's happened. I think that equity position is now already being used. I'm starting to see rent price movement in the negative in Hobart in the last three to four weeks. And just in this last week the rent, week over week, went down 1.29%. So that means that there's probably more investors in there. That means that there's more competition in there for those investors. And it basically means that when you have competition, you're going to have to either reduce the rents or offer incentives to tenants. And if people aren't prepared for a vacancy on a rental property, they can get themselves in a bit of trouble.
Phil Tarrant: Yeah, well observed. And how about South Australia? What's your thoughts?
Charles Tarbey: I love South Australia, only because it's had a constant, steady flow of property coming into the marketplace. It's had a lot of negative news at the same time so you get a balance. You've got this balance of this excitement in real estate market but, gee, can we get a job? So it's been one of those states where the movement in price has been steady all the way through. In the last few weeks, the Adelaide clearance rates have been pretty strong compared to this time last year.
There's only three capital cities at the moment, and that's Brisbane, Perth and Adelaide, that have had a better clearance rate in the last few weeks than this time last year. All other capital cities have gone significantly backwards. So I think that that's a steady marketplace that you can invest in fairly comfortably. You just have to make sure you allow for a little bit of extra cash, just in case you do get a vacancy or if there's a closure of another industry. 'Cause South Australia seems to get belted with that.
Phil Tarrant: It does.
Charles Tarbey: But there is upside there because of mining and so on now that's kicking in, in a steady way.
Phil Tarrant: So it's not going to be a big boom town but it's going to be a good, safe-
Charles Tarbey: A very good, steady area to buy in, yeah.
Phil Tarrant: Yeah, okay. And speaking of boom and bust, WA?
Charles Tarbey: Oh, yes, lovely WA. So there are people who bought property pre-boom five or six years ago and saw a lot of capital growth. And today the price of those properties is the same as what they bought them for. So they've gone through an incredible cycle, a full cycle, and Perth is one of my picks over the next few years to get some good growth. Because it's gotten so low that there are people there with negative equity, there are people there with mortgages that are bigger than the value of the house.
So the market has taken a significant hit. And the property management portfolio that I hold over there, it's substantial enough for me to get stats from. And it's in the many, many thousands of properties that we manage. And the vacancy rates there have been in the 10s and 11s for most of the year, and it's just been the last three to four months they've started to drop.
Phil Tarrant: Okay.
Charles Tarbey: And they've been coming in under eights. And I haven't seen a six yet but I've seen a seven. Last week was 8.49% vacancy rate.
Phil Tarrant: Okay.
Charles Tarbey: So that's pretty good for Perth. And I noticed a slight increase in rents of plus nine six, .96% increase in rents over this time last week. So there I'm starting to see a change. And if I was an investor, I would look at Perth very strongly because of South Africa, United Arab Emirates, they buy in those areas. They put a lot of their money there from their own sometimes unsafe economies. And in addition to that, there's an extended mining boom starting to occur in Perth, in an organised manner again. Not where people go crazy.
So I think if you're going to buy, you're going to buy in Perth remembering that the median price of a property in Perth was almost that of Sydney's a few years ago.
Phil Tarrant: Yeah.
Charles Tarbey: Well below now.
Phil Tarrant: It's changed.
Charles Tarbey: So they're the sort of places I'd be looking at.
Phil Tarrant: It's got to be a lot more livable, and always has been a livable town, Perth, historically. But now Qantas is going to fly direct to Rome from there.
Charles Tarbey: Yeah, I know.
Phil Tarrant: And that's going to open up Perth to the world even better. And we don't often talk about it, I've copped a bit of flak sometimes, these small markets like Tassie and Darwin and the Northern Territory. Any views on the Top End?
Charles Tarbey: Yeah, Darwin, the biggest problem with Darwin is that it is probably more of an Asian city as it is an Australian city nowadays. It seems to be connected to Asia more so. And you don't hear much about Darwin in the news, and you really sometimes don't even know if it's part of the country with the distance and so on. But that economy is probably the one that's struggled the most. If you look at the Pain and Gain reports that CoreLogic put out, it's had a significant amount of pain in terms of people selling properties for a lot less than what they purchased them for.
Phil Tarrant: Yeah.
Charles Tarbey: So when you come into Sydney as an example and you'll see that in the September quarter, 96 plus percent of people who sold in that quarter made a profit. You go to Darwin, 34 and a half percent, just over, made a loss in their property when they sold it.
Phil Tarrant: That worries me, that. You know, I hear that sort of stuff and I just go, okay, the rationale for doing something like the Smart Property Investment show, hopefully get people to make better property investment decisions. You know, it's like-
Charles Tarbey: People do rush into them. I see people that I've known for a long time, they know to have a chat. It's not as though every decision I've made has been right either, but the point is that nowadays I've got my hands on data and significantly over the last five, six years. Weekly data that I keep. And you can see patterns now. And the thing, the most important thing is that some of these people who you think are pretty switched on to it have gone and bought property in mining towns because the rental returns are high. And I said, well, why did you do that? You know, what happens if the mine closes? Oh, no, we're in a ... Boom, sure enough.
Phil Tarrant: Gone.
Charles Tarbey: Gone. And who wants to buy them, you know?
Phil Tarrant: Yeah. There's a lot of people still bleeding from mining booms in Port Hedland and up that way. You know, sometimes it keeps me awake at night, just how bad sometimes people go. You know, it's alarming. You've got agents right across the country. Before we sort of start crystal balling into 2018, agents right across the country, large franchise network, some very experienced agents, some newer guys to the marketplace.
Charles Tarbey: Yeah.
Phil Tarrant: But I like to look at markets and sentiments within markets from just the attitudes or the sentiments of real estate agents. So when you look at your network, and you've got some great performers out there, but which agents, which state, which capitals, have the most spring to their step right now?
Charles Tarbey: Yeah. I think it's an interesting thing too. Culture in an organisation is important and, you know, like-minded people are attracted to each other. And so I've tried to set up an organisation that is very down-to-earth, very family orientated, very mum and dad if you like, family operations. So that they've got a purpose for being there. Not about how fantastic they might be, the cars they drive, the holidays they take, the gloss, the shine, the whole thing. And so we've managed to build an organisation with some very strong families.
And give you an example. If I go to West Pennant Hills, the people that own that operation there, Joseph Tan Real Estate, their children are involved. And now their children's children are coming on stage with the parents to receive awards. And so you've got a strength in terms of a family that understands the business from grandfather down to grandchild. And from my perspective, those are the sorts of people that can help other families buy and sell real estate. And so from my point of view, it's that sort of focus in getting those types of people and families. And it's not just in different parts of the country. They're all over the country.
The Melbourne agents have always seen themselves as a better quality of agent. And I have to say that when you look at some of their marketing strategies and their presentation skills and so on, they seem to be far more advanced than most. So you'll find a good quality of presentation from agents in those areas. But across Australia and New Zealand, for me it's about the strength of the unit, of the family unit that gets involved in the business. And the bigger I see that happening, the more I see that happening, the more I know that people who buy and sell through us are going to be treated in the same manner as a family.
Phil Tarrant: And when you look at agents-
Charles Tarbey: Was that a good advertisement for my company there?
Phil Tarrant: Yeah. There you go. It's another one, mate.
Charles Tarbey: Yeah, I just want to make sure. Seeing it's a free ad, I thought I might throw it in.
Phil Tarrant: There you go. You know, I talk to a lot of real estate agents, both professionally and as a property investor, so I see all walks of life. And some agents are just always miserable. You know, they've got their heads in their hands. Doomsday merchants, sky's falling in, there's not enough listing coming. Yeah.
Charles Tarbey: Yeah, mental BO. They're the sort of people that brighten up a room when they leave. I know what you mean.
Phil Tarrant: Yeah, absolutely, absolutely. And then you have other agents who, irrespective of the market conditions, they'll still killing it, you know? So-
Charles Tarbey: And I actually see that in my organisation, almost from one suburb to the next. You'll see one person's going, wow, I'm just so busy, and the other person's saying what's going wrong? And it does come down to the individual and the attitude of those individuals. Look, I got onto a Qantas flight, and I fly Qantas all the time. And I've only ever had one bad experience with them. And I wrote to Qantas about it and I still fly with Qantas. But that one person, Qantas the brand got me there, Qantas the brand kept me there. Their loyalty programmes and so on.
But that one person who treated me indifferently on a flight could have made me decide never to go to Qantas again. And sometimes you get that in an organisation. You'll get a person that is just not, something's not right that day.
Phil Tarrant: Yeah.
Charles Tarbey: And they'll present themselves a certain way and all of a sudden my organisation is on the nose with everybody in that region because of that one person. So it's incredible to watch the attitudes of different people. And those that get up and recognise that problems are a sign of life, and the more problems you have, sometimes the more you're living. And I think that they acknowledge that, take it on, rather than walk past you and go, "Oh, God, not again, not another day." And I've seen that so often.
Phil Tarrant: It's off on a step away from property investment, per se, for a second, into business. 'Cause it's interesting. How do you police that? You know, and I've watched Century 21 over numerous years and very occasionally you'll have an agent that would behave inappropriately. Whether it's to do with trust funds, and it's not just Century 21. It's all real estate franchises struggle every now and then. How do you police?
Charles Tarbey: Oh, yeah. Look, I think every company has their battles with that.
Phil Tarrant: Yeah.
Charles Tarbey: Look, again it comes back to the culture of the business. And as I mentioned to you before, you try to bring in certain people that are like-minded. When I look across my organisation, I really do see a very large family. And I think that's the part I like most about it. When we do have conferences and conventions, a lot of the suppliers who will provide services and products to other organisations will always make the same comment, it just feels different with you guys.
And I think it's just that nobody puts anybody on a pedestal. Yes, we reward our top people but, you know, if they start to think, well, they're more important that the overall concept, they get cut down pretty quickly.
Phil Tarrant: Yeah.
Charles Tarbey: Look, I don't get a chance. You know, I own the business but I'm not going to go rolling up and expect them to be different towards me. Because, you know, we're all in the same business.
Phil Tarrant: Absolutely.
Charles Tarbey: We're all trying to look after our families and other families, and move forward.
Phil Tarrant: That's true.
Charles Tarbey: And I think we keep that approach to it pretty good.
Phil Tarrant: Yeah. And you always impress me, Charles, because whenever I speak to you you've got more information inside your brain that you can ... And by the way, for our listeners, Charles has sort of rattled out auction clearance rates across the nation this week and vacancy rates, et cetera. Testament, he hasn't got anything in front of him. So this stuff's up inside his brain. I've seen it on Sky and stuff. It's the same thing. You just, you know the numbers.
Charles Tarbey: Yeah.
Phil Tarrant: And as an investor I always talk about it. You need to know the numbers, right? You need to know the numbers, you need to know your portfolio. But, you know, you're a walking Google of real estate.
Charles Tarbey: That's very kind of you. Thank you.
Phil Tarrant: So, you know, that's the reason why I'm happy to go what's going to happen next year?
Charles Tarbey: Yeah.
Phil Tarrant: So I know you know the numbers. You look at trends, you identify trends and you use those trends to shape the way in which agents will work, give them the information they need to be better real estate agents, whether they're servicing the vendor or they're looking to sell.
Charles Tarbey: Yes.
Phil Tarrant: What's going to happen? What's going to happen next year? Is it going to be a good year in real estate?
Charles Tarbey: Yeah, and it's going to be a great year in real estate for those that know what they're doing. And that's the biggest issue. We've had four or five years now of real estate cycle where it looks really easy. You know, you put up an auction banner and people come along and they buy it. And the agent talks about how much over the reserve they got. And everybody's looking at the shiny videos and the shiny cars and the suits and the way in which people dress overall, male or female, and the way we're presenting the industry. And people are going I'm in, I want in. I've never seen more auctioneers come into the industry than I have in the last, you know, four or five years. I'd like to see what they're going to look like next year.
Phil Tarrant: So it's easy to be an auctioneer over the last couple of years, yeah?
Charles Tarbey: Oh, man, I've been an auctioneer for years and conducted thousands of auctions, and I have spent that much time working with buyers and sellers in an auction room, you know, for 30 minutes to an hour sometimes, to get something to happen. That's what I was talking about before. That's called real estate.
Phil Tarrant: Yeah.
Charles Tarbey: Not this, you know, the whole glossy image of real estate. Real estate's not what you see on social media. But people, hard working people, spend most of their nights seeing people after hours because that's the only time you can see them. And they're there working with people who are at home with their families while you're not at home with your family. And the way in which you see real estate occur in the real world is that we will list a significant number of properties, but you may not sell half of those properties. So you'll spend time with a whole lot of people and not get paid a single cent for all of that work.
It's one of the very few industries. I know you can't go to or ring up a doctor and say I'm just going to tell you what I think is wrong with me. I want your opinion over the phone before I come in and pay you. It doesn't work that way. But in our industry, everybody wants to know what's going on. They want you to come out and see their property. They want you to work with them, provide them with reports, et cetera, et cetera, for absolutely nothing. And when the market is a slower market, which we're coming into, that's when the real real estate agent comes to the surface.
And I've said it so many times. When perception meets reality, reality comes off second best. And what people have been seeing about the real estate industry in the last few years is not what our industry is about.
Phil Tarrant: Yeah.
Charles Tarbey: It's full of very, very hard working people who don't get paid for a lot of the things they do.
Phil Tarrant: And we're very pro real estate agent. However, there is a reasonable amount of disruption in this space right now.
Charles Tarbey: Correct.
Phil Tarrant: With low costs, poor base-
Charles Tarbey: Yeah, you've got it. Yeah, let's talk about it. Purple Bricks, you've got, yeah, you've got it.
Phil Tarrant: You know, let's have a chat. So we'll have a chat, so we'll get onto predictions for 2018 in a sec.
Charles Tarbey: Yeah, I think that's great. Yeah.
Phil Tarrant: Because this is intriguing. Because a lot of people think, yeah, I'll sell my place. So you've got for sale by owner websites. You've got your Purple Bricks which is a low cost listing engine. I think a lot of people don't really understand and appreciate the role of a real estate agent to the vendor to achieve the best price possible. They think they can be democratised and you take the person out of it and it should happen itself. Which, you know, hot market might be the truth. But, you know, slower or slowing market it's a very different game.
Charles Tarbey: You need somebody to work for you. And, see, in a good market lots of disruption comes up. Because it looks easy, as I was saying. So you get your Purple Bricks or you get OpenAgent who are promoting themselves as finding you the best agent. And a lot of vendors don't know they're paying OpenAgent, or the agent's paying OpenAgent, for example. But I don't see them as disruptions. One of my good friends, Graham Mirabito, ex CEO of CoreLogic, said, hey, you're looking at it the wrong way. And it's called constructive evolution. That's not disruption.
Phil Tarrant: That sounds like something he would say.
Charles Tarbey: You know, and I looked it up and I thought he's right. OpenAgent are doing a certain job that obviously we as agents are not doing very well. If Purple Bricks are able to achieve a great result for a seller with a lower commission, great, we need to learn. And so my advice to anybody is never about the commission. It's about the agent. And if you find the right agent and they can do it for a cheaper price for you and they're going to do the best job, go with them.
But don't go with an agent because it's saving commission. That's absolutely the wrong thing to do. So I know what it's like to negotiate a transaction. And I know that if you incentivize a real estate practitioner to do a job for you, and their incentive is their commission and they're getting paid well to do that job, then they're going to do the best possible job for you. Because it's not just about you. They want your family and your friends as well. But if you go into a low cost agent because it's low cost commission, they stick up a sign and they charge you upfront, and they put a couple of ads of realestate.com, great. If you think that that's getting you the best possible price, then you're probably going to be a very injured person some time down the track.
Phil Tarrant: And let's be fair. When you're selling a property if you're a vendor, the key goal is to get as much as possible you can to it. You're not going to sell it for as cheap as possible.
Charles Tarbey: You don't get too many chances if you've only got one property.
Phil Tarrant: Yeah.
Charles Tarbey: You know, I remember a story of a gardener who worked for me at my place and now retired. And I was scouring one of the websites and I saw his house on a private for sale. So I went out to the garden. I was at home. I said what are you doing? He goes, oh, you know, I'm going to save agent's commission. I mean, we've known each other for 30 years. I said and I see your house for sale on a private for sale. So he said we've already sold it. And I said how much? And he told me. I said have you signed contracts yet? He said I think we have. I said, Lewis, you'd better ring your lawyer and make sure if you have. 'Cause if you haven't, you need to withdraw. You've sold it for a hundred thousand less than what it's worth.
But he was saving agent's commission. And it was right in front of me. And I thought how, you know? It doesn't hurt to get agents out and get some advice. Just don't make your decision based on cheap. Make your decision based on what the agent can do for you. And challenge the agent. You know, each week come and see me. There's only two reasons why a property doesn't sell. Either the vendor's price is too high or the marketing is poor. And if the vendor and the agent agree on the marketing and each week they go over that marketing and make sure it's on track, it's the price.
But if the marketing's not right, adjust the marketing. But don't do it any other way because you're going to save commission. You are not going to save commission.
Phil Tarrant: Well, the thing is that as a property investor, I always look for those properties which haven't been marketed very well.
Charles Tarbey: Yeah.
Phil Tarrant: 'Cause you can pick 'em up cheap.
Charles Tarbey: I can't say that but you can.
Phil Tarrant: I can.
Charles Tarbey: There are certain places, if you are going to buy a property, you go to. And it's generally not in areas you might think, yeah.
Phil Tarrant: Poorly marketed properties are gold mines for property investors.
Charles Tarbey: Oh, yeah.
Phil Tarrant: So if you're a seller make sure you get a good agent to market it well then too.
Charles Tarbey: Some of the agents… I think my good friend Tom Panos showed me an ad that said, an auction it was, and it said diseased estate was the heading. So it wasn't deceased, it was diseased. And so you see some of those and you wonder whether the agent you're dealing with is on their game.
Phil Tarrant: I caught up with Tom the other day and I always enjoy having a chat with him. And that guy hustles hard auctioning, doesn't he?
Charles Tarbey: He does.
Phil Tarrant: Like every single Saturday. He works now for ... We've had Tom on the show beforehand but for our listeners that don't know Tom Panos, he probably does eight or so auctions every Saturday.
Charles Tarbey: Yeah, he's a very busy man.
Phil Tarrant: He works the Newtown, the sort of Newtown and inner west type thing.
Charles Tarbey: Yes. Yeah, yeah, yeah.
Phil Tarrant: And he's a great source of knowledge about the market and what's going on. But we'll get him on the show again soon. You can tune in. But I remember, Charles, sort of crystal balling into 2018, I'm pretty sure I've been to a couple of functions over the years when you mentioned Graham Mirabito who's the ex CEO of CoreLogic RP Data. You guys used to have a bit of a punt on-
Charles Tarbey: We did.
Phil Tarrant: What did you guys used to bet on? Was there-
Charles Tarbey: We used to bet on the movement of property prices.
Phil Tarrant: Across each state?
Charles Tarbey: Across each state, yeah.
Phil Tarrant: And do you still do it?
Charles Tarbey: No, we didn't. I'm not sure which one of us was injured the last time, 'cause it was a big bill you had to pay to take 20 odd people out to lunch.
Phil Tarrant: Yeah. That's it.
Charles Tarbey: I know the first year I won and hands down, and I remember all of a sudden Graham's senior analyst, and I'll name him. Mister Tim Lawless, who's a good friend but I'll name him, somehow came up with a report that had me right line ball and losing. And I said, no, no, this is not wrong. But Graham conceded that maybe he should at least pay for half the bill.
Phil Tarrant: That's fair enough.
Charles Tarbey: We stopped doing that. I think we just got busy more than anything else.
Phil Tarrant: Yeah. It's a bit unfair also, the guy owned a property database so he could get whatever he wants, you know?
Charles Tarbey: Yeah, yeah, yeah. But their property data is ... I see a sale happening in real time, right now, 'cause every office across Australasia is connected to a CRN platform that I developed over the years and so I can see exactly what's happening in each location. As they get a listing, as they make a sale, et cetera, and what price. So I was always saying to him that, yeah, you get real time data but most of the data back then was also delayed data. And so this is how he used it on me. I said, hey, this is real time, today, Graham, and these are my stats. And, you know, anyway, I'm not going to bag him…
Phil Tarrant: It's a bit elastic, data, sometimes. But anyway, look, so let's create a new tradition, Charles.
Charles Tarbey: Yes, okay.
Phil Tarrant: So at the end of every year let's get you back in the studio and let's set out what you think 2018 is happening across each of the states in terms of growth.
Charles Tarbey: Oh, I see. Yep, okay. Yep.
Phil Tarrant: Are you happy to do that?
Charles Tarbey: Yes, I am, yeah.
Phil Tarrant: And then we'll reflect again in a year's time and see how close you were.
Charles Tarbey: All right. Sounds good, sounds good.
Phil Tarrant: Nice. All right, well, let's start. New South Wales?
Charles Tarbey: New South Wales, I believe, will head backwards for the early part of next year.
Phil Tarrant: Yeah?
Charles Tarbey: Just adjusting. And then I believe we'll have steady growth right through to the end of the year. And it won't be major growth. But I believe, subject to interest rates as always and which we don't have a lot of control over in this country, I think people who bought property in New South Wales will find the end of next year that they'll have had some modest capital growth.
Phil Tarrant: Okay, cool. Victoria?
Charles Tarbey: Again, I think Victoria has still got more left in it than New South Wales because I think their pricing is excellent. And I think that also the lifestyle is excellent. So if you compare Sydney and Melbourne, I think the big difference between the two obviously is our wonderful harbour. But I think it's a very sophisticated lifestyle in Melbourne and I think that they'll probably have better growth than Sydney.
Phil Tarrant: Okay. QLD?
Charles Tarbey: Queensland's going to be an interesting one, mainly because I think it'll be dragged back a little bit with too much investment in there. And also dragged back a little bit with an oversupply of apartments. So I see housing as still having reasonable growth but I see apartment pricing as coming back a little bit.
Phil Tarrant: Cool. Tassie? We spoke about it earlier on.
Charles Tarbey: I think that's going to balance out. I don't think we'll see much out of Tasmania at all because I think it's had its growth and I think it's now just going to back into a steady cycle of being there waiting for the next Melbourne cycle to occur.
Phil Tarrant: Fair enough. SA?
Charles Tarbey: I like SA. And I don't think we'll see massive growth but I think we'll see steady growth in SA because it's economically I think it's getting better. And there's a significant number of suburbs that are still ready to be released in SA. The SA Government's very proactive. One of our offices deals with most of the land sales for the government. And they're working very hard to get sales through, which indicates to me that the market's stabilised somewhat.
Phil Tarrant: Okay. Northern Territory?
Charles Tarbey: The Northern Territory I still think has some negative patches to go through.
Phil Tarrant: Yeah?
Charles Tarbey: And I think if it ends up at the end of next year slightly ahead, it will be a real bonus.
Phil Tarrant: Okay, and WA? And it's a tough one because we're talking Perth primarily.
Charles Tarbey: Yeah. Yeah, I see Perth as having a bounce back from its dark days. And some modest growth out of WA for sure.
Phil Tarrant: Okay. So we're not looking at any huge boom anywhere really.
Charles Tarbey: No. And I don't think we're looking for any crash either.
Phil Tarrant: Yeah.
Charles Tarbey: I don't think the bubble's going to burst any time soon. Again, the problem is interest rates. If interest rates ... A lot of people haven't quite worked it out. If you're paying an interest rate of 4% somewhere, that's nice and comfortable. But if you're on 10% and you've adjusted your standard of living at 10% and it goes up to 12%, you're going to be able to cope with that because it's, you know, a modest increase. But it goes from four to six, and that's the same movement in interest rates, that's a 41% increase in your repayments.
Phil Tarrant: Yeah.
Charles Tarbey: And that's what a lot of people haven't figured out yet. So they've to be really careful about watching the interest rate movement very closely.
Phil Tarrant: Yeah. It's a good point. So in terms of price growth, steady as she goes. Keep an eye on interest rates to make sure you can-
Charles Tarbey: I don't think, and I've got to stop mentioning Harry Dent. I've never met Harry. I'm sure he's a lovely guy. But he's called a bubble in Australia pretty much every year for the last six or seven years. And we haven't seen it. Unless there's a collapse globally, I don't see it. But if ... You know, I think Harry will be right one of these days. Not next year.
Phil Tarrant: Not next year?
Charles Tarbey: I don't think so, no.
Phil Tarrant: So it's just about ensuring that your exposure is reasonable. That should that happen, what do you about it?
Charles Tarbey: Keep your LVRs lower, do some debt reduction while you can. Don't fix your interest rates on your entire property. Fix it on part so you've got some movement where you can get some debt reduction. 'Cause if you come out the other side at a fixed rate of 4% and you come out the other side in three years and the interest rates are 7%, you're in big trouble.
Phil Tarrant: Yeah, you can hurt. Nice one. I thought we did that pretty well, Charles.
Charles Tarbey: Yeah, thank you.
Phil Tarrant: That's good. As usual, mate, thanks for your support for your support this year.
Charles Tarbey: Great. All the best for the festive season.
Phil Tarrant: It's always good to have you involved and commenting on Smart Property Investment. Let's see more of it next year as well, so nice one.
Charles Tarbey: Good man. Thank you, Phil.
Phil Tarrant: Remember to check out smartpropertyinvestment.com.au. If you're not yet subscribing to our morning market intelligence so you're the first to know what's going on in property, even more than what's inside Charles' head most days, we can get to market possibly before him, smartpropertyinvestment.com.au/subscribe. If you like to get your information from social media, just search smartpropertyhq. You'll track us down.
And that's it for us. Until next time, we'll see you then. Bye bye.
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