Property seminars ‘canary in coalmine’

Investment Fears continue to grow that a bubble is developing in Australian property.

Jacob Greber and Duncan Hughes Pat Mesiti, whose mission in life is to create 10,000 millionaires before he dies, wants you.

The Sydney-based organiser of property seminars boasts he can show Australians the secrets of how he and his friends “built fortunes in real estate, starting from scratch with no special skills and not a lot of spare cash”.

All you need do is attend his “property millionaires” tour – in Melbourne this weekend – where you can learn how to develop, renovate and churn property.

“Many of you want to flip properties,” Mr Mesiti declares in a YouTube clip on his website.

“We want to teach you how you do that safely, securely, and make money.”

It’s the kind of pitch that worries analysts watching for signs the property market is overheating.

There are plenty of reasons to worry. Reserve Bank of Australia figures showed this week that investors now account for about 45 per cent of home loan approvals in NSW – a record and well above the previous peak in 2002-03.

RP-Data on Friday said Sydney house prices rose 1.5 per cent last month and are almost 15 per cent higher than a year earlier, a sign price growth may be accelerating.

Experts say an apparent explosion in property investment seminars is a warning parts of the property market are overheating.

“A pick-up in the property spruiking business is a signal things may be getting a little too exuberant,” said Paul Bloxham, HSBC Australia’s chief economist The former Reserve Bank official co-wrote a 2010 central bank study into the causes of the 2003 Sydney housing boom and bust.

Housing seminars are a common sight around hotel conference rooms, where they pitch to retirees or younger investors. Direct telephone marketing is also on the up.

Mr Bloxham’s original report noted that one of the alarm bells about Sydney’s overheating market a decade ago was a crackdown on property investment seminars and increased scrutiny by the tax office of rental deductions.

“Some of the tell-tale signs are there,” he said on Friday.

“The investor share of loans is at a record high, and higher than the very exuberant times of 2003, which ended with house prices falling and parts of Western Sydney doing it tough.”

He says the city appears to be following a familiar pattern, fuelled by record-low official and commercial lending rates that start with price rises based on fundamental drivers, such as a shortage of new homes and rising incomes.

“People then get overly excited about it and start buying assets because the price of those assets is rising.

“The solution is not to leave interest rates too low for too long. It’s one of the reasons the Reserve Bank won’t be cutting rates further and we have in mind they’ll be lifting early next year.”

Chris Curtis, a Sydney property buyers’ agent, said there was no doubt pushers were once again proliferating, but are more sophisticated.

They still use well-worn arguments to drum up business, such as negative comparisons to shares and a shortage of housing supply, while updating the pitch to emphasise affordability of property investments for self-managed super funds and the “globalisation” of Sydney as a haven for global capital.

“They’re quite appalling, and what’s happening now is that everyone is doing this property thing – it’s not just the Gold Coast white-shoe brigade: it’s now happening with credible brands,” Mr Curtis said.

The concern was echoed by last month’s David Murray financial system inquiry interim report, which said borrowing by self-managed funds would create problems if left unchecked.

Regulators, who say co-ordinating enforcement is tricky, fear much of the demand for off-the-plan apartments is being driven by double-digit commissions.

Cash payments of $40,000 are routinely made to advisers who recommend apartments, typically to selfmanaged super fund investors.

In turn, investors are promised double-digit returns, guaranteed tenancies, regular rental income and perks, such as “free” furniture, in a bid to invest in off-the-plan developments.

Tim Mackay, a financial adviser at Quantum Wealth, said high-pressure sales seminars promising easy wealth had become common.

“Aspirational investors should view it as a canary in the coalmine and tread cautiously.If in doubt seek independent advice,” he said.

Mr Mesiti, one of the spruikers, said that while there were pockets of overheating other parts were not “Property, like life, goes through different cycles at different times,” he told AFR Weekend.

“Everyone is entitled to their view. It think it is a great time to leverage and take control of your own destiny, of your wealth.” A pick-up in the property spruiking business is a signal things may be getting a little too exuberant Paul Bloxham, HSBC Australia chief economist.


Australian Financial Review, Australia by Jacob Greber And Duncan Hughes

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