Given the times we’re in, you might be concerned about the Australian property market. But investment expert Pete Wargent is optimistic about the future.
Pete is one of Australia’s brightest financial minds with a unique understanding of real estate market cycles, and uses proven strategies to assist investors in achieving their financial goals through property investment.
“Eventually we will come out the other side,” Pete said on the Get Invested podcast with Bushy Martin.
“So I think people don’t need to catastrophize. I think in a worst case as well, the Reserve Bank has recognised that a falling housing market is not a healthy dynamic. It never is for household wealth in the economy. So worst case scenario, payment holidays are going to be available for people with mortgages.
“We’re basically looking down the barrel of 10 years of low interest rates now. So people need to think a little bit differently about how they manage their finances, because the cash in the bank no longer earns a valuable rate of return. Mortgage offsets can.”
Pete said having an emergency buffer or ‘rainy-day’ reserve to fall back on is crucial, whether we are in risky times or not.
“Unforeseen things will always come around,” he said.
“It doesn’t matter if it’s a repair or a vacancy or a recession or whatever it may be, or even a period where your income takes a hit. And so in real estate, having that buffer is critical.
“But for landlords, I think just you need to stay alive and I think capitalise on those long-term growth opportunities. So, I know we always say this, but it is critical to have that buffer.”
Pete doesn’t believe that the covid-19 circumstances and the six-month tenant eviction moratorium will be as bad for landlords as some are predicting.
“My outlook on life is that things are rarely as good or bad as they seem,” Pete said.
“And obviously the initial reaction to such an announcement is that ‘this is the end for landlords, it’s gonna be people refusing to pay their rent’ and so on. I think in reality, most tenants, most professionals, will carry on paying their rent because my understanding of the rules is that the rent is still payable.
“Obviously [landlords] need to work with tenants and try to not be too heavy handed. But a first port of call for a lot of landlords will be insurance – if they’re insured for rent or cover. If not, there may be even a period where the rents are not flowing in as they would have been hoped to. But I suppose one of the things in Australia is net rental losses can be written off against income.”
With all this in mind, Pete said we can look positively towards the opportunities coming up in real estate and the property market.
“The good news for people with a buffer or people who were prudent and held back some cash is that some markets will become much more attractive than they were over the next year or two,” he said.
“I think in real estate, we’ve never had that situation where we could borrow such low mortgage rates in Australia before. So there’ll be opportunities as we come out the other side.”
Listen to the full interview here.
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