We pick up some interesting property predictions from Investorist founder and CEO Jon Ellis, around foreign buyers, short stay investment, unique product mixes and how developers are changing with the market.
Listen to the interview now:
Transcript:
Kevin: Certainly, the 2018 market is predicted to be a buyer’s market. That’s according to one commentator. The CEO for Investorist, Jon Ellis, joins me.
Jon, particularly with the off-the-plan market, you’re predicting a good time for buyers this year. Why is that?
Jon: Kevin, I think across Australia, we’ve seen a few factors that make it a buyer’s market this year. We’ve seen the retreat of foreign investors, change to funding restrictions in Australia, and increased [0:29 inaudible] across the country, which make it harder for developers to sell and easier for buyers to get a good deal.
Kevin: A lot of talk as well about failed contracts, the number of buyers not being able to complete, maybe the banks changing a bit of that landscape. Are you seeing much fallout from that at all at this stage, Jon?
Jon: We’re seeing a little bit of that. I don’t think the general public will see a lot of it, Kevin. I think that will be kept under wraps, but certainly, the industry is seeing it. And that’s another big opportunity for buyers this year. I think you’ll find lots of buyers who are in the know, particularly ones that have links with agencies with ties to Chinese investors, will be able to pick up nomination contracts over the next 12 to 18 months.
Kevin: Tell me about a nomination contract. What is that?
Jon: That’s the instance where a developer has sold a contract to an individual who cannot settle, and that contract then will be nominated to another buyer. The advantage of that nomination is that the developer would typically hold either some or all of the 10% deposit that the purchaser has put down, and the apartment is still treated as a brand-new apartment, so it comes with any of the stamp duty incentives that it may have had from its initial contract date.
So, if we have a contract in, say, Victoria that was entered into prior the 1st of July last year, that contract for that off-the-plan property will have significant stamp duty savings, maybe $25,000 worth of stamp duty savings. It might also have a 10% deposit held by the developer, so you might be talking about $75,000 worth of incentives on a $500,000 unit the developer can use to pass on to a purchaser.
Kevin: Is it reasonable to expect that the developer will pass on that full amount of the retained deposit that a failed purchaser may forfeit?
Jon: Probably not all of it, Kevin. I think the developer will be keen to mitigate their costs, because they obviously will have increased holding costs of the unit. They might have some additional financing costs, and they’ll also have some agent’s selling fees, and maybe some legal fees associated with pursuing that purchaser that they might like to claw back.
However, at the end of the day, there is still a significant amount of money there that may be able to benefit a purchaser, certainly a savvy purchaser.
Kevin: From what I’ve seen, too, Jon, developers are very clever at looking ahead of the market to try and pick the trends, what’s going to happen, how do they mold the development to suit what’s happening in the future? Are they taking any notice of things like Airbnb? Is that changing how they’re building?
Jon: Very much so. We’ve seen in the news just recently how rafts of owners are getting together and retaliating against Airbnb operators. I think when Airbnb was first established, it was considered to be room sharing or using unused portions of your apartments. We’ve certainly now seen that move to becoming a pseudo-hotel industry, and owners are quite frankly fed up in lots of high-rise buildings.
Developers have seen that and decided to embrace that trend, and they’re creating whole floors where they might have serviced apartment offerings. They’re even shuffling around purchasers in buildings with the purchaser’s consent to create areas where they have short-stay apartments and areas where they have long-stay apartments.
They’re providing additional entrances in some instances for people who are doing short stay, they’re providing key lockers, bag storage. All those sorts of things are starting to come into this hybrid short-stay, long-stay model that developers are looking at.
Kevin: Particularly the short stay model, is the size of units or apartments getting smaller?
Jon: I think we saw the units get to a really small size 18 months ago, probably two years ago. We saw two-bedroom apartments at 54 square meters. I certainly don’t find that trend continuing. If anything, I see it being reversed a little bit with developers hedging their bets between owner-occupiers and these short-stay units.
Knowing a couple of the operators that are running short-stay dwellings, they actually find two-bedroom units tend to rent better than one-bedrooms. We’re not seeing the return to the really small units, which I think is good for investors and good for resale values.
Kevin: Yes. It’s certainly going to be a little bit harder this year for off-the-plan sales. I guess some developers and sellers and project marketers are going to have to work a little bit harder. We already heard a lot of talk about over-supply of units, particularly in Melbourne and some other parts of Australia.
Do you think that’s going to have a big impact on that off-the-plan market?
Jon: I think the biggest impact that we have seen off-the-plan is not over-supply, but it is under-demand. Investors having retreated, and certainly off-the-plan investors having retreated, that’s taken out a big chunk of the demand. So, I think we’re going to find a bit of tough times over the coming 6 to 12 months, and then instead of over-supply, we’re going to start finding a pinch on not enough supply.
Kevin: Always good talking to you, Jon. Thank you very much for your time. Jon Ellis is the CEO for Investorist. The website is Invesotrist.com.au.
Jon: Yes, that’s correct, Kevin. Thank you very much.
Real Estate Talk – the only place where you hear all Australasia’s leading property experts.
Originally published as: https://www.realestatetalk.com.au/2018-property-trends-to-watch-jon-ellis/
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Kevin Tuner worked in radio as General Manager of various east coast radio stations. He started in real estate in 1988 and was ranked in the Top 10 Salespeople in the state until he was appointed as State CEO 1992.
He operated a number of real estate offices as business owner and was General Manager of several real estate offices in Christchurch.
He now hosts a real estate show on Radio 4BC and a weekly podcast at www.realestatetalk.com.au. He is the host of a daily 7 to 10 minute podcast show for real estate professionals at www.reuncut.com.au.
To hear more podcasts by Kevin Turner, click here
Disclaimer: while due care is taken, the viewpoints expressed by interviewees and/or contributors do not necessarily reflect the opinions of Your Investment Property.
