Georg Chmiel chats with Bill Malouf about the ins and outs of the market

The house recently featured on the TV show “Dream Home,” but the Maloufs have not always lived such a luxurious lifestyle. Their first marital home was an apartment above Auburn’s Royal Hotel, where Malouf himself served the beer.  

 

In this interview, I’ll take you behind the scenes with Bill Malouf and share with you his knowledge about current market conditions. This is the first of a series of interviews I will conduct for   Property Observer  in which you will get to know some of the sharpest minds in the real estate industry today.  

 

When I asked Malouf about market apocalyptic Harry Dent and his predictions that the Australian market will drop by as much as 50%, he said Dent must have gotten Australia confused with a third-world country.  

 

“In my opinion,” he said, “there is no chance of the residential market dropping in the Eastern Suburbs by 30, 40, or 50%. I just don’t believe it. 

 

“There are 55,000 residents in the area that I deal with, and water surrounds us. The driving factors here without a doubt are that it is a small territory and there is no room for expansion. Have we had hiccups? Yes, but in later years we more than picked up what we had lost.” 

 

 

The flip-side of limited land supply is often high home prices. As the agent who sold the “Bang & Olufsen” house on Sydney’s Harbour for the highest price achieved for a waterfront home at the time, Malouf knows about high prices.  

 

Some people are struggling to afford a home even in much less prestigious locations than the Harbour-front. Malouf pins much of the blame for high prices in his Eastern Suburbs market on a lack of listings. 

 

“In the prime selling period last year,” he said, “the   Wentworth Courier  was 150 pages. Every other year, it was 350 pages.” Since the Courier is the local paper and a standard outlet for real estate advertising, those missing pages reveal how far the number of homes for sale has dropped. In Sydney as a whole, CoreLogic reports that sales are down 9.4% in February, compared to one year earlier. 

 

Malouf added, “The lack of stock is driving the market in this area. That’s what has been keeping the Eastern Suburbs market very, very, very buoyant.” 

 

 

The best salesmen really believe in their product. Perhaps one secret to Bill Malouf’s success is that he is deeply convinced of the value of property. 

 

“I believe that paying rent is dead money,” he told me. “I have always told my children that.” 

 

Malouf says that first-time buyers should “Go out there and do everything you can to invest in property. You can borrow money at less than 4 percent.” 

 

Even a one-bedroom unit will allow you to earn capital gains and build equity. “Over time, it could turn into a two-bedroom, a three-bedroom, and eventually a house. As long as you are paying rent, that money can’t turn into anything.“ 

 

Malouf also pointed out that first home buyers have a rare moment this year in which Sydney apartment prices are flat or even dropping. 

“The number of units now being developed in Paramatta, Liverpool, Alexandria, and Botany have opened the market up so much that prices have probably adjusted downwards by 10% or so.” 

 

Given that Malouf’s own first home was hardly a dream property, young buyers who complain about having to buy on the city’s fringe may not get much sympathy from him. Besides, fringe areas are undergoing rapid price appreciation. 

 

Malouf pointed to Redfern as one area where buyers of 10 or 20 years ago have made a fortune. “These areas have burgeoned in the last few years. Any fringe city area has got good growth at this time.” 

 

 

If Sydney has starter apartments in surplus, it also has an abundance of high net worth individuals ― all of whom need a place to live.

 

Last year, Credit Suisse reported that Australia’s population of millionaires grew by 17% to a new total of 1.16 million. The number of Aussies with more than $50 million increased by 30%, to about 3,000. 

 

I asked Bill Malouf if the growing number of high net worth individuals in Sydney would cause “premium creep.” Would some humdrum suburbs of today become the next destination for the richest Sydneysiders in the years to come? 

 

He doesn’t think so. “I don’t think there will be a new Eastern Suburbs,” he said. “Everyone knows Wolseley Road, Point Piper is one of the most expensive streets in Australia.” 

 

Instead, Malouf predicts that prices for the 235 houses on the waterfront between Double Bay and Kirribilli will reach new heights over the next 15 or 20 years. 

 

“In 1971 the most expensive house sold on the waterfront cost $1 million,” he said. “Today that property is worth $60 million. It will be much more in another 20 years.” 

 

Dover Heights is another suburb where Malouf has seen rapid price growth. “I remember when you could be on the waterfront there for a couple of million dollars. One recently sold for $11.5 million,” he said. 

 

 

I’m Chairman of the No. 1 Chinese international property portal Juwai.com  and acutely aware of Chinese demand trends, so I asked Malouf what he sees in that area. 

 

He said that “At the top end of the market, the Asian buyer has definitely been looking at the Eastern Suburbs for the next generation.” 

 

But he pointed to one factor that is crimping demand. “Our federal government,” he said, “has not helped us. These buyers are paying 15% stamp duty, land tax, and a portion of the purchase price for their FIRB application. Even if they don't get the house they apply for, that money is non-refundable. 

 

“There is no doubt the laws regarding this should be changed. Why should you be denied the opportunity to earn the maximum amount of money possible on a property you or your parents had the foresight to invest in?” 

 

He also laid to rest the worry that foreigners are buying up everything. “There is a fallacy that Asians are buying everything. That is not correct. A lot of waterfront sales are to Australian citizens who are upgrading and not to the Chinese market.” 

 

 

Bill Malouf is proof that many of the best business minds never went to university. What does he consider to be his secret of success? 

 

For one thing, he works incredibly hard. 

 

“In the early days, I was working from 7:30 in the morning to 11 at night. We are in a service industry. There is no doubt when you are starting out that you have got to be prepared to work long hours.” 

 

Even today, when most of his business now comes to him via referrals, his most important tool is his mobile phone. “I can be sitting in New York or on the Mediterranean, and I can still negotiate deals,” he says, “as long as I take the phone call.” 

 

“If you ring most agents after 5 or 6 p.m., you can’t get them. Agents should not turn their phone off at 6 o’clock. You don’t know who might be trying to call you. It could be a vendor, or it could be someone driving home who saw a signboard and wants you to answer questions about that property.” 

 

Malouf also credits his extraordinary productivity to learning to rely on a personal assistant. He says his “most important asset” is his PA, Sophie Beaumont, who has been with him for several years.  

 

“In the early days,” Malouf recounts, “I did everything. I sold. I managed the team. I ran the office. But I was lucky enough to discover that having a good Personal Assistant on my team allowed me to let go of some of the tasks where I was least productive and focus on my most important skills.“ 

 

Malouf says he believes good management requires the ability to ask others to take responsibility for things at which you are weak, so you can stay focused on the areas where you can make the biggest impact. 

 

Even with all his success, Malouf knows that real estate is an industry where you have to really give service. “I don't turn my mobile phone off. Everybody knows that. If somebody calls me at 1 am, I will answer it.” 

 

 

As former CEO of LJ Hooker, I know that top performing real estate agents seldom get a chance to slow down and recharge their batteries. I asked Bill how he fits it in. 

 

He said, “My downtime is the Harbour. I love the water. I have a boat, and on it I get to relax and recharge my batteries, so I’m ready to go on Monday morning.” 

 

Bill Malouf’s life is probably far different than he once imagined it would be. He started out in the family business of managing pubs. But a “nasty incident” (as he says) with a knife-wielding patron led his wife to give him an ultimatum. Either he changed careers, or their marriage wouldn’t last. He made the switch to real estate soon after that. 

 

For Bill and his many real estate clients over the years, that dangerous incident has turned out to be perhaps one of the luckiest moments of his life.