Confidence returns to the market post-election - Ironfish

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Confidence returns to the market post-election

A message from our CEO & Founder, Joseph Chou

Two weeks out from the Coalition victory and the overwhelming response from customers, colleagues, developers, business associates, financiers, has all been very positive, and it has been a welcomed result for the property industry and property investors.

Compared to other developed nations, the Australian economy has been running stronger than most. The current Government has almost returned the budget to surplus and this economic stability is likely one of the reasons why the Coalition won.

The return of the Morrison Government also brings back certainty for many Australians. With Labor advocating for change on many fronts, there was some concern and doubt about Labor’s ability to deliver those change as well as the potential implications of those changes.

For example, Labor’s proposal to change negative gearing scared a lot of people and certainly spooked some property values in the last 18 months. For new buyers, it also raised concerns around potential negative equity in future.

Now that these concerns are alleviated, and no change is expected, business is back to usual. Those who believed in property continue to have faith in the market. 

election property market

With no change to negative gearing; stability in government; and the economy expected to continue positively, this could potentially lead to even lower unemployment rates, or even wage increases, all of which can help people to sustain their property investments. These factors contribute to higher levels of confidence, and we’ve seen that return to the market already. Just last week we held a seminar in Sydney after the election and we received double the number of bookings we were expecting. To me, this is another sign of confidence and interest in the market.

New Government policy

There are also new policies proposed by the Morrison Government, which we would expect to have a positive impact on the market. Just prior to the election, for example, the Liberals proposed a First Home Buyers Scheme, which would enable people to purchase with only a 5% deposit. This is something many people expect to add pressure, especially to the affordable end of the market.

Ironfish has developments across the country, and while we’re keen to support people to build up some assets, we’re also helping people get into their first home as well. So, we’re excited about our contribution to that.

The newly re-elected government is also very pro-building; with billions in infrastructure investment across the country. Every major capital city is going through major infrastructure projects and transformation, the scale of these projects will help strengthen the economy further.

One thing I’ve been emphasising to people lately, is that the Liberal government is very pro-enterprise, supportive of people who take risks, work hard at building a new business. This ‘philosophy’ can help more people feel confident to step out of their comfort zone, to take risks, innovate, have a go at bringing their ideas to life.

I have a strong belief that a country can only go forward, when it encourages its people to have dreams. When a country stops dreaming of growth, and is purely focussed on redistributing what’s already there, then the potential for growth is stifled.

One of the reasons why I love Australia so much is that it gives everyone a fair go. Here, you can have the opportunity to go out and pursue your dreams and know that you can always pick yourself up – as we have a great society that can support people when they’re in need. It’s easy to underestimate the impact of this.

Credit squeeze loosened

Coupled with the election results, we also received some good news immediately afterwards. APRA has now talked with more certainty around a reduction in lending restrictions; giving people greater purchasing power. There are also further indications of potential rate cuts by the RBA – all of which adds to the current excitement around the markets.

With the credit market being so very tight, alongside a growing Australian population, a shortage of housing supply is expected by 2021. Typically, it takes around three years to turn around a residential property development – perhaps even longer. So there will be a period of time in the near to medium term where things will be good for people who already own properties!

I’m not saying there will be another boom in Sydney and Melbourne as a result of all these factors, but there is at least a lot more confidence in the market again, which can also contribute to the overall economy.

election property market RBA

Positive media

In the last couple of weeks, it’s hard not to have noticed the many positive news headlines for the property market – even Sydney and Melbourne. The reality is that there are a lot of people who are guided by the media, or who have been sitting on the sidelines to see what would happen after the election. People know that the media tends to be quite negative, so when even newspapers are being positive – it’s a strong statement. It’s been quite refreshing, from my point of view, that the media have had to report some good news for a change!

2019 property strategy

For investors who have been taking a ‘wait and see’ approach, to me there are three very clear takeaways from the events of the last two weeks.

    1. If the credit squeeze is loosened and banks are already reducing rates, it means money is as cheap as ever, and potentially may even become cheaper. If people need to borrow money to build future assets, it makes a lot of sense to borrow money when it’s really cheap, rather than when it’s really expensive. We’re in this almost unprecedented time, when people can use leverage – i.e. the bank’s money – to build their future nest egg.

 

  1. In my opinion, there are now opportunities in a few markets. For example, Melbourne apartments, which underperformed in the current cycle, after playing catch up off the back of some great new planning rules and population growth. From my experience, the market cycles are working the same as they have been over the last few decades.We also see very strong signs in the South East Queensland market due to interstate migration and the relative affordability there. With Brisbane and the Gold Coast especially, I feel that for investors who go in there now, there will be a good chance for growth in the foreseeable future. All the infrastructure going in will be completing in the next 5 years. Interstate migrants who came in 18 months ago and started out renting, will in the next 12 months be looking to buy. Investors who made money in Sydney and Melbourne are continuing to go there – especially for premium product that appeals to owner occupiers – the type that Ironfish recommends to our buyers, a mixture of house and land as well as apartments.

    Interestingly, I did a seminar in Perth on the 16th of May, which had an overwhelming show up – we were hoping to get about 80 at most, but over 100 people showed up, some forced to stand in the cold as the venue only held 80. That shows me also the market is simmering a little there, as we have been telling our investors recently.ironfish perth
    An overwhelming attendance at a recent Ironfish Perth event

  2. The last thing I would emphasise, is to take a long-term approach to your property investment strategy. Because irrespective of governments and what’s happening outside, many people will still have to face the reality of not having enough to support themselves – whether at retirement or due to illness or other factors. If they don’t have other assets, or not enough super, they will face a challenge – whether they want to face that reality or not. So now is a good time to put some plans in place, gather a team of professionals, put a strategy together, make a commitment, and start doing something because it’s never going to get easier.

Regardless of when you decide to do something, you will always have to face the pressure and discomfort of making a decision. The ability to trust other people, the inconvenience of having to do things – all of that isn’t going to go away if you postpone it a year or two.

So, don’t think of property as an opportunistic investment, it is a long-term investment.

In the short term, however, what we know is that Scott Morrison’s election win has also won him the support of the Liberal party, giving him some freedom to run the country as he wants to. I know him from his time on the Property Council of Australia, and from when he was Treasurer, to be someone who is pro-building; a do-er, not a talker.

I think people should take advantage of all the good things that are happening – a journey of a thousand miles starts with a single step, as they say. If you’ve been waiting for a sign, then it’s time to get started; if you don’t get started, you’ll never get started.

Joseph Chou is the CEO & Founder of Ironfish and a highly seasoned property investor.

He shares his thoughts on the Ironfish blog at the end of each month and also travels regularly across Australia speaking at various events, workshops and property investment seminars.

To book your seat at his next speaking engagement, visit our property investment seminars page.