Property Investment & Wealth Creation Australia | The Michael Yardney Podcast

If you want to become more successful in life, business, and investing, you're going to get a lot out of today's show.

Even if you're not an entrepreneur in the sense that you would normally use that word, if you want to be more successful than the average Australian property invetsor you will need to be entrepreneurial.

In this episode, you'll hear me being interviewed by Brett Warren, the director of Metropole Property Strategists Brisbane. I'll be answering questions that have been left on the website by my blog readers and my podcast listeners, as well as a few questions that Brett himself came up with.

Highlights from the Interview with Brett Warren

• Why I got involved in property investment
• My first investment property
• What I enjoys about property
• The four ways to get money out of property
• How I suggest you choose a location to buy property
• When the best time is for someone to start investing in property
• What type of property I'm investing in and why
• The essential qualities of a successful property investor
• Why I'm still working and 0what drives me
• The most important lesson I have learned about property investment
• When I learned about the importance of mindset motivation
• How to make a mindset change
• Why successful people fail more often than unsuccessful people
• How Metropole can help potential property investors
• Why a buyer's agent is important, even in this economy

Links and Resources:

Michael Yardney

Metropole Property Strategists

Rich Habits Poor Habits

Michael Yardney's Mentorship Program

Brett Warren – director Metropole Property Strategists Brisbane

Some of our favourite quotes from the show:

"Performance isn't possible in an empty theater. So what a privilege it is that I have a large and ever-growing number of people with sustained and enduring interest in what I have to do, what I say, and what I teach." –Michael Yardney

"My first property that I bought for $18,000 I still have now …is worth well over 2 million dollars." – Michael Yardney

"In my mind, you've got to invest for capital growth until you've built enough of an asset base. If you want cash flow, don't buy real estate." –Michael Yardney

We all understand the concept of fake news.

The media plays with our emotions, our fear and our greed in an effort to get clicks and readers.

Today I'm going to discuss 6 things the media won't tell you about property investing that you should know.

Then, in my mindset moment, I'm going to talk about a concept that's helped me through my difficult times.

After that, I'll play a radio interview that I did with Laurie Atlas. In the interview, I talk about how you can make your kids richer and more successful in life. And if you don't plan to have kids, don't worry – the information in this interview can help you too.

What the Financial Media Won't Tell You About Property Investment

1. Property investment is simple, but not easy. Half of the people who get involved in property investment sell up within five years. 20% sell within one year. Of those who stay in the property investment game, 92% never get past their second investment property. The media makes it sound easy, but it isn't.
2. It's going to take you up to 30 years to become financially free through property. It takes a couple of property cycles to establish a large asset base.
3. Residential real estate is a high-growth, relatively low-yield investment.
4. The banks are not on your side. That doesn't mean the bank is untrustworthy, but their job is to sell products, and not all of those products are in your best interest.
5. No one can actually predict how the markets will act in the future. There are always surprises.
6. There's not just one property market. Each state is in its own stage in the property cycle, and there are differences even within one state.

Super Parents Raise Super Kids

• Most of our habits are learned by age 9
• People should aspire to be wealthy, not be driven by envy
• Reading can help your children become more successful
• People who were punished for losing their temper as kids are more likely to be successful
• Blaming others won't help your child get to the next level
• The school system isn't the right place to learn how to be successful and wealthy

Links and Resources:

Michael Yardney

Metropole Property Strategists

Rich Habits Poor Habits

Michael Yardney's Mentorship Program

Laurie Atlas Radio Show

Some of our favourite quotes from the show:

"The problem is that most of us act irrationally and emotionally when it comes to money." – Michael Yardney

"You can't tame the barking dogs. But you have it within your power to completely tune out from them." – Michael Yardney

"True wealth has nothing to do with how much money you've got. I've actually learned that rich people are actually very poor because all they've got is money. Wealthy people have got money plus relationships, money plus love, money plus the time to contribute back to the community, money plus health." – Michael Yardney

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me. Here's how.

Wondering what's ahead for property in 2019?

Maybe you'd like to know what other Australian property investors plan to do?

Well that's exactly what we discuss in today's show as we unpack the results of this year's Property Investor Sentiment Survey

You'll hear what over 1,800 Australians feel about our current real estate markets and what they plan to do.

You see...they took part in this year's Property Investor Sentiment Survey run by my Property Update newsletter in conjunction with Your Investment Property magazine and onthehouse.com.au

Being Australia's longest-running and largest survey of Australian property investor sentiment, it showcases insights from property investors and would be investors across the country. Running since 2011, it offers rich and vibrant insights into how property consumer trends and sentiments have changed over time.

One of the surprises is that despite our property markets moving to the slowdown phase of the cycle more than half of the respondents believe now is a good time to invest despite the fact that the vast majority of respondents (84%) believe that property prices will fall or remain flat over the next year.

Clearly, they are taking a long-term view.

However, this is significantly down from last year when 61% of respondents thought it was a good time to invest.

At the same time, the percentage that were unsure increased to 23% (up from 16% last year.)

However, they are realistic that they won't enjoy quick and massive capital growth in the near future, but they still intend to buy more property in the next year.

Our survey reveals that 42% of the respondents plan to buy an investment in the next year again showing strong confidence in property as a long-term investment.

Not surprisingly this is down from the last 2 years where on both occasions more than half (52%) the respondents were planning to invest in the coming year.

• South East Queensland is seen as the best place to invest over the next 5 years according to close to 70% of respondents (this includes Brisbane, the Gold Coast and Sunshine Coast.)
• Last year more than half of the respondents nominated Melbourne as the place to be last year,

Their focus is on long-term capital growth, rather than an immediate equity boost, and they're looking at property that has potential to add value,

Perhaps unsurprisingly, it also reveals that many investors are feeling the impact of credit squeeze with bank's tighter lending restrictions.

Almost half of respondents are finding the recent tighter lending criteria impacting their ability to purchase another property. Interestingly this is only slightly higher this year (48%) than last year (46%)

19% of respondents plan to buy a new home in 2019. This is down from 23% last year (but still higher than the number planning to buy a new home 24 months ago (14%)

Links and Resources:

Michael Yardney

Metropole Property Strategists

Ahmad Imam – Director Metropole Sydney

Sarah Megginson Editor Your Investment Property Magazine

Results of the 2018 Property Investor Sentiment Survey

Some of our favourite quotes from the show: "And again, it's not a competition, but it's interesting to know what people are thinking, what they're planning to do, because that's going to, I guess, set the scene for the markets for the next year." –Michael Yardney

"The average property writer for the big media, they're young people who probably have no background in real estate and wonder about these ugly greedy investors who've got properties, and they're almost asking for the property market to crash." –Michael Yardney

"I'd rather buy in the better location and a smaller component of land, than further out in a house with a big block of land that isn't going to do as well. As we keep saying, it's the location that does the heavy lifting." –Michael Yardney PLEASE LEAVE US A REVIEW Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me. Here's how.

Are you wondering what's going on with the property market – whether you should buy, whether you should sell, how your property portfolio is performing?

The media is full of mixed messages, so no wonder you're confused.

There's no doubt we're at the next phase of the property cycle, what some call the slump phase. But not all properties are slumping.

Today we'll talk about what you should do as a property investor in a buyer's market and which types of property will hold their own. We'll look at previous cycles and research to determine which properties do better in a buyer's market.

I'll also share a mindset moment, with a mentorship lesson from my own mentor Jim Rohn.

Then we'll have a chat with Ahmad Iman, Director of Metropole in Sydney, about what investors are looking for in terms of their financial goals.

Which properties will outperform in a buyer's market?

• The property market began to slow down around the middle of last year. Now the market is much softer.
• What happens next is dependent on finance and consumer confidence.
• Property values in some areas of Sydney and Melbourne may keep falling until sometime next year, but not by more than 5%. However, investment grade properties are not falling. They're holding their value.
• The Perth property market is likely to bottom out sometime over the next year or so. Its recovery is likely to be slow.
• Hobart's strong property growth is likely to slow down.
• Brisbane will probably be the strongest property market over the next couple of years
• Investment-grade properties and A-grade homes are holding their values even in the weak parts of Melbourne and Sydney.
• If you're a homebuyer, your family needs should dictate when you buy your next property. This is a good time for first home buyers to buy a new property or for established home buyers to trade up.
• If you're interested in investing, the best time to buy is when you have the financing to do so and the situation fits in with your long-term plan. Don't try to time the market.

How do your goals compare to other investors?

• Most clients have an end goal of financial independence.
• Beginning investors are looking for a property profile that generates $100,000 in passive income per year.
• The average Australian couple needs about $40,000-$50,000 just to live a modest lifestyle.
• $100,000 a year gross is very different from $100,000 a year net.
• Another common goal is 4 to 5 investment properties by retirement age or financial independence age.
• The size and value of your asset base and the quality of your investments is more important than how many properties you have.
• Experienced investors often have a goal of a property portfolio that generates close to $200,000 in passive income per year.
• It's important to consider your own existing lifestyle and spending habits when setting a passive income goal.
• More sophisticated investors look at purchasing developments or blocks of units to renovate.

Links and Resources:

Michael Yardney

Metropole Property Strategists

Rich Habits Poor Habits

Michael Yardney's Mentorship Program

Michael Yardney's Property Renovations and Development Workshop

Ahmad Imam – Director Metropole Properties Sydney

Some of our favourite quotes from the show:

"And as always, steer clear of the many property spruikers that are disguised as investment advisors but who are actually working for the project marketers or the developers." –Michael Yardney

"Even the experts can't time the market." –Michael Yardney

"As an investor, you need to take a long-term view, do your homework and research carefully and make sure you don't overpay, and go out and buy that property today – the sort that you would have had to fight much harder for a few months ago." –Michael Yardney

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me. Here's how.

The wealth gap is widening around the world.

The rich get richer and the poor get left behind. But why does this happen?

According to Tom Corley, the gap is really a parenting gap, not a wealth gap.

In today's episode, we'll discuss 10 critical habits that the self-made wealthy learned from their parents. This will help you understand the lessons that you should be teaching your children to help them grow up to be successful.

And if you haven't yet learned these lessons yourself, it's not too late to do so.

10 critical habits the wealthy learn from their parents

• You create your life. Your life is not determined by the government, other people or external circumstances. You are the pilot of your life.
• Take responsibility when things go wrong. Don't blame others or play the victim.
• Respect the law. When you break the rules, people don't trust you and don't want to do business with you.
• Seek your main purpose. Kids should experiment with different activities so that they can find and identify their true talents.
• Pursue your dreams and goals. Define an ideal future life. This creates clarity and helps you see down the road and focus your attentions.
• Acquiring wealth is a good thing. Wealthy people help fund charities, build hospitals and schools. They should be looked up to.
• Work hard for what you want. You don't have to be born wealthy to attain wealth, but you do need to be willing to work hard for it.
• Respect other people's property. You're not entitled to something that another person has. Don't expect others to give you anything.
• Improve yourself daily. Parents of self-made wealthy people teach their kids to focus on growth and knowledge.
• Use time productively. Don't waste time on distractions. Use your time to learn and improve yourself. Make productivity a habit.

Links and Resources:

Michael Yardney

Metropole

Rich Habits Poor Habits

Michael Yardney's Mentorship Program

Some of our favourite quotes from the show:

"We know that mentors, models are really important in life because we learn a lot of our habits, the things we do on a regular basis, from things we see, things we hear, things we experience as a child." –Michael Yardney

"Clearly, when you make money doing what you love, it leads to a different sort of resilience, it lets you get through the difficult times because all businesses have their ups and downs and challenges. It leads you to your true calling in life. –Michael Yardney

"You don't have to be born wealthy. Most successful people today, we're not born that way." –Michael Yardney

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me. Here's how.

Successful property investors need to own the types of properties that are going to be in continuous strong demand in the future.

Demand is driven by demographics.

That means all real estate investors should become students of demographics, so in today's episode, I want to discuss the major demographic milestones that Australia has recently reached.

I'll also share a mindset moment, with a lesson in the kind of people you should avoid.

After that, we'll chat with Ken Raiss about the five essential documents you need for Estate Planning.

You really should know about these demographic milestones

• At the end of August 2018, Melbourne's population was projected to reach five million people.
• Victoria accounts for over a third of Australia's population growth.
• Melbourne had the largest annual population increase of any city in Australia's history.
• Victoria is getting more migrants than anywhere else.
• All this population growth is a positive sign for the Victoria property market's long-term prospects.
• Melbourne is projected to hit 6 million people by 2025, the same year Sydney is projected to hit a similar population.
• There's an imbalance between the types of housing that's being built with what key buying groups want and can afford to buy properties.
• There are three types of home buyers: first-time homebuyers, upgraders, and downsizers - remember home buyers make up 70% of the market.)
• Research suggests that demand from young renters and upgraders is going to be declining.
• First home buyers and downsizers will drive Australia's housing market over the next decade.
• First home buyers are getting older.
• First home owners are looking for room to grow and the ability to add value. Affordability is also a concern.
• Downsizers are aged between 60-74.
• About ¾ of downsizers are couples or live alone.
• Downsizers are looking for low-maintenance, convenience, access to the same amenities near where they've been living, but smaller projects.

5 Critical Estate Planning Documents

1. A Will – And this should be linked to a Testamentary Trust which protects your assets and greatly reduces potential taxes.
2. Non-Estate Distributions – Your Superannuation is not technically yours and can't be passed on in a regular will. You'll need a Binding Death Nomination or Superannuation Will to pass on control of those assets.
3. Enduring Power of Attorney – If you become unable to handle your finances before death, an enduring power of attorney can authorize someone to act on your behalf. These documents can be very broad or very specific, depending on need.
4. Medical Power of Attorney – Allows you to specify medical wishes and after-death wishes like organ donation.
5. Personal Details – A list of things like passwords, bank account access information, and other personal details that your surviving spouse or relatives will need after you're gone.

Links and Resources:

Michael Yardney

Metropole Property Strategists

Rich Habits Poor Habits

Michael Yardney's Mentorship Program

Ken Raiss: Metropole Wealth Advisory

Some of our favourite quotes from the show:

"We must be cautious about who we surround ourselves with, because of both the short and the long-term implications." –Michael Yardney

"You need to surround yourself with people who can run circles around you in as many areas as possible, people who are exponentially better than you in a variety of ways. Because they're going to help you grow to the next level." –Michael Yardney

"You can't expect to live a positive life if you surround yourself with negative people." –Michael Yardney

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me. Here's how.

In today's show, I'll answer two listener questions.

The first question is from Trent who is concerned about what will happen to our property markets if Labor Party's proposed negative gearing and Capital Gains Tax changes are introduced.

Then we'll answer Joanne's question about whether you need a will.

In my mindset message I'll talk about 20 regrets people have when they die. You may be surprised by some of them.

House prices could drop 10% if ALP policies are introduced

A report recently showed that house prices could slide by up to 9% in Sydney and Melbourne if the labor party gets into power and introduces its planned property tax changes.

A report from RiskWise Property Research assessed the potential impacts of the proposed reforms to limit negative gearing to new rental dwellings and to halve the CGT tax discount.

According to the report, an unintended consequence of the ALP policies would occur in the our national property markets where the proposed changes would be the equivalent to a sudden 1-1.5 % increase in interest rates.

This could also cause housing prices to drop by 9 and 10% in certain parts of Australia.

These proposals were first muted before the previous election, almost three years ago.

But the housing market is very different now. Falling house prices are now making homes more affordable.

Yet shadow treasurer Chris Bowen has said that the negative gearing and CGT changes are about making long-term structural adjustments rather than addressing the short-term property cycle

Another issue is that property investors will be driven to buy new properties, both apartments (which will generally be in the CBD and houses (which are likely to be in the outer suburbs.)

Both these types of property make poor investments because of their locations and will make even worse investments as, once purchased, will be established properties.

However, in the long-term, property is going to remain a great long-term investment.

Don't allow these short-term proposed changes to not alter your long-term strategy.

Remember…negative gearing is not a property investment strategy, it's a short-term financial position.

My strategy (and yours) should be to build as big an asset base as we can, so in the future we have choices. The bigger the asset base you have, the more choices you'll have.

There will be many, many changes to tax and superannuation laws between now and when you retire, so don't change your long-term strategy because of short-term ups and downs.

Do I need a will?

• Studies have shown that at least 45% of Australians do not have a will.
• With no will, the government will decide who gets your money according to pre-determined formulas
• It's important to set up the right type of will. An estate lawyer is the right person to do that for you.
• How your assets will be distributed affects what taxes will be paid, the protection of those assets from one generation to another, and whether your assets end up where you intend them to go.
• You should have a couple of options for executor in your will, in case one person you've chosen doesn't want the job or isn't there.
• There are basically only four categories of people that can inherit superannuation: spouses, children, people who are financially dependent, and interdependent people. Different taxes apply within those groups.
• Shares and superannuation can be taxed in some circumstances.

Links and Resources:

Michael Yardney

Metropole Property Strategists

Ken Raiss – Metropole Wealth Advisory

RiskWise Report – The Impact of Labor's proposed tax changes

Some of our favourite quotes from the show:

"Another regret people had was not accomplishing enough. I guess the lesson is, start taking action." – Michael Yardney

"Everyone's got their own idea of what risk is, but you know when you're living too much in your comfort zone." – Michael Yardney

"Clearly one of the big benefits of having a will is it provides certainty on your death, it gives certainty about your wishes, how you want your assets passed on, how you want them divided." – Michael Yardney

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me. Here's how.

Who's right about the property markets – the pessimists or the optimists?

In today's Podcast you'll find out.

Following a couple of booming years where property values in Melbourne and Sydney experienced double-digit capital growth year on year, our markets have moved to the next stage of the property cycle where price growth has slowed in some cities and property values have fallen – particularly in Sydney and Melbourne.

Not surprisingly this is allowing some of the property pessimists on the internet forums to rub their hands in glee saying, "I told you so."

Sure, our property markets are experiencing a slowdown, but values are still rising in many locations, and yes prices are falling a little in some locations, however, we're not in for a property crash and in today's show I'm going to chat with Pete Wargent to explain why we're not worried about a property market meltdown.

Why our property markets won't crash

One of the most frequent questions I'm asked at present is "how long will this property market downturn last?"

Another one is – "Will our property markets crash?"

So if you are considering investing in property, or about to buy a home, it would be good to know the answer to these questions.

But firstly, remember there is not one property market around Australia.

Our markets are fragmented – not only is each state at its own stage of its property cycle, but within each state different segments of the markets are behaving differently.

If there isn't one market, it means it doesn't really make much sense to say the "Australian property market" will crash, to look at this topic in a bit more detail I've got Pete Wargent on the line.

What could cause a crash as opposed to an orderly drop in prices

We're experiencing a soft landing. On the other hand, a true collapse in house prices would require some large external shock such as:

1. Unemployment high enough to trigger a wave of forced home sales.
2. High-interest rates that would cause a raft of homeowners to default on their mortgages.
3. Severe credit squeeze
4. A severe recession that would cripple our economy.
5. A significant oversupply of property.
6. A halt to the rising population.
7. Changes to government legislation making property investment less favourable.

The fundamentals underpinning our markets

• World economy behaving itself
• Australian economy growing at around 3%
• No likelihood of an interest rate rise any time soon
• Our financial system/banks are in good shape
• Employment growth
• Strong population growth at a time when new constructions are slowing down
• Have not had a "crash" since the late 1890's – we have corrections on a regular basis
• Underpinned by the high percentage of homeowners
• More families at household formation age (esp immigrants
• Oversupply of property limited to certain locations only – lots of secondary property and a shortage of A-grade property
• No real concern about the level of household debt – on the whole, it's in the hands of those that can afford it
• No real concern about Interest only loans converting to P&I
• A culture of home ownership – 70% of us own or are paying off our homes

The bottom line:

For a number of years now bubblers and doomsayers have been predicting the bursting of Australia's property bubble.

They've told us we're in denial about the impending gloom blinded by the consistent performance of our property markets over the last few years.

We've just explained what could cause a property market collapse, but we've also explained why we don't think we should be worried.

However, we need to be vigilant.

As investors, we need to be aware of what's happening in the world's economies as Australia does not operate in isolation. And needs to keep cognizant of what's happening in our property markets

Remember there is not one property market and some locations including Brisbane are going to outperform.

BIS Oxford predicts an 11% increase in Brisbane property values by 2021.

Strategic investors will take advantage of the opportunities our property markets will offer over the next couple of years maximizing their upsides while protecting their downsides.

Michael Yardney

Metropole Property Strategists

Rich Habits Poor Habits

Michael Yardney's Mentorship Program

Pete Wargent

Some of our favourite quotes from the show:

"One of the things that's been pushing up our property markets has been the rising population that's been underpinning it, particularly in Melbourne and Sydney." –Michael Yardney

"This is just part of the property cycle. Don't change your long-term strategy of wealth creation because of a short-term blip in the market." –Michael Yardney

"If you've got the cash flow, you're going to get through." –Michael Yardney

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me. Here's how.

To become a successful as an investor you need to own the type of property that's going to be in strong demand not just now, but in the future as well.

So on this week's show I'm going to discuss a developing demographic change will affect the kinds of properties that will be in demand going forward.

I'll also share a mindset moment and explain why you need a guide to take you to the top of the mountain.

And then, I'll have a chat with Pete Wargent about household finance and mortgage stress.

There is a lot of concern that mortgage stress will cause a property market meltdown. The good news is that this story will finish with a happy ending.

A major demographic change all investors must understand

• For a long time, Baby Boomers have driven the property markets, because there were so many more of them than the previous generation
• Now, Gen Ys are beginning to shape the property markets
• The population growth in the 20-34-year-old age group has increased rapidly. There are now 5,5 million Australians (35% of our workforce) aged between 24-38.
• The Gen Y population growth is based on both the natural aging of the children of Baby Boomers and the strong overseas migration
• Gen Ys are now forming families and moving into homes
• Gen Ys prefer different homes from their parents. Rather than large houses in the suburbs, they prefer townhouses, family-friendly apartments, and smaller detached houses
• Gen Ys will seek affordable, smaller homes located closer to the locations where they want to be
• Gen Ys are looking for walkability, adjacency to parks, and access to public transport

Will Mortgage Stress cause a property market meltdown?

• There's no chance that 1,000,000 people will default on their mortgage in the next year like some of the property pessimists are predicting
• Only a very small share of loans are 90+ days delinquent
• There are more delinquencies in Western Australia because of the economic downturn
• In Sydney, Melbourne and Brisbane, mortgage arrears are very low
• Mortgage arrears for investor loans is even lower than that for home loans

Links and Resources:

Michael Yardney

Metropole Property Strategists

Rich Habits Poor Habits

Michael Yardney's Mentorship Program

Pete Wargent

Some of our favourite quotes from the show:

"Guides make all mountaintops attainable. And the same goes for success, and for building wealth." – Michael Yardney

"Why on earth would you try to figure out everything on your own when you can learn from someone who came before you?" – Michael Yardney

"People have been talking about recession for as long as I've been commentating on markets." – Pete Wargent

PLEASE LEAVE US A REVIEW

Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes - it's your way of passing the message forward to others and saying thank you to me. Here's how.

Is the media killing our property markets and the economy?

Something is causing a crisis of confidence -- and it's not the economic fundamentals.

But homeowners and property investors are scared.

They're reading headlines like:

• Melbourne and Sydney house prices are falling $1,000 a week.
• A Shorten government will decimate the property market because of its proposed tax changes.
• One million investors will need to sell up their homes because their loans will convert from interest only to principle and interest.

No wonder they're scared.

But should they be? Are the headlines right?

Today I'll chat with Dr. Andrew Wilson, Chief Economist of MyHousingMarket.com.au and we'll tell you what's really going on.

Crisis of Confidence

The regularly reported ANZ-Roy Morgan consumer confidence index is below the longer-term average of 113 held since 1990

Investors are asking us at Metropole if they should sell

So, what's changed? What's scaring investors?

Remember, different consumers can be scared about different things but here are the factors that could explain it:

• I've never seen the media with as much negative press about house prices heading south – not even during the global financial crisis
• Headlines talk about rising interest rates.
• It's harder to get money from the banks due to the restrictions placed by APRA and the Royal Commission has scared the banks,
• The Wentworth by-election result and the fact that we now have a minority Government. This may mean we have another Federal election, which might come sooner than the one expected in late May.
• The uncertainty of State elections in Victoria and NSW
• The stock market is pretty negative and crazy right now, with the S&P/ASX 200 index down over 6% in October.
• Low wages growth – increasing Petrol prices are now at the highest level in a decade, which has to be scaring households on tight budgets.

Highlights of the Interview With Dr. Andrew Wilson

• You would have to go back to 2008 to see clearance rates consistently below 50% at this time of the year, and that was at the time of the global financial crisis.
• Currently, however, the drivers of the housing market are on the opposite end of the scale. We have a strong economy, unemployment numbers show that performance in the labor market is best in six years. We're creating jobs, we have strong migration, there are booming first home buyer numbers, rents are increasing, interest rates are low and not increasing. Yet the market has lost its nerve.
• Banks have tightened their lending which means fewer buyers, which means fewer sellers, and banks see the decline and tighten lending again. It's a self-perpetuating cycle.
• When consumer confidence is high, it can take a while to shift it back. It's even harder to shift low confidence to high confidence.
• Interest rates will probably go down before they go up again.
• We have strong fundamentals for property. There's no financial crisis.

Links and Resources:

Michael Yardney

Metropole Property Strategists

Rich Habits Poor Habits

Dr. Andrew Wilson

Some of our favourite quotes from the show:

"Those who can see the big picture opportunities and invest based on fundamentals, rather than making investment decisions based on the media, are going to take advantage of the opportunities the market offers them." – Michael Yardney

"The best way to reflect on your failures is to focus on the lessons that you've learned and the person that you've become, rather than spending your time avoiding failure." –Michael Yardney

"It's not the events that define who you are. It's how you choose to react to what's happening to you that defines who you are." –Michael Yardney

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