Mike: Welcome to Geared for Growth. This week we're chatting with Simon Pressley, the founder of Propertyology. Simon is a buyer’s agent and investment property specialist, but also a research analyst as well. We chat to Simon about how he picks his growth areas and all the metrics and drivers that go into them. Simon is regularly quoted in the media, and he's quite an expert on finding growth areas, particularly in regional locations. Here's Simon. Simon Pressley, thanks for joining us.
Simon: Pleasure Mike. Thank you for having us on.
Mike: Wonderful. Now I just wanted to get a bit of a bio, and get you beating your own drum if we can. Tell us a little bit about who you are, and what you do, and what you specialise in.
Simon: Okay. I'm the founder of Propertyology. We're a business that helps mom and dad property investors. My background is in commercial lending, so I've always had a keen interest in economics. I started investing in property at a very young age, and I've got professional services background as well.
Quite a while back we recognised that there was a large gap in Australia where there was no real professional body that could help mum and dads invest in properties right through Australia at an arm's length basis. That's the objective, it's to help people do that with trust and skill.
Mike: You're so passionate about that notion that you went on to invent a word, and named your business after it, that being Propertyology. That's really the study of property markets, and you sort of draw a parallel between that and say the stock market.
Simon: Yeah. Propertyology obviously is a play on word, it's our word, but we feel very strongly there is a science to understanding property markets in the same way that I'm sure stock brokers around the world would say there's a science to share markets. What's important for everyone who's got an interest in investing in property is to understand that human are full of emotions, and we all live somewhere, and all of those emotions that we attach to our own home, and where we would and wouldn't live can significantly influence the decision to where we might invest.
We need to separate those two things completely. We see property as a financial instrument, we don't get involved with the family home. We're only involved with the property investor. There's a heavy connection in your research with economics, I guess that's tied to our name Propertyology.
Mike: Yeah. We want to certainly dive into some of that property economics and your methodology as well. Just so we can get to know you a little bit, I want to know what sort of posters were given prime real estate on the Pressley bedroom wall as a kid.
Simon: Look, I love sport. I particularly love the AFL. I'm a passionate supporter of the Brisbane Lions. I've been a proud full member about 25 years I think it is now. I won't miss a home game and I enjoy taking my beautiful ten-year-old son along. One of the most exciting days of my life was being live at the MCG for the 2001 grand final, which was Brisbane Lions' first Premiership success, and then enjoyed two more premierships after that.
Mike: Yeah. You are an educated investor that one certainly paid off. Let's hope that it pays off for you in the long term again.
Simon: Absolutely. Let's hope so.
Mike: How did you get started with property, and what was your first investment?
Simon: How I got started with property look. As I said earlier, I started a career in commercial finance, I always had an interest in economics. Raised in a household that was full of love and morals, but blue collar mum and dad did it tough, and it wasn't until my late teens, early 20s, that I really appreciated how much they struggled, and would often reflect on how could that be, you know they're hardworking, above-average intelligence.
Then I started to actually consider other aunties, and uncles, and grandparents, and that sort of stuff and realised that actually most Australians end up toward the end of their working life with a little bit of equity and a family home, a bit of superannuation that employers have contributed towards but not much else. I recognise this as a problem, and today we're confronted every single day. We hear a federal treasurer talk about, "I can't balance the books, and my biggest expense is age pensions."
It doesn't actually need to be that way. Australians are quite intelligent, and reasonable with money, but what we're not good at is making financial decisions. I was determined to make sure that as I got older and had a family that we didn't have the struggles that mum and dad did, so I've always been responsible, and enjoy helping others to do something similar.
Mike: Fantastic. Now you've said that you're a big believer in treating property as a financial instrument, which you just sort of touched on there. What do you mean by that exactly, and why is that such an important point to make?
Simon: Yeah, and it's critical for anyone looking to invest. It's a great question Mike. We all live somewhere, and that dwelling is predominantly chosen due to our personal tastes. Whether it's a house, whether it's apartment, the colour schemes and the style of the fitout, whether it's Art Deco, or bold colours, or antique furniture, or whatever it is, they're subjective things and that's our right. What we like isn't necessarily what everyone else likes. The analogy that we use for clients, four people could go to the same restaurant, be given the same menu, one's going to order steak, another chicken, another seafood, and another vegetarian. No one's right or wrong there. When it comes to property, think of it that way as well, but don't make decisions on where to invest because you could or could not see yourself living there, because that's not your objective, your objective is to make money.
When we say we see property as a financial instrument, it is a very similar process to a share investor. An astute share investor hopefully would be a lot more sophisticated and say, "I'll buy stocks in this company because I like their chains in the logo." Or, "I've got a banking background, so therefore I've got four stocks. CBA, NZ, Westpac, or NAB." You've got thousands of companies on the stock exchange, and logos and industries, and all those sort of things really have a small influence on whether it's a good investment or not. Property, see it's shelter, it's a commodity at the end of the day. It's an essential commodity that we all we need. Need a roof over our head.
Why we have such an interest in economics, is because logic says that wherever in the future there'll be demand for more jobs, there'll also be demand for more shelter. Wherever we have a location that has plenty of jobs, and housing is also very affordable, that also gives us a chance for greater demand. Affordability we believe is the number one influence on demand, not the desire, they are the emotional things that we often like about a property, but actually not everyone can afford.
Mike: Yeah, I do want to get into those drivers and the economics and the hot spotting. But first I just wanted to chat to you about your focus on helping people to achieve an adequate retirement asset balance. That's really sort of I guess a point of difference that I see with your content, and your marketing, and that sort of thing. It's also part of your business specifically. How important is this to you when working with your clients?
Simon: Yeah. Look it's very important, and again there's a lot of the similarities I think with what Propertyology does for someone who's interested in the property asset class, to what a Masoud stockbroker might do for someone who prefers shares. We see it as a financial instrument, we're big believers in diversifying. Australia if you like is the equivalent of our stock exchange. Within Australia there are 550 local government authorities, if you like that's equivalent to 550 companies on the stock exchange. Our role as a property investor, instead of buying a share in a company, it's a share in a community. Again, we're trying to think differently to the house and land that we might go home to live in at night. Different locations, we heard Australia's had different economic profiles. Having an understanding of industry, or business, which industries have a healthy outlook, which industries don't have a healthy outlook, directly influences where we recommend people to invest and not to invest.
When we're working directly with clients, we're trying to tailor our philosophies, locations that we're actively investing in at that time to their personal circumstances. If for example, someone's got a family home in Sidney, an investment property in New Castle, and they're looking to ... they can afford to buy two more properties, already we're sort of saying, you've got a heavy focus there on the state of New South Wales, and none anywhere else, but that still leaves seven states and territories throughout Australia. What are the individual industries that had a heavy influence on say Sydney and Newcastle, and we're trying to complement their portfolio. That enables that individual investor to take advantage of more opportunities, to minimise land taxes, and to minimise risk by picking locations that have a different industry mix each and every time.
Mike: That's a really interesting notion that you raise there, that you're making an investment in a community. It's an interesting way to put it. For your sake I hope these council mergers don't go and ruin your research too much. I read something about you sort of getting a few grey hairs over you know that sort of altering some of your strategy there.
Simon: When NSW had recent council mergers sort of caused some challenges with a number of spreadsheets, merged data and that sort of stuff.
Mike: I'm sure you'll be all right. Now, you've talked a little bit about your secret sauce, and you specifically mentioned 41 individual characteristics that you track. Now of course like the kernel we're not expecting to get all of that from you today, but how did you land on this number, and how much of it is say demographics versus supply for example?
Simon: Yeah. It's not a magic number, that just happened to about 41, but some of those you know, when you're really drilling down to find individual property within an identified location, some of those 41 ingredients relate to more the asset selection, most of the 41 relates to the things that we considered a specific town or city in the first place. There's really ... if you might think of a property market of having three engines, there's the things that influence demand, there's the things that influence supply, and there's also the things that influence sentiment, the degree of confidence within a community. Without rattling off all 41, on the demand side of things it's things like migration policies, and interstate migration. It's a number of things to do with the economy, it's things to do with affordability, and it could be some things to do with taxes as well. Policies in different states, or federates in time to time, which can have a positive or negative impact on demand for housing.
The supply side of things, a lot of things there that relate to the construction industry. It's a current supply in that particular market. It's things like building approvals, it's things like zoning changes, and governments releasing more land for example. All these things influence supply. The sentiment side of things ... look the confidence in say Sydney for example, is a lot higher at the moment than what it is in Perth at the moment, that may change on the time. There are things that directly affect that degree of confidence. State elections can have a positive or negative effect on things. The individual industries obviously purse heavily weighted towards oil and gas, and it's not going through a good cycle at the moment, so confidence is low there. There can be other times when there's proposals and changes to a community that start to lead to excitement within a community.
Mike: Yeah. Just getting back to supply for a second, you label it as a growth suppressant, and I just wanted to sort of chat to you about building approval specifically. How important are they when selecting a location, and what are some of the problems with that when we're looking at the time that it takes to construct a dwelling, comparing those back to those figures?
Simon: Now I think the supply side of the three engines I've described there is the most underrated, but arguably the most important, and I think that property investors should consider. The hard thing with construction mark is it's not just what you can see with your eyes, you know we can all drive around our home, city and we can form an opinion as to whether it's under supplier or oversupply of the moment, but there's actually a lot of information there about that community to do with supply that you can't see. That's the actions that are occurring behind the scenes of the construction industry. If there's a really high volume of new dwellings that have been approved there in a short period of time by a particular government, we're not going to see evidence of that by driving around.
Progressively, as an approval becomes a commencement you'll see a hole being dug, or a big crane going up in the sky. If you've made a decision to buy there, six months earlier well it's too late if all of a sudden you think, "Gee, I didn't realise there's going to be a thousand apartments in the same community I just invested in." But even then, it could be lots of projects that are currently a warehouse, or what looks like a farm, or something like that in a couple of years to come could be a lot of extra dwellings, a lot more than that community would typically construct in a particular year. What we do are you know, first we look at the drivers on the demand side, but before giving a location the green light we cross-reference the things that are in that supply pipeline, so building approval volumes are very important to that.
Mike: Yeah, and I'm guessing that you focus a little bit more on houses sometimes, because it's difficult for an extreme amount of supplier to come on the market because you can't generally put 200 units next to a house, although I've seen a couple of examples. With your infographic, I wanted to have a chat about that. You've got a great infographic, which we'd love to share, which has supply, demand, and sentiment. We've covered supply, can we have a bit of a chat about demand and what are the key sort of sub drivers within demand that you look at when you're giving green lights to the locations.
Simon: Yeah. I think demand often gets confused by another word starting with D, desire. They're not the same, but often the property investor ... This is what a motion does to us, but often we're not aware that that's what's going on in the brain. We can see something and think that looks nice, that's desire. We can all relate to why a lot of people might like to live in Bondi for example, near the beach and the cafe's and that sort of stuff, but it's actually not high demand at all. A very small percentage of Australia's population live in Bondi, not because it's undesirable, but because it's low demand. It's expensive. This is what property does to us, we start ... whether we're conscious of it or not, we start to think about I can see the attraction to that. I can see ... and we feel like we can see the growth, we actually can't. That's emotion talking to us.
The biggest driver of demand is affordability. We can all aspire to want something, a particular property, but if we can't afford it, it's just not accessible. The more affordable a community is, the more accessible it is to a greater number of people, and the greater potential for growth over the longer term. The affordability side of things, it's also extremely important to be conscious that right here and now 2017, interest rates have never been lower in this country. Big cities like Sydney and Melbourne for example, have had significant periods of growth, that no other city has seen over the last few years, helped along by these incredibly low interest rates. What might happen if at some point in the future we added just 1% to that household mortgage, we're in Sydney, that household mortgage might be 800,000 on a typical $1 million home. 1% increase on a household budget with an $800,000 mortgage, are going to have a lot bigger impact than other communities where that same mortgage might be 300,000 or $400,000.
Mike: We're about to see that. I mean the markets are pricing in interest rate movements in an upward direction in 2018, so I think we're going to be able to see how that plays out, and certainly we've got some people that are pretty exposed with massive mortgages that are going to see some stress for sure. I just wanted to touch on a point you made about affordability. You're well known for sourcing property way below the median price in places like Sydney, in fact you probably get two for the median price of Sydney in regional locations. Is there a reason why you favour regionals over and above the price of entry difference, and the sort of competition at that price point?
Simon: Yeah. I understand that perception but we're not into capital city, what we are is we're big believers that over the longer term, so property is a long-term asset class, we need to make decisions with a say 10 to 15 year buy and hold out looking in our opinion, unless you're a developer or renovator. That's really not investing, that's more a business transaction. With that in mind, history has taught us, historical evidence has taught us that the locations that have performed better, a common denominator amongst them has been affordability. Sydney and Melbourne if we disregard it the last four years, have been amongst the worst performing capital cities in Australia, officially Sydney's being the worst performing capital city in Australia the last 15 years. People forget what happened before the loss.
Mike: It's easy to forget when you look at the core logic figures that come out that basically just blow your hair back.
Simon: Yeah. Yeah. We're not anti-capital cities Mike, what we are is placing a heavy emphasis on affordability, and that just happens to open up a lot of regional cities. That's not to say that every regional centre is a good investment, but we could say the same about capital cities. Perth and Darwin are now in their third year of declining property values, so a capital city doesn't make a blue-chip. At the end of the day, every state and territory in Australia can only have one capital city, but it doesn't mean that that city is better or worse than some of the regions. In fact, in a lot of cases the fundamentals might be better in some regional location. What we're looking for is affordability, but we're also looking for regional centres that have all the essential infrastructure, that all sustainable communities need. Quality retail facilities, tertiary education for those who require that before the end of the workforce, good health care facilities.
That's essential for all communities, you don't need to be a capital city to have those. We look for economic diversity. We won't invest in a regional location that's just a one industry town for example, even though that one industry might have a healthy outlook for the foreseeable future, no industry runs hot forever.
Mike: As a case in point, you highlighted Hobart as a growth market. Now of course Hobart has a pretty low price of entry even compared with some regional towns. It's a capital city as well so it's proof in point that you don't avoid capital cities. What was it about Hobart that you saw, and how can we relate that to other markets when we're doing our own research?
Simon: Hobart is a wonderful success story, and a great city for investors to learn from. Propertyology gave Hobart our official green light in April 2014, so three years ago. At that point in time, Tasmania as a whole had had several years of miserable economic performance, and I was as guilty as anybody on occasions describing it as an economic basket case.
Mike: Yeah, and high unemployment. I mean that was a real concern for a long time.
Simon: Yeah. But investing is about ... not that anyone can give us a guarantee, or no-one's got a crystal ball including Propertyology but it is ... key to making a good decision, is to look into the future by taking interest of the things that will shape it. The past is the past, so we felt that we had a good understanding of why Tasmania had had its challenges, but in doing that we also gained confidence about its ability or potential to improve. We could see improvement, probably late 2013 Hobart was starting to take an interest in as a research company, and we developed a better understanding of it and the more we looked at it, the more confident we got that its economy is going to improve. With that job creation, confidence that comes back to things we said earlier, economics leads to demand for shelter, sentiment has a big influence on property markets.
We look at the supply side of things, the vacancy rate was a very basic statistic, was already really tight. Good rural bodies were already very low, and there was no suggestion that the local constructions was about to ramp that up. It was a no-brainer in the end, the trouble is investors don't take the time out to study the fundamentals of any location, until the media starts talking it up. By the time they start talking it up it's often too late anyway. We ignored what the general consensus was saying about it, and just focused on what the fundamentals told us. Here and now today, Propertyology has helped over a little more than 70 people invest in a property in Hobart. 2014 and 15, you know those who we got in those years, the market there was dead flat, so we didn't have buyer competition. Our investors were benefiting from some significant discounts on the purchase price.
Now here and now today, in what are we? March 2017, I think officially Hobart is the hottest market in Australia, including Sydney and Melbourne. You cannot buy a property in Hobart. We're still trying to but every day there's less on the market, there's more people looking to buy them, for every 10 properties we express interest in, we might miss out on nine, and we think we're in the early stages of a growth cycle. That to us is the best example of understanding fundamentals, and making a decision based on those rather than what the broader public is saying.
Mike: It is funny that there is a bit of an announcement effect when we actually see the runs on the board, I mean it's obviously great that you're getting in before that happens, but core logic was showing us the runs on the board, the mainstream media have picked it up, and there is a flood of people getting into it. You talked about research before, and investors sort of not doing that research. Investors are often buying properties in their own suburb, or at least an area that they're familiar with. I guess playing devil's advocate and being fair, they're investing in a place that they know fairly well, so it's positive from the research point to a degree, but how important is it to broaden that search?
Simon: There's a big difference Mike between knowing your neighbourhood, which I think we all would admit that we know our neighbourhood unless we just moved in, versus knowing a market. Most Australians actually know very little about their market, but of course we're not going to admit that to ourselves. If we truly know our markets, we will know the breakup of different industries that provide the jobs in the community that we live in. We will know things about household age and household income. We will know about the current rate of supply and what's in the supply pipeline. I put it to you that very few of 24 million Australians actually know those things about their market, what they know is their neighbourhood. They know where the streets are, the know where the cafes are, they know where they fill up their car with petrol, there's a big difference there.
It probably gives us a sense of, we feel like we're safe because we can drive there, but think about that through the eyes of a share investor, are they going to invest in CBA just because they've got a bank account with CBA? Is that doing the best that they can, or is it better to stand back and take some time to try to understand this asset class? There's a big difference between reading and research. With the internet these days there's that much information out there, but let's not be fooled into thinking that we can spend X number of hours on Dr. Google and all of a sudden become an expert in this very complexed asset class called property, anymore that we could spend a lot of time on Dr. Google thinking we're going to become a GP, by putting a number of hours up on our laptop.
Mike: Although we do give it a red-hot go, don't we?
Simon: We give it a go.
Mike: You've only got to go to any barbecue, and you'll get certainly plenty of advice on real estate markets. I've actually never heard anyone second-guessing their ability to analyse a real estate market. It can be a bit of a minefield, can't it?
Simon: Yeah. There'll never be a shortage of experts when it comes to property, everyone's got an opinion.
Mike: You're an advocate of investing in mini capital cities, which I guess we touched on you know, regional centres versus capital cities, but there's a point where this kind of a hybrid nature of it when you look at the drivers. Regional centres that aren't too reliant on one industry like a capital city isn't. Can you give us some examples of those?
Simon: Yeah. There's actually a lot more of them than people realise. Probably if I would guess 40 to 50 locations throughout Australia, that we would consider to be mini capital cities. In no particular order I'm just going to visualise a map of Australia in my head. Let's start at the top of the country, and come down the coast. We've got Cairns, Townsville, Mackay, Rockhampton, Gladstone, Hervey Bay, Gold Coast, Sunshine Coast, Toowoomba. This is Queensland. There's probably a dozen locations of knowing there. New South Wales has probably got just as many. On the coast you've got Byron Bay, you've got Coffs Harbour, you've got Port Macquarie, you've got Wollongong, you've got Newcastle.
Inland New South Wales, some wonderful opportunities for investors in there. In no particular order, you've got Tamworth, Dubbo, Orange, Armidale, Bathurst, Wagga. These locations have good quality infrastructure, good lifestyles, very affordable housing, and a lot of a cases they have more controlled housing supply, than what these big cities have shown over the last couple of years. Victoria doesn't have as many, but you've still got the likes of Jalan, Bathurst, Bendigo, Shepparton. In South Australia we have the least, I think it's the biggest city outside of Adelaide is Whyalla, and would be a stretch to call it a mini capital city. Western Australia you've got places like Geraldton, Albany, Bunbury, they've probably the main ones. Tasmania is Launceston, Devonport, and Burnie. There's a lot, isn't it?
Mike: There certainly is, and we've just got a bit of an insight into the rainman-like approach you take to property markets. There's obviously a lot of information floating around in that noggin of yours, which makes me want to ask the question, can the average investor hope to select growth property markets themselves, or do they realistically need an expert?
Simon: Look, I've been doing this for many years. I reckon I've spent 40 hours a week, every week, research related topics, and I know I don't know it all, you never know it all. Little wine stop investors trying and there's nothing wrong with that, but you don't know what you don't know, and if you're doing something every so often a couple hours a day, every four or five years, when you feel that you're getting close to affording an investor, I would suggest that the odds of you stumbling across a really good location compared to someone that does it all day, the odds aren't great.
Mike: Something that muddies the water that we talked about before is sentiment, specifically the media. What influence do you think the media has on property markets, and is that a source for good or evil?
Simon: I'm sure there's no evil. Well obviously there's no evil intended, but more often or not it's unhelpful the role the media play, and not just with property with a lot of things, just current affairs in general I think. What's a saying a lot of journos use if it bleeds it reads. They tend to use the glass-half-empty rather than the glass half full approach, I'm very much a glass half-full personality. Because I said earlier, there's so much information on the media, which a large percentage of it isn't produced by experts in the field, it's produced by mainstream media. If the public is consuming this, and if they read something over and over again, I think that the way the brain process that information is, "Oh that must be true, this thing keeps popping up." It doesn't necessarily mean that it's good quality information, it just means it's being repeated a lot.
For example our home city of Brisbane, you know throughout Sydney and Melbourne's boom we've constantly heard the so-called experts say, "Well Brisbane's going to boom as well," and in our understanding of poverty markets we had a completely different view up to that. Our reputation suggests that we were right and the so-called experts weren't. Brisbane was and hasn't been horrible, it's been underwhelming, 2-4% growth each year for the last four years is a long way from a boom that many people predicted.
Mike: Yeah. I mean there are certainly some pockets of Brisbane that have done very well, but I think as far back as maybe two, three, four years ago, it was interesting to see the media really did jump on Brisbane. I guess if I had to sort of surmise the reason, it had a historically long period of uninspiring growth, the median house price compared to Sydney and Melbourne was a lot lower, so do you think those were some of the two factors that the media kind of thought, "Well here is my sort of desktop analysis and let's go all in on it."
Simon: I think they just highlight. The Brisbane story is highlighted our little lockable know about property including the so-called experts. Melbourne and Sydney had also had prolonged periods of miserable performance post GFC, and I think often people have a too simplistic view about property markets, so it's a lot I think a property market performs like a common cold, Sydney's had it, Melbourne's caught it next day therefore Brisbane must catch it after that. Why wouldn't this keep going up the coast you know, those regional cities as we described earlier, it doesn't work that way.
Mike: That was a shame. I was about to jump all in on Darwin and Perth.
Simon: It's more economics. Economics have the biggest influence and 3-4 years ago when everyone else was saying Brisbane has to go because it's more affordable in Sydney and Melbourne, had to think about that statement. Every location in Australia was more affordable than Sydney and Melbourne, so why wouldn't all of Australia boom? The nothing other than Sydney and Melbourne did boom, and until in the last 12-18 months have actually really taken off. Employment indicators are the most useful bit of information to property investors, not property data. The property data is in the rear vision mirror, it's behind us. Taking an interest in economics gives us some insight into what might happen in future years.
Mike: Getting into some economic policy, you've written extensively about negative gearing and the impacts of any wine back. You've actually sort of commented to say that you're not worried about it for your portfolio, because you think it may actually put upward pressure on prices. Can you give us a bit of a brief summary of your views on the topic, and reference age pension if you will, because that's another topic that you've discussed in reference to negative gearing?
Simon: I think the negative gearing debates now looks like a hot one. We haven't heard the end of it unfortunately. It's a misunderstood topic, and both sides of government did a terrible job explaining that in the last federal election. I don't think they tried to explain it, they're more interested in winning votes and whatever they felt they had to say. At the end of a negative gearing is a policy that's been around in Australia for well over 80 years. It's not a tax policy, it was actually ... Its origins way back 80 years ago, related to recognising the impact then there's still just as relevant if not more relevant today, and that is that governments can't, sorry ... Not everyone has the financial capacity or the will to buy their own home. That's not unique to Australia, that's worldwide.
Governments in over 80 years ago didn't have the financial capacity to provide all those dwellings for residents of Australia, who didn't already own one themselves. As the population started to grow, the problem become even bigger, and unless the nation was prepared to cop massive tax rises to create funding to supply more rental stock, how would they do that? That's where negative gearing, that's the motive as to why it was created. Somewhere over the generations it's changed its name, and was given this term negative gearing. Negative gearing is applicable for all asset classes.
Mike: People forget that. Don't they? With the shares and that sort of thing it applies to everyone.
Simon: Yes, absolutely. This is a benefit from negative gearing, every business in Australia, publicly listed, private, can be small business, home offices, you can claim the expenses associated with that businesses' ability to earn income as a tax deduction. That's all the property investor is doing. If you like their businesses to provide accommodation to someone else, they've got to claim the revenue received, and they can claim the expenses associated directly with that. If that equation is a negative figure, if it's a loss, it's offset against other incomes. Businesses if they incur a loss, they can carry forward that loss next year and offset it against a profit. It's really no different, but when you have a period where property market such as a Sydney performs extremely well, in a city that has more Australians than anywhere else, it becomes a political topic. Everyone's now blaming negative gearing for the cause of it, and all these rich people are driving it up.
Well if negative gearing cause that for Sydney, then the opposite also applies, doesn't it? Why is negative gearing not responsible for driving down prices in places like Perth and Darwin for example? It's been a poorly debated topic, and at the end of the day our view as a property investment business what will be, will be it will always be important for Australians to invest. If you don't take control of your own financial future, you are setting yourself up for a lifestyle that will be funded by a measly government funded pension, of which value keeps decreasing each year. You need to ... yes.
Mike: Yeah. I mean when you look at some of the figures of retirement pensions, I mean I look at it myself and sort of shudder with fear. I have notions of maybe seeing the world, or having a nice glass of wine, it doesn't look good for people that aren't investing in their future, does it?
Simon: No. As a society, we all got to take responsibility for that. We don't teach financial literacy, though I remember in grade one representative Commonwealth Bank coming out and helping us all open up a $1 dollarmites account, and talk about importance of putting money aside and saving for bigger things, but it stopped there.
Mike: It did. I mean and to be cynical they got a hell of a lot of bank accounts out of that, but I think the payoff was worth it. I mean we had a conversation about financial literacy at a young age, and there are certainly some people that are saying that financial habits are ingrained in you when you sort of ... up to around 8 or 9 years old, you really get an idea about how money works and your notions of it are formed. I'd love to see more of that in school certainly.
Simon: Yeah. We just don't teach it, even the basics of living within your means, and the power of compounding, and really basic things that I think someone in grade five or six could probably comprehend, if we actually taught them, but we don't. What our education system teaches I think, is it gives us skills to earn money. The things that we take an interest in in high school often directly influence what career paths we take. We use education to earn a living, but very little thought has actually given to, "Well what happens when I no longer want to work, or no longer capable of working?" The average Australian spends 20 years of our life learning, 45 years of our life earning, and we get to the age 65 and then spend the rest of our years retired, on whatever miserable amount of money we got. 45 years is a long time.
Mike: That's about to go up too potentially.
Simon: But we do very little with it. I think there's a lot of emphasis on you know, live for today, and we'll worry about tomorrow. We get there and that's everyone's right if they want to do that, but it's not sustainable. The country cannot afford to ... With a growing population or an ageing population, to keep making taxpayer-funded pensions for us. At the end of the day it's not worth much money anyway, so why we would want to retire on that all I don't know.
Mike: Yeah. I guess it's in the nation's interest to try and encourage people to put money aside, obviously they've done that with superannuation from back in the day, but of course investing in property or shares is a fantastic way to lessen the financial burden of the age pension, because less people are going to qualify if they're successful investors, aren't they?
Simon: Spot on Mike. That's why we should be encouraging investing but yet from time to time, including the negative gearing debate, I don't know how you encourage someone to do anything by whacking him over the head with a stick. We hear about principles of teaching, there's the stick or the carrot approach. To me if you want to encourage a positive behaviour, you lead with a carrot. If you want to steam something out, well you use the stick. In a society where we need to encourage investing, we start contemplating taking away incentives such as negative gearing, I don't understand the logic.
Mike: It's an interesting point, and I noticed an article just yesterday, which this podcast will come out a little bit later, but it was by the head of the Urban Development Institute of Australia, talking exactly about that. That there is a stick mentality to developers, where there needs to be a little bit more carrot properties. Very highly taxed when we talk about getting supply on. There really needs to be I think a rethink of that. Would you agree?
Simon: I would. I bet it's probably been an important topic for my 40-50 years that the nation is funding billions of dollars on all sorts of reviews and studies, and very rarely do we actually at the end of those big white papers, very few things actually get implemented.
Mike: A couple of consultants have probably done really well out of it.
Simon: They probably have. But wasn't the agenda to be the tax was supposed to replace all taxes?
Mike: Yeah. That didn't work out too well. Simon, I just wanted to sort of wrap up by asking, what exactly your business Propertyology does to help property investors, and what your point of difference is, and if we can get some advice on how people can get in touch with you.
Simon: Okay. Thank you, Mike. Propertyology, our office is in Brisbane, our market is Australia. Our core business involves studying property markets literally all over the country every single day. The purpose behind such a big investment in that ongoing mark analysis, is to partner with motivated mum and dad investors who see value in working with true professionals. In engaging in our buyers agency service, you're directly benefiting from our full time market research, as well as our award-winning buyer's agency skills. You can then form a relationship with a professional organisation that's in your corner each and every time you can afford to invest, you get to directly tap into where it is that we think at that time has better potential.
Mike: Fantastic. If people do want to get in touch with you, what's the best way Simon?
Simon: Best start would be our website, there's a wealth of information on www.propertyology.com.au or 1300 654 070.
Mike: We'll share some data there at the end of the podcast as well. Just to wrap up Simon, if you could impart one piece of advice, I know this might be tricky, what would it be?
Simon: One piece of advice, if you are looking to invest in property, you need to view it as a financial instrument, treat it as shelter, and study the things that influence shelter, as opposed to whether you would or would not live in a particular property or particular community.
Mike: That sounds like a pretty good way to round out the podcast. Simon thanks very much for your time. Much appreciate it.
Simon: Always a pleasure. Thanks Mike.
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