Wealth Pi People | Tiger Liu says: Australian Real Estate – Opportunity or to be feared?

The Managing Director of Wealth Pi FundTiger Liu talked about his prediction of the Australian property market in 2019, the directions that may eventuate over the year and the opportunities that might arise from this.

Mr Liu has completed over $250 million worth of real estate financing in the past 2 years and is one of the leading real estate fund managers in Australia.

1. Initially, what motivated you to enter the real estate finance industry? What opportunity did you see?

In the beginning, I invested in real estate because of my personal interest in it. Through this investment process, I found that although bank was the main provider of funds for property development, it simply could not satisfy the market’s “funding appetite”. Also, around this time, I came into contact with investment funds and private lenders who showed great interest in property investments. This led me to realize the great potentials of non-bank lending sector to help correct this supply-demand imbalance.

The opportunity arose when Australian Prudential Regulation Authority (APRA) tightened bank loan policy in 2016, which opened up opportunities for investors to get exposure to this emerging asset class. Since then, the market share of non-bank lending has been gradually expanding and there are considerable potentials for non-bank lenders to grow. With the recent completion of the “Royal Commission into banking” being less than favourable, I expect this tightening to continue and more opportunities to arise.

2. What does “PI” stand for? What is the meaning behind it?

“P” and “I” represent Professionalism and Integrity. I wish to gather like-minded people with the right professional skills and industry knowledge to support me in the development of appropriate credit policies and procedures. This assures that we only focus on quality deals and act in the best interests of our clients, maintaining our “integrity” in this complicated market. The goal of Wealth Pi Fund is to be a stable and pragmatic financial company.

To seize the enormous opportunities in the non-bank lending market, it is crucial to have a cohesive team with shared beliefs and values. As the company was growing, professionals who share these values have joined me and made the team more vibrant and proficient.

I am very fortunate to have met my current partners – Olivia JiangPatrick KeenanDan GallenWendy Fergie and Christina Jiang, who are all the top local financial real estate experts. Each of us has his/her unique skill sets and resources to support the company’s growth in its early stages. All along, I have paid great attention to the ‘people’ in the company; and I strongly believe that whether it is a partner or a colleague, having the same values is the most important aspect of establishing a strong and sustainable business.

3. Given the current property price downfall, how do you see Wealth Pi Fund’s development in 2019?

Considering the current real estate market conditions, the residential properties are in a trough. However, I believe that prices have gradually stabilised in some other property segments. Also, considering the rigid demand for Australian real estate, the market is likely to rebound in late 2019 or early 2020.

Until then, Wealth Pi Fund will continue to adopt conservative real estate debt investments, cooperate with our strong institutional partners and exercise stringent due diligence to provide investors with stable fixed income flows.

We also expect to explore different market segments such as commercial real estate financing to diversify our revenue streams, especially with interests in office buildings. Last year, we have arranged a commercial property development project with a building area of around 30,000 square meters in the north-eastern part of Melbourne and will continue to plan for other investments in this segment in 2019. Through this, we strive to deliver a wide range of investment products to help investors maximise returns in this prosperous market given their risk profiles.

4. With so many investment products available nowadays, what kinds of investment do you think would stand out?

It is true that there are so many opportunities out there, but the real high-quality projects can only be managed by a few teams. Wealth Pi Fund is confident that it has the best local due diligence team and project resources, to select the premium ones from a large pool of projects. Also, through stringent risk management, our team can deliver investment products with risk and reward characteristics suitable for both sophisticated investors and institutional investors.

Wealth Pi Fund team always strives to give our investors a peace of mind with their investments. So far, our investor pool consists of 70% of local institutional investors and high net worth individuals and 30% of Chinese high net worth individuals. The institutional investors tend to have strong risk awareness and knowledge of the local market; therefore, our Chinese customers often find themselves more confident and relaxed while investing along with those institutional investors.

5. What are your thoughts on the Australian property market in 2019?

I believe the downturn in the residential real estate market in 2019 is a rare opportunity for many real estate professionals. We are constantly monitoring the market and preparing to launch new products when opportunities arise, so that our investors can seize the “growth after trough”.

Warren Buffett once said that as an investor, it is wise to be “fearful when others are greedy and greedy when others are fearful.” If you believe the media reports today, then we are definitely in the “fearful period” of the Australian property market cycle. However, I believe that commercial real estate will keep up its solid momentum and it is worthy of attention and continued investment. Of course, this does not mean reckless investment; rather, we believe these opportunities need to be scrutinised on their current merits to see if they truly provide value.

Conservative investment strategies and strict risk management tactics will remain central to our investment analysis. I am confident that our team will be able to deliver the highest-quality deals to our investors through this market downturn.

The ups and downs of real estate are very normal cyclical behaviour. It is how you take advantage of these moves that will set you ahead of other investors.