Michael Pascoe, finance and economics commentator tells us why, in his opinion, investing in property doesn’t add up.   He doesn’t say don’t do it but he points out why many investors go wrong.   We wanted to get a balance to what Michael Pascoe said so we asked Michael Yardney from Metropole Property Strategists, for his opinion and you might be a bit surprised to hear his view.

A person’s motivation to sell is rarely just about financial reasons according to buyers agent Patrick Bright.  He joins us to explain how you can spot a sellers motivation and why its important.

We catch up with the world’s most successful celebrity real estate agent - Josh Altman star of the hit American TV show Million Dollar Listing LA. He shares some interesting stories.

Brad Beer from BMT Tax Depreciation explains how you can get the maximum deductions available from your investment properties.   Handy advice in the lead up to the end of financial year.

Bernard Hickey from Hive News New Zealand has a waning for Australian investors looking to cash in on the hot market there.  He gives us detail about a new tax on foreign investment that has been mooted by the NZ Prime Minister.

 

Transcripts:

Michael Pascoe -

Kevin:  Joining me now is Michael Pascoe, finance and economics commentator, over 40 years’ experience in all forms of media.

It’s a pleasure to have you on the show, Michael, and thank you for your time.

Michael:  My pleasure.

Kevin:  You’ve written an article that was called “Why Investing in Property Doesn’t Add Up.” Could you tell us a bit more about that piece and what it means for Australians who are looking to invest in property?

Michael:  There are a couple of things to it. First of all, it’s obviously a very general piece, because there isn’t one Australian property market; there are about 10,000 of them at least. But on the averages now, there has been such a surge in prices that you’re obviously not going to see that same soaring capital appreciation, obviously, until we digest a pretty big lift over the last few years.

The other side of it is supply has responded to demand, there has been a lot more building. That’s showing up and investors have certainly been active, meaning there’s more rental property around, meaning some rents are beginning to fall, other rents aren’t rising, and if the gross rental return isn’t flash, then the net rental return is even worse.

Kevin:  When you build that on top of the credit squeeze that we had to have, with the banks toughening up on lending and so on, we’re probably going to see a lot of those units that are being built and apartments being built being left vacant or not being able to be sold, too. Will that add to that problem, or is that part of it?

Michael:  I’m not so sure about that end of it. I think before you get to that situation… I presume you’re talking about properties that have been sold off the plan and then people can’t get finance.

Kevin:  Yes, I am.

Michael:  That’s a problem that the market will digest, but I think it’s a fairly short-term problem. The longer term is if you look in very rough figures, if you assume that prices on average are only going to rise by about the inflation rate for the next few years – and some people would call that an optimistic view; I think it’s not unreasonable. So let’s say prices go up by 2% a year. When you buy an investment property, depending upon what state you buy it in and how much it is, you’re paying as much as 5% stamp duty, so you’re not going to break even on your stamp duty for two and a half years. On top of that, you have land tax. Again, depends on where you are and how big your holdings are, but that has another bite of it.

My suspicion is that investors very rarely are honest and accurate in their assessment of costs of owning property. They might look at the gross yield and think, “Well, yes, that’s that. Well, we’ll be