Hello, my beloved readers!
I am terribly sorry that it has taken me so long to put up a new article. I must confess that I have been an incredibly busy bee. This new world we find ourselves in is filled with so much new wonder and opportunity that I find myself wishing I was an octopus and not a manic little bee. This is not to disparage the noble bee in any manner – we are all thankful every day that this marvellous little creature keeps chugging away at its job, keeping us all alive… Bee power!
Now to the business at hand. Shall we, my friends?
Have you ever looked back at a moment in time and thought to yourself “if only I had understood what I was seeing?” Or maybe you have always been an armchair commentator, telling your friends “if I had only had the timing and opportunity, I could have been that guy or achieved that great thing.”
Well, luckily for all of you, it is exactly that time, and it is now that will separate the hot-air armchair coaches from the truly successful.
Today, my friends, is day one of the property boom. The flag has dropped and the race is on. Now, I suppose you need a little more meat on the bone than just taking my word for it, so let me paint a little picture for you.
As you know, property moves in cycles. There is no great mystery to this phenomenon. To become an expert in property cycles, just do some research – look at what creates a low, a plateau and a dip in the cycle. Let us look at the decade following the 2008 Global Financial Crisis (GFC).
Property cycles are book-ended by recessions, the GFC being the start and this current recession being the end of our last cycle.
During the GFC, we saw property prices drop by up to 30% in some areas. As I have mentioned in previous posts, this was due to emotion in the market. There were no cataclysmic events, no meteorites plummeting to Earth. In fact, here in Australia, most of us did not even realise we were in the midst of a GFC until we received some cash from my friend, good old Kevin Rudd. I still think he was one of our best PMs. He was just too ahead of the times, but let’s burn me on that cross another time, shall we?
My point is if we did not feel the economic pinch of the GFC, then how did our property prices fall up to 30%? Well, it was a combination of emotion in the marketplace and the banks’ response to tightening of credit, particularly in the development space. This created a lot of foreclosures for large property developers. Banks increased servicing requirements in particular areas and the media proliferated the worst of it, which was a catalyst for panic sales of property.
Skip forward two years and all of those properties had climbed back up to their original values. Additionally, they picked up the average growth that they would have experienced over those two years ordinarily. This is where we again saw media headlines touting 40% gains in property prices; however, you and I, my dear readers, know from basic maths that those properties only gained the 5% per year that they would have achieved regardless. The other 30% was a stupid tax on people who have a tendency to buy high and sell low.
OK, so how do we know what to look out for now? How do we know where we are in this property cycle? Well, I am glad you asked, friend.
We are in the middle of this recession and are in uncharted waters due to the hold on mortgages, thanks to COVID. However, that coverage is due to disappear this month so we will start to see exactly where we are in terms of an economic fallout. Now, I want all of you with property to hold very firmly to the lesson we all learnt from the GFC and the story I just told you: DO NOT SELL LOW, wait two years. A property is a 30-year plan. If you are thinking your property is suddenly going to be worth $1, like they are in Detroit, just remember that Australia (not the US) has one of the strongest economies in the world. We are reliant on our resources sector, which bolsters the whole country. We are not reliant on any particular sector or industry for individual states or cities. A good example of this is the tourism industry, which completely died in Australia, and let us be perfectly honest… it didn’t matter, not in an overall sense. It has not affected our country substantially; look at Venezuela and then tell me we have it tough. We are a resource and agricultural nation. We always have been and will continue to be for the next 500 years. Okay, rant over. Haha.
So, now that we have a point zero in our minds, let’s look at the peak. After the GFC, we had a huge run on property. Everyone became a developer. Every corner block was purchased and turned into two houses. Every piece of farmland on the fringes of the urban sprawl became new gated communities. Every apartment builder competed to become the tallest building so that they could be closer to Mount Olympus. Property brokers were everywhere, in your lounge room, on your phone, on Facebook and on the sides of buses. And let us not forget all of the new age property gurus, all of those 20-somethings who bought 20 properties to become a millionaire with books and podcasts galore (on an unrelated note, please keep an eye out for my book release, expected on 1st November 2020 ).
But you know what, my negative nancies… they were right, weren’t they? They did make millions, they did prosper, there was a property boom and you said to yourself “if I had only known.”
Well let me show you where we are today.
- The other shoe is about to drop in this recession and it is hard to say how bad it is going to get It is not out of the question that property prices will plummet to a whopping 40% below today’s price (so if you did not take my advice a year ago and sell your property, then do not sell it now, just hang in there).
- The go-to fix of every recession by the government is to build more infrastructure, like roads, bridges, tunnels and a giant statue to Shaun Fox (I have not seen the petition that I am sure you are all circulating to erect this statue, but like Julius Caesar before me, I just cannot accept the crown, I am one with my people )
- The next go-to fix is for the government to approve all kinds of housing grants. We’ve already seen this as part of the economic stimulus package in response to the recession, as they need to stimulate the economy by having chippies chip, and plumbers plumb and foreman.. well sit around and point at stuff, but you get the drift.
- Most importantly, banks will be encouraged to loosen up serviceability, the metric that banks use to assess your ability to be able to get a loan.
All of these steps are the ends and the rebirth of the property cycle. Number four happened today. I was lazily lying in bed this morning, reading through the paper, when I came across this article. Essentially, this is the RBA giving the banks the green light to loosen all of the restrictions that were imposed post-royal commission. From here, we will see a bit of a cat and mouse game with the banks staying tough and the government giving concessions until the real loosening starts. This will be where the banks give a bit of stick back to the government for the thrashing they received during the witch-huntery of the commission. For us, this allows us time to start putting all of our plans in motion.
What this means is that every opportunity that you thought you missed out on the last 10 years was not a loss, but a lesson. Now is the time for you to capitalise on those lessons and there are endless possibilities stretched out before you, my young padawans.
My suggestion is for you to get out a piece of paper, sit down with your partner, mother, friend, pet, and brainstorm on everything you can remember from the last 10 years. If you want to focus on property, do that. If you want to look at which stocks and shares flourished post-GFC, do that.
Here are some areas to look at.
- Property broking. Any monkey with two symbols can be a property broker. In fact, I am setting up half a dozen of these businesses right now for some of my mentees so feel free to get in contact if this interests you.
- Building industry. This is going to grow exponentially. If you are a crane driver, look at buying your own crane etc.
- Construction site kiosks. Okay, I just made this one up, but you can use it. Start a coffee and sandwich van that targets large construction sites.
- Property development. Develop the back of the block on your property. Book this in now – the cost of building is low because people need work, but it’s about to explode.
- Invest in a small business. Find a builder who is doing it tough right now and buy in to his business.
I cannot state this enough (and I will be referring back to this article a lot, so if you are in the future looking back at this article, then yes, this is an “I told you so” note), the opportunity is right now. The property boom started today and it will run hot and heavy for five years before it stagnates. After that, you will need to wait 10 more years before we get back to where we are today.
Good luck, my friends. Share your journey with me. I love to hear what you are all up to, new friends and old.
Also, my new YouTube series is doing well. We have had over 20,000 views in the first five weeks so thank all of you for that. In response to some common questions: the mentoring masterclass series will commence after my book is released on 1st November. I am hoping for the classes to be out by 1st December.
I love you all and wish you the best. Be motivated and lean on each other.
(If you do make a statue of me, can you do something about my nose? )