WEBVTT - Property Expert: Why Australian House Prices Are Falling Faster Than Expected 0:00:00.280 --> 0:00:03.199 Tim Lawless, Mate, what a time crazy. 0:00:03.240 --> 0:00:05.280 I think things are moving very quickly and a lot 0:00:05.280 --> 0:00:07.240 of water under the bridge since we spoke a month 0:00:07.320 --> 0:00:08.000 or or two ago. 0:00:08.160 --> 0:00:10.640 Well do we speak after the budget before the budget? 0:00:10.640 --> 0:00:13.159 I think time is moving so quick, ma, I think 0:00:13.160 --> 0:00:15.520 it's before the budget. For me, I think I think 0:00:15.560 --> 0:00:17.360 it's just before the budget, before the budget. 0:00:17.440 --> 0:00:20.119 And so obviously lots happened to the budget. But we 0:00:20.160 --> 0:00:23.239 had another you know, three months of higher interest rates 0:00:23.560 --> 0:00:25.680 since san or a couple months of higher interest rates 0:00:25.680 --> 0:00:28.520 since sand looking at about another one perhaps in August. 0:00:28.600 --> 0:00:31.720 But let me just go back to let's talk about 0:00:31.720 --> 0:00:34.159 the budget. You know, we've had a lot of interesting 0:00:34.200 --> 0:00:37.920 discussions of various people about the budget in terms of 0:00:38.000 --> 0:00:43.080 data as head of research at Totality formerly known as 0:00:43.080 --> 0:00:48.680 core Logic, one of Australias like you know, leading analytical 0:00:48.760 --> 0:00:51.440 organizations when it comes to the property market and other things. 0:00:51.440 --> 0:00:55.000 But let's just talk about the proborty market. Say, what 0:00:55.120 --> 0:00:58.200 is the data telling you about the state of the market. 0:00:58.720 --> 0:01:03.080 Let's say right now post budget? Yeah, so post budget 0:01:03.120 --> 0:01:06.240 the market's clearly weakened. It was weakening pre budget, I 0:01:06.240 --> 0:01:07.800 think is important for the context. 0:01:08.040 --> 0:01:08.600 Yeah, as you. 0:01:08.560 --> 0:01:12.720 Say, higher rates, affordability, serviceability challenges are really low levels 0:01:12.720 --> 0:01:16.200 of consumer confidence, and then the budget. So I think 0:01:16.200 --> 0:01:19.520 the budget really did to amplify the downturn. We're already 0:01:19.560 --> 0:01:22.399 in the fact that the market was already slowing, but 0:01:22.480 --> 0:01:25.720 since we've seen the budget handed down, there's a lot 0:01:25.760 --> 0:01:29.320 of anecdotes. There's very little hard evidence of say, investors 0:01:29.360 --> 0:01:31.760 pulling back and first home buyers on the sidelines, but 0:01:32.360 --> 0:01:34.440 you can speak to anybody in the market and they're 0:01:34.480 --> 0:01:37.040 seeing it. So I think, well, since since the budget 0:01:37.040 --> 0:01:42.600 we've seen housing values the downturn nationally has gathered some momentum. 0:01:43.040 --> 0:01:46.280 We've seen Sydney and Melbourne already moving backwards and values 0:01:46.720 --> 0:01:50.919 Adelaides now falling over a rolling four weekly basis. Brisbane's 0:01:51.040 --> 0:01:54.120 absolutely flat, Perth is seeing about half a percent growth 0:01:54.160 --> 0:01:56.880 month on month. Go back a couple of months ago, 0:01:56.920 --> 0:01:59.520 Perth was rising in value by nearly two percent month 0:01:59.560 --> 0:02:03.400 on months, So everywhere is either slowing down sharply or 0:02:03.640 --> 0:02:05.200 now going backwards in value. 0:02:05.560 --> 0:02:09.120 That's maybe we could unpack it a little bit more 0:02:09.160 --> 0:02:12.200 to teim if you don't mind them. So the point 0:02:12.240 --> 0:02:14.920 you made was an interesting one, a good one that 0:02:15.600 --> 0:02:19.960 pre the budget we'd had three rate rises, but you know, 0:02:20.000 --> 0:02:25.480 we've got interest rates up quite high, relatively speaking, put 0:02:25.520 --> 0:02:28.840 us up to where we were before the rate reductions, 0:02:29.240 --> 0:02:32.520 which was at that point considered to be restrictive interest 0:02:32.600 --> 0:02:38.160 rate environment. You mentioned that we were already starting to 0:02:38.200 --> 0:02:40.160 see a little bit of an effect from those three 0:02:40.240 --> 0:02:43.760 rate rise increases, and I think that's when you and 0:02:43.760 --> 0:02:49.160 I last spoke and you were sort of predicting house 0:02:49.200 --> 0:02:54.080 price changes. In other words, it's always difficult to talk 0:02:54.080 --> 0:02:57.240 about Australia because it covers a lot of territory, but 0:02:57.320 --> 0:03:02.160 you were sort of predicting pretty much a lightning and 0:03:02.880 --> 0:03:06.120 we were saying that then. But what is it that 0:03:06.160 --> 0:03:10.800 the budget This is only hypothetical at this stage, but 0:03:11.120 --> 0:03:12.520 you probably don't have data to back it up. But 0:03:12.560 --> 0:03:14.320 what do you think it is that the budget did 0:03:15.120 --> 0:03:19.400 to make it go faster or have a great effect? 0:03:19.440 --> 0:03:19.919 What is it? 0:03:20.160 --> 0:03:22.960 Yeah, I think that's probably two really important outcomes from 0:03:22.960 --> 0:03:25.720 the budget. The first wine is very direct towards investment. 0:03:25.800 --> 0:03:29.200 Of course, so if you're an investor in Australian housing markets, 0:03:29.680 --> 0:03:32.519 you've generally been attracted to the opportunities for capital gain. 0:03:32.720 --> 0:03:34.960 So that was already because the tax on capital game. 0:03:35.360 --> 0:03:36.840 No, No, just just. 0:03:36.920 --> 0:03:38.400 You were going to make it gain on the body. 0:03:38.640 --> 0:03:42.040 So the point I'm trying to make is yield didn't 0:03:42.080 --> 0:03:44.360 really factor into your decision as an investor. 0:03:45.120 --> 0:03:45.680 Was the rents? 0:03:45.960 --> 0:03:49.240 Yeah, your the balance between your rental payments and or 0:03:49.720 --> 0:03:53.040 your rental income, and you're holding costs getting mortgage, your payments, 0:03:53.120 --> 0:03:57.640 maintenance whatever, strata, insurance, etc. All that sort of stuff. 0:03:57.680 --> 0:04:01.640 So yield was always well for most investors aside thought 0:04:01.800 --> 0:04:04.160 or a secondary or tertiary part of the decision making, 0:04:04.640 --> 0:04:07.320 most investors will be buy for a couple gain. But 0:04:07.480 --> 0:04:11.320 now that we've seen the negative gearing component being removed 0:04:11.360 --> 0:04:13.880 for established homes in the budget, even though it's not 0:04:13.960 --> 0:04:16.920 legislated yet, I think it's virtually the same as I 0:04:17.000 --> 0:04:19.760 think most people accept this is going to get through Parliament, 0:04:20.000 --> 0:04:22.400 it'll be the new rules. Even if it doesn't, it's 0:04:22.400 --> 0:04:25.280 already disrupted confidence. So I think for most investors now, 0:04:25.360 --> 0:04:28.479 if you can't negaly gear an established home, the math 0:04:28.640 --> 0:04:32.640 just doesn't stack up. The holding costs become prohibitive, and 0:04:32.920 --> 0:04:36.200 your serviceability assessments become very hard if you can't include 0:04:36.200 --> 0:04:39.640 a negative gearing rebate. The second part of the budget. 0:04:39.640 --> 0:04:42.960 I think that's been really impactful simply on sentiment on confidence. 0:04:43.520 --> 0:04:46.680 Confidence was already low due to higher inflation due to 0:04:46.720 --> 0:04:49.400 what's happening ran and then the budget was handed down, 0:04:49.520 --> 0:04:52.880 and now there's just increased, almost palpable levels of uncertainty, 0:04:53.520 --> 0:04:55.600 especially with all the backpedaling and the carve outs we're 0:04:55.600 --> 0:04:58.480 starting to see in the federal budget as well. And 0:04:58.600 --> 0:05:02.200 we know that confidence, for how is critical. When confidence 0:05:02.279 --> 0:05:05.359 is low, you generally see less housing turnover. When confidence 0:05:05.440 --> 0:05:08.840 is high, you have a much more, much better ability 0:05:08.920 --> 0:05:12.159 to make high commitment financial decisions. So we're not seeing 0:05:12.160 --> 0:05:12.720 that at the moment. 0:05:13.120 --> 0:05:20.600 So if the budget and the capital gains tax changes 0:05:21.720 --> 0:05:27.400 are geared towards investors in terms of both negative gearing, 0:05:27.560 --> 0:05:31.680 the ability to do negative gearing, and or the attractive 0:05:31.880 --> 0:05:34.919 tax rates you pay on again, the marketplace is assuming 0:05:34.960 --> 0:05:38.240 that there's going to be gained. There's an assumption built 0:05:38.279 --> 0:05:41.680 into buying property buy investors that they'll make a capital gain, 0:05:42.279 --> 0:05:44.080 and that is based on the fact that we don't 0:05:44.120 --> 0:05:47.800 have enough supply relative to the demand, which will actually 0:05:48.000 --> 0:05:53.040 therefore by definition, push prices up. And if those two 0:05:53.160 --> 0:05:58.479 things are directed at investors, what did it in terms 0:05:58.520 --> 0:06:03.400 of impact. What would you normally see in the data 0:06:04.880 --> 0:06:11.160 as maybe contribution in turnover by investors at any at 0:06:11.200 --> 0:06:13.400 any one particular time. So if the market's one hundred, 0:06:14.400 --> 0:06:19.039 is there forty investors for every sixty home unoccupied? 0:06:19.200 --> 0:06:19.840 Is that it works? 0:06:20.040 --> 0:06:22.400 Yeah, so it's pretty much leading into the budget. That's 0:06:22.480 --> 0:06:24.520 exactly the number. It was about forty one percent of 0:06:24.560 --> 0:06:28.040 demand was being driven by investment, which was elevated. Long term, 0:06:28.120 --> 0:06:30.200 you'd expect investors to be about a third of demand, 0:06:30.240 --> 0:06:31.200 about thirty three percent. 0:06:31.400 --> 0:06:34.920 That's the normal long term run rate of investors buying 0:06:35.000 --> 0:06:38.160 property at auctions and private treaty and whatever it is 0:06:38.240 --> 0:06:41.240 cross the market. Yeah, across Australia, Yeah, exactly. Is a 0:06:41.240 --> 0:06:44.080 bigger or bigger or smaller in other state states where 0:06:44.080 --> 0:06:45.000 they were all pretty much the same. 0:06:45.040 --> 0:06:48.719 I know, there's definitely some variability. So national, at least 0:06:48.760 --> 0:06:51.440 the March quarter, that's the most recent numbers, forty one 0:06:51.440 --> 0:06:54.080 percent of demand's coming from investment. If you've got somewhere 0:06:54.160 --> 0:06:57.200 like Victoria that had one of the lowest profiles for investors, 0:06:57.360 --> 0:06:59.599 but it was still thirty seven percent. That's still quite 0:07:00.240 --> 0:07:02.560 but nowhere near as high as New South Wales, which 0:07:02.600 --> 0:07:05.200 was about forty four percent of demand being driven by investment. 0:07:06.040 --> 0:07:08.720 So if you go back to periods where investors have 0:07:08.839 --> 0:07:11.239 pulled back sharply in the market, and the most recent 0:07:11.840 --> 0:07:14.640 evidence of that, the most recent example would be back 0:07:14.680 --> 0:07:17.440 in twenty eighteen twenty nineteen, when we had the Royal 0:07:17.440 --> 0:07:20.400 Commission and APRA had put in a couple of macrovidential 0:07:20.440 --> 0:07:24.680 policies that really restricted investment lending. We saw investors pull 0:07:24.720 --> 0:07:26.400 back to about twenty four percent of demand. 0:07:27.440 --> 0:07:30.000 My guess, APRA being the regulator, told the banks, we 0:07:30.000 --> 0:07:32.120 don't want to lend as much money to investors. Yeah. 0:07:32.120 --> 0:07:36.040 Well, they had firm limits on interest on any lending yep. 0:07:36.240 --> 0:07:38.880 And they had firm limits on investment credit growth ten 0:07:38.920 --> 0:07:41.720 percent and a thirty percent limit on interest on you. 0:07:41.920 --> 0:07:44.360 So the regulator was turning the banks, we don't want 0:07:44.400 --> 0:07:51.920 you to grow your percentage of borrowers who are investors. 0:07:52.520 --> 0:07:54.640 We don't want you to grow above ten percent pronum. 0:07:54.720 --> 0:07:57.880 That's right, right, Yeah, So we saw investors drop back 0:07:58.000 --> 0:08:00.800 to about from about forty six center demand, So that 0:08:00.920 --> 0:08:03.240 was a record high, back to our twenty four percent. 0:08:03.840 --> 0:08:05.840 My guess is post budget, we're going to be seeing 0:08:05.880 --> 0:08:09.200 something similar, maybe even more dramatic. I just think for 0:08:09.320 --> 0:08:12.440 investors investing in Australian real estate, yields are very low. 0:08:12.680 --> 0:08:14.600 So if you're an investor, unless you have a really 0:08:14.680 --> 0:08:17.760 large deposit, chances are you're going to be negatively geared. 0:08:17.760 --> 0:08:19.040 You're going to you're going to be seeing a negative 0:08:19.080 --> 0:08:21.200 cash flow in your property. That's going to make holding 0:08:21.240 --> 0:08:23.320 that that property harder. Without negative gearing. 0:08:23.720 --> 0:08:25.680 Which they used to mind because they could get they 0:08:25.720 --> 0:08:26.560 would get some money back. 0:08:26.640 --> 0:08:29.920 That's right exactly, So that crutch, if you will, is 0:08:30.000 --> 0:08:32.160 no longer going to be available for established homes, and 0:08:33.000 --> 0:08:35.559 you know about eighty percent of investors are buying established homes. 0:08:36.120 --> 0:08:39.800 I don't think there's going to be a huge diversion 0:08:40.000 --> 0:08:44.280 of investment appetite to buy new simply because new housing 0:08:44.400 --> 0:08:47.360 has a price premium, so it's more expensive. The resale 0:08:47.400 --> 0:08:49.360 market could be quite risky because you're going to be 0:08:49.440 --> 0:08:52.880 selling that investment property to another investor that doesn't get 0:08:52.920 --> 0:08:55.240 the same tax treatment as you did buying the new home. 0:08:55.760 --> 0:08:59.319 Plus there's also just probably some risk around supply. New 0:08:59.720 --> 0:09:02.800 house areas like inner city apartments and out of greenfield 0:09:03.600 --> 0:09:06.599 detached housing doesn't have the same scarcity of supply that 0:09:06.720 --> 0:09:09.920 investors tend to love. Really, yeah, there's more of it. Yeah, 0:09:10.000 --> 0:09:12.160 I mean it could be quite bulky levels of supply, 0:09:12.280 --> 0:09:15.120 especially inner city apartments that you know, one new development 0:09:15.120 --> 0:09:18.679 could add another three hundred apartments, yeah, quite quickly. So 0:09:18.840 --> 0:09:21.760 most investors tend to target the established market, which I 0:09:21.800 --> 0:09:25.120 think is now going to be prohibitively costly and difficult 0:09:25.120 --> 0:09:28.800 to hold because of the non benefit from negative gearing. 0:09:28.960 --> 0:09:31.959 So you know, you guys examine data within an inch 0:09:32.040 --> 0:09:36.240 of its life. Maybe I asked, could Tim Lawless for 0:09:36.440 --> 0:09:42.440 us get inside the head of a residential property investor 0:09:42.480 --> 0:09:42.880 from moment? 0:09:44.120 --> 0:09:44.320 Sure? 0:09:44.559 --> 0:09:46.240 So, And these are the people who are dropping off 0:09:46.280 --> 0:09:49.920 thow flies at the moment. Data indicates, you know, from 0:09:49.960 --> 0:09:52.080 forty one percent, don't we don't have another a new 0:09:52.160 --> 0:09:53.120 number doing it well? 0:09:53.480 --> 0:09:55.120 August fourteenth market calendar. 0:09:55.120 --> 0:09:57.559 That's why we actually the Dune quarter lending indicators that 0:09:57.960 --> 0:09:58.559 I can be the best. 0:09:58.840 --> 0:10:01.520 Okay, So I was forty one percent, and I can 0:10:01.600 --> 0:10:05.120 tell you as a lender, we were around that those numbers. 0:10:05.200 --> 0:10:07.520 Forty percent. Around forty percent of our lending was to 0:10:07.800 --> 0:10:11.280 investors and the balances to unoccupiers. I can tell you 0:10:11.360 --> 0:10:15.040 that number of investors has dropped off dramatically in terms 0:10:15.080 --> 0:10:18.400 of applications. Obviously haven't said all yet, but just that apps. 0:10:19.520 --> 0:10:21.559 But put just if I could get asked Tim Laws 0:10:21.640 --> 0:10:24.960 just to put his self into the mind of an 0:10:25.000 --> 0:10:31.719 investor for property, investor says, I would normally be able 0:10:31.720 --> 0:10:33.600 to buy. I would normally go and buy a million 0:10:33.600 --> 0:10:36.160 dollar apartment forg mistake it just pick an easy number. 0:10:36.480 --> 0:10:39.640 I've got twenty percent deposit, I've got two inn a 0:10:39.679 --> 0:10:41.959 grand sitting in the bank. Normally I would go out 0:10:41.960 --> 0:10:45.920 and buy one of these properties. What is investor weighing 0:10:46.040 --> 0:10:49.560 up now? What is he saying to himself or herself 0:10:50.000 --> 0:10:51.760 about whether they should go to the property market or not. 0:10:52.040 --> 0:10:53.400 What are the pros and cons? 0:10:53.679 --> 0:10:56.040 Well, again, I think the first thing that's going to 0:10:56.040 --> 0:10:57.760 be they're going to be thinking about is what's the 0:10:57.800 --> 0:11:01.000 opportunity for capital gain on this million dollar apartment or 0:11:01.040 --> 0:11:03.760 two million dollars apartment, which I think is going to. 0:11:03.760 --> 0:11:04.839 Be uncertain right. 0:11:05.240 --> 0:11:06.560 I think we have uncertainty. 0:11:06.679 --> 0:11:09.520 I think we have uncertainty around the trajectory of capital gains, 0:11:10.120 --> 0:11:12.520 especially in the apartment sector, where you know, there's a 0:11:12.559 --> 0:11:14.920 lot of focus on getting more supply into that sector 0:11:14.920 --> 0:11:16.480 of the market. As hard as it is and as 0:11:16.640 --> 0:11:18.800 difficult it is to get a feasibility to stack up, 0:11:19.360 --> 0:11:23.280 eventually there will be a supply response, probably quite focused 0:11:23.280 --> 0:11:25.439 on density to some extent, just on that. 0:11:26.720 --> 0:11:30.079 Prior to maybe the capital gains tax, there was more certainty. 0:11:30.760 --> 0:11:34.040 Are you saying that? Are they less certain today than 0:11:34.120 --> 0:11:37.120 they were before the couple of gains tax in the 0:11:37.160 --> 0:11:39.320 budget be announced? Yeah? 0:11:39.520 --> 0:11:42.559 I think I think there's there's definitely a greater degree 0:11:42.600 --> 0:11:45.959 of uncertainty in where capple gains are going to be 0:11:46.440 --> 0:11:49.720 going forward, partly because of the uncertainty around what level 0:11:49.800 --> 0:11:52.640 of aggregate demand are investors going to be adding. You know, 0:11:52.679 --> 0:11:54.520 if we're going from forty percent of demand down to 0:11:54.600 --> 0:11:56.959 say twenty percent or less, that's a big drop. That's 0:11:57.000 --> 0:11:58.280 a big drop of aggregate demand. 0:11:58.360 --> 0:12:00.360 There's a twenty percent drop in the title D demand 0:12:00.440 --> 0:12:02.920 and fIF percent drop in the invested demand. Yeah. 0:12:03.120 --> 0:12:06.320 Absolutely, And then there's uncertainty around what the overall supply 0:12:06.400 --> 0:12:08.480 outcomes are going to be over the medium to long term. 0:12:08.640 --> 0:12:11.000 I think short term absolutely, supply is going to remain 0:12:11.120 --> 0:12:15.560 very tight. But ultimately Australia will see a supply response, yeah, 0:12:15.720 --> 0:12:19.880 probably later rather than sooner, I would say the second 0:12:19.920 --> 0:12:21.880 thing is going to be what's a yield on a 0:12:21.920 --> 0:12:24.800 two million dollar apartment. It's probably going to be something 0:12:24.960 --> 0:12:28.959 like percent, yeah, maybe three if you're likely three and 0:12:29.000 --> 0:12:29.880 a half percent gross. 0:12:29.960 --> 0:12:33.120 In other words, the beginning like maybe twelve hundred bucks 0:12:33.120 --> 0:12:33.400 a week. 0:12:33.600 --> 0:12:34.280 Yeah yeah. 0:12:34.400 --> 0:12:36.319 So add to that, you've got your your mortgage or 0:12:36.320 --> 0:12:40.040 payments probably around the mid sixes from mortgage rates. You've 0:12:40.040 --> 0:12:42.520 got strata fees, you've got insurance costs, all of those 0:12:42.559 --> 0:12:45.920 are going up quite swiftly. You've got tendancy reform, which 0:12:46.000 --> 0:12:47.679 means if you're looking for a tenant, you've got to 0:12:48.200 --> 0:12:51.120 probably ensure there's minimum standards, which can be expensive. And 0:12:51.160 --> 0:12:53.680 you've got higher maintenance costs as well, because construction costs 0:12:53.720 --> 0:12:56.720 have gone up, which implies it's costly or to maintained 0:12:56.800 --> 0:12:59.920 strata strata fees. No, this is actually wear and tear. 0:13:00.400 --> 0:13:03.000 If you've got to fix the plumbing, fix the sink, whatever, 0:13:03.440 --> 0:13:05.959 it's a lot more expensive to do that now than 0:13:06.000 --> 0:13:08.719 it was five years ago, simply because the cost of 0:13:08.800 --> 0:13:12.720 trades and materials have gone up so substantially. So if 0:13:12.800 --> 0:13:15.559 you compare that to what might be compared to say, 0:13:15.679 --> 0:13:19.160 a much lower maintenance style of investment like buying into 0:13:19.160 --> 0:13:21.760 a shareport for you or an ETF no maintenance costs, 0:13:22.240 --> 0:13:25.360 no holding costs really whatsoever, apart from if you're leveraged, 0:13:26.000 --> 0:13:30.280 very low transactional fees generally fairly similar long term capital 0:13:30.320 --> 0:13:31.000 gain outcomes. 0:13:31.080 --> 0:13:33.640 Yeah, they have been. I've seen the sharp ratio has 0:13:33.720 --> 0:13:35.760 done for these things, and there's not much difference. The 0:13:35.800 --> 0:13:38.800 sharp ratio is pretty equal relative to the risk. 0:13:39.000 --> 0:13:41.760 That's right for an asset that gives you a fairly 0:13:41.800 --> 0:13:44.520 similar outcome but much lower holding costs, much more liquid, 0:13:44.640 --> 0:13:46.520 so you can buy it and out with very low 0:13:46.600 --> 0:13:49.319 transactional costs as well. So I think a lot of 0:13:49.360 --> 0:13:50.040 investors will. 0:13:49.960 --> 0:13:50.880 Be doing that. Maths. 0:13:51.600 --> 0:13:56.640 Is property going to give me enough return for the 0:13:56.760 --> 0:13:57.800 risk I'm taking. 0:13:57.600 --> 0:14:01.040 In that asset, especially during the period before I sell it, 0:14:01.160 --> 0:14:04.199 because during that period, I am paying all this costs, 0:14:04.440 --> 0:14:07.600 I am paying the interest, I am not getting much 0:14:07.720 --> 0:14:12.920 return in terms of my rents, So I'm actually losing money. 0:14:14.200 --> 0:14:16.240 Like while I'm holding this asset, I'm losing but this 0:14:16.360 --> 0:14:18.160 is one of those few assets when I lose I'm 0:14:18.160 --> 0:14:21.520 not allowed to actually claim a tax production notwithstanding I'm 0:14:21.600 --> 0:14:23.960 losing money. You can, by the way, what most people 0:14:23.960 --> 0:14:26.560 forgotten is you can accumulate that loss so that when 0:14:26.600 --> 0:14:28.240 you do eventually sell it, if you make it be profit, 0:14:28.320 --> 0:14:31.160 you can offset that loss. Then that's down the track. 0:14:31.560 --> 0:14:33.640 So this is going through the mind of a residential 0:14:33.720 --> 0:14:35.800 investment property buyer. I don't know if you have any 0:14:35.880 --> 0:14:38.080 data on this, but is he or she thinking, Yeah, 0:14:38.160 --> 0:14:39.840 for the time being, i might just put the money 0:14:39.880 --> 0:14:42.520 in the bank, or maybe I'll buy some CBA shares 0:14:42.560 --> 0:14:45.640 and I'll get this return on it. It's pretty simple. 0:14:45.640 --> 0:14:47.720 I don't have to do anything, and I'll get again 0:14:47.800 --> 0:14:52.280 on the CBA shares potentially whoever, whichever bank, and I'll 0:14:52.280 --> 0:14:55.160 get a dividend and they're paying pretty good Frank dividends 0:14:55.160 --> 0:14:55.560 at the moment. 0:14:56.280 --> 0:14:56.480 Yeah. 0:14:56.560 --> 0:14:58.480 So there isn't any data on this that I'm aware 0:14:58.520 --> 0:15:00.920 of yet, Mark, So watch this space, though. I think 0:15:01.400 --> 0:15:03.400 once we start to see more of the lending indicators 0:15:03.400 --> 0:15:06.920 flowing through, Unfortunately, these data sets are pretty lagged, so 0:15:07.080 --> 0:15:09.400 you're seeing it on your own books. I'm hearing other 0:15:09.440 --> 0:15:12.880 banks talking about twenty twenty five percent drop in investment 0:15:12.920 --> 0:15:16.600 inquiries as well, so I think it's already happening. And 0:15:16.760 --> 0:15:19.120 once we start to see the data points that'll be 0:15:19.360 --> 0:15:22.480 well down the track and the trend will have gathered momentum. 0:15:23.080 --> 0:15:26.240 Do you think that people are as sophisticated in that 0:15:26.400 --> 0:15:29.920 process as you've just gone through or is it more 0:15:30.480 --> 0:15:33.400 Are they more just listening to people like you talk 0:15:33.480 --> 0:15:34.680 and just saying, you know, like this is all a 0:15:34.680 --> 0:15:36.240 bit high at the moment, just going to take a 0:15:36.360 --> 0:15:38.200 step back and watch what happens. 0:15:38.480 --> 0:15:40.880 Yeah, I think I'll give them them credit where it's due. 0:15:41.000 --> 0:15:43.280 I mean, if you're spending one hundreds of thousand dollars, 0:15:43.280 --> 0:15:46.520 if not millions of dollars to buy an asset being property, 0:15:47.040 --> 0:15:50.360 I think you would be doing your due diligence. Property 0:15:50.400 --> 0:15:53.640 is not a sophisticated investment. I would say, it's not 0:15:53.760 --> 0:15:57.720 like buying into a commercial asset or an industrial asset, 0:15:57.760 --> 0:16:01.320 where you have much more complex least terms and so forth, 0:16:01.400 --> 0:16:05.360 and make goods property is. I don't think you need 0:16:05.520 --> 0:16:09.080 to be a rocket scientist investor to be investing in property, 0:16:09.160 --> 0:16:12.200 But if you are looking to invest in property, there 0:16:12.240 --> 0:16:14.320 are a lot of safeguards around that. And I think 0:16:14.400 --> 0:16:17.280 even if you weren't a sophisticated investor, he didn't go 0:16:17.400 --> 0:16:19.840 through the mathematics. The bank's going to be doing that 0:16:20.000 --> 0:16:20.240 for you. 0:16:20.320 --> 0:16:20.840 When you go to. 0:16:21.000 --> 0:16:22.560 Apply for a loan, they'll tell you what you can 0:16:22.560 --> 0:16:26.160 afford in your can'ty exactly yes. So what seems to 0:16:26.280 --> 0:16:31.400 be not being discussed is around the couple of gains 0:16:31.720 --> 0:16:34.960 potential of buying into a problem into the problem market. 0:16:36.400 --> 0:16:39.840 Is the problems existed here in austraighta for a long 0:16:39.880 --> 0:16:42.880 long time. I can definitely get at least twenty years 0:16:43.160 --> 0:16:45.800 to twenty five years to the two thousand and one 0:16:45.840 --> 0:16:48.600 election of John Howard when he talked about affordability when 0:16:48.640 --> 0:16:52.200 he launched his election campaign, it was affordability was a 0:16:52.240 --> 0:16:55.920 problem then, as a problem now, and it's never been solved. 0:16:55.920 --> 0:16:58.800 In fact, it's been exacerbated over the last few years. 0:17:00.560 --> 0:17:07.160 The supply demand issue, I don't mean investor demand. I'm 0:17:07.160 --> 0:17:12.040 talking about just population growth. The number of properties are 0:17:12.040 --> 0:17:15.600 available for people to live in relative to the number 0:17:15.600 --> 0:17:18.919 of properties that are available that are demanded to. 0:17:18.920 --> 0:17:19.320 Be lived in. 0:17:21.760 --> 0:17:25.240 That generally speaking, there's a mismatch. In other words, we 0:17:25.320 --> 0:17:29.840 have a supply demand problem. People still got to live somewhere. 0:17:30.119 --> 0:17:31.920 It doesn't matter if I buy propertly as an investor, 0:17:31.960 --> 0:17:33.679 I rendered to you because you've got to live somewhere 0:17:34.080 --> 0:17:36.840 you're either going to buy or rent it. That hasn't 0:17:36.880 --> 0:17:40.119 been solved. So what is the prognosis from someone like 0:17:40.240 --> 0:17:45.200 totality for the future, because surely house prices must dwelling 0:17:45.240 --> 0:17:49.280 price must still go up because the demand by population 0:17:49.400 --> 0:17:50.240 growth is still there. 0:17:50.840 --> 0:17:53.680 Yeah, absolutely, this helps to keep a floor under housing prices. 0:17:53.880 --> 0:17:56.840 If we didn't have that disconnect between supply and demand, 0:17:56.920 --> 0:18:01.760 supply being overwhelmed by demand, we probably would have a 0:18:01.880 --> 0:18:04.919 much worse case scenario when it comes to the housing 0:18:05.000 --> 0:18:08.119 correction that we're starting to move through now. So I 0:18:08.200 --> 0:18:11.520 think most most economists thing will probably see a downturn 0:18:11.680 --> 0:18:13.960 at least a macro level around five to ten percent 0:18:14.080 --> 0:18:15.960 across Australian housing house prices. 0:18:16.080 --> 0:18:17.520 Yeah, exactly. If we didn't have. 0:18:17.720 --> 0:18:21.359 An undersupply of homes in Australia almost guarantee they would 0:18:21.359 --> 0:18:23.800 be a much larger number. So I think that that 0:18:23.960 --> 0:18:26.480 under supply absolutely helps to keep a floor under housing 0:18:26.520 --> 0:18:30.360 prices to some extent. But the demand side fundamentals really 0:18:30.440 --> 0:18:32.600 need to be considered here. Absolutely, we have very low 0:18:32.680 --> 0:18:35.520 levels of supply when you look at immediate supply, so 0:18:35.600 --> 0:18:38.119 how many homes actually being advertised or listed for sale 0:18:38.600 --> 0:18:41.040 that's now getting to above average levels. So for people 0:18:41.080 --> 0:18:43.880 looking to buy a home at the moment, not buy 0:18:43.880 --> 0:18:46.280 a new home, but buy an established home in a marketplace, 0:18:46.720 --> 0:18:49.280 there's more listings than what we've seen over the past 0:18:49.320 --> 0:18:52.840 five years on average, in Sydney, in Melbourne, now in Brisbane, 0:18:52.840 --> 0:18:55.520 which is quite different for that market. Perth used to 0:18:55.560 --> 0:18:58.000 have listing numbers about fifty percent below average. Now it's 0:18:58.040 --> 0:19:01.160 about fifteen percent below average and rising quickly. So there's 0:19:01.200 --> 0:19:02.080 more stock to choose. 0:19:01.920 --> 0:19:05.680 From, so white people selling though. That's interesting because most 0:19:05.680 --> 0:19:08.640 of these would be grandfathered under the couple of gas tax. 0:19:08.720 --> 0:19:09.960 Is that right? Absolutely? 0:19:10.200 --> 0:19:12.800 This isn't about investors dumping stock on the market or 0:19:13.560 --> 0:19:17.399 homeowners suddenly becoming vendors. In fact, new listings coming to 0:19:17.480 --> 0:19:20.840 the market are actually quite low, they're below outage. What 0:19:20.960 --> 0:19:23.760 I'm talking about here is your total stock levels, not 0:19:23.880 --> 0:19:25.960 the flow of new listings coming to market. And because 0:19:26.000 --> 0:19:28.919 homes are taking longer to sell, the things that haven't sold, exactly, 0:19:28.960 --> 0:19:32.440 there's an accumulation of stock in the market that's building. 0:19:32.160 --> 0:19:35.040 Up over the last not desperate by sellers, but just 0:19:35.359 --> 0:19:36.520 wanted to sell for some reason. 0:19:36.960 --> 0:19:37.760 That's exactly right. 0:19:37.880 --> 0:19:38.880 So it's accumulating. 0:19:39.320 --> 0:19:41.359 Auction clearance rates are sort of in the low forty 0:19:41.400 --> 0:19:45.960 percent range now, time to sell is rising, Discounting rates are, 0:19:46.040 --> 0:19:49.000 negotiation levels arising as well. It's now a buyer's market 0:19:49.160 --> 0:19:52.440 in quite a few markets now. So definitely we're seeing 0:19:52.520 --> 0:19:56.800 supply from an immediate perspective is now becoming higher demand 0:19:57.240 --> 0:20:00.520 when you think about people's actually ability to buy so 0:20:00.880 --> 0:20:04.800 demonstrated demand. We're now seeing transactional activities a home sales, 0:20:04.800 --> 0:20:08.120 which I think is demonstrated demand. Well, it's how many 0:20:08.160 --> 0:20:11.040 people actually, it's turnover, it's how many people are how 0:20:11.080 --> 0:20:13.879 many people are buying a home. So the number of 0:20:13.920 --> 0:20:16.680