1 00:00:06,920 --> 00:00:10,000 Speaker 1: Hello and welcome to the Australians Money Puzzle podcast. Aunt 2 00:00:10,039 --> 00:00:12,720 Speaker 1: James Kirkby the World, the editor at The Australian. Welcome 3 00:00:12,760 --> 00:00:24,360 Speaker 1: aboard everybody. Happy New Year, everybody. I hope twenty twenty 4 00:00:24,360 --> 00:00:27,720 Speaker 1: five will work out very well for you in your investing, 5 00:00:27,800 --> 00:00:30,800 Speaker 1: in your endeavors. Will be here to hold your hand, 6 00:00:30,800 --> 00:00:32,919 Speaker 1: will be here to help you in every way possible. 7 00:00:33,520 --> 00:00:37,320 Speaker 1: And you can help yourself by writing into us and 8 00:00:37,440 --> 00:00:40,440 Speaker 1: letting us know the issues that you want to hear 9 00:00:40,479 --> 00:00:43,320 Speaker 1: and you want covered in the year ahead. It's always 10 00:00:43,360 --> 00:00:45,760 Speaker 1: good to hear from you for the moment. What we're 11 00:00:45,760 --> 00:00:47,640 Speaker 1: going to do, of course, is our summer series and 12 00:00:47,680 --> 00:00:50,559 Speaker 1: if you've been listening to the series, it's been terrific 13 00:00:50,600 --> 00:00:54,040 Speaker 1: and terrific response, I have to say, considering the last 14 00:00:54,040 --> 00:00:56,200 Speaker 1: majority of people are on holidays. But we had the 15 00:00:56,200 --> 00:01:00,200 Speaker 1: fire episode FIORI financial independence Retire Early, Aer thed so 16 00:01:00,720 --> 00:01:04,280 Speaker 1: on Christmas week and considering it was Christmas week, there 17 00:01:04,319 --> 00:01:06,720 Speaker 1: was quite a response. I know there would be because 18 00:01:06,720 --> 00:01:10,320 Speaker 1: this is an issue which captures people's imaginations so much, 19 00:01:10,920 --> 00:01:15,040 Speaker 1: this idea that you can achieve financial independence and retire early. 20 00:01:16,040 --> 00:01:18,880 Speaker 1: We had a very good session with Lionel Lee. I 21 00:01:18,920 --> 00:01:21,520 Speaker 1: find every time we mentioned it, there is always a 22 00:01:21,640 --> 00:01:24,560 Speaker 1: chorus which suggests that we've forgotten to say this or 23 00:01:24,600 --> 00:01:27,520 Speaker 1: we didn't mention that. And I'm very happy to return 24 00:01:27,560 --> 00:01:31,080 Speaker 1: to the fire movement and the idea of financial independence 25 00:01:31,120 --> 00:01:34,200 Speaker 1: retiring early in the weeks ahead. What I tried to 26 00:01:34,200 --> 00:01:36,200 Speaker 1: do with this series was give you a runway, if 27 00:01:36,200 --> 00:01:39,679 Speaker 1: you like, for the year ahead. So we had the 28 00:01:39,720 --> 00:01:42,520 Speaker 1: first part of the series, which was on share markets, 29 00:01:42,840 --> 00:01:47,200 Speaker 1: individual share markets and nasdakaraix, whatever you've got, and what 30 00:01:47,400 --> 00:01:51,279 Speaker 1: the consensus outlook was for those markets. Very good session 31 00:01:51,280 --> 00:01:54,080 Speaker 1: with Mark Jokun again of Beta Shares. You can hear 32 00:01:54,120 --> 00:01:56,920 Speaker 1: all these if you've missed them. The second part of 33 00:01:56,960 --> 00:01:59,520 Speaker 1: that series then it was zoning, you know, on individual 34 00:01:59,680 --> 00:02:02,760 Speaker 1: stuff on the ASX and what was the outlook for 35 00:02:02,880 --> 00:02:05,960 Speaker 1: the different sectors and the different stocks, big stocks that 36 00:02:06,000 --> 00:02:07,960 Speaker 1: we all know and small caps that we all know. 37 00:02:08,360 --> 00:02:11,919 Speaker 1: That was with June Belieu of the ten Capital Group. 38 00:02:12,440 --> 00:02:14,600 Speaker 1: If you put all these episodes together, then you really 39 00:02:14,639 --> 00:02:16,800 Speaker 1: have a package. I think that will give you a 40 00:02:16,800 --> 00:02:20,320 Speaker 1: great start of the year. What we needed to do next, 41 00:02:20,320 --> 00:02:24,280 Speaker 1: of course, was property and who should be in the 42 00:02:24,320 --> 00:02:27,440 Speaker 1: hot seat. Do you think for the property session. Well, 43 00:02:28,000 --> 00:02:30,440 Speaker 1: I thought it was hard to beat. Stuart Wems of 44 00:02:30,480 --> 00:02:35,200 Speaker 1: the pro Solution Group and the Investorly podcast. Happy New Year, Stuart, 45 00:02:35,240 --> 00:02:36,400 Speaker 1: How are you happy? 46 00:02:36,440 --> 00:02:38,680 Speaker 2: Ne James, and happy to you to all our listeners, 47 00:02:38,720 --> 00:02:40,200 Speaker 2: and thanks very much for having me back. 48 00:02:40,800 --> 00:02:43,359 Speaker 1: You're welcome. It's that time of the year where there 49 00:02:43,400 --> 00:02:46,400 Speaker 1: is a lot of in the nature of media, certainly 50 00:02:46,400 --> 00:02:49,000 Speaker 1: there's a lot of you know, what you might call 51 00:02:49,320 --> 00:02:53,240 Speaker 1: wraps and lists what happened in twenty twenty four, what 52 00:02:53,280 --> 00:02:56,760 Speaker 1: will happen in twenty twenty five, And it's natural enough 53 00:02:56,760 --> 00:03:03,000 Speaker 1: that people want to know the market moving pretty much instantly, 54 00:03:03,680 --> 00:03:08,440 Speaker 1: the share market obviously quite lively already, the outlook for 55 00:03:09,400 --> 00:03:13,400 Speaker 1: rates and moving around quite a basic, the looming arrival 56 00:03:14,120 --> 00:03:18,560 Speaker 1: of Trump, that is, the inaugurated Trump coming down the line, 57 00:03:18,600 --> 00:03:20,880 Speaker 1: and all sorts of effects for markets. But in property, 58 00:03:20,880 --> 00:03:22,480 Speaker 1: one of the things that really struck me. I think 59 00:03:22,560 --> 00:03:26,480 Speaker 1: over the holiday where I I'm the sort of person 60 00:03:27,080 --> 00:03:30,399 Speaker 1: that I imagine some of our listeners are like this too. 61 00:03:30,680 --> 00:03:33,240 Speaker 1: I do like to look at property, you know, I'm 62 00:03:33,280 --> 00:03:37,600 Speaker 1: a spare time and we were actually looking, not that 63 00:03:37,680 --> 00:03:40,800 Speaker 1: there was much for sale, unfortunately, in that time of 64 00:03:40,840 --> 00:03:42,760 Speaker 1: the year that I like to look, or I have 65 00:03:42,880 --> 00:03:46,280 Speaker 1: some time to look. But it did strike me that 66 00:03:46,360 --> 00:03:50,560 Speaker 1: we must never forget as property commentators, you and I 67 00:03:50,640 --> 00:03:54,000 Speaker 1: and everybody else on this show, that property is still 68 00:03:54,560 --> 00:03:57,040 Speaker 1: such a local issue. And we talk all the time 69 00:03:57,120 --> 00:04:01,360 Speaker 1: about the averages and what's happenings us here in terms 70 00:04:01,400 --> 00:04:04,680 Speaker 1: of macro or even averages for a city. And then 71 00:04:04,720 --> 00:04:07,240 Speaker 1: you know, for all the social media and for all 72 00:04:07,280 --> 00:04:09,960 Speaker 1: the technology, at the end of the day, you must 73 00:04:10,000 --> 00:04:12,800 Speaker 1: get out of the car I reckon, and you must 74 00:04:12,840 --> 00:04:14,560 Speaker 1: go and look at that property. And you get out 75 00:04:14,560 --> 00:04:19,200 Speaker 1: of the car and you immediately have a curbside assessment 76 00:04:19,279 --> 00:04:21,760 Speaker 1: which tells you, oh gee, you know that looks so 77 00:04:21,800 --> 00:04:24,080 Speaker 1: good on the internet. And this isn't going to work. 78 00:04:24,440 --> 00:04:26,640 Speaker 1: I know before I even leave the car, this isn't 79 00:04:26,680 --> 00:04:30,560 Speaker 1: going to work. The issues that our listeners face when 80 00:04:30,600 --> 00:04:33,280 Speaker 1: they buy a property. You know, there's the block. It's 81 00:04:33,320 --> 00:04:36,359 Speaker 1: a bad block, but it's a great apartment, except the 82 00:04:36,400 --> 00:04:39,359 Speaker 1: fact that it backs out to a car yard. Whatever. 83 00:04:39,720 --> 00:04:42,120 Speaker 1: The point I'm making is that it's very local, isn't it. 84 00:04:42,160 --> 00:04:44,279 Speaker 1: At the end of the day, it's almost become a cliche, 85 00:04:44,320 --> 00:04:45,360 Speaker 1: but it's so true. 86 00:04:46,120 --> 00:04:47,400 Speaker 3: Well, there's no better evidence. 87 00:04:47,480 --> 00:04:50,400 Speaker 2: If you can pay the Perth market to the Melbourne market. 88 00:04:50,480 --> 00:04:53,880 Speaker 2: We have the same interest rate settings. We have broadly 89 00:04:53,960 --> 00:04:58,040 Speaker 2: the same you know, federal economy or national economy. I 90 00:04:58,080 --> 00:05:00,520 Speaker 2: should say a lot of the settings are the same 91 00:05:00,560 --> 00:05:03,680 Speaker 2: that economists would point to that we should be looking at, 92 00:05:03,800 --> 00:05:05,960 Speaker 2: or be telling us we should be looking at to 93 00:05:06,000 --> 00:05:09,040 Speaker 2: work out how property is going to behave. But supply 94 00:05:09,120 --> 00:05:12,719 Speaker 2: and demand, employment, interest rates, you know, these sorts of 95 00:05:12,760 --> 00:05:16,080 Speaker 2: things are generally the things that economists tell us that 96 00:05:16,160 --> 00:05:19,240 Speaker 2: will dictate property prices. But here we are Melbourne's off 97 00:05:19,279 --> 00:05:22,000 Speaker 2: three percent and per s got double digit growth. So 98 00:05:22,640 --> 00:05:27,160 Speaker 2: same settings, but it shows where sentiment and where market 99 00:05:27,200 --> 00:05:30,440 Speaker 2: cycles have a really big influence on these things. In 100 00:05:30,480 --> 00:05:33,600 Speaker 2: the longer run, of course, interest rate settings will play out, 101 00:05:33,760 --> 00:05:36,400 Speaker 2: but in the shorter term, I think it's really about 102 00:05:36,480 --> 00:05:39,240 Speaker 2: sentiment and market cycles and. 103 00:05:39,360 --> 00:05:43,880 Speaker 1: Their property the particular property. I can go over to 104 00:05:43,960 --> 00:05:48,200 Speaker 1: Perth hot market and I can buy a crap piece 105 00:05:48,200 --> 00:05:51,479 Speaker 1: of real estate wouldn't be hard yep. And I can 106 00:05:51,520 --> 00:05:56,440 Speaker 1: go to Melbourne in a poor market, a soft market, 107 00:05:56,839 --> 00:06:01,360 Speaker 1: nothing going right, and I can probably buy an excellent property. 108 00:06:01,640 --> 00:06:03,919 Speaker 1: Because it's all in the end, it comes down to 109 00:06:04,320 --> 00:06:07,560 Speaker 1: this high It's not like buying an etf It's highly individual, 110 00:06:07,600 --> 00:06:08,400 Speaker 1: isn't it each time? 111 00:06:09,160 --> 00:06:11,600 Speaker 2: It's one of the attractions to property, right, is that 112 00:06:11,760 --> 00:06:15,040 Speaker 2: I've got control over asset selection. You know, I can 113 00:06:15,080 --> 00:06:18,040 Speaker 2: decide where to invest. I can then control that asset 114 00:06:18,080 --> 00:06:21,359 Speaker 2: in terms of improving it or how I'm going to 115 00:06:21,480 --> 00:06:23,240 Speaker 2: use that asset. It's one of the things I think 116 00:06:23,440 --> 00:06:26,760 Speaker 2: control is one of the main things that attract investors. 117 00:06:26,800 --> 00:06:28,800 Speaker 2: But you're right, James. I mean, you look at the 118 00:06:28,839 --> 00:06:31,560 Speaker 2: meaning house price in Melbourne. Core Logic says it's off 119 00:06:31,600 --> 00:06:34,680 Speaker 2: three percent. But I know some sales last year of 120 00:06:34,880 --> 00:06:40,280 Speaker 2: really good a grade property that have actually exceeded the vendors' 121 00:06:40,360 --> 00:06:43,200 Speaker 2: expectations when they went to sell it. Now, the thing is, 122 00:06:43,240 --> 00:06:45,560 Speaker 2: a lot of a grade property doesn't trade when the 123 00:06:45,600 --> 00:06:48,679 Speaker 2: market is soft. So that kind of skews the data 124 00:06:48,720 --> 00:06:51,200 Speaker 2: as well, because a lot of vendors are discretionary, right, 125 00:06:51,240 --> 00:06:53,960 Speaker 2: So why would you if you had a fantastic property, 126 00:06:53,960 --> 00:06:55,880 Speaker 2: why would you sell it in a soft market if 127 00:06:55,880 --> 00:06:57,839 Speaker 2: you didn't have to? And so a lot of a 128 00:06:57,920 --> 00:07:00,440 Speaker 2: grade property doesn't trade. But when it does trade, and 129 00:07:00,480 --> 00:07:03,520 Speaker 2: you see in these slower markets, it really shows that 130 00:07:03,800 --> 00:07:07,280 Speaker 2: quality performs completely differently. And that's the key thing that 131 00:07:07,279 --> 00:07:10,760 Speaker 2: listeners need to think about. Obsess about quality when you 132 00:07:10,800 --> 00:07:13,600 Speaker 2: buy a property. After you've bought that property, then obsess 133 00:07:13,680 --> 00:07:16,440 Speaker 2: about the cash flow of that property. Yes, because you 134 00:07:16,480 --> 00:07:18,960 Speaker 2: can't change the quality. Really, you can't change the quality 135 00:07:18,960 --> 00:07:21,640 Speaker 2: in terms of location, land size, these sorts of things 136 00:07:21,720 --> 00:07:22,520 Speaker 2: after you've bought it. 137 00:07:22,960 --> 00:07:25,160 Speaker 1: That's right, This is what I was alluding to there. 138 00:07:25,200 --> 00:07:27,600 Speaker 1: You know, might have been so individual. So you drive 139 00:07:28,280 --> 00:07:30,720 Speaker 1: your minds across the city and you look at an 140 00:07:30,800 --> 00:07:35,720 Speaker 1: apartment which looks so good. Then you realize the block 141 00:07:35,800 --> 00:07:38,480 Speaker 1: is not well kept and the block is never going 142 00:07:38,480 --> 00:07:41,640 Speaker 1: to improve. You can do what you like inside that apartment, 143 00:07:41,680 --> 00:07:43,280 Speaker 1: but that block isn't going to come right. So this 144 00:07:43,360 --> 00:07:45,520 Speaker 1: is the great power of a house, obviously a standalone 145 00:07:45,560 --> 00:07:48,080 Speaker 1: property to those who can afford it that you can 146 00:07:48,160 --> 00:07:50,440 Speaker 1: do that. You can make it better, and you can 147 00:07:50,480 --> 00:07:53,640 Speaker 1: make any property better, but some have more scope than others. 148 00:07:54,240 --> 00:07:55,920 Speaker 1: One of the things just before we get to the 149 00:07:56,040 --> 00:07:58,240 Speaker 1: issue at hand, which is what's going to happen in 150 00:07:58,280 --> 00:08:02,720 Speaker 1: the year ahead, mentioned Victoria there. Well, I did something 151 00:08:02,840 --> 00:08:09,360 Speaker 1: in the Australia yesterday and it was about Victorian state 152 00:08:09,480 --> 00:08:16,800 Speaker 1: taxes because do you know there are ten ten separate 153 00:08:17,120 --> 00:08:20,000 Speaker 1: state taxes for properly, two of which are new. And 154 00:08:20,080 --> 00:08:22,200 Speaker 1: this is in a city where the market was the 155 00:08:22,280 --> 00:08:25,960 Speaker 1: weakest in the entire country last year, and it's heading 156 00:08:25,960 --> 00:08:28,760 Speaker 1: the same way this year and this morning so far. 157 00:08:28,920 --> 00:08:32,280 Speaker 1: That is, there are six hundred and thirty six comments 158 00:08:32,320 --> 00:08:35,560 Speaker 1: on that piece, which would suggest to me that it 159 00:08:35,640 --> 00:08:39,000 Speaker 1: hit a nerve. And I'm often reluctant to write on 160 00:08:39,360 --> 00:08:43,199 Speaker 1: a region inside a national newspaper because I always have 161 00:08:43,280 --> 00:08:45,440 Speaker 1: that feitling, Oh, you know, the person in Queensland isn't 162 00:08:45,440 --> 00:08:48,440 Speaker 1: going to be interested. But actually everyone was interested because 163 00:08:48,480 --> 00:08:50,920 Speaker 1: I think they're worried. They see what's happening in that 164 00:08:50,960 --> 00:08:54,000 Speaker 1: state as what could be a prototype for every state, 165 00:08:54,440 --> 00:08:57,200 Speaker 1: and that's not what people want to see. This will 166 00:08:57,200 --> 00:08:59,720 Speaker 1: come up in the show, folks. We will now deliver 167 00:08:59,760 --> 00:09:02,839 Speaker 1: on promise to tell you about the year ahead. Because 168 00:09:02,880 --> 00:09:06,200 Speaker 1: Stewart has been studying this all through his holidays. He's 169 00:09:06,240 --> 00:09:07,959 Speaker 1: been getting ready for this show. He's got a lot 170 00:09:08,000 --> 00:09:10,960 Speaker 1: to tell you. So let's start with the obvious question, 171 00:09:11,640 --> 00:09:17,400 Speaker 1: what are the key factors specifically and exclusively about twenty 172 00:09:17,440 --> 00:09:20,000 Speaker 1: twenty five that property investors should know. 173 00:09:21,120 --> 00:09:26,200 Speaker 2: Sentiment will outweigh I think most fundamental factors, James, and 174 00:09:26,240 --> 00:09:28,800 Speaker 2: it sort of goes to your point about the taxation 175 00:09:29,000 --> 00:09:33,480 Speaker 2: in Victoria, particularly around taxation around property in Victoria. And 176 00:09:34,120 --> 00:09:35,760 Speaker 2: we might on the face of it look at that 177 00:09:35,800 --> 00:09:38,120 Speaker 2: and go, well, that's a big negative. That's a detractor, 178 00:09:38,200 --> 00:09:40,240 Speaker 2: and it really is. But at the end of the day, 179 00:09:41,120 --> 00:09:45,240 Speaker 2: investor sentiment will outweigh that. So if investor sentiment decides, okay, 180 00:09:45,280 --> 00:09:48,720 Speaker 2: we think there's a lot of value in Melbourne despite 181 00:09:48,760 --> 00:09:51,200 Speaker 2: the taxes, investors will look through it. I mean, if 182 00:09:51,240 --> 00:09:53,920 Speaker 2: you're an investor, a property investor, the tax system is 183 00:09:53,960 --> 00:09:56,040 Speaker 2: going to change. You might hold a property for thirty years. 184 00:09:56,080 --> 00:09:57,600 Speaker 2: There's going to be a lot of changes you need 185 00:09:57,640 --> 00:09:59,800 Speaker 2: to navigate over that period of time. And if you 186 00:09:59,840 --> 00:10:02,480 Speaker 2: look back over the last forty years in Australia, there's 187 00:10:02,480 --> 00:10:08,199 Speaker 2: been heaps of changes, Kaprigain's tax introduced to GST negative 188 00:10:08,200 --> 00:10:10,920 Speaker 2: gearing with quarantine for a short period of time, but 189 00:10:10,960 --> 00:10:14,440 Speaker 2: the property market has navigated that. I find the best 190 00:10:14,440 --> 00:10:18,000 Speaker 2: sort of proxy for sentiment around a particular location is 191 00:10:18,080 --> 00:10:21,679 Speaker 2: interstate migration. It gives us a sense of, you know, 192 00:10:21,720 --> 00:10:25,800 Speaker 2: how Australians are really thinking about a particular location, and 193 00:10:25,880 --> 00:10:29,320 Speaker 2: it's interesting to note that interstate migration is fifty percent 194 00:10:29,440 --> 00:10:32,360 Speaker 2: higher than the long term trend in New South Wales. 195 00:10:32,920 --> 00:10:36,280 Speaker 1: When you say it's higher, what's higher, people living, people leaving, 196 00:10:36,440 --> 00:10:39,559 Speaker 1: people leaving the Southwest because it's so expensive, possibly. 197 00:10:39,440 --> 00:10:41,640 Speaker 2: Probably and probably because of interest rates. So New South 198 00:10:41,679 --> 00:10:44,720 Speaker 2: Wales normally loses about five thousand people per quarter. It's 199 00:10:44,800 --> 00:10:48,280 Speaker 2: averaging about seven thousand, seven hundred over the last twelve months. 200 00:10:49,040 --> 00:10:51,839 Speaker 2: When you look at Queensland, Queensland normally gets about six 201 00:10:51,960 --> 00:10:56,160 Speaker 2: thousand people per quarter. It's invited seven half thousand people 202 00:10:56,160 --> 00:10:59,199 Speaker 2: on average per quarter over the last twelve months. So 203 00:10:59,360 --> 00:11:04,120 Speaker 2: Queensland's benefit. South Australia normally has a negative interstate migration. 204 00:11:04,200 --> 00:11:06,600 Speaker 2: It's still negative, but to a lower extent. That's no 205 00:11:06,760 --> 00:11:10,280 Speaker 2: surprise given how that market's been doing, and Western Australia's 206 00:11:10,320 --> 00:11:12,800 Speaker 2: turned around but off a very low base. I think 207 00:11:12,840 --> 00:11:17,400 Speaker 2: the interesting one though, is Victoria. Victoria was well documented 208 00:11:17,520 --> 00:11:20,440 Speaker 2: was losing about five thousand people per quarter through that 209 00:11:20,520 --> 00:11:23,679 Speaker 2: COVID period twenty twenty to twenty twenty three. It's now 210 00:11:23,720 --> 00:11:27,040 Speaker 2: turned positive. The number doesn't really matter so much. You know, 211 00:11:27,080 --> 00:11:29,960 Speaker 2: you can say, oh, Stuart, six hundred and sixty people 212 00:11:29,960 --> 00:11:32,800 Speaker 2: per quarter, came to Victoria, net Okay, we've got two 213 00:11:32,800 --> 00:11:34,679 Speaker 2: and a half people per house, so these are that 214 00:11:34,840 --> 00:11:37,880 Speaker 2: new dwellings. We need to accommodate those people. That's not 215 00:11:37,920 --> 00:11:40,920 Speaker 2: really the point. The point is that quite often a 216 00:11:41,040 --> 00:11:46,000 Speaker 2: change in interstate migration predates a change in property price movement, 217 00:11:46,640 --> 00:11:49,840 Speaker 2: which I've studied previously. So if you look at Queensland, 218 00:11:49,840 --> 00:11:52,600 Speaker 2: it was negative interstate migration for a long period of time. 219 00:11:52,840 --> 00:11:56,800 Speaker 2: That switched around in twenty eighteen and that's when prices 220 00:11:56,840 --> 00:11:58,920 Speaker 2: started to sort of take off. So I think probably 221 00:11:58,920 --> 00:12:02,559 Speaker 2: the interesting thing here is Sydney's above average losing more 222 00:12:02,600 --> 00:12:03,360 Speaker 2: people than normal. 223 00:12:03,400 --> 00:12:04,440 Speaker 3: That's kind of interesting. 224 00:12:04,440 --> 00:12:07,360 Speaker 2: Maybe that tells us maybe the Sydney market is losing 225 00:12:07,360 --> 00:12:09,240 Speaker 2: a bit of steam, and that might tell us what 226 00:12:09,320 --> 00:12:13,079 Speaker 2: happens in twenty twenty five. But the most interesting observation 227 00:12:13,240 --> 00:12:17,720 Speaker 2: obviously is those states that have outperformed Queensland, South Australi 228 00:12:17,720 --> 00:12:21,920 Speaker 2: and Western Australia are still enjoying strong popularity. And the 229 00:12:22,000 --> 00:12:24,880 Speaker 2: key one though, I think, is the change in Victoria. 230 00:12:25,000 --> 00:12:28,360 Speaker 1: Are they buying homes? This isn't investor action really is 231 00:12:28,400 --> 00:12:30,120 Speaker 1: that these are people buying their homes. 232 00:12:30,400 --> 00:12:32,760 Speaker 2: These are own occupiers, but It's sort of reflects in 233 00:12:32,840 --> 00:12:35,000 Speaker 2: loan volumes as well, So you can look at investor 234 00:12:35,040 --> 00:12:38,559 Speaker 2: loan volumes and it's the theme is sort of the same. 235 00:12:38,800 --> 00:12:41,040 Speaker 2: But what I'm really looking at is sentiment. How are 236 00:12:41,080 --> 00:12:44,320 Speaker 2: people thinking about a particular location for a long time. 237 00:12:44,360 --> 00:12:46,680 Speaker 2: You think ten years back, are in fifteen years back? 238 00:12:47,040 --> 00:12:50,119 Speaker 2: Queensland was had political problems, had a lot of floods. 239 00:12:50,440 --> 00:12:52,000 Speaker 2: You know, they had a lot of challenges. No one 240 00:12:52,040 --> 00:12:55,360 Speaker 2: wanted to go to Queensland anymore. Now that's changed. They 241 00:12:55,360 --> 00:12:57,439 Speaker 2: haven't had those disasters for a while. They've got the 242 00:12:57,480 --> 00:13:01,200 Speaker 2: Olympics coming up. You know, it's all really positive. Sentiment 243 00:13:01,280 --> 00:13:05,000 Speaker 2: in the shorter term will drive markets, and we'll drive 244 00:13:05,040 --> 00:13:08,600 Speaker 2: markets beyond some of the fundamentals things like increase taxes 245 00:13:08,640 --> 00:13:11,160 Speaker 2: and so forth. And if we're thinking about what will 246 00:13:11,160 --> 00:13:13,360 Speaker 2: happen in twenty twenty five, sentiment is one of the 247 00:13:13,400 --> 00:13:15,640 Speaker 2: big things we need to really think about. 248 00:13:16,440 --> 00:13:19,880 Speaker 1: Okay, that's interesting, so folks, in terms of factors this 249 00:13:20,000 --> 00:13:24,400 Speaker 1: year on property investment and even home buying, there is 250 00:13:24,400 --> 00:13:28,960 Speaker 1: that issue of internal migration trends, and then exists interesting 251 00:13:29,040 --> 00:13:33,080 Speaker 1: out of Sydney into Queensland. The course which is so 252 00:13:33,200 --> 00:13:36,160 Speaker 1: well established, but Curiously, did you say that there is 253 00:13:36,200 --> 00:13:40,280 Speaker 1: actually an optic in internal migration to Victoria? 254 00:13:40,360 --> 00:13:40,680 Speaker 3: Correct? 255 00:13:40,760 --> 00:13:44,840 Speaker 2: Normally, long term trend is Victoria loses one thousand people 256 00:13:44,840 --> 00:13:47,800 Speaker 2: per quarter. Over the last twelve months it's been positive 257 00:13:47,920 --> 00:13:51,199 Speaker 2: six hundred and sixty, so percentage wise, it's a pretty 258 00:13:51,200 --> 00:13:54,679 Speaker 2: big turnaround. I'm not too worried about the actual number, 259 00:13:54,720 --> 00:13:57,640 Speaker 2: but it's more the theme of the number. Yes, gives 260 00:13:57,679 --> 00:14:01,000 Speaker 2: us some sense of how people are thinking. Victoria has 261 00:14:01,040 --> 00:14:04,880 Speaker 2: the highest population growth, so obviously interstate migration is only 262 00:14:04,920 --> 00:14:09,120 Speaker 2: one element. Victoria's population growth over the twelve months is 263 00:14:09,640 --> 00:14:12,319 Speaker 2: two point four percent. The only state that has a 264 00:14:12,400 --> 00:14:15,440 Speaker 2: higher population growth is Western Australia at two point eight percent, 265 00:14:15,880 --> 00:14:20,640 Speaker 2: and that's pretty important. Obviously, population growth drives housing demand, 266 00:14:21,120 --> 00:14:23,680 Speaker 2: so you know, whilst there's a lot of negativity around Victoria, 267 00:14:24,120 --> 00:14:27,560 Speaker 2: the numbers show us that maybe sentiments changing and certainly 268 00:14:27,720 --> 00:14:28,960 Speaker 2: the population growth. 269 00:14:28,720 --> 00:14:32,760 Speaker 1: Is strong and it certainly isn't keeping people away, that's right, 270 00:14:32,960 --> 00:14:35,400 Speaker 1: though it might appear to do so. Just to pick 271 00:14:35,480 --> 00:14:37,320 Speaker 1: up on your line of thinking, like why would you 272 00:14:37,320 --> 00:14:39,600 Speaker 1: go to a state where they have ten different property 273 00:14:39,640 --> 00:14:42,760 Speaker 1: taxes And the simple answer is because it's cheaper and 274 00:14:42,840 --> 00:14:46,320 Speaker 1: it's so much cheaper, as you're saying that the investor 275 00:14:46,320 --> 00:14:50,000 Speaker 1: will see through the taxes which are a flexible cost 276 00:14:50,080 --> 00:14:52,840 Speaker 1: if you like, and that can change, and government's changed 277 00:14:52,840 --> 00:14:55,080 Speaker 1: in their train of things just to cover off on 278 00:14:55,640 --> 00:14:58,360 Speaker 1: the other big factor always the swing factory, if you like. 279 00:14:58,400 --> 00:15:01,680 Speaker 1: In property. Everyone says to me, well, when they cut rates, 280 00:15:01,760 --> 00:15:05,120 Speaker 1: property will come alive. I wonder about that. I wonder, 281 00:15:05,160 --> 00:15:07,320 Speaker 1: a will they cut rates if they deal with they 282 00:15:07,360 --> 00:15:12,160 Speaker 1: cut them like anything we're expecting, and I wonder will 283 00:15:12,240 --> 00:15:17,280 Speaker 1: it really charge and stimulated market where there is something 284 00:15:17,360 --> 00:15:21,160 Speaker 1: of a drift going on. We saw pretty ordinary market 285 00:15:21,240 --> 00:15:26,320 Speaker 1: last year, like five percent national average lift, one city 286 00:15:26,680 --> 00:15:30,560 Speaker 1: falling behind Melbourne down three. Canberra also actually off just 287 00:15:30,600 --> 00:15:33,200 Speaker 1: a little bit over the year, and Sydney kind of 288 00:15:33,240 --> 00:15:35,520 Speaker 1: drifting as well, going nowhere towards the end of the year. 289 00:15:35,960 --> 00:15:40,400 Speaker 1: Terrific performance of course over in Perth. Amazing factor about 290 00:15:40,400 --> 00:15:42,400 Speaker 1: that you mentioned at the very beginning of the show. 291 00:15:42,400 --> 00:15:45,520 Speaker 1: And it's so true that you have one city where 292 00:15:45,640 --> 00:15:48,400 Speaker 1: prices are falling, in one city where prices are rising 293 00:15:48,520 --> 00:15:53,000 Speaker 1: Melbourne and Perth, and in another jurisdiction or whatever, you 294 00:15:53,080 --> 00:15:55,480 Speaker 1: might have two different central banks and one would say 295 00:15:55,640 --> 00:15:58,600 Speaker 1: things are heating up too much. They need a rate 296 00:15:58,680 --> 00:16:00,880 Speaker 1: lift over in Perth and they need rec decrease and 297 00:16:01,400 --> 00:16:03,000 Speaker 1: can't do that. If you're the RBA, You've got to 298 00:16:03,000 --> 00:16:04,680 Speaker 1: set it for the whole country. It's one of those 299 00:16:04,960 --> 00:16:08,400 Speaker 1: curiosities we find ourselves with. But tell me about reates. 300 00:16:08,440 --> 00:16:10,920 Speaker 1: What are you, as a property professional of what are 301 00:16:10,960 --> 00:16:13,680 Speaker 1: you assuming? Are you assuming a cut? And when would 302 00:16:13,720 --> 00:16:14,560 Speaker 1: it be and for how much? 303 00:16:15,320 --> 00:16:18,280 Speaker 3: Sure? I have no idea. 304 00:16:18,040 --> 00:16:20,960 Speaker 1: James, no idea? Oh, fair enough, honest answer. 305 00:16:21,240 --> 00:16:24,040 Speaker 2: I think the monthly inflation data was rees yesterday. I 306 00:16:24,080 --> 00:16:26,400 Speaker 2: think the market's getting a bit excited about talking about it. 307 00:16:26,440 --> 00:16:26,920 Speaker 3: February. 308 00:16:26,960 --> 00:16:28,960 Speaker 1: I thought they were getting excited in the absence of 309 00:16:29,000 --> 00:16:32,080 Speaker 1: anything else. I mean, really, am I supposed to change 310 00:16:32,160 --> 00:16:35,000 Speaker 1: my view on rates because of one inflation print? You know? 311 00:16:35,440 --> 00:16:39,080 Speaker 2: Yeah, let's reframe the question, if I may. Let's think 312 00:16:39,120 --> 00:16:41,680 Speaker 2: about if we do get an interest rate cunt, how 313 00:16:41,760 --> 00:16:44,960 Speaker 2: will it affect the property market? And the answer to 314 00:16:45,040 --> 00:16:47,800 Speaker 2: my mind is in loan volumes, right, That's what we 315 00:16:47,840 --> 00:16:51,080 Speaker 2: need to be studying. Because more money flowing into the market, 316 00:16:51,200 --> 00:16:54,320 Speaker 2: of course, PUSH's price is higher. There's a very close 317 00:16:54,360 --> 00:16:57,280 Speaker 2: correlation with loan volumes and property price movements. 318 00:16:57,920 --> 00:16:59,400 Speaker 3: And so that's what I really look at. 319 00:16:59,480 --> 00:17:03,000 Speaker 2: So if interest rates come down by three quarters of 320 00:17:03,040 --> 00:17:05,159 Speaker 2: a percent, which is what the kind of market's pricing 321 00:17:05,200 --> 00:17:08,280 Speaker 2: in this calendar year, by my calculation, to increase someone's 322 00:17:08,320 --> 00:17:12,159 Speaker 2: borrowing capacity by about five to ten percent, so it's okay. 323 00:17:12,400 --> 00:17:15,119 Speaker 2: And it might be like, might push someone from not 324 00:17:15,200 --> 00:17:17,560 Speaker 2: being able to buy property to being able to buy property. 325 00:17:17,600 --> 00:17:20,160 Speaker 2: So it could be a really big decider, but it's 326 00:17:20,160 --> 00:17:23,520 Speaker 2: not massive. Right of course, people that have already have 327 00:17:23,560 --> 00:17:26,879 Speaker 2: a lot of mortgages, a small interest rate can't helps 328 00:17:26,920 --> 00:17:30,800 Speaker 2: their cash flow significantly. So certainly someone that is on 329 00:17:30,840 --> 00:17:33,960 Speaker 2: the journey of building a property portfolio might be in 330 00:17:34,000 --> 00:17:36,720 Speaker 2: a better position or might feel more comfortable after a 331 00:17:36,760 --> 00:17:38,800 Speaker 2: little bit of a rate cut to buy again or 332 00:17:38,880 --> 00:17:43,399 Speaker 2: invest again. But loan volumes are already relatively high, James, 333 00:17:43,400 --> 00:17:45,800 Speaker 2: when you look at the actual numbers, it's almost back 334 00:17:45,840 --> 00:17:48,199 Speaker 2: to the peak that hit in late twenty twenty two. 335 00:17:49,040 --> 00:17:52,359 Speaker 2: So can loan volumes go higher? The interesting thing, James, 336 00:17:52,400 --> 00:17:54,600 Speaker 2: and I haven't mentioned this to you that a lot 337 00:17:54,640 --> 00:17:58,040 Speaker 2: of the banks have been covertly changing credit policy. They've 338 00:17:58,080 --> 00:18:01,320 Speaker 2: been telling us we require less documentation here, We're going 339 00:18:01,359 --> 00:18:03,320 Speaker 2: to be a little bit more flexible for an interest 340 00:18:03,359 --> 00:18:08,040 Speaker 2: only rollover term. Here, they're just small changes at the fringe, 341 00:18:08,040 --> 00:18:09,840 Speaker 2: but we haven't seen them. We only started to see 342 00:18:09,880 --> 00:18:12,280 Speaker 2: them in the last quarter of last year. So I 343 00:18:12,320 --> 00:18:16,040 Speaker 2: think the banks will want to keep that credit growth going. 344 00:18:16,600 --> 00:18:19,200 Speaker 2: And obviously APRA said no, we're not changing the three 345 00:18:19,200 --> 00:18:21,680 Speaker 2: percent loan buffer, so that's in place. So I think 346 00:18:21,720 --> 00:18:24,919 Speaker 2: the bank's response then will better change their own credit 347 00:18:24,960 --> 00:18:27,760 Speaker 2: policy to sort of loosen off credit a little bit. 348 00:18:28,240 --> 00:18:30,399 Speaker 2: So if that happens at the same time as interest 349 00:18:30,440 --> 00:18:34,480 Speaker 2: rates reducing, I think that will stimulate loan volume and 350 00:18:34,560 --> 00:18:37,480 Speaker 2: it will probably have a positive impact on the market. 351 00:18:37,880 --> 00:18:41,439 Speaker 2: But maybe to a lesser extent, maybe people will say, well, 352 00:18:41,560 --> 00:18:45,400 Speaker 2: persorly taken off, Melbourne looks really cheap. Now I've got 353 00:18:45,440 --> 00:18:47,600 Speaker 2: a little bit more money I can borrow. I can 354 00:18:47,640 --> 00:18:50,000 Speaker 2: now buy a house in Melbourne. Let's go and do that. 355 00:18:50,400 --> 00:18:53,920 Speaker 2: And so I think the relaxation of interest rates and 356 00:18:53,960 --> 00:18:58,119 Speaker 2: perhaps credit policy might serve Melbourne better than some of 357 00:18:58,160 --> 00:18:59,160 Speaker 2: those hotter markets. 358 00:19:01,680 --> 00:19:04,560 Speaker 1: Interesting hope that thought. Folks can take a short break. 359 00:19:04,600 --> 00:19:16,679 Speaker 1: We'll be back in a moment. Hello, and welcome back 360 00:19:16,720 --> 00:19:19,800 Speaker 1: to the Australian's Money Puzzle. I'm James Kirby and talking 361 00:19:19,800 --> 00:19:23,679 Speaker 1: to Stuart Weams. Now we had a look at some 362 00:19:23,720 --> 00:19:26,680 Speaker 1: of the issues as an investor you should be aware of. 363 00:19:27,160 --> 00:19:29,680 Speaker 1: I'm assuming to some extent you're across the basics, and 364 00:19:29,720 --> 00:19:31,960 Speaker 1: I'm sure you are. About the property market. Okay, it 365 00:19:32,000 --> 00:19:34,160 Speaker 1: was an okay year last year. We did four point 366 00:19:34,200 --> 00:19:36,399 Speaker 1: nine percent on average across the country and in a 367 00:19:36,400 --> 00:19:40,880 Speaker 1: way that tells you very little. Because Melbourne fell over 368 00:19:40,880 --> 00:19:43,920 Speaker 1: the year, Perth went through the roof over the year, 369 00:19:44,040 --> 00:19:46,080 Speaker 1: so it was one of those years where there really 370 00:19:46,200 --> 00:19:51,080 Speaker 1: was major dislocation across the performances of the different cities. 371 00:19:51,440 --> 00:19:53,359 Speaker 1: One of the things that happened all year was this 372 00:19:53,400 --> 00:19:55,840 Speaker 1: sort of expectation that rates would fall. The fact is 373 00:19:55,880 --> 00:19:58,720 Speaker 1: they didn't fall. They didn't move for the entire year. 374 00:19:59,480 --> 00:20:03,360 Speaker 1: We are now told by the powers that be economists 375 00:20:03,400 --> 00:20:08,159 Speaker 1: and various professional forecasters that rates will come down in 376 00:20:08,359 --> 00:20:12,359 Speaker 1: this year twenty twenty five mid year perhaps, Okay, there's 377 00:20:12,359 --> 00:20:15,480 Speaker 1: some variation around that, but there's a broad consensus they'll fall. 378 00:20:15,960 --> 00:20:18,280 Speaker 1: I think Stuart, you were thinking something in the orders 379 00:20:18,320 --> 00:20:21,320 Speaker 1: of just three quarters of eight percent over the whole 380 00:20:21,400 --> 00:20:24,000 Speaker 1: yeara which, as you say, we'll move the dial. But 381 00:20:24,080 --> 00:20:27,000 Speaker 1: it won't exactly flip things on their head. So all 382 00:20:27,040 --> 00:20:28,560 Speaker 1: we might do in this segment is just take a 383 00:20:28,560 --> 00:20:32,720 Speaker 1: look at what is expected now specifically in the market 384 00:20:32,760 --> 00:20:35,240 Speaker 1: this year, and what you think of that and why 385 00:20:35,359 --> 00:20:38,080 Speaker 1: people might have come to these conclusions. So, first of 386 00:20:38,119 --> 00:20:40,080 Speaker 1: all is Sydney, and I think the base case there 387 00:20:40,280 --> 00:20:43,760 Speaker 1: is that Sydney will continue to drift and fall. Maybe 388 00:20:43,800 --> 00:20:46,639 Speaker 1: one to five percent is what I can see. What 389 00:20:46,680 --> 00:20:47,359 Speaker 1: do you think of that? 390 00:20:48,080 --> 00:20:52,480 Speaker 2: The interstate migration indicators sort of concerns me a little bit. 391 00:20:53,160 --> 00:20:55,880 Speaker 2: Speaking to bias agents in Sydney last year, they said 392 00:20:55,920 --> 00:20:59,439 Speaker 2: that it's a very interesting market's almost perfectly balanced in 393 00:20:59,560 --> 00:21:02,840 Speaker 2: terms of the supply from both demand from buyers and 394 00:21:02,880 --> 00:21:06,199 Speaker 2: supply from sellers. The buyers Agehn speaking to had been 395 00:21:06,240 --> 00:21:08,720 Speaker 2: operating that market for twenty years, hadn't seen that sort 396 00:21:08,760 --> 00:21:11,960 Speaker 2: of perfectly balanced market, which means that only a little 397 00:21:12,000 --> 00:21:14,159 Speaker 2: bit needs to go wrong to sort of put it 398 00:21:14,200 --> 00:21:17,240 Speaker 2: off kilter a little bit. I don't think we'll see 399 00:21:17,600 --> 00:21:20,600 Speaker 2: much of anything really from Sydney, So somewhere negative three 400 00:21:20,640 --> 00:21:23,320 Speaker 2: to positive three in terms of a range a three 401 00:21:23,320 --> 00:21:25,919 Speaker 2: percent changing property process. Let's not get excited that the 402 00:21:25,960 --> 00:21:28,480 Speaker 2: share market can drop three percent in a day. Yeah, 403 00:21:28,520 --> 00:21:32,040 Speaker 2: pretty much nothing, I think, is the answer. I wouldn't 404 00:21:32,040 --> 00:21:33,840 Speaker 2: be surprised if it was in that range. 405 00:21:34,400 --> 00:21:37,919 Speaker 1: Okay, So sort of a balanced market between buyers and 406 00:21:37,920 --> 00:21:40,879 Speaker 1: sellers in Sydney. I would never underestimate the capacity of 407 00:21:40,920 --> 00:21:45,480 Speaker 1: Sydney to bounce, never under resumeate that market. It's a 408 00:21:45,520 --> 00:21:48,760 Speaker 1: great market for investors, certainly tough to be at home buyer, 409 00:21:48,840 --> 00:21:51,040 Speaker 1: and of course always has been and always will be. 410 00:21:51,320 --> 00:21:54,800 Speaker 1: All right, and then Melbourne, I see that again, something similar, right, 411 00:21:54,840 --> 00:21:57,640 Speaker 1: minus one to minus five percent, they're saying from Melbourne, 412 00:21:58,359 --> 00:22:02,000 Speaker 1: it's already done minus three. You did your own numbers 413 00:22:02,080 --> 00:22:06,000 Speaker 1: on Melbourne. What was your contention about the Melbourne over 414 00:22:06,040 --> 00:22:07,200 Speaker 1: the decade. 415 00:22:06,920 --> 00:22:09,480 Speaker 3: Well, over the last eight years, James nice eight years. 416 00:22:09,560 --> 00:22:13,920 Speaker 2: Yeah, Yeah, Melbourne's median house price has dropped net of inflation, 417 00:22:14,040 --> 00:22:17,560 Speaker 2: so on real terms two point four percent over that 418 00:22:17,680 --> 00:22:20,880 Speaker 2: period of time, over eight years compounding. Yeah, their only 419 00:22:20,920 --> 00:22:24,600 Speaker 2: worst market was in Sydney between nineteen eighty nine and 420 00:22:24,720 --> 00:22:27,800 Speaker 2: nineteen ninety six. Again another eight year period where it 421 00:22:27,880 --> 00:22:31,480 Speaker 2: dropped two point eight percent. So we're almost making history 422 00:22:31,680 --> 00:22:33,840 Speaker 2: not for good in Melbourne in terms of where the 423 00:22:33,880 --> 00:22:37,080 Speaker 2: price drops are. I also studied the flat cycles. So 424 00:22:37,600 --> 00:22:40,639 Speaker 2: property tends to move in either a growth cycle followed 425 00:22:40,640 --> 00:22:43,080 Speaker 2: by a flat cycle, and so on and so forth. Yes, 426 00:22:43,240 --> 00:22:45,800 Speaker 2: and that's quite distinct, you can pick that up. And 427 00:22:45,840 --> 00:22:49,320 Speaker 2: so I studied all flat cycles, all flat cycles since 428 00:22:49,400 --> 00:22:53,439 Speaker 2: nineteen eighty in those core markets. They tend to if 429 00:22:53,480 --> 00:22:56,120 Speaker 2: you look at the average or the median, about eight 430 00:22:56,200 --> 00:22:58,440 Speaker 2: eight and a half years, a flat cycle will last 431 00:22:58,440 --> 00:23:01,480 Speaker 2: for and over that time, in real terms, net of inflation, 432 00:23:02,000 --> 00:23:04,919 Speaker 2: a one percent per annum drop in prices over that 433 00:23:04,960 --> 00:23:07,800 Speaker 2: period of time, So in real terms, your house is 434 00:23:07,840 --> 00:23:10,960 Speaker 2: falling in value. And the longest flat cycle was in Perth, 435 00:23:11,000 --> 00:23:14,760 Speaker 2: the most recent flat cycle that lasted twelve years. So 436 00:23:15,240 --> 00:23:18,879 Speaker 2: it's possible Melbourne continues on that trajectory, but it's already 437 00:23:18,920 --> 00:23:22,120 Speaker 2: had quite a significant fall in prices net of inflation. 438 00:23:23,040 --> 00:23:25,480 Speaker 2: It wouldn't surprise me if we started to see small 439 00:23:25,520 --> 00:23:28,760 Speaker 2: positive increases in Melbourne to kind of level that. 440 00:23:28,760 --> 00:23:31,440 Speaker 1: Out, crucially because the last AHOs were so bad. 441 00:23:31,640 --> 00:23:34,160 Speaker 3: Yes, correct, yep, exactly right. 442 00:23:34,240 --> 00:23:37,280 Speaker 2: You know, sentiment will change first and then prices will follow, 443 00:23:37,320 --> 00:23:40,359 Speaker 2: and typically the market will want to see some price 444 00:23:40,400 --> 00:23:42,840 Speaker 2: action and then most of the people then decide to 445 00:23:42,920 --> 00:23:45,159 Speaker 2: jump aboard, right, most people are too late to the 446 00:23:45,200 --> 00:23:49,400 Speaker 2: party in terms of investing. So I wouldn't be surprised 447 00:23:49,440 --> 00:23:51,560 Speaker 2: if we see some positive price growth. 448 00:23:51,320 --> 00:23:52,280 Speaker 3: In Melbourne this year. 449 00:23:52,880 --> 00:23:54,919 Speaker 2: I don't think it's going to be huge, but I 450 00:23:54,960 --> 00:23:58,320 Speaker 2: think we're getting closer and closer to the beginning of 451 00:23:58,320 --> 00:24:01,240 Speaker 2: a new growth cycle. And if I put a circle 452 00:24:01,280 --> 00:24:03,320 Speaker 2: around it, I would say within the next two years, 453 00:24:03,840 --> 00:24:06,040 Speaker 2: I think Melbourne will enter into a growth cycle. 454 00:24:06,600 --> 00:24:10,000 Speaker 1: There are long periods, aren't they, These cycles, your flat 455 00:24:10,040 --> 00:24:12,760 Speaker 1: periods of growth period you're saying eight years, eight years. 456 00:24:13,080 --> 00:24:15,280 Speaker 1: This is why say they always say pulled on for 457 00:24:15,320 --> 00:24:19,200 Speaker 1: at least ten so that whatever happens you get two 458 00:24:19,240 --> 00:24:20,600 Speaker 1: growth hears. Yeah. 459 00:24:20,640 --> 00:24:22,679 Speaker 2: Well, if you're unlucky to mess the timing up and 460 00:24:22,720 --> 00:24:24,879 Speaker 2: by just before a flat cycle, you actually got to 461 00:24:24,880 --> 00:24:27,560 Speaker 2: hold onto that property for maybe twenty years. 462 00:24:28,040 --> 00:24:29,840 Speaker 3: You really need as many. 463 00:24:29,720 --> 00:24:32,360 Speaker 2: Growth cycle as you do flat cycles. And that's why 464 00:24:32,400 --> 00:24:35,400 Speaker 2: it's important to really think about where markets are in 465 00:24:35,440 --> 00:24:38,760 Speaker 2: those cycles. If you'll oblige a little bit, James, I'll 466 00:24:38,760 --> 00:24:41,280 Speaker 2: talk about the growth cycles because I study them as well. 467 00:24:41,320 --> 00:24:44,720 Speaker 2: Of course, the average or median time is banging on 468 00:24:44,800 --> 00:24:48,840 Speaker 2: ten years for growth cycles since nineteen eighty. Over that time, 469 00:24:48,960 --> 00:24:52,520 Speaker 2: prices increased by two hundred percent, So that means the 470 00:24:52,520 --> 00:24:56,520 Speaker 2: meeting house price triples over that ten year period. And 471 00:24:56,560 --> 00:24:58,359 Speaker 2: so if you have a look at Adelaide and Perth, 472 00:24:58,359 --> 00:25:00,679 Speaker 2: they're five and a half years into their cycle and 473 00:25:00,720 --> 00:25:04,719 Speaker 2: we've seen seventy percent increase in prices in Adelaide and Brisbane, 474 00:25:04,800 --> 00:25:07,399 Speaker 2: you'd say that maybe they're past a halfway point, but 475 00:25:07,400 --> 00:25:09,600 Speaker 2: they still go a little bit to go. Yeah, Perth 476 00:25:09,680 --> 00:25:11,680 Speaker 2: is only two years into it and we've seen a 477 00:25:11,720 --> 00:25:13,440 Speaker 2: forty percent increase, So. 478 00:25:13,400 --> 00:25:16,320 Speaker 1: You would say there's plenty left. History would suggest because 479 00:25:16,320 --> 00:25:19,200 Speaker 1: they had such adult I mean, nothing happened there for 480 00:25:19,240 --> 00:25:20,080 Speaker 1: a decade, right. 481 00:25:20,280 --> 00:25:20,960 Speaker 3: Twelve years. 482 00:25:21,000 --> 00:25:24,520 Speaker 2: They had in real terms a one percent perannum compounding 483 00:25:24,560 --> 00:25:27,159 Speaker 2: drop over that twelve year period. Yeah, there's a lot 484 00:25:27,200 --> 00:25:28,240 Speaker 2: of ground to make up there. 485 00:25:28,720 --> 00:25:33,080 Speaker 1: Yes, it swings roundabouts, folks, and it's really worth keeping 486 00:25:33,119 --> 00:25:35,800 Speaker 1: this in mind. I'll ask your question, what is the 487 00:25:35,920 --> 00:25:40,040 Speaker 1: minimum period of time on average you believe an investors 488 00:25:40,040 --> 00:25:41,840 Speaker 1: should get engaged with any property for. 489 00:25:42,320 --> 00:25:45,520 Speaker 2: As in the holding period. Yeah, for as long as 490 00:25:45,560 --> 00:25:48,160 Speaker 2: you possibly can. But I think if your time horizon 491 00:25:48,280 --> 00:25:49,800 Speaker 2: is less than ten years, it's going to be a 492 00:25:49,880 --> 00:25:54,440 Speaker 2: risky proposition unless you're buying something that you can manufacture 493 00:25:54,480 --> 00:25:56,960 Speaker 2: some equity, So you're buying something you think you can 494 00:25:57,359 --> 00:26:01,000 Speaker 2: complete a substantial renovation that's going to substantially change the 495 00:26:01,040 --> 00:26:04,040 Speaker 2: value of the asset. But for a passive investing, you know, 496 00:26:04,080 --> 00:26:06,600 Speaker 2: if you hold a property for thirty years, you'll get 497 00:26:06,680 --> 00:26:08,680 Speaker 2: maybe about ten percent of the gains in the first 498 00:26:08,680 --> 00:26:11,879 Speaker 2: ten You've got about thirty percent of the gains in 499 00:26:11,480 --> 00:26:15,119 Speaker 2: the second ten year period, but most of your gains 500 00:26:15,160 --> 00:26:18,760 Speaker 2: will come in that last ten year period over that 501 00:26:18,800 --> 00:26:20,920 Speaker 2: thirty years. So the longer you hold it, the better 502 00:26:20,960 --> 00:26:24,399 Speaker 2: off you are. But it's substantially better off, right, And 503 00:26:24,440 --> 00:26:27,400 Speaker 2: that's why asset selection, which we spoke about at the beginning, James, 504 00:26:27,680 --> 00:26:30,560 Speaker 2: buying the right property is so important because if we're 505 00:26:30,600 --> 00:26:33,040 Speaker 2: going to hang on to it, hopefully for twenty or 506 00:26:33,080 --> 00:26:36,200 Speaker 2: thirty years, that decision that we made twenty or thirty 507 00:26:36,240 --> 00:26:38,080 Speaker 2: years ago is going to have a big impact on 508 00:26:38,480 --> 00:26:40,680 Speaker 2: how our property is performing in that at that time. 509 00:26:41,000 --> 00:26:43,040 Speaker 1: That's the up film. Is there a minimum where you say, 510 00:26:43,280 --> 00:26:46,359 Speaker 1: I really don't think people can make money on a 511 00:26:46,400 --> 00:26:49,919 Speaker 1: property how passively in a period of less than. 512 00:26:50,119 --> 00:26:53,720 Speaker 2: X eight to ten years, probably more ten because you 513 00:26:53,800 --> 00:26:55,919 Speaker 2: just don't know how markets behave You could have a 514 00:26:55,960 --> 00:26:58,679 Speaker 2: GFC event or something like this. 515 00:26:59,080 --> 00:27:01,119 Speaker 3: You can't really control returns. 516 00:27:01,520 --> 00:27:04,160 Speaker 2: Yeah, I guess if I was investing in Melbourne, for example, 517 00:27:04,160 --> 00:27:05,840 Speaker 2: where I think I've got a strong view that it's 518 00:27:05,880 --> 00:27:08,520 Speaker 2: about to enter into a growth cycle, you might go 519 00:27:08,640 --> 00:27:10,800 Speaker 2: to the lower end of that band, so eight years. 520 00:27:11,200 --> 00:27:13,280 Speaker 2: But if I was going to go into something like 521 00:27:13,400 --> 00:27:16,800 Speaker 2: Brisbane that's already sort of through a gross I'd want 522 00:27:16,960 --> 00:27:19,520 Speaker 2: ten plus years just to make sure I can hold 523 00:27:19,560 --> 00:27:21,080 Speaker 2: it long enough to enjoy that growth. 524 00:27:21,480 --> 00:27:24,320 Speaker 1: It's interesting, isn't it. I hope this is useful to 525 00:27:24,560 --> 00:27:28,080 Speaker 1: the listeners, and it's so counter to you know, we 526 00:27:28,160 --> 00:27:31,200 Speaker 1: love to write about this the property that someone bought, 527 00:27:31,359 --> 00:27:34,040 Speaker 1: you know, and two years later flipped, But you know 528 00:27:34,119 --> 00:27:36,480 Speaker 1: the number suggest actually most of the time, for most people, 529 00:27:36,560 --> 00:27:39,160 Speaker 1: that is not how it works, and it can go very, 530 00:27:39,359 --> 00:27:43,000 Speaker 1: very wrong if your flip doesn't work. Basically, you could 531 00:27:43,000 --> 00:27:44,760 Speaker 1: spend the rest of your life trying to sort it out. 532 00:27:45,040 --> 00:27:47,639 Speaker 1: And I have met people who are basically a certain 533 00:27:47,640 --> 00:27:53,359 Speaker 1: property proposal or prospect or development which did not work 534 00:27:53,400 --> 00:27:57,360 Speaker 1: out for them really sort of skewed, you know, half 535 00:27:57,400 --> 00:28:00,080 Speaker 1: their investing life. And we don't pay attention to that 536 00:28:00,160 --> 00:28:02,320 Speaker 1: so often, but on this show we do because we 537 00:28:02,359 --> 00:28:08,400 Speaker 1: want to look after you. Okay, we'll take short break 538 00:28:08,440 --> 00:28:21,480 Speaker 1: back in a moment. Hello, Welcome back to the Australians 539 00:28:21,480 --> 00:28:24,320 Speaker 1: Money Puzzle podcast. I'm James kirkby Well, the editor at 540 00:28:24,320 --> 00:28:27,720 Speaker 1: The Australian, talking to Stuart Weens of pro Solution and 541 00:28:27,760 --> 00:28:31,920 Speaker 1: the Investoperly podcast. We're talking about property in the year ahead. 542 00:28:32,560 --> 00:28:34,600 Speaker 1: This is part of our summer series. I hope you're 543 00:28:34,680 --> 00:28:37,440 Speaker 1: enjoying it. I'm going to now throw the curly one. 544 00:28:37,960 --> 00:28:40,560 Speaker 1: Everyone likes to think we can have something to hang 545 00:28:40,560 --> 00:28:42,720 Speaker 1: on to at the start of the year, that there 546 00:28:42,760 --> 00:28:46,600 Speaker 1: are these forecasts that we can sort of live by, 547 00:28:46,800 --> 00:28:49,080 Speaker 1: that the share markets will go up by seven to 548 00:28:49,080 --> 00:28:52,200 Speaker 1: ten percent or something like that, and the property will 549 00:28:52,200 --> 00:28:55,800 Speaker 1: grow up or won't go up or on average this 550 00:28:55,960 --> 00:28:59,640 Speaker 1: capital city average forecast properly, by the way, for the 551 00:28:59,800 --> 00:29:05,040 Speaker 1: entire nation of Australia urban settings dwellings twenty twenty five, 552 00:29:05,160 --> 00:29:07,360 Speaker 1: if you want to hear it is somewhere between plus 553 00:29:07,360 --> 00:29:09,320 Speaker 1: one and plus four percent, which is all very good 554 00:29:09,560 --> 00:29:11,719 Speaker 1: and very comforting, but actually the truth is, no one 555 00:29:11,760 --> 00:29:14,840 Speaker 1: has a clue what's going to happen. A clue on 556 00:29:14,840 --> 00:29:18,120 Speaker 1: Earth in certainly in the space of the year they don't. 557 00:29:18,600 --> 00:29:24,440 Speaker 1: So what could throw these assumptions out the windows? Tore 558 00:29:24,680 --> 00:29:25,760 Speaker 1: in twenty twenty five. 559 00:29:26,760 --> 00:29:31,120 Speaker 2: So quite often people's site global instability, you know, a war, 560 00:29:31,680 --> 00:29:33,920 Speaker 2: Trump upsetting someone, and I think that's going to happen, 561 00:29:34,600 --> 00:29:38,479 Speaker 2: which will upset stock markets of course typically, and actually 562 00:29:38,520 --> 00:29:41,000 Speaker 2: that pushes more people away from the stock market into 563 00:29:41,040 --> 00:29:43,960 Speaker 2: the property market. So I've found over last twenty plus 564 00:29:44,080 --> 00:29:48,280 Speaker 2: years that a global event like that actually makes people think, say, 565 00:29:48,320 --> 00:29:50,200 Speaker 2: that's why I should have bought property, because it's a 566 00:29:50,240 --> 00:29:52,120 Speaker 2: real asset. I can see it. It's not going to 567 00:29:52,160 --> 00:29:54,800 Speaker 2: change in value, So I don't think I'm not too 568 00:29:54,880 --> 00:29:58,800 Speaker 2: concerned about something like that. Our biggest risk is James. 569 00:29:59,240 --> 00:30:02,600 Speaker 2: There are markets around Australia where there's a lot of 570 00:30:03,000 --> 00:30:06,600 Speaker 2: people that hold property that would love to sell but 571 00:30:06,680 --> 00:30:08,800 Speaker 2: don't want to give it away. They realize it's a 572 00:30:08,800 --> 00:30:12,720 Speaker 2: soft market, particularly in Victoria. They're paying these extra taxes 573 00:30:13,200 --> 00:30:16,520 Speaker 2: and they would like to change their mind, particularly around 574 00:30:16,560 --> 00:30:20,719 Speaker 2: coastal locations, but I think it's everywhere. The only reason 575 00:30:20,960 --> 00:30:24,880 Speaker 2: we haven't seen prices crash in Melbourne and Victoria is 576 00:30:24,960 --> 00:30:28,440 Speaker 2: because people have been in a financial situation where they 577 00:30:28,480 --> 00:30:31,040 Speaker 2: haven't had to sell, they can make the decision. Now 578 00:30:31,080 --> 00:30:33,240 Speaker 2: if that was to change. So if we saw a 579 00:30:33,280 --> 00:30:37,760 Speaker 2: substantial rise in the unemployment and financial distress, then those 580 00:30:37,800 --> 00:30:39,640 Speaker 2: people will be put in a position where they have 581 00:30:39,720 --> 00:30:43,920 Speaker 2: to sell. Prices will fall significantly in that scenario. 582 00:30:44,080 --> 00:30:44,480 Speaker 3: I think. 583 00:30:44,640 --> 00:30:47,080 Speaker 2: Now I'm not anticipating it, but if you have a 584 00:30:47,120 --> 00:30:51,120 Speaker 2: look at Victoria feet for instance, over the last ten years, 585 00:30:51,480 --> 00:30:54,800 Speaker 2: Victorian's tax revenue is increased by ten billion dollars a year. 586 00:30:55,440 --> 00:30:59,680 Speaker 2: Victoria's wage bill, a public service wage bill, has also 587 00:31:00,200 --> 00:31:02,240 Speaker 2: by ten billion dollars a year. Right, so all those 588 00:31:02,240 --> 00:31:06,240 Speaker 2: taxes are going into this bloated workforce. My concern, then, 589 00:31:06,280 --> 00:31:09,120 Speaker 2: all the risk is that there's a change of government 590 00:31:09,120 --> 00:31:12,040 Speaker 2: in Victoria. They say let's reduce the workforce, this public 591 00:31:12,080 --> 00:31:14,800 Speaker 2: service workforce, because that's the easiest way then to give 592 00:31:14,840 --> 00:31:17,560 Speaker 2: some tax relief, and then all of a sudden, unemployment 593 00:31:17,600 --> 00:31:21,920 Speaker 2: rises in Victoria. There's a lot of discretionary vendors out 594 00:31:21,920 --> 00:31:24,160 Speaker 2: there that would like to sell their property. Now they 595 00:31:24,200 --> 00:31:26,760 Speaker 2: have to sell their property and prices drop. 596 00:31:26,880 --> 00:31:31,120 Speaker 1: So ironically, in trying to reform the taxes they could 597 00:31:31,160 --> 00:31:34,320 Speaker 1: spark that's interesting. It suggests a kind of catch twenty 598 00:31:34,360 --> 00:31:35,360 Speaker 1: two then, doesn't it? Really? 599 00:31:35,640 --> 00:31:36,000 Speaker 3: It is. 600 00:31:36,040 --> 00:31:38,480 Speaker 2: I think the underlying economy is pretty strong. I think 601 00:31:38,520 --> 00:31:41,640 Speaker 2: the labor market is strong. I don't think that a 602 00:31:41,720 --> 00:31:44,959 Speaker 2: government's going to make substantial changes like that. You've got 603 00:31:44,960 --> 00:31:47,400 Speaker 2: to sort of grow the economic pie and then re 604 00:31:47,760 --> 00:31:51,360 Speaker 2: home those employees back in the private sector. So I 605 00:31:51,360 --> 00:31:53,800 Speaker 2: don't anticipate. I don't think it will. But that's the 606 00:31:53,840 --> 00:31:56,280 Speaker 2: one thing that's kind of saved the property market is 607 00:31:56,320 --> 00:31:59,080 Speaker 2: the health of the employment market and the strength of 608 00:31:59,120 --> 00:32:01,840 Speaker 2: household budgets in terms of being able to afford these houses. 609 00:32:01,880 --> 00:32:05,120 Speaker 2: But if that was to change, then the higher taxes 610 00:32:05,320 --> 00:32:07,840 Speaker 2: on property will have an impact because people will be 611 00:32:07,880 --> 00:32:09,320 Speaker 2: forced to sell in that scenario. 612 00:32:10,280 --> 00:32:13,800 Speaker 1: What about if the redcut never came to pass, And 613 00:32:13,800 --> 00:32:16,680 Speaker 1: that's not inconceivable at all. The thing is that the 614 00:32:16,800 --> 00:32:19,520 Speaker 1: beforecasters make their forecasts, as I always say that the 615 00:32:19,520 --> 00:32:22,240 Speaker 1: secret to making this for lutcras forecast is not a smile. 616 00:32:22,600 --> 00:32:25,480 Speaker 1: So they stand there and they say, we think, and 617 00:32:25,520 --> 00:32:27,920 Speaker 1: they're frown what they're doing that. You know, whatever rates 618 00:32:27,920 --> 00:32:30,880 Speaker 1: will be X and Y, no one knows. So let's 619 00:32:30,920 --> 00:32:34,360 Speaker 1: say in a very natural way that in twenty twenty 620 00:32:34,400 --> 00:32:39,080 Speaker 1: five they just kept pushing the data of the forecasters 621 00:32:39,200 --> 00:32:43,200 Speaker 1: red cut further out, and it never came to pass, 622 00:32:43,400 --> 00:32:46,840 Speaker 1: so rates remained where they are. What would that do well? 623 00:32:46,920 --> 00:32:50,440 Speaker 2: I expect rad cuts will have a slightly positive impact 624 00:32:50,480 --> 00:32:53,760 Speaker 2: on the property market, James, because lending volumes are already high. 625 00:32:53,880 --> 00:32:55,200 Speaker 3: So the reverse is true too. 626 00:32:55,600 --> 00:32:57,440 Speaker 2: If we don't see a rate cut, I think it 627 00:32:57,440 --> 00:33:00,520 Speaker 2: will have a slightly negative impact, but but I don't 628 00:33:00,520 --> 00:33:03,480 Speaker 2: think it will be substantial. You know, people are making 629 00:33:03,480 --> 00:33:06,640 Speaker 2: decisions already. We've got to understand where we came from 630 00:33:06,960 --> 00:33:10,200 Speaker 2: was not sustainable. You know, interstrates of two percent was ridiculous. 631 00:33:10,520 --> 00:33:13,640 Speaker 2: Where we are today is only slightly above kind of 632 00:33:13,680 --> 00:33:16,520 Speaker 2: long term average. This is kind of normal in terms 633 00:33:16,560 --> 00:33:19,640 Speaker 2: of interest rates. Is so if interestrates were to hold out, 634 00:33:19,680 --> 00:33:23,040 Speaker 2: that's fine, and I think households can afford it. It's 635 00:33:23,080 --> 00:33:25,719 Speaker 2: showing that the areas rates have ticked up a little bit, 636 00:33:25,720 --> 00:33:28,120 Speaker 2: but they're not material as long as the health of 637 00:33:28,160 --> 00:33:30,800 Speaker 2: borrowers maintain, I don't think it's going to have an 638 00:33:30,800 --> 00:33:32,320 Speaker 2: impact on property prices. 639 00:33:32,800 --> 00:33:40,080 Speaker 1: So in conclusion, it seems you are carefully, conservatively mildly 640 00:33:40,600 --> 00:33:42,360 Speaker 1: optimistic if it's see. 641 00:33:42,400 --> 00:33:45,320 Speaker 3: No, you're not wrong, it's not a very popular opinion. 642 00:33:45,400 --> 00:33:48,000 Speaker 2: But I think twenty twenty five will probably be a 643 00:33:48,040 --> 00:33:50,960 Speaker 2: repeat of twenty twenty four in terms of those standout 644 00:33:51,000 --> 00:33:54,960 Speaker 2: markets will continue. Maybe Melbourne will turn around. It wouldn't 645 00:33:55,000 --> 00:33:58,040 Speaker 2: surprise me if we see some small growth in Melbourne, 646 00:33:58,440 --> 00:34:01,480 Speaker 2: and it wouldn't surprise me. Actually what Sydney prices are 647 00:34:01,520 --> 00:34:03,719 Speaker 2: up to and a half percent last year, It wouldn't 648 00:34:03,720 --> 00:34:06,920 Speaker 2: surprise me actually if Sydney records a slight negative next 649 00:34:07,000 --> 00:34:09,120 Speaker 2: year as well. But I don't think, you know, we 650 00:34:09,120 --> 00:34:11,560 Speaker 2: look at Melbourne, Sydney, I don't think any major changes 651 00:34:11,600 --> 00:34:14,200 Speaker 2: in prices. But Perth I think will again be the 652 00:34:14,200 --> 00:34:15,359 Speaker 2: standout market. 653 00:34:15,440 --> 00:34:19,520 Speaker 1: Very good. Whatever else. Investors do like some certainty to 654 00:34:19,560 --> 00:34:21,600 Speaker 1: the extent that they can get certainty, and to the 655 00:34:21,640 --> 00:34:24,120 Speaker 1: extent that it is normal. As you say, you know, 656 00:34:24,239 --> 00:34:27,560 Speaker 1: rates aren't crazy. They're not fifteen percent. Neither are they 657 00:34:27,760 --> 00:34:30,680 Speaker 1: zero or one percent. We're in a zone which is 658 00:34:30,760 --> 00:34:34,640 Speaker 1: something close to historical norms, and on that basis a 659 00:34:34,640 --> 00:34:39,239 Speaker 1: lot of what we regard as normal investment theory or 660 00:34:39,320 --> 00:34:44,239 Speaker 1: approach or practice should work. And maybe, on that mildly 661 00:34:44,280 --> 00:34:48,280 Speaker 1: positive note, we will let it rest for our listeners 662 00:34:48,320 --> 00:34:51,560 Speaker 1: to digest. Okay, hey, Thank you Stuart. Great to talk 663 00:34:51,640 --> 00:34:53,239 Speaker 1: to you. We'll have you on again across during the 664 00:34:53,280 --> 00:34:55,560 Speaker 1: You're lovely to have you on the Property Show today. 665 00:34:55,800 --> 00:34:57,160 Speaker 3: Thanks James better pleasure. 666 00:35:01,719 --> 00:35:04,320 Speaker 1: That was Stuart Beams. There, folks of with pro Solution 667 00:35:04,440 --> 00:35:08,960 Speaker 1: Group and the Investoperly podcast regular on the show. Thanks 668 00:35:09,000 --> 00:35:13,160 Speaker 1: for listening. Now, if you've listened to the share Markets feature, 669 00:35:13,800 --> 00:35:17,439 Speaker 1: the Individual Shares and Property Show, we will now put 670 00:35:17,520 --> 00:35:21,000 Speaker 1: those issues together and in the next show I'm going 671 00:35:21,040 --> 00:35:24,200 Speaker 1: to look at the overall outlook for you and your 672 00:35:24,560 --> 00:35:27,440 Speaker 1: investment allocation. In twenty twenty five. We're going to look 673 00:35:27,440 --> 00:35:29,160 Speaker 1: at some of the issues that we didn't pick up 674 00:35:29,200 --> 00:35:32,240 Speaker 1: in the series so far, such as cash for instance, 675 00:35:32,320 --> 00:35:36,400 Speaker 1: our view on that alternatives crypto, which we have to 676 00:35:36,440 --> 00:35:40,759 Speaker 1: take seriously as an investment class. Whether you like it 677 00:35:40,920 --> 00:35:42,880 Speaker 1: or not, it's there. The issue is what you do 678 00:35:42,960 --> 00:35:46,080 Speaker 1: about it, and we will look right across all aspects 679 00:35:46,120 --> 00:35:48,640 Speaker 1: of investments into your head. That's the next show with 680 00:35:49,000 --> 00:35:50,799 Speaker 1: James Gerard. Until then, talk to you soon.