5 Real Estate Euphemisms That Need To Die, Now.

As property investors we all tolerate and enjoy some tired euphemisms. ‘Renovator’s Dream’, ‘Cosy’ and ‘Full of character’ have become old jokes as we wised up to them. At the same time though, we can unwittingly swallow a lot of nonsense fed to us by marketers, commentators and other investors. Some of these clichés have got under my skin recently and it’s time to give them a blast.

“Great for first-time investors”

This phrase implies that the property is not so great for seasoned investors. Would the real estate agent or developer advise against experienced buyers getting involved?

Not meaning to be rude sir, but you already have five properties, so this wouldn’t suit you. It would suit someone with less experience, a novice, …someone gullible perhaps.

Any property which is a good deal for a first time investor is an equally good prospect for an experienced investor. This phrase just gives the inexperienced an undue confidence boost.

“Are you negative gearing it?”

Gees I better check. Did I mismanage this property such that it is positively geared by mistake?

Dear tenant, it has come to my attention that your rent is so high that I have failed to ‘negatively gear’ this property, and I will need to reduce your rent.

First of all, nobody in their right mind sets out to negatively gear a property and is then surprised to find it’s not making them a loss after all. If this happens to you, congratulations! Add this positively geared property to your portfolio and go try again to buy something that loses money.

Second, the term applies to the outcome, not the strategy. You add up the income and subtract from that all the expenses and if the final number is negative, then the property is negatively geared. You don’t really make a management decision to “negatively gear it” – it comes out “negatively geared”.

“To be honest with you…”

Look, to be honest with you, I have several other interested parties who are ready to make an offer…

Should I be cautious of someone who qualifies a statement with, “To be honest with you…”? Does that mean every other statement they make without that qualification is dishonest?

At least it’s nice of them to let me know when they are telling the truth?

“Long term gainer”

Property has great long term prospects! (Don’t expect to make any money in the short term.)

How long is “long”? How long will I have to wait for that to come true and what happens in the meantime? What does this clairvoyant real estate agent know about the property market that I don’t?

This comment is a reflection of the agent’s opinion about short-term growth prospects – that they’re not great. After all, how can anyone truly know what will happen in the distant future to prices in any market? We may all be living in The Matrix and not even need properties in the future.

“This location will always be in demand”

Don’t be lured in by this phrase. It is technically correct but not helpful for investors.

There are locations that for a very long time have been highly prized by owner occupiers. These are the most expensive places to live in capital cities around the country. But merely wanting to own in such locations, doesn’t affect their prices.

A 14 year old boy will want a Ferrari for example, but that kind of demand doesn’t affect the price of Ferraris. The kind of demand we investors needto see is the kind of demand that actually affects prices, people bidding at auction, turning up to open homes and making offers.

This kind of demand is the very reason why I created the DSR score.

To cut through the euphemisms, get the facts on any property for free with a Microburbs report.


For press enquiries about this article, please call Microburbs Founder Luke Metcalfe on 0414 183 210.

Negative Gearing: Be Patient, Don’t Muck With It

What will the impact be on the property market if the proposed changes by Labour go ahead to abolish negative gearing on old properties? What will life be like for investors? How will it affect first home buyers? Jeremy Sheppard from DSR Data walks us through the winners and losers.

Supply and demand

In a free market, prices rise when demand exceeds supply. But if the government tampers with the market, like seen in communist regimes, the natural law of supply and demand may be distorted.

What caused demand to exceed supply?

Some would argue that investors are responsible for the increased demand for property. And that might be true for Sydney and Melbourne for the most recent boom.

However, there have been booms in the past without such significant involvement from investors. This time was just a magic combination for investors. We shouldn’t apply a permanent measure for a temporary situation. Time will balance things out anyway as I’ll explain soon.

Australia is a truly great place to live, that’s the real reason why prices are so high here. We have a great economy and freedom from a lot of problems making hell-holes elsewhere in the world.

It makes sense that people want to live here which pushes up prices. If the government considers high prices to be a problem, they should look at modelling how other countries have maintained low prices with some of this:

  • Civil war
  • Famine
  • Corruption
  • Restricted education
  • Poor health care
  • Low technology
  • No infrastructure
  • Dictatorships

Implementing any of these strategies in Australia will quickly solve the demand problem.


To solve the “problem” with supply, government could reduce taxes charged on developers to build new properties. They could also look at relaxing development constraints.

However, without those taxes, vital infrastructure like water supply, electricity and sewerage would not be available. And without building constraints, developers could prop up any cardboard box like shack.

In other words, government should make it as easy as possible for shanty towns with no sewerage to spring up overnight everywhere.

In every boom, the response from developers has been: build, build, build. They make a buck by supplying to the demand. Eventually they balance out the supply and demand equation and normality is restored.

The same will happen to ease the current boom. It’s not something that needs fixing. Supply and demand in Sydney and Melbourne will probably balance out before Labour get into power anyway.

Impact on existing investors

Because the proposed change wouldn’t be retrospective, existing property investors would be largely unaffected. However, if they owned property in well-established areas where old properties dominate the landscape, there may be reduced capital growth.

Although such areas may still be in demand by owner-occupiers, the demand to buy old houses by investors would diminish. So the short term capital growth prospects for such areas might diminish too.

Impact on future investors

After the plan is introduced it would be tax-inefficient for investors to buy old properties. However, new properties are unattractive to many investors given:

  • High margins applied by developers

  • Lack of opportunity to add value through renovations

  • Established areas have limited land available so new properties in established area are invariably units with little uniqueness

  • New housing estates on the other hand are typically in poor capital growth locations distant from the CBD

  • There is also a risk of the developer failing to complete the project or problems with quality of finish – all the usual risks with off-the-plan purchases that investors prefer to avoid

So the proposed change may knock a significant portion of investors out of the market. They may instead choose shares to be a better option.

Initially, this reduced demand from a segment of the buyers in the market is what would improve affordability. Investors roughly represent about a third of all buyers. Negatively geared investors represent a smaller proportion than that.

In the short-term it would be ugly for some. But eventually, the law of supply and demand would rebalance and either rent would rise or property would become scarce again pushing up prices.

Impact on developers

It’s not known if investors will switch to less effective new investments, or simply exit the market. In the 1st case, there would be an increased demand for new property. So developers would be licking their lips.

In the 2nd case, with decreased demand from investors and lower prices, more developers would find some deals simply unfeasible. Some might even go belly-up. Most would simply cancel less profitable projects.

Note that with less development projects, supply will quickly dry up and prices will start booming again. Supply and demand will have its way.

Impact on 1st home buyers

FHBs have been complaining recently that it is not possible to compete with investors. If investors target new developments, FHBs will be in an even worse position buying anything new.

But established areas with old properties are usually in better locations and therefore command a price tag well outside the reach of FHBs. So with no way of affording existing properties and more investors than ever to compete with over new properties, FHBs might be between a bigger rock and a harder place than they are now.

Impact on renters

If renters are still unable to convert to FHBs, I don’t think they’ll be stung by rising rents as much as some would suggest. Most landlords are already charging the top dollar possible. In fact, there may be a temporary drop in rents by landlords to secure their tenants rather than lose them as budding FHBs.

However, if investors are knocked out of the market and prices drop as planned, development will dry up. Developers won’t want their clientele diminished nor their profit margins cut. With less development supply is reduced which will eventually lead back to higher prices and higher rents again.

Suburbs most heavily impacted

Those suburbs most likely to feel the pain of the change would have the following characteristics assuming investors decide to pursue new developments:

  • Suburbs with very little development currently or planned – means there is less interest from new buyers who might be investors

  • Suburbs traditionally of interest to investor owners rather than owner occupiers – means a greater percentage of future buyers are affected by the change

  • Unaffordable suburbs for FHBs – means buying activity from FHBs is unlikely to prop up the reduced demand from lack of investor interest

  • Suburbs with a lot of old stock on the market at the time the plan is implemented – sellers will lose interest from investors and may be forced to drop prices further

Supply and demand feedback loop

Knocking investors out of the market to reduce demand has an effect on developers. With reduced clientele and reduced prices, there are reduced profit margins for developers. So they reduce their construction which reduces supply which eventually leads to price rises again. This brings investors back in and developers too.

That’s how supply and demand works. There’s an in-built feedback loop in a free market that ensures that eventually everything returns to normal. Don’t be spooked by markets that are out of balance for a couple of years.

It’s beautiful how it all works together. It sorts itself out – no need for the government to meddle in it.

Once property becomes cash-flow neutral under the new regime, investors will return to the market. Developers will follow that increased demand with increased supply and balance will once again be restored to the cosmos. Prices will continue to climb as they always have.

In a nutshell

You have two options to affect prices:

  1. Decrease demand by making our country a hell-hole; or

  2. Increase supply by encouraging shanty towns

A sudden tax change will merely create overnight winners and losers. But the same “problem” will reappear. Supply and demand will sort it all out naturally in time.

Australia is a great place to live – don’t muck with it.