Ask An Adviser: Where property is heading, debt recycling and the future of rentvesting with Pat Noll

Alec Renehan (0:00)

The whole rent-vesting wave and the rent-vesting strategy, is that strategy dead?

Pat Noll (0:04)

You shouldn't be buying property to sell over a few year period.

Bryce Leske (0:08)

Prices are falling, but I guess inflation is sticking around. The trade-off between now buying and renovating versus, I guess, a more upgraded place.

Pat Noll (0:16)

So we're seeing a lot of people start to do this. You're nearly $220,000 a year for the bank to give you the loan. You know, let's say top 5% income is in short, to be under a first-time buying scheme. You're on $200,000 a year, but you broke. Yeah, it's all about affordability and whether a bank will give you a loan should be of no consequence to whether or not you should actually take it out.

Bryce Leske (0:39)

Welcome to another episode of Equity Mates, a podcast where we explore what is possible in the world of investing. If you've just joined us for the very first time, a huge welcome to our community.

Alec Renehan (0:48)

My name is Bryce and I'm Ren and today we're talking all things property. We're going to talk about the state of the market and whether property is still an investible asset class.

We've got an expert joining us today.

He's a mortgage broker. He talks all things property for a living. Patt Noll, welcome to Equity Mates.

Pat Noll (1:05)

Thanks guys. Thanks for having me on.

Bryce Leske (1:07)

Now, Patt is from Runestone Finance.

If you would like to get in touch with Patt, just send us an email and we'll connect you. But if you would also like to get in touch with any of our other financial advisors, head to equitymates.com/advice, fill in the form and we'll get you in touch. Now, Patt, this is a listener mailbag. So we are going to, as Ren said, explore all things property with questions that have come in from the community. We're going to start with the state of the Australian property market because there are a bunch that have come in. People want to know what's going on and what they should do.

Pat Noll (1:38)

Me too.

Bryce Leske (1:39)

Good, well I'm glad you're in the same boat. So let's start with one from Sophie. What is happening across the Australian property market right now and how should buyers separate short-term price movements from long-term fundamentals of a suburb or a city?

Alec Renehan (1:55)

Sure.

Pat Noll (1:55)

Great question. So I think broadly there's just a few things happening at the moment and it's all coinciding in one go. And I think that's exacerbating the whole problem of affordability. One is the tax changes obviously from the May budget is the big one.

The other is we have sort of persistently high interest rates on the back of a high inflation. So those two things are creating a problem that maybe we had before, but now the market is starting to slip on the back of that.

Borrowing capacities are really taking a hit. But broadly, you shouldn't be buying property to sell over a few year period. Stamp duty and the other costs associated with buying and selling property is really, really expensive. So I think you should really be looking at sort of an 8, 10 plus year horizon when you're buying a property. So if you can get a discount of 10% from six months ago, that could be a really good time to actually get in, particularly if you're sort of targeting a 10 plus year hold. So yeah, you don't want to catch the fulling knife, so to speak. And you know, maybe it's going to go lower. But I think it's a really good opportunity for people to get in, provided you can afford it is the really big one.

Bryce Leske (3:03)

Yeah. Where do you think we are in the cycle at a national level? Of course, there's nuances at sort of state and sort of city level. But where do you just feel like we are in the cycle?

Pat Noll (3:16)

Look, I think there is more pain to come. Yeah. And I think where most of the economic forecasting from the big banks shows another couple of rate rises it's looking like. And I think there's just sort of a built up amount of money and savings that people have, which is sort of persistently meaning that people aren't in mortgage distress. But just anecdotally, we are seeing clients now sort of reporting back. And when we do our six-monthly check-ins, we're hearing that, oh, God, actually, this emergency fund is pretty drawn down. And there's not a whole lot of leeway between what they're earning and what they have to spend in their mortgage repayments.