1 00:00:03,560 --> 00:00:05,920 Speaker 1: Welcome to Ask Fear and Greed. Will we answer questions 2 00:00:05,920 --> 00:00:09,840 Speaker 1: about business, investing, economics, politics and more. I'm Michael Thompson 3 00:00:09,880 --> 00:00:11,120 Speaker 1: and Hello, Sean. 4 00:00:10,840 --> 00:00:12,480 Speaker 2: Ayle, Hello Michael Shawn. 5 00:00:12,520 --> 00:00:16,080 Speaker 1: Today's question is all about property and it's a good 6 00:00:16,079 --> 00:00:19,360 Speaker 1: one because we were talking today on the show about 7 00:00:19,440 --> 00:00:21,840 Speaker 1: the fact that for the first time since COVID, house 8 00:00:21,920 --> 00:00:27,040 Speaker 1: prices in all eight capital cities are rising. Yeah, so 9 00:00:27,240 --> 00:00:30,520 Speaker 1: every city is seeing growth at the moment. This was 10 00:00:30,560 --> 00:00:34,320 Speaker 1: based on data from Domain and now we've got house 11 00:00:34,320 --> 00:00:38,320 Speaker 1: prices record highs in Sydney, Brisbane, Adelaide and Perth, got Melbourne, 12 00:00:38,360 --> 00:00:41,199 Speaker 1: Hobart at their highest levels in several years. So it 13 00:00:41,360 --> 00:00:43,559 Speaker 1: just has this feel of it just kind of keeps 14 00:00:43,640 --> 00:00:47,120 Speaker 1: on going. So the question for you today as the 15 00:00:47,280 --> 00:00:51,640 Speaker 1: expert in the studio can they just keep on going? 16 00:00:51,800 --> 00:00:55,240 Speaker 1: Will house prices just keep on rising forever? At what 17 00:00:55,280 --> 00:00:58,160 Speaker 1: point do they plateau? Do they ever? Or is it 18 00:00:58,240 --> 00:01:00,480 Speaker 1: just from now until the end of time that growing. 19 00:01:01,240 --> 00:01:04,720 Speaker 2: Yes, it could be asked if any asset cast really 20 00:01:04,760 --> 00:01:09,240 Speaker 2: couldn't it Do shares just keep growing? So broadly the 21 00:01:09,280 --> 00:01:13,320 Speaker 2: answer is yes, because if you have economic growth there 22 00:01:13,520 --> 00:01:17,360 Speaker 2: is and particular if you have real economic growth then 23 00:01:17,480 --> 00:01:22,039 Speaker 2: you're adding more to society, to the economy, you're becoming richer, 24 00:01:22,920 --> 00:01:25,600 Speaker 2: and that is reflected in asset prices, and houses are 25 00:01:25,640 --> 00:01:29,759 Speaker 2: an asset price, so broadly they do keep growing. Now, 26 00:01:29,800 --> 00:01:34,200 Speaker 2: of course, in between you have downtime. So the end 27 00:01:34,280 --> 00:01:38,240 Speaker 2: of twenty twenty two early twenty twenty three, house prices 28 00:01:39,120 --> 00:01:44,479 Speaker 2: I will not in every city, but in Melbourne definitely, 29 00:01:44,880 --> 00:01:49,320 Speaker 2: some places of parts of Sydney they fell. So the 30 00:01:49,360 --> 00:01:51,360 Speaker 2: answer to this always comes down to supply and demand. 31 00:01:51,520 --> 00:01:53,440 Speaker 2: Did you ever do economics at university or did you 32 00:01:53,520 --> 00:02:00,680 Speaker 2: ever do economics in any way, Michael, this feels like 33 00:02:00,720 --> 00:02:03,720 Speaker 2: a trap. No, it's not, because I did. 34 00:02:03,880 --> 00:02:09,519 Speaker 1: Do economics in high school for a week and then 35 00:02:09,800 --> 00:02:12,760 Speaker 1: I changed, and this may not surprise you. I changed 36 00:02:12,960 --> 00:02:13,960 Speaker 1: to drama. 37 00:02:14,240 --> 00:02:17,040 Speaker 2: That does not surprise me. Look, it's all about supply 38 00:02:17,120 --> 00:02:20,600 Speaker 2: and demand, pretty much like everything. So an oversupply of 39 00:02:20,680 --> 00:02:27,280 Speaker 2: housing or under demand pushes prices down, and undersupply over 40 00:02:27,360 --> 00:02:32,520 Speaker 2: demand pushes prices up. There are a bunch of factors 41 00:02:32,520 --> 00:02:36,320 Speaker 2: in the housing market which affect supply and demand. So 42 00:02:36,440 --> 00:02:39,560 Speaker 2: lower interest rates tend to boost demand because people can 43 00:02:39,600 --> 00:02:41,639 Speaker 2: afford it. You know, there's cheap to borrow money let's 44 00:02:41,639 --> 00:02:43,600 Speaker 2: get out there and buy a house. So too does 45 00:02:43,680 --> 00:02:46,520 Speaker 2: high immigration, totally different reasons. There's just more people in 46 00:02:46,520 --> 00:02:49,799 Speaker 2: the market wanting it, so that tends to push up prices, 47 00:02:50,720 --> 00:02:54,560 Speaker 2: boost demand. Economic growth and a strong employment market does 48 00:02:54,600 --> 00:02:57,799 Speaker 2: exactly the same thing. People with the job can afford 49 00:02:57,800 --> 00:03:01,160 Speaker 2: a house, they push up demand. There's also a bunch 50 00:03:01,200 --> 00:03:05,680 Speaker 2: of things like restrictive planning policies, the amount of land available, 51 00:03:05,760 --> 00:03:10,840 Speaker 2: which hurts or effects supply. So it's both demand and 52 00:03:10,840 --> 00:03:13,639 Speaker 2: supply that really matter. It's kind of why most experts 53 00:03:13,639 --> 00:03:16,160 Speaker 2: when they look at what's going on in Australia today, 54 00:03:16,639 --> 00:03:18,920 Speaker 2: it's a supply issue. It's not a demand issue. There 55 00:03:18,960 --> 00:03:23,360 Speaker 2: is plenty of demand. What we need are more houses 56 00:03:23,400 --> 00:03:25,600 Speaker 2: to be built, and that's the whole government's plan to 57 00:03:25,600 --> 00:03:28,400 Speaker 2: build one point two million houses over five years, et cetera, 58 00:03:28,440 --> 00:03:30,480 Speaker 2: et cetera. But back to the question, well, house prices 59 00:03:30,560 --> 00:03:35,119 Speaker 2: always rise. Used to be a rule of thumb, every 60 00:03:35,200 --> 00:03:39,880 Speaker 2: ten years house price is double. That's not actually true. 61 00:03:40,400 --> 00:03:43,440 Speaker 2: House prices have tended to double about every fifteen or 62 00:03:43,480 --> 00:03:48,240 Speaker 2: sixteen years. Unit prices double every eighteen years. Now, you 63 00:03:48,280 --> 00:03:50,400 Speaker 2: are a mathematician who came first in the state in 64 00:03:50,440 --> 00:03:55,440 Speaker 2: mathematics in your HCEM. What I'm sure you've calculated in 65 00:03:55,480 --> 00:03:58,960 Speaker 2: your head or heady? Are they looking at your face? 66 00:03:59,040 --> 00:04:02,880 Speaker 2: Perhaps not? If you had an economic grads rate of 67 00:04:02,920 --> 00:04:08,000 Speaker 2: about three percent over eighteen years, you wouldn't double value. 68 00:04:08,280 --> 00:04:12,080 Speaker 2: So yeah, I've got something out correct. 69 00:04:12,520 --> 00:04:13,480 Speaker 1: I agree with your finding. 70 00:04:13,520 --> 00:04:15,640 Speaker 2: So what that says is that house prices are rising 71 00:04:15,680 --> 00:04:18,960 Speaker 2: more than economic growth. 72 00:04:19,080 --> 00:04:26,320 Speaker 1: Okay, So in the end, the trend is your friend. 73 00:04:26,720 --> 00:04:28,320 Speaker 2: Not that we're going anywhere near that. 74 00:04:28,400 --> 00:04:30,880 Speaker 1: What I wanted to ask, no, because I wanted to 75 00:04:30,920 --> 00:04:32,920 Speaker 1: talk about the fact that we talk about these short 76 00:04:33,000 --> 00:04:35,440 Speaker 1: term dips and things. But if we just look at 77 00:04:35,440 --> 00:04:38,520 Speaker 1: this very long time, yes, then it is the case. 78 00:04:38,680 --> 00:04:40,799 Speaker 2: If you're at the shere market over the last hundred years, 79 00:04:40,839 --> 00:04:45,599 Speaker 2: it always trends up. House prices always trend up over 80 00:04:45,680 --> 00:04:47,240 Speaker 2: the very long term. 81 00:04:47,680 --> 00:04:53,640 Speaker 1: If our population stagnates and starts to decrease, for instance, yes, 82 00:04:54,040 --> 00:04:58,160 Speaker 1: we have an aging population, birth rate slips perhaps or 83 00:04:58,240 --> 00:05:03,600 Speaker 1: just steadies, and we don't do digration migration exactly, that 84 00:05:04,240 --> 00:05:08,760 Speaker 1: could see theoretically house prices also stagnate, right. 85 00:05:08,680 --> 00:05:12,320 Speaker 2: Yeah, totally or four or four because it's not being replaged. 86 00:05:12,520 --> 00:05:15,640 Speaker 2: What I mean, A good way of thinking about it 87 00:05:15,680 --> 00:05:19,360 Speaker 2: is how much of your income is contributed to home 88 00:05:19,400 --> 00:05:22,760 Speaker 2: loan repayments or to rent, and that has increased over 89 00:05:22,839 --> 00:05:26,880 Speaker 2: time in Australia, so more of our hard earned is 90 00:05:26,960 --> 00:05:29,920 Speaker 2: going to housing. I don't know that that's a good thing, 91 00:05:30,480 --> 00:05:33,039 Speaker 2: and I wonder at some point, like the Swiss model, 92 00:05:33,040 --> 00:05:36,560 Speaker 2: for example, the insurers own pretty much all the property 93 00:05:36,680 --> 00:05:38,880 Speaker 2: or the vast bulk of the property, and people rent 94 00:05:38,920 --> 00:05:41,440 Speaker 2: all their life. And you know, as you grow and 95 00:05:41,600 --> 00:05:44,039 Speaker 2: put money away, you have put money away for rent, 96 00:05:44,720 --> 00:05:46,400 Speaker 2: and you just know that's what's going to happen when 97 00:05:46,440 --> 00:05:47,919 Speaker 2: you're retired. You're going to have to keep renting, and 98 00:05:47,960 --> 00:05:50,000 Speaker 2: that's what you're saved for, so you don't actually say 99 00:05:50,080 --> 00:05:52,400 Speaker 2: for it. And that's not a bad option. 100 00:05:53,120 --> 00:05:56,360 Speaker 1: If you're organized, you've got to be organized. So that's 101 00:05:56,400 --> 00:05:59,720 Speaker 1: the problem. Okay, I think we've done a decent in 102 00:05:59,839 --> 00:06:04,520 Speaker 1: our job. I give an a eight out of ten. Yeah, no, 103 00:06:04,640 --> 00:06:05,520 Speaker 1: maybe a nine. 104 00:06:05,320 --> 00:06:06,560 Speaker 2: You know, let's go nine. 105 00:06:06,880 --> 00:06:09,160 Speaker 1: You know what, I think it was perfect? It was perfect, 106 00:06:09,279 --> 00:06:10,520 Speaker 1: ten out of ten. 107 00:06:10,720 --> 00:06:10,960 Speaker 2: Ten. 108 00:06:11,279 --> 00:06:13,560 Speaker 1: Oh wond of them. There's no one in the studio 109 00:06:13,640 --> 00:06:15,960 Speaker 1: to disagree with us. Thank you very much, Sewan. 110 00:06:16,000 --> 00:06:16,480 Speaker 2: Thanks Michael. 111 00:06:16,480 --> 00:06:17,960 Speaker 1: If you've got your own question that you would like 112 00:06:18,000 --> 00:06:20,240 Speaker 1: to ask, then send it on through either website or 113 00:06:20,240 --> 00:06:22,640 Speaker 1: any of the social media platforms where you will find 114 00:06:22,640 --> 00:06:25,080 Speaker 1: fear and greed. Oh Michael Thompson. This is ask Fear 115 00:06:25,160 --> 00:06:25,520 Speaker 1: and Greed.