Letter from the editor: Property investing isn't about the sexy sales pitch
It was the Sydney Home Buyer and Property Investor show over the weekend.
It is indisputably one of my favourite yearly events as familiar faces are brought into the one room to speak to the people we write for and educate all year round.
Every time I attend, I am struck with how it reflects the trends in the housing market – a microcosm of what is currently happening on a wider scale. Each city reflects the confidence in that area, for instance this time round I was told by Right Property Group that they saw more activity on the first day of the Sydney show than they did the entire time of the Perth show, an observation that many others conceded to be correct. This is no exact art, and yet it proves surprisingly accurate each year.
The trends in what is “en vogue” for investing itself are also present for those keenly observing. Where mining towns were once the dominant theme of new exhibitors, and then the United States, China, granny flats and self-managed super funds, this year there was little of any particularly new theme. There remained one company that appeared to be pitching to Chinese investors only – speaking to them in their own tongue, and there remained a granny flat builder, selling it more to those interested in the services than pitching it as an investment solution.
I didn’t note a single US property guru. In fact, it seemed to be that the exhibitor list was slightly whittled down to a core of those who have been in the market for a long time. While I wouldn’t spend money with every person on the exhibitor list, for a number of reasons, there are many on there that I respect.
While there are a huge number of new companies deserving applaud for the ground they are breaking in property, and their education offerings and ethics, the “test of time” is still one of the better gauges for success in the property industry – not in the least because property is a long-term asset, and it’s expected that good experts are able to retain a good name and deliver on their predictions and offerings over this time. We see many new companies and trends come and go, but solid investing principles and ethics see the same businesses stay in the game year after year as past exhibitors vanish or hang on with blackened names.
I was also struck by one other detail – the increasing concern and diligence of the public. Spending some time over at the Property Investment Professionals of Australia stand, where they have a petition for regulation of the industry, I heard people say that they felt ‘overwhelmed’ a number of times and sign the petition willingly.
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In the past, explaining the dangers of the industry, many attendees were surprised.
This time, it seems the message is getting through – be prepared, do your research, don’t hand your money over without your due diligence. The “splashy” sales pitches of the past, with huge price gain claims, seemed to be less common.
When listening to my editor-at-large Jonathan Chancellor’s speech on the resi stage, where he spoke about the difficulties of investing using mining town Zeehan in Tasmania as his example, the crowd furiously wrote down notes. He said that he wasn’t trying to put anyone off the property market, but rather off the idea that it is easy, that it’s fast money and that it doesn’t require hard work from yourself as a consumer.
Providing his research tips, some of which he has taught myself and the editorial team for the way in which we look for stories (setting up alerts for announcements about infrastructure, for instance), I felt very proud of what the industry is achieving, and also for the increasing sophistication of investors and home buyers.
Now, more than ever, we are sent in detailed questions from readers who don’t want to just know “what” something is, but how to use it themselves. They don’t always want a hotspot list, or to be handed a property on a plate – although these are useful and fun in their own ways. They want to equip themselves with the skills to do the research themselves, or to at least ensure their investment team is doing the right thing.
We don’t suggest going it alone in the property field, but we do suggest undertaking your own due diligence and research. Test your own theories on property, for instance. After his talk, I overheard Jonathan speaking to one of the audience members and telling them to choose a suburb they know well to research and do a “practice run” with getting the latest information if they’re not experienced with getting it right the first time round. This will allow you to see any flaws in your process, and understand what to look for, before you start researching an area you do not know.
We all think we understand property better than everyone else. But it is time consuming, and you are expecting to dedicate some work into getting the information you need to save yourself the funds in the future from the market moving backwards. And, as RBA governor Glenn Stevens re-iterated in the much-discussed speech, the market can and does move backwards – it is by no means unheard of. We would hate any person to suffer through bad property choices, particularly when the situation could have been avoided through a little more education and effort - or through better choice of expert. Bad decisions happen frequently and, as we know, hindsight is 20/20 while foresight is basically a thick fog.
But is it possible to make money through property? Yes, it is. Is it certain or simple? No, it is not. To suggest it's easy is irresponsible. It’s not a sexy message, and it doesn’t make a good headline. The sales pitch “It’s hard work, not certain, expensive and you may not make as much money as you think” isn’t particularly enticing. No one was ever interested in writing about the suburb that is a ‘quiet achiever’ and growing just slightly above the national average. It’s a hard sell for us to write a story about a suburb that isn’t “booming”, it’s a hard sell for someone to push property there or to suggest someone invests there – and so these areas can often be ignored.
Jonathan told the crowd that this is actually exactly what they’re looking for.
The hotspot lists help you know where not to buy – where the herds are buying and everyone else is investing – instead, you want the quiet places that no one else is talking about yet. These are places that, while we do our best, aren’t always going to make it into our headlines. We write based on what we hear and what we're told by investors and experts, each with their own agenda, so you can understand where we come in during the process.
After everything, I found myself smiling and cheerful at the show – those with ethics, who are forward thinking and care for their clients, they will see long-term success and repeat business. And consumers who are the same, who are diligent and careful, do their research and educate themselves – they are putting themselves in a better position as well.
We can’t be naïve to think that another investment trend won’t be seen – that there won’t be another form of investing that hits a chord for a while (and, yes, makes some people plenty of money), but we can hope that by the time the next property sensation takes off the next wave of buyers are ready to truly analyse it and work out whether or not it’s for them.
