Two words will define the next Decade. Disruption and Challenge.
Be ready for a set of “new normals”. By 2029 these will include the 4 day week, autonomous motor vehicles, air taxis and the substitution of fast food outlets with food factories. Apart from a 4 day week, workers will have to adjust to the arrangement of casual work contracts which in turn will force Banks to adjust their assessment of mortgage applications. Undoubtedly a significant sector of our community will not be able to enjoy the benefits of home ownership because of the uncertainty of full time work. As less people purchase property, more will need to rent putting upward pressure on the rental market both in supply and price. As the revolution of machine learning works its way through the economy, the cost of goods sold will fall and interest rates, which are a symptom of inflation, will remain low and so too will the return on investments. By the end of the decade there will be a bigger gap between the ‘haves’ and the ‘have nots.
Undoubtedly we will all be able to adapt to the Disruption, but the question really is can we meet the Challenge of what is to come.
You will remember this time last year I was particularly excited about year 2019 and to find ourselves in the position we are in today is frustrating to say the least. Year 2019 was a lost year in another lost decade for most South Australians.
Over the Christmas break two events occurred which have changed my way of thinking. The first was a discussion at a Christmas wedding which began with the question ‘What will we need to do to get SA back on track?’ The respondent, an expat now living in Melbourne, said You need 300,000 people and to do that you need to become the no-tax state. The problem we have in SA is a people problem and the lost generation must now be re-discovered. The second event was when I read the reasoning as to why Hobart has enjoyed better times than us. In 1999 a state wide seminar asked the question ‘Where do you want Tasmania to be by 2020?’ One suggestion was considered to be outrageous and that was ‘I would like to see a world class museum built on the river (Derwent)’. Well they now have a world class museum, it is called Mona, and it was made possible by a professional gambler. It has become the cornerstone of what Tasmania is all about in 2020. In 1999 Tasmania was openly declared as being ‘the sickest, poorest, dumbest State in Australia’. With the median house price in Hobart now higher than that in Adelaide, we have now adopted that mantra.
The recent debate around Land Tax is an indication that the Treasury in S.A. has zero tolerance to the unexpected. The unexpected in this instance was the blackhole of lost stamp duty ($206m) as declared by Treasurer Lucas in Feb 2019 resulting from the negative effect of the BRC. With the apocalyptic consequences of wild fires in the Adelaide Hills and KI, we do not have the capacity to raise the necessary funds by simply increasing taxes. The godsend to the Treasurer is that interest rates are low and therefore the only way that we can rebuild our lost ‘diamonds’ is to borrow $1b and have the cash to do whatever needs to be done, and more, immediately. Every South Australian would be prepared to take on their share of that debt knowing that this State is doing its upmost to help those who have been affected. Let’s not forget the bushfire in KI started with a lightening strike in a ravine. Forget about surplus budgets and royal commissions because the animals of every description that survived now have paddocks with no feed, trees with no leaves and creeks with no water. South Australia’s phoenix must rise from the ashes in the form of strong leadership to a receptive assembly of South Australians. Just like the challenge faced by Tasmanians in 1999 we can turn this disadvantage into an advantage by doing it right and doing it now.
The Challenge also extends into the property market with a particular focus on retiring ‘Baby Boomers’. The decade to come will see the migration of retirees downsizing into smaller apartment style living which will in turn mobilise the market by providing much needed family homes for the second time home buyer. The surplus funds available from downsizing will need to be invested wisely in order to bolster the dismal returns on the “no risk” term deposits. I iterate my previous blog when I say that a low risk option is in the form of 2 bedroom flats within 5km of the CBD for under $350,000. Net returns of 3.5% plus will go a long way to living a life with more dignity. This investment option has been stagnant for the last 10 years, so the downside is zero and the opportunities remind me of the Perth market that we invested in in 1984/85.
At our annual Christmas drinks, I declared I have decided to extend my working life for another 10 years. This picks up on the advice given to my golfing mates back at the time of the GFC of 2008 ‘Don’t give up your day job’. It also excites me to know that I am available to help clients meet the challenges of the next 10 years. To that end we have developed a new website that will be linked to Instagram to promote our business and your properties. We start the year with 9 listings in the next 2 months ranging from $250,000 1 bedroom flats to $4m houses.
Make my day a happier one by ringing me for a chat.
The J & T team wish you all the Best in All Things for the Decade to come.