1 00:00:15,400 --> 00:00:18,600 Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm 2 00:00:18,680 --> 00:00:22,480 Speaker 1: James Kirby, the editor at The Australian. Welcome aboard everybody. 3 00:00:23,079 --> 00:00:24,800 Speaker 1: I don't know about you, but I'm just looking at 4 00:00:24,840 --> 00:00:27,240 Speaker 1: these property figures that have been coming through in the 5 00:00:27,320 --> 00:00:31,600 Speaker 1: last few days, a few weeks, i suppose, and something 6 00:00:31,720 --> 00:00:36,159 Speaker 1: perhaps of a soft patch emerging in the national property market. 7 00:00:36,240 --> 00:00:40,959 Speaker 1: Those auction levels are certainly not as strong as they 8 00:00:41,000 --> 00:00:44,479 Speaker 1: were I think this time last year. Prices going the 9 00:00:44,520 --> 00:00:46,360 Speaker 1: right way, but not going at quite the speed they 10 00:00:46,360 --> 00:00:48,239 Speaker 1: were at the start of the year. Say on a 11 00:00:48,280 --> 00:00:52,960 Speaker 1: monthly basis. Rental vacancy rates are of course rock bottom, 12 00:00:53,040 --> 00:00:58,040 Speaker 1: but in fact they are from a teeny level starting 13 00:00:58,080 --> 00:01:01,000 Speaker 1: to widen. That is, there's slightly more to rent and 14 00:01:01,040 --> 00:01:03,720 Speaker 1: that will affect I imagine prices and rates in the 15 00:01:03,760 --> 00:01:06,240 Speaker 1: fullness of time. But I might be wrong, and I'd 16 00:01:06,280 --> 00:01:08,280 Speaker 1: like to know more about it all. And I've got 17 00:01:08,280 --> 00:01:10,679 Speaker 1: the idea of guests to tell us. It's narrative Canopy. 18 00:01:10,840 --> 00:01:13,120 Speaker 1: She's the chief economist at Revy. Lovely to have you 19 00:01:13,160 --> 00:01:15,640 Speaker 1: here in our lovely Sydney studio. Thanks for coming in. 20 00:01:16,040 --> 00:01:18,400 Speaker 1: Tell me about this. I had this sense all the 21 00:01:18,480 --> 00:01:21,560 Speaker 1: year that it would slow down through the year. Is 22 00:01:21,600 --> 00:01:22,399 Speaker 1: that what we're seeing. 23 00:01:23,600 --> 00:01:26,000 Speaker 2: It does depend on where you are. If we go 24 00:01:26,160 --> 00:01:29,520 Speaker 2: to the absolute top market at the moment, it's strongest 25 00:01:29,520 --> 00:01:31,760 Speaker 2: market at the moment, it is Perth, and Perth is 26 00:01:31,800 --> 00:01:35,960 Speaker 2: continuing to show very rapid rates of growth. Prices are 27 00:01:36,040 --> 00:01:39,560 Speaker 2: up around twenty five percent compared to last year. Compare 28 00:01:39,600 --> 00:01:43,240 Speaker 2: that to the poorest performing market, that's Melbourne. Properties are 29 00:01:43,280 --> 00:01:46,920 Speaker 2: piling up. There's a lot coming to market. Prices are 30 00:01:46,959 --> 00:01:50,360 Speaker 2: barely moving falling in some places, and we are seeing 31 00:01:50,680 --> 00:01:53,000 Speaker 2: a distinct difference to the rest of Australia. 32 00:01:53,200 --> 00:01:55,440 Speaker 1: Yeah, that's and we'll have to do this. I mean 33 00:01:55,480 --> 00:01:57,800 Speaker 1: we all because it's a national show. We'd abt to 34 00:01:57,880 --> 00:01:59,680 Speaker 1: just talk on the national basis all the time, but 35 00:02:00,240 --> 00:02:02,920 Speaker 1: is local and in this market, it's really sort of 36 00:02:03,040 --> 00:02:06,960 Speaker 1: in two speed in many ways. Is it true? This 37 00:02:07,000 --> 00:02:09,040 Speaker 1: is our question you didn't see coming. Is it true 38 00:02:09,040 --> 00:02:11,760 Speaker 1: what they say that the people in Perth are resisting 39 00:02:11,880 --> 00:02:13,560 Speaker 1: selling to Eastern staters. 40 00:02:13,800 --> 00:02:16,480 Speaker 2: I'm sure if the price is right, I would. 41 00:02:16,320 --> 00:02:18,239 Speaker 1: Have thought of the price was right, they wouldn't care 42 00:02:18,600 --> 00:02:19,880 Speaker 1: what state they were from. 43 00:02:20,000 --> 00:02:21,680 Speaker 2: I don't know. There was a. 44 00:02:21,680 --> 00:02:26,079 Speaker 1: Slightly and entertaining, if slightly unbelievable story making the rounds 45 00:02:26,080 --> 00:02:29,560 Speaker 1: a few days ago that the Perth sellers were resisting 46 00:02:29,600 --> 00:02:32,240 Speaker 1: selling to Eastern status, which is very funny, but I 47 00:02:32,240 --> 00:02:34,799 Speaker 1: doubt it's true. Yeah, and I imagine it's a free 48 00:02:34,840 --> 00:02:37,600 Speaker 1: market in every state, so that's how it goes. There is, though, 49 00:02:37,880 --> 00:02:39,800 Speaker 1: just a little bit closer on Perth and that twenty 50 00:02:39,800 --> 00:02:42,760 Speaker 1: five percent lift. It is a fact, though, isn't it 51 00:02:42,800 --> 00:02:46,080 Speaker 1: that it's pretty tightly held, and that those numbers reflect 52 00:02:46,600 --> 00:02:51,000 Speaker 1: relatively small number of properties being sold in terms of 53 00:02:51,000 --> 00:02:53,000 Speaker 1: the volumes that were used to say Sydney Melbourne. 54 00:02:53,160 --> 00:02:56,120 Speaker 2: Yeah. The thing with Perth is Timer market has dropped 55 00:02:56,200 --> 00:02:59,360 Speaker 2: to a very low level. So I think times on 56 00:02:59,400 --> 00:03:02,960 Speaker 2: average is within about five days, so very different to 57 00:03:03,000 --> 00:03:05,720 Speaker 2: where we were just prior to the pandemic when Timer 58 00:03:05,800 --> 00:03:09,400 Speaker 2: market was sort of thirty days. So Perth either is 59 00:03:09,480 --> 00:03:12,240 Speaker 2: red hot or stone cold. It really is infortumable. 60 00:03:12,280 --> 00:03:13,799 Speaker 1: What's a healthy average route? 61 00:03:14,720 --> 00:03:17,520 Speaker 2: Look, I think normally sort of ten to fifteen days 62 00:03:17,520 --> 00:03:20,200 Speaker 2: would be at a more normal rate. So selling within 63 00:03:20,280 --> 00:03:23,080 Speaker 2: five days is I mean, look, even ten to fifteen 64 00:03:23,160 --> 00:03:24,600 Speaker 2: is pretty strong. I mean, if you look at the 65 00:03:24,639 --> 00:03:28,160 Speaker 2: average auction campaign, it's around four weeks, so it is 66 00:03:28,200 --> 00:03:30,959 Speaker 2: a very strong market, even to the extent what we're 67 00:03:30,960 --> 00:03:34,120 Speaker 2: seeing is that homes aren't even getting listed, they're selling 68 00:03:34,360 --> 00:03:35,400 Speaker 2: prior to listing. 69 00:03:35,440 --> 00:03:37,120 Speaker 1: With it's a red hot market. That is a red 70 00:03:37,160 --> 00:03:43,400 Speaker 1: hot yeah, okay, but either volumes ultimately pretty slim that 71 00:03:43,480 --> 00:03:46,000 Speaker 1: those figures are coming from the twenty five percent lift. 72 00:03:46,240 --> 00:03:49,200 Speaker 2: There's definitely a shortage of Stockholm market and there's also 73 00:03:49,240 --> 00:03:51,240 Speaker 2: a shortage of homes being built. And what we are 74 00:03:51,280 --> 00:03:54,920 Speaker 2: seeing is very strong conditions in premium markets places like 75 00:03:55,000 --> 00:03:58,280 Speaker 2: Coddter's Low Pimant Grove, things are moving very quickly, but 76 00:03:58,680 --> 00:04:01,040 Speaker 2: also in very cheap market if you go to places 77 00:04:01,080 --> 00:04:05,160 Speaker 2: like Belldivers, which have always been very affordable, we're seeing 78 00:04:05,320 --> 00:04:07,360 Speaker 2: homes so quickly. So they seem to be driven by 79 00:04:07,360 --> 00:04:10,600 Speaker 2: different things. I mean, one hand, expensive markets, a little 80 00:04:10,600 --> 00:04:13,040 Speaker 2: bit of interstate money, a lot of mining money. Lithium 81 00:04:13,120 --> 00:04:15,400 Speaker 2: is doing very well there, whereas on the fringe it 82 00:04:15,440 --> 00:04:18,240 Speaker 2: does seem to be rising construction costs that have led 83 00:04:18,279 --> 00:04:21,440 Speaker 2: to existing homes being pushed higher as a result. 84 00:04:21,600 --> 00:04:23,960 Speaker 1: Okay, and then at the other end of the spectrum, 85 00:04:24,200 --> 00:04:28,880 Speaker 1: still is the Melbourne market the softest market. It shouldn't be. 86 00:04:29,279 --> 00:04:31,680 Speaker 1: There's no good reason for us. It's five million people, 87 00:04:31,760 --> 00:04:34,520 Speaker 1: it's growing to be the biggest city in the land. 88 00:04:35,160 --> 00:04:37,760 Speaker 1: It's fundamentals are more or less same as the other states. 89 00:04:38,400 --> 00:04:41,320 Speaker 1: So are there actually pockets are suburbs where the prices 90 00:04:41,320 --> 00:04:41,760 Speaker 1: are dropping. 91 00:04:42,760 --> 00:04:44,760 Speaker 2: Look at that there is I mean, what we're seeing 92 00:04:44,760 --> 00:04:49,120 Speaker 2: in Melbourne is probably less related to long term fundamentals, which, 93 00:04:49,120 --> 00:04:52,440 Speaker 2: as you said, are positive. We are seeing strong population growth. 94 00:04:52,440 --> 00:04:56,320 Speaker 2: We're also it's a relatively affordable market. There's jobs, there 95 00:04:56,360 --> 00:04:58,320 Speaker 2: is some jobs growth. But I think what the problem 96 00:04:58,360 --> 00:05:01,640 Speaker 2: in Melbourne at the moment is the tax station regime, 97 00:05:01,880 --> 00:05:05,680 Speaker 2: which has put increased taxes on investors, which doesn't help. 98 00:05:06,320 --> 00:05:08,320 Speaker 2: I'm not sure we will know for sure how the 99 00:05:08,400 --> 00:05:12,400 Speaker 2: Victorian economy is going later or early next year and 100 00:05:12,440 --> 00:05:16,200 Speaker 2: we get those state GSP figures, but we can see 101 00:05:16,200 --> 00:05:20,000 Speaker 2: that unemployment's the highest in the country. I mean, it's 102 00:05:20,080 --> 00:05:24,120 Speaker 2: fairly marginal, but it's still highest in Victoria. And also 103 00:05:24,400 --> 00:05:26,880 Speaker 2: it's not population growth. But I think there's some underlying 104 00:05:26,920 --> 00:05:28,400 Speaker 2: weakness in the economy at the moment. 105 00:05:28,480 --> 00:05:30,360 Speaker 1: But it would at the same time be the big 106 00:05:30,520 --> 00:05:32,160 Speaker 1: immigrant city. 107 00:05:32,640 --> 00:05:34,880 Speaker 2: Yes, yeah, and so this is I mean, this is 108 00:05:34,920 --> 00:05:39,479 Speaker 2: what will probably keep probably will keep Melbourne pricing more 109 00:05:39,520 --> 00:05:42,920 Speaker 2: elevated long term is that it does continue to attract 110 00:05:42,920 --> 00:05:46,640 Speaker 2: a lot of international migrants. We've also got very high 111 00:05:46,680 --> 00:05:49,920 Speaker 2: construction costs at the moment. So to give you an idea, 112 00:05:50,000 --> 00:05:53,839 Speaker 2: I mean, Melbourne has been relatively affordable for a long time, 113 00:05:53,880 --> 00:05:57,520 Speaker 2: particularly the apartment market, but talking to developers in the 114 00:05:57,520 --> 00:06:00,320 Speaker 2: Melbourne market, I just can't build at the same lefels 115 00:06:00,320 --> 00:06:02,880 Speaker 2: that they were able to build four or five years ago. 116 00:06:03,360 --> 00:06:07,320 Speaker 2: Is that unique to the city, No, it's not unique. 117 00:06:07,360 --> 00:06:09,600 Speaker 2: I mean I suppose there was one example that was 118 00:06:09,640 --> 00:06:12,720 Speaker 2: given to me around Collingwood. So Collingwood, you can still 119 00:06:12,800 --> 00:06:15,920 Speaker 2: buy a two bedroom apartment relatively new for around six 120 00:06:16,160 --> 00:06:20,520 Speaker 2: six hundred and six fifty thousand. But apparently when developers 121 00:06:20,520 --> 00:06:23,240 Speaker 2: are trying to build new stock in Collingwood, they're having 122 00:06:23,240 --> 00:06:25,760 Speaker 2: it's costing them around nine hundred thousand to build a 123 00:06:25,760 --> 00:06:29,719 Speaker 2: similar apartment. So there's a real mismatch at the moment nationally, 124 00:06:29,960 --> 00:06:33,680 Speaker 2: but showing up particularly in out of suburban areas where 125 00:06:33,680 --> 00:06:35,719 Speaker 2: we see a lot of new home builds, and also 126 00:06:35,760 --> 00:06:37,440 Speaker 2: in apartment markets. 127 00:06:37,680 --> 00:06:40,720 Speaker 1: And we talked about post we mentioned what was really 128 00:06:40,760 --> 00:06:43,000 Speaker 1: strong of what was weakest, what would be the situation 129 00:06:43,160 --> 00:06:46,160 Speaker 1: Victoria in terms of geography, in. 130 00:06:46,160 --> 00:06:48,440 Speaker 2: Terms of the performance, I mean, regional Victoria is not 131 00:06:48,480 --> 00:06:51,040 Speaker 2: doing too well, so we are seeing a lot of 132 00:06:51,080 --> 00:06:54,320 Speaker 2: weakness in places like Ballarat and Bendigo. 133 00:06:54,360 --> 00:06:55,000 Speaker 1: At the moment. 134 00:06:55,480 --> 00:06:59,080 Speaker 2: Mornington Peninsula is fairly weak, but prices did move very 135 00:06:59,160 --> 00:07:02,839 Speaker 2: quickly during the panic. So I think Victoria's I mean 136 00:07:02,920 --> 00:07:06,279 Speaker 2: one to watch. I mean, certainly a market that's probably 137 00:07:06,360 --> 00:07:09,240 Speaker 2: more more affordable relative to its long term fundamentals and 138 00:07:09,720 --> 00:07:12,040 Speaker 2: some of the other markets, but he's going through a 139 00:07:12,080 --> 00:07:14,080 Speaker 2: bit of a rough patch just to go. 140 00:07:14,080 --> 00:07:16,040 Speaker 1: Back up again if you like. To the national picture, 141 00:07:16,720 --> 00:07:21,080 Speaker 1: like our price is generally slowing on a nation mode basis, 142 00:07:21,360 --> 00:07:24,360 Speaker 1: on a month to month basis price growth. 143 00:07:24,440 --> 00:07:26,560 Speaker 2: Yeah, look at it just I mean, I suppose if 144 00:07:26,600 --> 00:07:32,320 Speaker 2: you look on average, things are being dragged up by Queensland, Adelaide, Perth, 145 00:07:32,840 --> 00:07:35,200 Speaker 2: Sydney's sort of hovering the middle, and then you've got 146 00:07:35,360 --> 00:07:39,520 Speaker 2: Hobart and Melbourne, which are both pretty weak at the moment. 147 00:07:39,840 --> 00:07:41,800 Speaker 2: It's hard to tell. I mean, we're not really seeing 148 00:07:42,040 --> 00:07:45,760 Speaker 2: a slowing but there does seem to be I guess 149 00:07:46,200 --> 00:07:50,040 Speaker 2: a sense of cautiousness, and I don't think it's necessarily 150 00:07:50,440 --> 00:07:54,200 Speaker 2: to do with the threat of interest rate rises. I 151 00:07:54,200 --> 00:07:58,120 Speaker 2: think it's probably just fatigue around how high interest rates 152 00:07:58,160 --> 00:07:58,840 Speaker 2: are at the moment. 153 00:07:58,960 --> 00:08:02,520 Speaker 1: But isn't it interesting that the concern is interest rate rises, 154 00:08:03,080 --> 00:08:07,200 Speaker 1: how far we've moved from potential of interest rate cuts. 155 00:08:07,360 --> 00:08:11,200 Speaker 2: I know one inflation point and we've since shut it 156 00:08:11,320 --> 00:08:11,720 Speaker 2: through US. 157 00:08:11,760 --> 00:08:14,280 Speaker 1: I suppose on the broader picture, there's also anyone who 158 00:08:14,320 --> 00:08:17,920 Speaker 1: would be looking at global economy or global economics knows 159 00:08:17,960 --> 00:08:21,920 Speaker 1: that rates are lifting. They are lifting in Europe, everything 160 00:08:21,960 --> 00:08:24,480 Speaker 1: in the US points I know they were due to 161 00:08:24,520 --> 00:08:27,200 Speaker 1: have a cut, But I mean, obviously, if Trump was 162 00:08:27,240 --> 00:08:29,600 Speaker 1: to win and today, on today's numbers, it looks like 163 00:08:29,640 --> 00:08:33,040 Speaker 1: he will, then that he's an inflationary figure. He's going 164 00:08:33,080 --> 00:08:34,839 Speaker 1: to lift. The interest rates are going to go higher 165 00:08:34,880 --> 00:08:37,240 Speaker 1: under him. It wasn't so much a drama than Ice time. 166 00:08:37,240 --> 00:08:39,160 Speaker 1: But then the last time was two sixteen, and rates 167 00:08:39,160 --> 00:08:42,200 Speaker 1: were flat on the floor when he came into office, 168 00:08:42,200 --> 00:08:44,599 Speaker 1: so they started to lift from there. I suppose a 169 00:08:44,640 --> 00:08:47,040 Speaker 1: better way of covering that for listeners is to ask you, 170 00:08:48,480 --> 00:08:52,480 Speaker 1: do you think these concerns about rates going up? Are valid? Look? 171 00:08:52,520 --> 00:08:55,640 Speaker 2: I don't. I think it's likely the next move will 172 00:08:55,679 --> 00:08:58,200 Speaker 2: be a cut, but at this point, it's unlikely to 173 00:08:58,240 --> 00:09:01,880 Speaker 2: happen into early next So if we have a look 174 00:09:01,920 --> 00:09:04,319 Speaker 2: globally what's happening. Rates are being cut. So we saw 175 00:09:04,400 --> 00:09:06,520 Speaker 2: cuts in Europe, We're probably going to see cuts in 176 00:09:06,559 --> 00:09:10,040 Speaker 2: the UK in the next month or so. The US 177 00:09:10,120 --> 00:09:13,080 Speaker 2: will probably cut sometime this year. 178 00:09:13,240 --> 00:09:14,880 Speaker 1: Do you think that's the version? 179 00:09:14,920 --> 00:09:17,000 Speaker 2: Yeah, I think so. I mean their inflation number came 180 00:09:17,080 --> 00:09:20,840 Speaker 2: in at a level which they could start to cut. 181 00:09:20,920 --> 00:09:23,680 Speaker 2: But I think, as you said that the challenge in 182 00:09:23,679 --> 00:09:27,600 Speaker 2: the US, if we do see Trump being elected, he 183 00:09:27,720 --> 00:09:30,120 Speaker 2: will a lot of the policies he has in place 184 00:09:30,200 --> 00:09:34,240 Speaker 2: will overheat that economy and that inflationary pressure will affect 185 00:09:34,320 --> 00:09:36,160 Speaker 2: us as well. I think it's still a while away 186 00:09:36,200 --> 00:09:38,720 Speaker 2: before that happens, and hopefully we squeeze a cut in 187 00:09:38,800 --> 00:09:42,640 Speaker 2: before then, but it is obviously probably the major risk 188 00:09:42,760 --> 00:09:44,840 Speaker 2: to Australia, the Australian economy. 189 00:09:45,840 --> 00:09:47,160 Speaker 1: What would you what would you say to people who 190 00:09:47,240 --> 00:09:51,319 Speaker 1: listening to the show who aren't in too deep economics, 191 00:09:51,360 --> 00:09:54,319 Speaker 1: but we're just like to know what's the outlook for it? 192 00:09:54,360 --> 00:09:55,360 Speaker 1: It's what would you see? 193 00:09:55,760 --> 00:09:57,920 Speaker 2: The big challenge at the moment is inflation isn't coming 194 00:09:57,960 --> 00:10:01,680 Speaker 2: down as quickly as we hoped, and that's really what 195 00:10:01,920 --> 00:10:05,400 Speaker 2: changed the outlook back in April with that inflation came 196 00:10:05,480 --> 00:10:08,760 Speaker 2: in a lot higher than expected, and the outlook shifted 197 00:10:08,800 --> 00:10:11,800 Speaker 2: from an October cut to an October twenty four cut 198 00:10:11,840 --> 00:10:15,199 Speaker 2: to an October twenty five cut. Inflation is coming down. 199 00:10:15,360 --> 00:10:18,640 Speaker 2: I think if you are someone concerned about rates, you 200 00:10:18,720 --> 00:10:21,280 Speaker 2: obviously should be watching the inflation number very carefully. The 201 00:10:21,360 --> 00:10:23,880 Speaker 2: Reserve Bank games to keep it between two and three percent, 202 00:10:24,040 --> 00:10:26,920 Speaker 2: so as it does get closer to that three percent mark, 203 00:10:26,960 --> 00:10:29,040 Speaker 2: that's the point at which we will hopefully see a 204 00:10:29,080 --> 00:10:29,640 Speaker 2: right cut. 205 00:10:29,960 --> 00:10:33,920 Speaker 1: Okay, hopefully we don't know, folks. That is narrator who 206 00:10:33,960 --> 00:10:36,480 Speaker 1: is chief economist at Reefways. That's as good a voice 207 00:10:36,679 --> 00:10:39,679 Speaker 1: and an authoritative comment on that issue as we were 208 00:10:39,800 --> 00:10:41,679 Speaker 1: likely to get. All right, take sure break and we'll 209 00:10:41,720 --> 00:10:50,880 Speaker 1: be back in a moment. Hello, Welcome back to the 210 00:10:50,920 --> 00:10:54,720 Speaker 1: Australians Money Puzzle. I'm James Kirby, Well, editor at The Australian, 211 00:10:54,720 --> 00:10:57,920 Speaker 1: and I'm talking to Narratorconmosty, who is the chief economist 212 00:10:58,240 --> 00:11:01,680 Speaker 1: at Reethwhite, someone I've known long time when she was 213 00:11:01,840 --> 00:11:04,240 Speaker 1: an economist in different positions, but always in this area 214 00:11:04,280 --> 00:11:08,200 Speaker 1: and always interested in national economics, particularly in property, and 215 00:11:08,320 --> 00:11:10,320 Speaker 1: we've talked on and off for a long time about this. 216 00:11:10,760 --> 00:11:12,440 Speaker 1: I don't know the last time you were on the show. 217 00:11:12,800 --> 00:11:15,200 Speaker 1: One of the issues certainly would have been about the 218 00:11:15,280 --> 00:11:18,200 Speaker 1: idea of a mortgage cliff. And this was the course, 219 00:11:18,240 --> 00:11:22,120 Speaker 1: if everyone recalls, there was this extraordinary period which is 220 00:11:22,200 --> 00:11:25,760 Speaker 1: now roughly four or five years ago, which is almost 221 00:11:25,760 --> 00:11:28,320 Speaker 1: hard to believe that it happened now, of course, but 222 00:11:28,440 --> 00:11:31,280 Speaker 1: it did where rates were I mean, rates didn't just 223 00:11:31,280 --> 00:11:34,240 Speaker 1: go to zero, they went negative around the world and 224 00:11:34,280 --> 00:11:36,839 Speaker 1: people were paying people to have their money banks. I mean, 225 00:11:36,920 --> 00:11:38,559 Speaker 1: it was just in a strange way. It was actually 226 00:11:38,559 --> 00:11:41,840 Speaker 1: a scary time because it was so unnatural that rates 227 00:11:42,080 --> 00:11:45,360 Speaker 1: were solo in any event. Slowly but surely, the news 228 00:11:45,400 --> 00:11:48,160 Speaker 1: percolated through to the wide republic, not just property investors, 229 00:11:48,160 --> 00:11:51,400 Speaker 1: but everybody I think in Australia was damn aware that 230 00:11:51,480 --> 00:11:54,240 Speaker 1: rates were super super low, that our long term average 231 00:11:54,320 --> 00:11:57,120 Speaker 1: might be about six to nine would that be about right? 232 00:11:57,760 --> 00:12:00,120 Speaker 1: And here they were at two percent or whatever. The 233 00:12:00,120 --> 00:12:02,760 Speaker 1: banks were offering not just two percent, but fixed term. 234 00:12:03,160 --> 00:12:06,280 Speaker 1: Hundreds of thousands of people took loans fixed terms as 235 00:12:06,280 --> 00:12:08,320 Speaker 1: long as they could three years, five years. At these 236 00:12:08,400 --> 00:12:12,680 Speaker 1: rates two percent, and now the last of them, the 237 00:12:12,720 --> 00:12:15,520 Speaker 1: last of the Mohicans, the last of these very lucky people, 238 00:12:15,960 --> 00:12:19,319 Speaker 1: are getting their little notes from the bank saying hello, 239 00:12:19,400 --> 00:12:21,680 Speaker 1: piece of news for you. Your mortgage, which is currently 240 00:12:21,720 --> 00:12:25,440 Speaker 1: two will go to what six seven? Like that overnight. 241 00:12:25,559 --> 00:12:28,560 Speaker 1: It's tough. It's tough. But what I want to ask 242 00:12:28,600 --> 00:12:30,520 Speaker 1: you is what's that a bit of a wind up? 243 00:12:30,520 --> 00:12:33,200 Speaker 1: The whole mortgage cliff thing? Because we were told I 244 00:12:33,320 --> 00:12:35,720 Speaker 1: thought to myself, this is gonna be this is going 245 00:12:35,800 --> 00:12:38,720 Speaker 1: to be trouble when these people come after mortgages. What happened? 246 00:12:39,240 --> 00:12:40,840 Speaker 2: I think there's a few things. I think the first 247 00:12:40,880 --> 00:12:43,160 Speaker 2: one is that people saved a lot of money during 248 00:12:43,200 --> 00:12:46,640 Speaker 2: the pandemic, and so we have seen people spending down 249 00:12:46,880 --> 00:12:49,320 Speaker 2: those savings, which is obviously unfortunate. 250 00:12:49,480 --> 00:12:51,640 Speaker 1: So they had a savings buffer and the banks talked 251 00:12:51,640 --> 00:12:53,319 Speaker 1: about that, but they don't talk about it now because 252 00:12:53,320 --> 00:12:53,800 Speaker 1: they're gone. 253 00:12:53,840 --> 00:12:54,280 Speaker 2: They're gone. 254 00:12:54,480 --> 00:12:56,400 Speaker 1: Yeah, time passes the same. 255 00:12:56,520 --> 00:12:59,520 Speaker 2: That's good. I think that the second factor was that 256 00:12:59,600 --> 00:13:03,120 Speaker 2: banks became super profitable as interest rates started to rise. 257 00:13:03,160 --> 00:13:05,240 Speaker 2: And if you have a look at Australian banks, they 258 00:13:05,240 --> 00:13:08,800 Speaker 2: made thirty billion worth profit over the past twelve months, 259 00:13:08,840 --> 00:13:12,199 Speaker 2: so they have been able to be fairly not lenient, 260 00:13:12,200 --> 00:13:14,000 Speaker 2: but they have been able to work with customers more 261 00:13:14,040 --> 00:13:17,800 Speaker 2: easily than say, following the global financial crisis, when that 262 00:13:17,920 --> 00:13:20,120 Speaker 2: money wasn't available when we talked to banks. They have 263 00:13:20,240 --> 00:13:23,560 Speaker 2: been doing things like extending loans. They've been putting people 264 00:13:23,600 --> 00:13:28,040 Speaker 2: on interest only, basically anything to try and keep their customers. 265 00:13:28,040 --> 00:13:30,640 Speaker 2: I guess fundamentally, so what is going on? Is this 266 00:13:30,679 --> 00:13:32,960 Speaker 2: what people are doing? So I'm thinking about someone who 267 00:13:33,000 --> 00:13:36,040 Speaker 2: has a mortgage that is half a million or a million. 268 00:13:37,080 --> 00:13:40,040 Speaker 2: The rate was two percent, suddenly it's six. Their salary, 269 00:13:40,120 --> 00:13:44,960 Speaker 2: whatever that salary is, hasn't changed, Their partner's salary hasn't changed, apparently, 270 00:13:45,200 --> 00:13:47,280 Speaker 2: And I haven't seen the numbers. Maybe you've seen the numbers. 271 00:13:47,600 --> 00:13:49,840 Speaker 2: People are doing all sorts of things. They're extending the 272 00:13:49,920 --> 00:13:53,800 Speaker 2: length of their mortgage, that's one, or they're moving to 273 00:13:54,720 --> 00:13:58,000 Speaker 2: interest only. Could you explain first of all that why 274 00:13:58,040 --> 00:13:59,599 Speaker 2: people are doing that and what it might mean for 275 00:13:59,640 --> 00:14:02,520 Speaker 2: the mark I suppose they're doing it, and we're obviously 276 00:14:02,559 --> 00:14:05,880 Speaker 2: doing it so they pay less, they can continue with 277 00:14:06,360 --> 00:14:08,800 Speaker 2: the type of life they have and keep their homes. 278 00:14:08,880 --> 00:14:11,800 Speaker 2: I think fundamentally, when we looked at what was happening 279 00:14:11,800 --> 00:14:15,640 Speaker 2: when rates started to rise, we did expect two sorts 280 00:14:15,679 --> 00:14:18,200 Speaker 2: of properties to sell more rapidly, and they were holiday 281 00:14:18,240 --> 00:14:22,200 Speaker 2: homes and investment properties. And holiday homes started to come 282 00:14:22,240 --> 00:14:24,840 Speaker 2: to market really quickly as interest rates started to write 283 00:14:25,160 --> 00:14:27,240 Speaker 2: at that point, I mean that was probably a couple 284 00:14:27,240 --> 00:14:29,280 Speaker 2: of years ago. Now we started to see New South Wales, 285 00:14:29,320 --> 00:14:32,760 Speaker 2: South Coast, Mornington Peninsula, a lot of those markets starting 286 00:14:32,760 --> 00:14:36,720 Speaker 2: to see a rise in listings and prices softening. Investment 287 00:14:36,720 --> 00:14:40,440 Speaker 2: properties took a bit longer, I think because probably because 288 00:14:40,600 --> 00:14:44,040 Speaker 2: rents rose increased a bit to sort of offset those 289 00:14:44,160 --> 00:14:47,560 Speaker 2: increased mortgage free payments, and they were fully occupied and 290 00:14:47,560 --> 00:14:51,080 Speaker 2: they were fully occupied. Yeah, absolutely, so that took a 291 00:14:51,080 --> 00:14:53,320 Speaker 2: bit longer. But I mean, if you look in Melbourne 292 00:14:53,360 --> 00:14:56,800 Speaker 2: at the moment, that's probably a big factors that there 293 00:14:56,800 --> 00:14:59,720 Speaker 2: are a lot of investment properties coming to market because 294 00:15:00,400 --> 00:15:02,560 Speaker 2: you don't I mean, you need your family home, you 295 00:15:02,600 --> 00:15:05,000 Speaker 2: need somewhere to live, and you need shelter. Rental market's 296 00:15:05,080 --> 00:15:07,640 Speaker 2: very tough, so the alternative isn't much better. But if 297 00:15:07,680 --> 00:15:09,840 Speaker 2: you've got an investment property, it's probably something that you 298 00:15:09,880 --> 00:15:12,200 Speaker 2: can sell and free up a bit. 299 00:15:12,040 --> 00:15:13,640 Speaker 1: Of So people are throwing in the towel. 300 00:15:14,560 --> 00:15:17,240 Speaker 2: Yeah. I mean, look, it's not super it's not like 301 00:15:17,480 --> 00:15:21,360 Speaker 2: catastrophic conditions, but it would certainly be the case so 302 00:15:21,400 --> 00:15:23,360 Speaker 2: that they're the properties to go. So I think that's 303 00:15:23,400 --> 00:15:24,120 Speaker 2: the other fact. 304 00:15:24,000 --> 00:15:27,280 Speaker 1: When you extend your mortgage. So let's say I'm on 305 00:15:27,320 --> 00:15:30,840 Speaker 1: a twenty five year or let's say I have twenty 306 00:15:30,840 --> 00:15:32,960 Speaker 1: five years after my mortgage and I go back into 307 00:15:33,000 --> 00:15:34,600 Speaker 1: the bank and I say, okay, open it back up 308 00:15:34,640 --> 00:15:36,760 Speaker 1: to thirty. So my mortgage. 309 00:15:36,480 --> 00:15:40,600 Speaker 2: Drops, your repayments drop. Yeah, but I end up paying 310 00:15:40,600 --> 00:15:43,760 Speaker 2: more to the bank. You do people, Yeah, I mean, 311 00:15:43,880 --> 00:15:46,280 Speaker 2: I mean to the extent that I think some of 312 00:15:46,320 --> 00:15:48,760 Speaker 2: the bank's now offering up to forty year mortgages, which 313 00:15:48,920 --> 00:15:52,560 Speaker 2: is quite extraordinary given that you'd have to be quite 314 00:15:52,600 --> 00:15:55,560 Speaker 2: young to be able to pay that off in a 315 00:15:55,640 --> 00:15:56,560 Speaker 2: working lifespame. 316 00:15:56,640 --> 00:15:58,640 Speaker 1: Have you ever seen them before in the market? Not 317 00:15:58,720 --> 00:16:02,120 Speaker 1: forty years? No, that that is new, but interesting. Who's 318 00:16:02,160 --> 00:16:02,520 Speaker 1: doing it? 319 00:16:02,560 --> 00:16:05,080 Speaker 2: I think CBA. Look at that's a few months ago. 320 00:16:05,120 --> 00:16:07,000 Speaker 2: I heard that, but it'd be capable of it. I 321 00:16:07,000 --> 00:16:09,960 Speaker 2: haven't tried to access one, but I have heard that 322 00:16:10,000 --> 00:16:11,040 Speaker 2: they are offering them. 323 00:16:11,360 --> 00:16:13,240 Speaker 1: I don't know, I mean, i'd see difference between forty 324 00:16:13,240 --> 00:16:17,760 Speaker 1: and thirty really, I mean, they're both inconceivably long when 325 00:16:17,800 --> 00:16:20,800 Speaker 1: you're starting playing a mortgage. But the point I want 326 00:16:20,800 --> 00:16:24,280 Speaker 1: to make to listeners is be careful on this. Nothing 327 00:16:24,360 --> 00:16:25,800 Speaker 1: to do with or not do it, but to be 328 00:16:25,840 --> 00:16:29,600 Speaker 1: aware that, for instance, very roughly, if you do go 329 00:16:29,640 --> 00:16:31,920 Speaker 1: from a twenty five year mortgage to a thirty year mortgage, 330 00:16:31,960 --> 00:16:34,680 Speaker 1: and your monthly mortgage does go down by whatever it 331 00:16:34,760 --> 00:16:36,320 Speaker 1: might be, put a number on it, one hundred or 332 00:16:36,320 --> 00:16:39,440 Speaker 1: two hundred a month. The thing is that, of course 333 00:16:39,480 --> 00:16:42,200 Speaker 1: the mortgage itself swells on the fire side, it goes 334 00:16:42,240 --> 00:16:44,880 Speaker 1: up by whatever. On a very rough figures, an average 335 00:16:44,920 --> 00:16:46,520 Speaker 1: mortgage on an average house might go up by one 336 00:16:46,560 --> 00:16:48,880 Speaker 1: hundred grand. Are you willing to borrow another one hundred 337 00:16:48,880 --> 00:16:50,760 Speaker 1: grand at the rates they have today? Because that's what 338 00:16:50,760 --> 00:16:52,880 Speaker 1: you're saying you're going to do. It's tough if you 339 00:16:52,920 --> 00:16:55,280 Speaker 1: have to make that decision. It's nice to know there 340 00:16:55,280 --> 00:16:58,800 Speaker 1: are options there for people on fixed salaries especially. It's 341 00:16:58,840 --> 00:17:00,880 Speaker 1: great to know there's another way to mortgage, and that's 342 00:17:00,880 --> 00:17:06,560 Speaker 1: schools for investors too. Interest only then investors traditionally like them. Anyway, 343 00:17:07,320 --> 00:17:09,359 Speaker 1: I would have thought banks wouldn't hand them out too 344 00:17:09,440 --> 00:17:11,000 Speaker 1: easy to owner occupiers. 345 00:17:12,280 --> 00:17:15,159 Speaker 2: Again, I think it's a bit of the last resort option. 346 00:17:15,480 --> 00:17:17,560 Speaker 2: I mean, banks have spent a lot of money getting 347 00:17:17,600 --> 00:17:21,480 Speaker 2: customers over the last decade or so, so I don't 348 00:17:21,480 --> 00:17:23,680 Speaker 2: want to lose them now that I also don't want 349 00:17:23,680 --> 00:17:26,840 Speaker 2: to lose them given that rates have probably peaked and 350 00:17:26,960 --> 00:17:30,880 Speaker 2: rates probably will come down next year. So I think 351 00:17:31,000 --> 00:17:34,159 Speaker 2: there's a view that now is probably the worst. It 352 00:17:34,200 --> 00:17:37,159 Speaker 2: will get better. So better to yeah, better to get 353 00:17:37,200 --> 00:17:38,040 Speaker 2: people through. 354 00:17:38,560 --> 00:17:41,119 Speaker 1: Again with the interest only. It's kind of similar, isn't it. 355 00:17:41,240 --> 00:17:44,879 Speaker 1: You say, Okay, it's interest only. Now it's not princiville interest. 356 00:17:45,040 --> 00:17:46,560 Speaker 1: That's great. We don't have to pay as much each 357 00:17:46,640 --> 00:17:49,520 Speaker 1: month as we used to. But just beware you are 358 00:17:49,560 --> 00:17:51,320 Speaker 1: like as Stewart Ween said on the show, you are 359 00:17:51,400 --> 00:17:54,360 Speaker 1: kicking the can down the road. Because similarly, if you're 360 00:17:54,359 --> 00:17:56,680 Speaker 1: not paying out the principal, guess what it sits there. 361 00:17:57,200 --> 00:17:58,680 Speaker 1: It's still there at the end of the year. So 362 00:17:58,720 --> 00:18:00,200 Speaker 1: when you get to the end of the year, say 363 00:18:00,280 --> 00:18:03,640 Speaker 1: what's changed on the mortgage? Nothing, because all you did 364 00:18:03,760 --> 00:18:07,359 Speaker 1: was pay the interests. And you really should try and 365 00:18:07,400 --> 00:18:10,320 Speaker 1: think these things through if you're going to do it now. 366 00:18:10,359 --> 00:18:11,880 Speaker 1: One the other thing I want to ask you about 367 00:18:12,000 --> 00:18:15,040 Speaker 1: NDA was about our banks and how they're linked with 368 00:18:15,600 --> 00:18:18,320 Speaker 1: the home markets. Here we go, come Well Bank is 369 00:18:18,320 --> 00:18:20,920 Speaker 1: about one hundred and thirty dollars now it's two hundred 370 00:18:20,960 --> 00:18:24,680 Speaker 1: and twenty five billion dollar bank thereabouts is past PHP 371 00:18:24,840 --> 00:18:27,440 Speaker 1: is the biggest stock in the Australian stock market. It's 372 00:18:27,480 --> 00:18:30,600 Speaker 1: also the nation's biggest lender. Is the biggest mortgage bank. 373 00:18:31,000 --> 00:18:34,520 Speaker 1: So there's a real nexus between mortgages, the health of 374 00:18:34,520 --> 00:18:37,280 Speaker 1: the property market and the health of the banks. The 375 00:18:37,320 --> 00:18:40,439 Speaker 1: banks in turn dominate the top ten. It's five of 376 00:18:40,440 --> 00:18:42,680 Speaker 1: them in the ten if you include McQuary, and the 377 00:18:42,760 --> 00:18:45,880 Speaker 1: number one is come Whit Banks. So what I'm saying 378 00:18:45,920 --> 00:18:49,639 Speaker 1: to you is are the banks kind of becoming a 379 00:18:49,720 --> 00:18:51,960 Speaker 1: real proxy for the housing market itself? 380 00:18:52,840 --> 00:18:55,720 Speaker 2: I mean bank the Australian banks are very sensitive to 381 00:18:55,840 --> 00:18:59,560 Speaker 2: the property market. I think the common Wealth bank pricing 382 00:18:59,600 --> 00:19:05,479 Speaker 2: though probably driven in part by offshore buyers of Commonwealth 383 00:19:05,520 --> 00:19:08,600 Speaker 2: Bank shares, and I think a lot of the uncertainty 384 00:19:08,600 --> 00:19:13,160 Speaker 2: and instability overseas is making some Australian stocks seem quite safe. 385 00:19:13,359 --> 00:19:16,320 Speaker 1: Can they go to ask you something? All the major brokers, 386 00:19:16,320 --> 00:19:20,960 Speaker 1: including the global ones, Morgan Stanley UBS have sell notes. Yes, 387 00:19:23,359 --> 00:19:26,399 Speaker 1: that's right, and I don't want to see who it 388 00:19:26,520 --> 00:19:29,119 Speaker 1: is because I might get it wrong. But if all 389 00:19:29,200 --> 00:19:31,720 Speaker 1: the brokers, include the overseas brokers have said notes to 390 00:19:31,760 --> 00:19:34,440 Speaker 1: come with bank, does that mean that the offshore institutions 391 00:19:34,480 --> 00:19:35,919 Speaker 1: ignore them when they bought the stuff. 392 00:19:36,640 --> 00:19:38,320 Speaker 2: I don't think they would ignore them. I think it 393 00:19:38,359 --> 00:19:42,080 Speaker 2: would be compared to what else they would be looking 394 00:19:42,119 --> 00:19:45,159 Speaker 2: to buy. So I think it's always a matter. I mean, 395 00:19:45,160 --> 00:19:47,800 Speaker 2: it's looking at commercial properly, looking at the office market 396 00:19:47,880 --> 00:19:50,080 Speaker 2: that if you're looking into buy an office building in 397 00:19:50,119 --> 00:19:52,320 Speaker 2: the US at the moment, they seem a lot less 398 00:19:52,800 --> 00:19:55,560 Speaker 2: secure than one in Australia. We have offshore buyers looking 399 00:19:55,560 --> 00:19:58,359 Speaker 2: at Australian office markets, we think very high vacancies and 400 00:19:58,400 --> 00:20:01,959 Speaker 2: rents aren't going anywhere. But at the same time, compared 401 00:20:02,000 --> 00:20:04,280 Speaker 2: to other parts of the world, it's pretty good. So 402 00:20:05,040 --> 00:20:07,000 Speaker 2: I think it's probably that, I think, and I think 403 00:20:07,000 --> 00:20:09,920 Speaker 2: the other thing too is that the US banks came 404 00:20:10,000 --> 00:20:13,159 Speaker 2: in at very high profit number, came in with very 405 00:20:13,240 --> 00:20:16,520 Speaker 2: high profit numbers in their results season last week, so 406 00:20:16,560 --> 00:20:19,960 Speaker 2: I think that that possibly played into it. But it'll 407 00:20:20,000 --> 00:20:22,080 Speaker 2: be into August, I think is when we're going to 408 00:20:22,119 --> 00:20:25,760 Speaker 2: see the results. So I think that's that point will 409 00:20:25,800 --> 00:20:27,520 Speaker 2: get a better idea. But you're right, I mean, the 410 00:20:27,600 --> 00:20:30,760 Speaker 2: sensitivity to the mortgage market is the issue. 411 00:20:31,240 --> 00:20:34,600 Speaker 1: And has the sensitivity to the mortgage market increased. 412 00:20:35,040 --> 00:20:38,359 Speaker 2: Over a long time period. Absolutely, yeah, it must have. 413 00:20:38,440 --> 00:20:41,920 Speaker 2: I think over recent past twelve months. Probably not but definitely. 414 00:20:42,000 --> 00:20:44,240 Speaker 2: I mean if you look at as you said, CBA, 415 00:20:44,359 --> 00:20:47,360 Speaker 2: the biggest home loan lender, they would be very sensitive 416 00:20:47,400 --> 00:20:49,920 Speaker 2: to what's happening to housing. I mean also, I suppose 417 00:20:49,920 --> 00:20:52,240 Speaker 2: the other thing, the bounce back in house prices would 418 00:20:52,240 --> 00:20:54,840 Speaker 2: have benefited them as well. That we didn't see that 419 00:20:55,040 --> 00:20:58,959 Speaker 2: crash that was that many predicted, so I suppose that 420 00:20:59,040 --> 00:21:00,920 Speaker 2: was also a fact the plight into it. 421 00:21:01,080 --> 00:21:03,800 Speaker 1: Okay, just before we go to questions, do you is 422 00:21:03,840 --> 00:21:06,280 Speaker 1: there a number you use in terms of what last 423 00:21:06,320 --> 00:21:09,240 Speaker 1: year Australian house prices nashally And it's an average obviously 424 00:21:09,240 --> 00:21:11,640 Speaker 1: it's nationwide so might tell us so much. But last 425 00:21:11,720 --> 00:21:17,240 Speaker 1: year calendar two three prices about nine percent? 426 00:21:17,400 --> 00:21:19,879 Speaker 2: Is that right across the board? And what sort of 427 00:21:19,960 --> 00:21:22,800 Speaker 2: number are you think in this year it's it's probably 428 00:21:22,840 --> 00:21:24,800 Speaker 2: a little bit. I'm I don't know, I'm pulling a 429 00:21:24,880 --> 00:21:27,639 Speaker 2: number seven percent, but then you've got zero from Melbourne 430 00:21:27,680 --> 00:21:30,080 Speaker 2: twenty five percent for Berth. So it's a it's a 431 00:21:30,119 --> 00:21:30,879 Speaker 2: hot it's a. 432 00:21:30,920 --> 00:21:33,879 Speaker 1: Leverage that may not be very useful, but we have 433 00:21:33,920 --> 00:21:36,119 Speaker 1: to use it. It's a it's like my joke about 434 00:21:36,119 --> 00:21:41,080 Speaker 1: the average January temperature in Melbourne twenty six degrees, except 435 00:21:41,119 --> 00:21:44,880 Speaker 1: it's never twenty six degrees, sixteen or thirty six. Yeah, 436 00:21:44,960 --> 00:21:48,040 Speaker 1: so same sort of thing. So I suppose it's a 437 00:21:48,119 --> 00:21:50,760 Speaker 1: time for those nationwide figures really don't tell us a lot. 438 00:21:50,800 --> 00:21:54,960 Speaker 1: If you're sitting in Perth, then you should know that 439 00:21:55,000 --> 00:21:57,879 Speaker 1: there's double figures there. They're doing twenty percent plus. And 440 00:21:57,920 --> 00:21:59,680 Speaker 1: if you're sitting in Melbourne, you should know that there 441 00:21:59,680 --> 00:22:03,159 Speaker 1: are of the city actually going backwards. And that's not 442 00:22:03,200 --> 00:22:05,359 Speaker 1: a surprise because I think the entire city went backwards 443 00:22:05,400 --> 00:22:10,159 Speaker 1: in the first quarter this year, just the first quarter. Yeah, 444 00:22:10,920 --> 00:22:14,040 Speaker 1: so everyone that comes on the show reckons that's not 445 00:22:14,040 --> 00:22:16,760 Speaker 1: going to last forever, that long terms, that it's actually 446 00:22:16,840 --> 00:22:20,679 Speaker 1: an investment opportunity. We should remind people of that. All Right, 447 00:22:20,720 --> 00:22:22,040 Speaker 1: we'll take a break and we'll be back with some 448 00:22:22,080 --> 00:22:33,520 Speaker 1: great questions. Hello and welcome to The Australian's Money Puzzle. 449 00:22:33,560 --> 00:22:38,399 Speaker 1: I'm James Kirby with narrativeconospy, and we're talking all things property, 450 00:22:38,440 --> 00:22:42,080 Speaker 1: and we're also talking about not just property, house prices, 451 00:22:42,160 --> 00:22:46,560 Speaker 1: investment properties. But you know the degree to which our 452 00:22:46,560 --> 00:22:50,399 Speaker 1: big banks are dependent on the health, if you like, 453 00:22:50,520 --> 00:22:53,560 Speaker 1: of the property market, and not just our big banks, 454 00:22:53,600 --> 00:22:56,840 Speaker 1: but our entire market. Because the big banks were always 455 00:22:56,920 --> 00:22:59,600 Speaker 1: important in the Australian stock exchange, and they might have 456 00:22:59,640 --> 00:23:03,200 Speaker 1: been ranging between fifteen and twenty percent of the whole thing, 457 00:23:03,440 --> 00:23:06,480 Speaker 1: but in recent times they've just become so powerful and 458 00:23:06,520 --> 00:23:09,159 Speaker 1: Comebank has now ascended, if you like, over BHP to 459 00:23:09,160 --> 00:23:10,919 Speaker 1: be the biggest stock in the market. So keep that 460 00:23:10,960 --> 00:23:14,600 Speaker 1: in mind, just how powerful our banks are, but also 461 00:23:14,680 --> 00:23:18,560 Speaker 1: how they're very closely linked with house prices, so you 462 00:23:18,600 --> 00:23:22,120 Speaker 1: can't really separate them anymore. Macquarie perhaps, but the other 463 00:23:22,200 --> 00:23:25,000 Speaker 1: four are very much I think it was Ashley Owen 464 00:23:25,080 --> 00:23:26,359 Speaker 1: said the other day who was on the show a 465 00:23:26,359 --> 00:23:29,080 Speaker 1: few weeks ago. He called them glorified building societies, which 466 00:23:29,119 --> 00:23:31,760 Speaker 1: is a bit severe, But I nobody's trying to say 467 00:23:31,800 --> 00:23:35,479 Speaker 1: that they are very dependent on house prices. Compared to 468 00:23:35,520 --> 00:23:37,760 Speaker 1: the American banks. Whatever that you might read about their 469 00:23:37,800 --> 00:23:40,399 Speaker 1: results the city or whatever, they're more like Macquarie than 470 00:23:40,400 --> 00:23:44,320 Speaker 1: they are like a combanks. Shall we say, okay, now questions, Beryl. 471 00:23:44,520 --> 00:23:46,800 Speaker 1: I purchased an apartment, I lived in there for five years, 472 00:23:46,840 --> 00:23:49,159 Speaker 1: I moved out, and I've been renting it for twenty years. 473 00:23:49,560 --> 00:23:51,920 Speaker 1: I'm now looking at downsizing from my home and moving 474 00:23:51,960 --> 00:23:54,239 Speaker 1: back into that apartment. I've heard if I move back 475 00:23:54,320 --> 00:23:56,080 Speaker 1: into this property and lived there for the rest of 476 00:23:56,119 --> 00:23:59,320 Speaker 1: my life, those who inherit this property are not liable 477 00:23:59,320 --> 00:24:01,520 Speaker 1: to pay CG if they then sell it. Is it 478 00:24:01,560 --> 00:24:03,280 Speaker 1: true that all those years that I rented out and 479 00:24:03,359 --> 00:24:07,160 Speaker 1: had consequence CGT liability are wiped out and we're off 480 00:24:07,160 --> 00:24:10,880 Speaker 1: the hook. Never advice, Beryl, and we'll get someone actually 481 00:24:10,920 --> 00:24:13,159 Speaker 1: to take a closer look at this in the weeks ahead. 482 00:24:13,200 --> 00:24:17,760 Speaker 1: But look very broadly, I'm sorry to say that CGT 483 00:24:17,880 --> 00:24:19,600 Speaker 1: is applicable if you rent out a property, it's an 484 00:24:19,600 --> 00:24:21,720 Speaker 1: investment property. So if you have a property, you have 485 00:24:21,760 --> 00:24:24,000 Speaker 1: it for five years, you live in it, you leave it, 486 00:24:24,200 --> 00:24:26,280 Speaker 1: you rent it out for ten years, you come back, 487 00:24:26,320 --> 00:24:27,719 Speaker 1: and you live in it for ten years. The ten 488 00:24:27,800 --> 00:24:29,960 Speaker 1: years that you rented it, it was an investment property 489 00:24:30,240 --> 00:24:33,840 Speaker 1: for those ten years in the life of the transaction. 490 00:24:34,160 --> 00:24:36,240 Speaker 1: When it comes to pass, when that house is ultimately 491 00:24:36,280 --> 00:24:39,679 Speaker 1: sold somewhere down the line, it's liable for CGT. I 492 00:24:39,680 --> 00:24:43,280 Speaker 1: would think on face value. This is not personal advice 493 00:24:43,359 --> 00:24:46,119 Speaker 1: in any ways. This is a general observation on properties 494 00:24:46,160 --> 00:24:48,960 Speaker 1: in that situation, and leave it with us and we 495 00:24:49,000 --> 00:24:51,080 Speaker 1: will take a second look at this one, because there's 496 00:24:51,119 --> 00:24:53,520 Speaker 1: all sorts of variations on this, like how is it held, 497 00:24:53,600 --> 00:24:56,480 Speaker 1: what's the ownership structure or for instance, these things can 498 00:24:56,600 --> 00:24:59,919 Speaker 1: vary if they're held in trusts, in your soul names, 499 00:25:00,040 --> 00:25:04,159 Speaker 1: self managed super fund. But CGT to an extent is 500 00:25:04,320 --> 00:25:08,200 Speaker 1: very hard to actually avoid, especially if a property was 501 00:25:08,240 --> 00:25:09,960 Speaker 1: run as an investment property for a period of time. 502 00:25:10,040 --> 00:25:12,320 Speaker 1: I'm speaking from my own experience there. Okay, we'll be 503 00:25:12,359 --> 00:25:14,840 Speaker 1: back to that one. That was general information for the 504 00:25:14,840 --> 00:25:18,359 Speaker 1: moment now, Lucy, I love the show on villa units. 505 00:25:18,440 --> 00:25:21,160 Speaker 1: Villa units. If you don't know what villa units are, folks, 506 00:25:22,240 --> 00:25:26,680 Speaker 1: they are those simple, often a red brick, single story 507 00:25:27,160 --> 00:25:30,360 Speaker 1: little unit developments that you get in every city in Australia. 508 00:25:30,560 --> 00:25:34,800 Speaker 1: They are not fashionable and they are highly valued. And 509 00:25:34,880 --> 00:25:36,840 Speaker 1: let me tell you, we've had several different people on 510 00:25:36,880 --> 00:25:40,160 Speaker 1: the show this year who said, villa units, that's where 511 00:25:40,200 --> 00:25:43,120 Speaker 1: the value is in Australia by them. Now people think 512 00:25:43,160 --> 00:25:45,200 Speaker 1: of them as little old ladies bringing out the bins 513 00:25:45,640 --> 00:25:47,800 Speaker 1: and all that sort of thing, which is true. But 514 00:25:48,160 --> 00:25:52,560 Speaker 1: I certainly understand the theory that it's land value and 515 00:25:52,560 --> 00:25:54,879 Speaker 1: you're buying land in the middle of the city with 516 00:25:55,119 --> 00:25:58,320 Speaker 1: three bedrooms and a garden and a garbage and hey, 517 00:25:58,480 --> 00:26:01,359 Speaker 1: so they're not the coolest thing around. But Lucy, I 518 00:26:01,400 --> 00:26:03,960 Speaker 1: think that the people on the show who said this 519 00:26:04,040 --> 00:26:06,280 Speaker 1: were on the right track. So Lucy says, I've always 520 00:26:06,320 --> 00:26:08,480 Speaker 1: ruled them out, and now I see them everywhere because 521 00:26:08,480 --> 00:26:11,000 Speaker 1: they've always been there. Lucy, my concern would be that 522 00:26:11,080 --> 00:26:14,760 Speaker 1: other residents are beyond your control and the development might 523 00:26:14,800 --> 00:26:18,560 Speaker 1: go downhill in the years after I purchase any thoughts. Yeah, 524 00:26:19,080 --> 00:26:22,080 Speaker 1: entirely possible. That's the thing. It's shared. It's shared, right, 525 00:26:22,119 --> 00:26:24,680 Speaker 1: the six invariably six. You look up the driveway, there's 526 00:26:24,680 --> 00:26:27,320 Speaker 1: three on the left, three on the right, and that's right. 527 00:26:27,359 --> 00:26:31,320 Speaker 1: You can't really control You can't control the behavior or 528 00:26:31,359 --> 00:26:34,000 Speaker 1: otherwise of other people in the complex. But that goes 529 00:26:34,040 --> 00:26:37,040 Speaker 1: for any anything that goes for anywhere you live an 530 00:26:37,119 --> 00:26:39,440 Speaker 1: ordinary street. You can't control the people next door. We'll 531 00:26:39,480 --> 00:26:42,320 Speaker 1: leave that one swinging out there any observations on that narrative. 532 00:26:42,359 --> 00:26:45,440 Speaker 1: Cana Speak, chief economist of Rae White Look, I think 533 00:26:45,640 --> 00:26:48,560 Speaker 1: often I would also have some sort of management. I 534 00:26:48,600 --> 00:26:50,760 Speaker 1: would have thought body corporate of some sort, So I 535 00:26:50,760 --> 00:26:53,720 Speaker 1: think that would probably be the area. Probably look at 536 00:26:53,720 --> 00:26:55,400 Speaker 1: the body corporate when you look. 537 00:26:55,280 --> 00:26:57,359 Speaker 2: To buy, and I agree. I think they're often in 538 00:26:57,480 --> 00:26:59,760 Speaker 2: very well located areas. So if you are looking to 539 00:26:59,800 --> 00:27:02,760 Speaker 2: get into a great suburb at a more affordable price point, 540 00:27:02,800 --> 00:27:04,120 Speaker 2: they're definitely worth looking at. 541 00:27:04,400 --> 00:27:08,040 Speaker 1: And I think you'll find that rather than neglect Lucy. 542 00:27:08,320 --> 00:27:10,560 Speaker 1: Often the issue is that there's people who are just 543 00:27:10,960 --> 00:27:15,800 Speaker 1: extremely interested in their body corporates. And I mentioned on 544 00:27:15,840 --> 00:27:18,440 Speaker 1: the show that, to our surprise, we ended up in 545 00:27:18,840 --> 00:27:21,880 Speaker 1: a set of villa units not that long ago when 546 00:27:21,920 --> 00:27:24,959 Speaker 1: we were renting because we were moving house and we 547 00:27:24,960 --> 00:27:27,240 Speaker 1: were building a house, and we wanted to rent near 548 00:27:27,280 --> 00:27:29,880 Speaker 1: the house that we were building, and on the street 549 00:27:29,960 --> 00:27:31,800 Speaker 1: there was a villa unit and we went in and 550 00:27:31,840 --> 00:27:34,760 Speaker 1: we lived there for a year, and we had a guy. 551 00:27:34,800 --> 00:27:37,040 Speaker 1: He had taken it upon himself to be the master 552 00:27:37,200 --> 00:27:39,760 Speaker 1: of the place, and if there was a weed out 553 00:27:39,800 --> 00:27:41,439 Speaker 1: of place, this guy would be out there in the 554 00:27:41,440 --> 00:27:43,800 Speaker 1: morning fixing it all up and He was absolutely all 555 00:27:43,840 --> 00:27:46,280 Speaker 1: over it, and it looked great, and it was a 556 00:27:46,359 --> 00:27:49,640 Speaker 1: very nice It was really good, and I always hold 557 00:27:49,720 --> 00:27:51,879 Speaker 1: that they were under value, and I'm absolutely persuaded of 558 00:27:51,880 --> 00:27:55,360 Speaker 1: it now having lived in one not that long ago. Okay, 559 00:27:55,760 --> 00:27:59,159 Speaker 1: our final question is from Stephen, My question, why do 560 00:27:59,280 --> 00:28:02,480 Speaker 1: we say thirty percent of houses have a mortgage? Isn't 561 00:28:02,520 --> 00:28:05,719 Speaker 1: it the thirty percent of houses that are the primary 562 00:28:05,760 --> 00:28:09,560 Speaker 1: place of residents have a mortgage? We say rates don't 563 00:28:09,600 --> 00:28:13,720 Speaker 1: do much by that. Stephen would probably mean rates are 564 00:28:13,800 --> 00:28:16,239 Speaker 1: set by the RBA in terms of moving them up 565 00:28:16,240 --> 00:28:19,639 Speaker 1: and down, don't have much effect on the economy because 566 00:28:19,680 --> 00:28:22,120 Speaker 1: only thirty percent of people have a mortgage. But isn't 567 00:28:22,119 --> 00:28:25,560 Speaker 1: this forgetting investment of properties? What's the stats on that 568 00:28:25,600 --> 00:28:26,520 Speaker 1: one narrator? 569 00:28:27,080 --> 00:28:30,400 Speaker 2: Yeah, so that thirty percent one is more. It's from 570 00:28:30,440 --> 00:28:34,879 Speaker 2: the census the population in housing, so it looks at households. No, 571 00:28:35,119 --> 00:28:37,920 Speaker 2: so it's thirty percent of people own their property out right, 572 00:28:37,960 --> 00:28:39,960 Speaker 2: thirty percent of people have a mortgage and thirty percent 573 00:28:39,960 --> 00:28:44,240 Speaker 2: of people rent, So the ownership of those rental properties. 574 00:28:44,600 --> 00:28:47,440 Speaker 2: He's absolutely right, a lot of them would have mortgages, 575 00:28:47,560 --> 00:28:50,840 Speaker 2: but we don't it just the methodology for collecting that 576 00:28:50,880 --> 00:28:54,920 Speaker 2: statistic is based on people's reporting. 577 00:28:54,640 --> 00:28:58,160 Speaker 1: In the sensus. Okay, but when they talk about how 578 00:28:58,200 --> 00:29:01,600 Speaker 1: the RBA can't really affect because it's a blunt instrument, 579 00:29:01,680 --> 00:29:04,080 Speaker 1: et cetera. With efficient reads, they are talking about home 580 00:29:04,200 --> 00:29:05,800 Speaker 1: owners mortgages, aren't. 581 00:29:05,560 --> 00:29:08,720 Speaker 2: There, they'd be looking at everything. I mean, I guess 582 00:29:08,720 --> 00:29:12,360 Speaker 2: one of the challenges we've had this cycle is that 583 00:29:12,760 --> 00:29:15,960 Speaker 2: one of the big drivers of inflation has been rents. 584 00:29:16,600 --> 00:29:20,920 Speaker 2: So rising rents has increased inflation. So increasing inflation means 585 00:29:21,000 --> 00:29:26,080 Speaker 2: increased rates. Increased rates means fewer investment properties, which again 586 00:29:26,440 --> 00:29:28,520 Speaker 2: leads to rising rents. So there's a bit of there 587 00:29:28,560 --> 00:29:31,200 Speaker 2: is a circular problem that we're seeing at the moment 588 00:29:31,320 --> 00:29:35,800 Speaker 2: because of this factors. I don't know that answers the question, 589 00:29:36,040 --> 00:29:40,200 Speaker 2: but it is they absolutely would. There's a whole building 590 00:29:40,400 --> 00:29:43,560 Speaker 2: full of economists that look at everything very closely, so 591 00:29:44,160 --> 00:29:45,080 Speaker 2: there's no doubt. 592 00:29:45,600 --> 00:29:47,720 Speaker 1: As an economist. If I asked you, is it the 593 00:29:47,760 --> 00:29:50,840 Speaker 1: case the private ownership of rental property is a positive 594 00:29:50,840 --> 00:29:53,959 Speaker 1: for the markers? What's your answer? 595 00:29:54,680 --> 00:29:57,320 Speaker 2: They provide ninety percent of rental properties. I mean, if 596 00:29:57,320 --> 00:30:00,560 Speaker 2: you have a look overseas, we do see much larger 597 00:30:00,600 --> 00:30:04,160 Speaker 2: proportion of corporate owned rental properties. So in the US, 598 00:30:04,200 --> 00:30:08,320 Speaker 2: particularly UK as well, big institutions own. Yeah, a lot 599 00:30:08,360 --> 00:30:12,320 Speaker 2: of the companies that have done very well overseas owning 600 00:30:12,360 --> 00:30:14,640 Speaker 2: rental properties are very interested in Australia because we have 601 00:30:14,680 --> 00:30:17,520 Speaker 2: such a small proportion. And for a long time they 602 00:30:17,560 --> 00:30:21,440 Speaker 2: weren't interested in Australia because Australia had such low yields, 603 00:30:21,520 --> 00:30:24,120 Speaker 2: but because rents have increased so much, it is attracting 604 00:30:24,120 --> 00:30:25,400 Speaker 2: a lot more interesting I see. 605 00:30:25,520 --> 00:30:27,840 Speaker 1: Okay, they have that issue with vulture funds of course, 606 00:30:27,880 --> 00:30:31,680 Speaker 1: which which has been a problem with the corporate ownership, 607 00:30:31,720 --> 00:30:34,120 Speaker 1: but that really is just one wing of it, and 608 00:30:34,160 --> 00:30:37,480 Speaker 1: there are people making an effort to do something similar, 609 00:30:37,600 --> 00:30:40,760 Speaker 1: like the long View group here in Australia, which has 610 00:30:40,800 --> 00:30:43,360 Speaker 1: been built and being sort of put together by Evan Thornley. 611 00:30:43,800 --> 00:30:46,000 Speaker 1: And as you probably know, he's out there reporting that 612 00:30:46,400 --> 00:30:49,360 Speaker 1: well that point view across, which of course needs to 613 00:30:49,360 --> 00:30:52,040 Speaker 1: say makes sense to him, but obviously he's able to 614 00:30:52,040 --> 00:30:55,640 Speaker 1: put together pretty articulate arguments on that too. Okay, very good, look, 615 00:30:55,640 --> 00:30:57,680 Speaker 1: thank you very much for coming in, narrator, Thanks for 616 00:30:57,720 --> 00:30:59,480 Speaker 1: having me. Great to have you on the show again. 617 00:31:00,000 --> 00:31:02,959 Speaker 1: It's good. Always interesting to get the National Picture and 618 00:31:03,040 --> 00:31:04,959 Speaker 1: we'll talk to you again soon. And thank you everyone 619 00:31:05,000 --> 00:31:07,600 Speaker 1: for listening to today's episode. ID love to have some 620 00:31:07,640 --> 00:31:12,400 Speaker 1: more questions or comments, send them in the email. Is 621 00:31:12,600 --> 00:31:15,640 Speaker 1: the money Puzzle at the Australian dot com dot au 622 00:31:16,000 --> 00:31:16,640 Speaker 1: Talk to you soon.