1 00:00:08,039 --> 00:00:10,799 Speaker 1: Hello, and welcome to the Australian's Money Puzzle podcast. 2 00:00:10,880 --> 00:00:13,000 Speaker 2: I'm James Kirby. Welcome aboard everybody. 3 00:00:13,200 --> 00:00:17,160 Speaker 1: Well, it's the first podcast under a fresh new labor 4 00:00:17,640 --> 00:00:23,759 Speaker 1: administration at federal level, the second term of the Albanese government. 5 00:00:24,760 --> 00:00:27,040 Speaker 1: Now on the show, we do try not to get 6 00:00:27,080 --> 00:00:31,840 Speaker 1: particularly sidetracked or bog down in political talk because it's 7 00:00:31,880 --> 00:00:34,600 Speaker 1: an investor show. But there's times you know, you really 8 00:00:34,600 --> 00:00:37,760 Speaker 1: do need to know what a change of government means 9 00:00:37,800 --> 00:00:40,640 Speaker 1: for you as an investor, and this is one of 10 00:00:40,640 --> 00:00:41,440 Speaker 1: those times. 11 00:00:41,760 --> 00:00:42,640 Speaker 2: And my guest. 12 00:00:42,360 --> 00:00:45,720 Speaker 1: Today is Stuart Weems. He's been doing some really interesting 13 00:00:45,720 --> 00:00:47,960 Speaker 1: work on investment property, which I'm going to talk to 14 00:00:48,040 --> 00:00:50,880 Speaker 1: him about. We'll also talk about what this all means 15 00:00:51,440 --> 00:00:54,680 Speaker 1: for you, the investor particularly. I think today we look 16 00:00:54,680 --> 00:00:58,200 Speaker 1: at the property side of things, the home buyer side 17 00:00:58,200 --> 00:01:00,960 Speaker 1: of things, and later in the week I'm going to 18 00:01:01,000 --> 00:01:03,160 Speaker 1: have Will Hamilton on the show and we will talk 19 00:01:03,200 --> 00:01:07,040 Speaker 1: about the investment side, allocation, super etcetera. So we get 20 00:01:07,120 --> 00:01:10,000 Speaker 1: right across what this new government means. Because they're in, 21 00:01:10,720 --> 00:01:16,080 Speaker 1: they're stronger than they were, They have more capacity to 22 00:01:16,240 --> 00:01:21,280 Speaker 1: pass more legislation than they did because of the arrangements 23 00:01:21,440 --> 00:01:26,880 Speaker 1: in Parliament, particularly what looks like a more simplified, if 24 00:01:26,920 --> 00:01:29,000 Speaker 1: you like, Upper House Senate, which is where a lot 25 00:01:29,040 --> 00:01:31,720 Speaker 1: of stuff got stuck. So we will take a good 26 00:01:31,720 --> 00:01:33,520 Speaker 1: look at that because I think it's really really relevant. 27 00:01:33,680 --> 00:01:35,640 Speaker 1: My guest today, as I said, is Stuart Wims from 28 00:01:35,640 --> 00:01:37,920 Speaker 1: the pro Solution Private Clients Group. 29 00:01:37,920 --> 00:01:38,640 Speaker 2: How are you, Stewart. 30 00:01:38,959 --> 00:01:40,000 Speaker 3: I'm really well, James. 31 00:01:40,040 --> 00:01:42,160 Speaker 4: You know it was only four months ago when we 32 00:01:42,240 --> 00:01:45,839 Speaker 4: met to talk about our expectations for the property market. Boy, 33 00:01:45,880 --> 00:01:48,320 Speaker 4: things can change within such a short period of time, 34 00:01:48,400 --> 00:01:48,880 Speaker 4: can't they. 35 00:01:49,240 --> 00:01:52,640 Speaker 2: Yeah, yeah, they do, they do, and certainly no one. 36 00:01:54,200 --> 00:01:57,440 Speaker 1: It is entertaining to watch all the political analysts making 37 00:01:57,520 --> 00:02:01,080 Speaker 1: the point that no one including them saw this coming 38 00:02:01,680 --> 00:02:04,040 Speaker 1: at all, and no one on either side that that 39 00:02:04,200 --> 00:02:08,320 Speaker 1: is an increased majority for the Albaneza government and perhaps 40 00:02:08,480 --> 00:02:13,240 Speaker 1: less Teals than we had seen and have greatly reduced 41 00:02:13,280 --> 00:02:20,639 Speaker 1: coalition ranks of course, and maybe an empowered Greens constituency 42 00:02:20,639 --> 00:02:23,160 Speaker 1: will see about that too. So one of the things 43 00:02:23,240 --> 00:02:25,520 Speaker 1: that the Albaneza government did just to cover off in 44 00:02:25,560 --> 00:02:27,600 Speaker 1: terms of what's coming down the line, what's on offer 45 00:02:27,600 --> 00:02:29,400 Speaker 1: if you like from them, then there was plenty of 46 00:02:29,840 --> 00:02:33,720 Speaker 1: on offer. So the two big ticket items for them 47 00:02:34,320 --> 00:02:38,360 Speaker 1: was the offering of a first home guarantee depositive scheme. 48 00:02:38,400 --> 00:02:40,880 Speaker 1: Now that exists already, but what they've said is no 49 00:02:41,000 --> 00:02:45,200 Speaker 1: caps anyone anywhere in Australia. First home buyer they want 50 00:02:45,240 --> 00:02:49,880 Speaker 1: to buy a property, old or new for their first home, 51 00:02:50,160 --> 00:02:54,040 Speaker 1: the government will help them. They only needed five percent 52 00:02:54,040 --> 00:02:56,840 Speaker 1: to positive. The government will cover the other fifteen percent 53 00:02:56,960 --> 00:03:00,440 Speaker 1: that the banks like to see so that the people 54 00:03:00,480 --> 00:03:04,160 Speaker 1: can actually buy these homes on a ninety five percent deposit. 55 00:03:05,120 --> 00:03:06,799 Speaker 1: What does that mean for property investors? 56 00:03:07,440 --> 00:03:10,440 Speaker 4: They remove the income caps, James, but there's still property 57 00:03:10,480 --> 00:03:12,440 Speaker 4: price caps, although they've been a little bit. 58 00:03:12,520 --> 00:03:15,040 Speaker 1: There is a and they're kind of layered relating to 59 00:03:15,200 --> 00:03:17,280 Speaker 1: the different states. We wont go through that, but there's 60 00:03:17,280 --> 00:03:19,519 Speaker 1: a sort of a ladder which would link the Sydney 61 00:03:20,040 --> 00:03:22,080 Speaker 1: the most obviously because it's the dearest markets. 62 00:03:22,160 --> 00:03:22,400 Speaker 3: Yeah. 63 00:03:22,560 --> 00:03:25,280 Speaker 4: Yeah, And those caps normally range between seven hundred and 64 00:03:25,280 --> 00:03:28,040 Speaker 4: a million, except for Sydney's is one and a half million. 65 00:03:28,560 --> 00:03:29,120 Speaker 3: I think it's a. 66 00:03:29,040 --> 00:03:32,600 Speaker 4: Great scheme in terms of solving the problem of helping 67 00:03:32,639 --> 00:03:36,520 Speaker 4: people buy houses. Doesn't solve the house cost problem in 68 00:03:36,600 --> 00:03:38,880 Speaker 4: terms of the price of the house, but the ability 69 00:03:38,920 --> 00:03:41,600 Speaker 4: to be able to buy the House is pretty good 70 00:03:41,720 --> 00:03:44,480 Speaker 4: sure that the scheme was previously capped at thirty five 71 00:03:44,520 --> 00:03:47,520 Speaker 4: thousand per year, so that the government's open that up. 72 00:03:47,560 --> 00:03:50,480 Speaker 4: There's no limit now, and they estimate there's about one 73 00:03:50,560 --> 00:03:53,080 Speaker 4: hundred and ten to one hundred and thirty thousand first 74 00:03:53,080 --> 00:03:56,680 Speaker 4: home buyers each year, which is about eleven percent of 75 00:03:56,720 --> 00:04:00,720 Speaker 4: the market, So it's pretty considerable. Like in terms of 76 00:04:01,440 --> 00:04:04,320 Speaker 4: the impact on the market, particularly the sub million dollar 77 00:04:04,360 --> 00:04:05,600 Speaker 4: price point, does. 78 00:04:05,480 --> 00:04:07,760 Speaker 1: That mean automatically that that's actually got to be the hottest, 79 00:04:07,920 --> 00:04:11,720 Speaker 1: most top hoighly contested end of the market, the sub million. 80 00:04:11,840 --> 00:04:15,000 Speaker 4: The program kicks in or the what's the been announced 81 00:04:15,080 --> 00:04:17,799 Speaker 4: kicks in at the beginnea of next year, that's exactly 82 00:04:17,800 --> 00:04:19,520 Speaker 4: what I expect. I think it's going to have a 83 00:04:19,520 --> 00:04:24,279 Speaker 4: big impact the average mortgage insurance savings about twenty three 84 00:04:24,320 --> 00:04:26,960 Speaker 4: thousand dollars they've said, which sounds about right to me. 85 00:04:27,040 --> 00:04:31,400 Speaker 4: It's a pretty considerable saving. But most importantly, get more leverage. 86 00:04:31,600 --> 00:04:33,680 Speaker 4: You know, you can borrow to ninety five percent when 87 00:04:33,720 --> 00:04:37,200 Speaker 4: people might have otherwise not decided to do that. So 88 00:04:37,320 --> 00:04:39,680 Speaker 4: it extends my capacity to be able to spend more, 89 00:04:39,880 --> 00:04:43,760 Speaker 4: and also it extends people's capacity that were previously kind 90 00:04:43,760 --> 00:04:46,400 Speaker 4: of priced out of the market just because of lending 91 00:04:46,480 --> 00:04:49,120 Speaker 4: standards or rules, and now they can get into that market. 92 00:04:49,240 --> 00:04:52,600 Speaker 4: So I think we'll see a lot higher demand. I mean, 93 00:04:52,640 --> 00:04:55,880 Speaker 4: that's eleven percent of the overall market. I should have 94 00:04:55,920 --> 00:04:58,640 Speaker 4: worked out, you know, what proportion of properties sold below 95 00:04:58,680 --> 00:05:01,960 Speaker 4: than a million dollars, but imagine it's a pretty significant 96 00:05:02,000 --> 00:05:03,640 Speaker 4: proportion in the market. I think it's going to have 97 00:05:04,400 --> 00:05:07,040 Speaker 4: a really strong impact. So I guess if you're looking 98 00:05:07,080 --> 00:05:11,000 Speaker 4: to buy a property that costs less than a million dollars, 99 00:05:11,080 --> 00:05:14,240 Speaker 4: you probably should do that this year because you'll have 100 00:05:14,320 --> 00:05:15,120 Speaker 4: less competition. 101 00:05:15,360 --> 00:05:18,640 Speaker 1: Yeah, because it starts in January, right, it starts January one, 102 00:05:18,839 --> 00:05:21,800 Speaker 1: in January as opposed to July one. Keep that out 103 00:05:21,800 --> 00:05:25,559 Speaker 1: of mind, folks. Yeah right, Okay, interesting, really interesting. Okay, 104 00:05:25,600 --> 00:05:27,360 Speaker 1: so we're probably going to have a fair bit of heat. 105 00:05:28,160 --> 00:05:32,320 Speaker 1: Government bank rolled heat at the first home buyer layer. 106 00:05:32,680 --> 00:05:35,120 Speaker 1: If you're an investor, it is what it is, take 107 00:05:35,160 --> 00:05:38,560 Speaker 1: it or leave it. Alternatively, the government also had for 108 00:05:38,640 --> 00:05:40,960 Speaker 1: what it's worth. By the way, of course, the Coalitions plans, 109 00:05:41,400 --> 00:05:44,240 Speaker 1: which was to allow you to do some tax deductions 110 00:05:44,240 --> 00:05:47,120 Speaker 1: that's gone. And similarly their plan that you could get 111 00:05:47,200 --> 00:05:49,039 Speaker 1: up to fifty thousand dollars of your own super to 112 00:05:49,080 --> 00:05:52,040 Speaker 1: buy home. That's gone for the moment. The other labor 113 00:05:52,360 --> 00:05:55,520 Speaker 1: first home package is the Shared Equity program, which allows 114 00:05:55,640 --> 00:05:58,880 Speaker 1: people again buying a first house, to share ownership with 115 00:05:58,920 --> 00:05:59,400 Speaker 1: the government. 116 00:06:00,040 --> 00:06:00,800 Speaker 2: They will take up to. 117 00:06:00,760 --> 00:06:03,359 Speaker 1: Forty percent of a new house and thirty percent of 118 00:06:03,360 --> 00:06:06,400 Speaker 1: an old house. Is that sideline? Now to some degree, 119 00:06:06,480 --> 00:06:09,719 Speaker 1: that program by the big one of the guarantee. 120 00:06:09,160 --> 00:06:11,600 Speaker 4: Well, I mean the guarantee is good because it helps 121 00:06:11,680 --> 00:06:14,520 Speaker 4: the deposit side, which tends to be the difficult thing 122 00:06:14,640 --> 00:06:17,400 Speaker 4: for younger people wanting to get into the market to 123 00:06:17,480 --> 00:06:20,200 Speaker 4: try and outsave the market to acquire a big enough 124 00:06:20,240 --> 00:06:22,920 Speaker 4: deposit or maybe even tap into the bank of mom 125 00:06:22,960 --> 00:06:26,520 Speaker 4: and dad. But it still requires the serviceability side, So 126 00:06:26,560 --> 00:06:28,960 Speaker 4: I still need to Whilst I can borrow ninety five percent, 127 00:06:29,240 --> 00:06:31,080 Speaker 4: I still need to be able to demonstrate that I 128 00:06:31,080 --> 00:06:32,760 Speaker 4: can afford to do that. So that's going to be 129 00:06:32,800 --> 00:06:35,600 Speaker 4: linked to my income of course, and in a falling 130 00:06:35,680 --> 00:06:38,520 Speaker 4: interest rate environment, I guess those two things are working 131 00:06:39,000 --> 00:06:43,520 Speaker 4: nicely together to extend people's borrowing capacity. But if I'm 132 00:06:43,960 --> 00:06:47,120 Speaker 4: a low income earner, the five percent guarantee is not 133 00:06:47,200 --> 00:06:49,679 Speaker 4: necessarily going to help me, because I still can't afford 134 00:06:49,720 --> 00:06:52,120 Speaker 4: to service the ninety five percent. 135 00:06:51,839 --> 00:06:54,000 Speaker 2: At costs, and the bank will say no to you. 136 00:06:54,360 --> 00:06:55,080 Speaker 3: The bank will say no. 137 00:06:55,160 --> 00:06:57,640 Speaker 4: I mean, if I've got a very limited income sixty thousand, 138 00:06:57,680 --> 00:07:00,520 Speaker 4: I'll want to borrow six hundred thousand, ten times income. 139 00:07:00,800 --> 00:07:01,960 Speaker 3: That's just not going to happen. 140 00:07:02,560 --> 00:07:04,839 Speaker 4: So I guess the shared equity scheme is going to 141 00:07:04,880 --> 00:07:08,720 Speaker 4: help lower income owners get into the property market where 142 00:07:08,760 --> 00:07:11,000 Speaker 4: they otherwise couldn't afford to do. 143 00:07:11,080 --> 00:07:11,240 Speaker 2: So. 144 00:07:11,840 --> 00:07:14,160 Speaker 4: There's been a few shared equity schemes around the world. 145 00:07:14,200 --> 00:07:16,640 Speaker 4: The UK has had one for ten years and it's 146 00:07:16,680 --> 00:07:20,120 Speaker 4: helped three hundred and seventy five thousand purchases over that 147 00:07:20,160 --> 00:07:22,920 Speaker 4: ten year period. It's been pretty successful. Okay, So I 148 00:07:22,960 --> 00:07:25,120 Speaker 4: think it's going to fill a market, but it's going 149 00:07:25,160 --> 00:07:28,720 Speaker 4: to be quite narrow niche I think it's going to 150 00:07:28,760 --> 00:07:32,360 Speaker 4: be people that are really struggling from an income perspective, 151 00:07:32,960 --> 00:07:36,280 Speaker 4: and it's going to be in areas where property is cheaper, 152 00:07:36,280 --> 00:07:37,160 Speaker 4: I would imagine. 153 00:07:37,400 --> 00:07:40,200 Speaker 1: So, if you're an investor, you know rets are coming down, 154 00:07:41,240 --> 00:07:44,440 Speaker 1: and you know that the share market's follows had and 155 00:07:44,480 --> 00:07:47,040 Speaker 1: you now know that a whole layer of the market 156 00:07:47,640 --> 00:07:51,120 Speaker 1: will move after January and that the competition would be 157 00:07:51,160 --> 00:07:56,160 Speaker 1: intensified in that sub million dollar category. So really, as 158 00:07:56,200 --> 00:07:59,080 Speaker 1: you say, investors, if they're serious and they want to 159 00:07:59,200 --> 00:08:02,880 Speaker 1: get out started this year, get started before January because 160 00:08:02,880 --> 00:08:06,160 Speaker 1: there's literally there's going to be an optick after January 161 00:08:06,440 --> 00:08:09,720 Speaker 1: of demand and it can't start before January because the 162 00:08:09,760 --> 00:08:11,400 Speaker 1: scheme doesn't start before January. 163 00:08:11,720 --> 00:08:14,360 Speaker 4: Yeah, they've already exhausted the thirty five thousand places that 164 00:08:14,440 --> 00:08:18,000 Speaker 4: they previously had in that guarantee scheme. They went very quickly. 165 00:08:18,360 --> 00:08:20,360 Speaker 4: There's always a lot of demand for it. So it 166 00:08:20,400 --> 00:08:23,000 Speaker 4: does show us that there's plenty of people out there 167 00:08:23,040 --> 00:08:26,000 Speaker 4: that want to use that scheme and that will use 168 00:08:26,040 --> 00:08:29,000 Speaker 4: that scheme. As I said, average first home buyer is 169 00:08:29,040 --> 00:08:30,960 Speaker 4: one hundred and ten hundred and thirty thousand a year, 170 00:08:31,000 --> 00:08:33,160 Speaker 4: but maybe because of the scheme, there's going to be 171 00:08:33,200 --> 00:08:35,240 Speaker 4: more to come out of that would work and it 172 00:08:35,280 --> 00:08:38,480 Speaker 4: could be a more considerable portion of the market. We 173 00:08:38,520 --> 00:08:42,280 Speaker 4: only have to think back to around the GFC when 174 00:08:42,640 --> 00:08:45,640 Speaker 4: the rud government doubled the first home owners grant. Yes, 175 00:08:45,760 --> 00:08:48,200 Speaker 4: that had a huge impact in that price point back 176 00:08:48,240 --> 00:08:50,920 Speaker 4: at that time. So we know these sorts of I 177 00:08:50,960 --> 00:08:52,559 Speaker 4: don't know if you want to call it a stimulus. 178 00:08:52,559 --> 00:08:55,160 Speaker 4: But we know these sorts of government assistance can really 179 00:08:55,640 --> 00:08:58,400 Speaker 4: impact the market and the demand for property in that 180 00:08:58,480 --> 00:09:01,319 Speaker 4: particular price point. So I think you bang on, James, 181 00:09:01,360 --> 00:09:02,960 Speaker 4: if you're looking to buy in that market, do it 182 00:09:03,000 --> 00:09:05,440 Speaker 4: as soon as possible, Whereas if you're a vendor, if 183 00:09:05,440 --> 00:09:08,120 Speaker 4: you're looking to sell in that market, hang on until 184 00:09:08,160 --> 00:09:10,560 Speaker 4: next year. I think you're probably going to sell in 185 00:09:10,600 --> 00:09:14,599 Speaker 4: a fully interest rate environment where people have more capacity. 186 00:09:15,160 --> 00:09:17,600 Speaker 1: Good point. Okay, very good point. All right, Well, take 187 00:09:17,600 --> 00:09:29,360 Speaker 1: a break. We'll be back in the moment. Hello, Welcome 188 00:09:29,360 --> 00:09:32,480 Speaker 1: back to The Australian's Money Puzzle podcast. James Kirby here 189 00:09:32,480 --> 00:09:35,880 Speaker 1: talking to Stuart Weems, regular on the show, as you know, 190 00:09:36,120 --> 00:09:39,440 Speaker 1: of the pro Solution Group and regular contributor to The 191 00:09:39,559 --> 00:09:44,800 Speaker 1: Australian on property matters and property investment matters. Now Stuart 192 00:09:44,800 --> 00:09:47,719 Speaker 1: and I have been talking. I did something I think 193 00:09:47,760 --> 00:09:52,440 Speaker 1: it was last week the ahu or I Ahurri, the 194 00:09:52,600 --> 00:09:58,160 Speaker 1: Australian Housing and Urban Research Institute. It's one of those nonprofit, 195 00:09:58,200 --> 00:10:02,679 Speaker 1: independent think thanks survey groups that has really clout and 196 00:10:02,720 --> 00:10:07,080 Speaker 1: respect in the market, and they issued a report which 197 00:10:07,160 --> 00:10:09,840 Speaker 1: was a very interesting report a few days ago. 198 00:10:10,040 --> 00:10:10,240 Speaker 2: Now. 199 00:10:10,520 --> 00:10:13,280 Speaker 1: They made the point that if you know, basically property, 200 00:10:13,360 --> 00:10:16,640 Speaker 1: if you were to scrap negative gearing, rents would go up, 201 00:10:16,679 --> 00:10:20,080 Speaker 1: for instance, and landloaders and property owners would leave the market, 202 00:10:20,080 --> 00:10:23,360 Speaker 1: which is deductive and would hardly surprise anybody. 203 00:10:23,600 --> 00:10:26,400 Speaker 2: But also one of the things they said, they. 204 00:10:26,240 --> 00:10:28,840 Speaker 1: Made the point that rent investors, if you don't you 205 00:10:28,880 --> 00:10:32,360 Speaker 1: know what renvestors are, I'm sure. Okay, So these are people, 206 00:10:32,400 --> 00:10:36,160 Speaker 1: invariably younger people who can't afford to buy the house 207 00:10:36,240 --> 00:10:38,280 Speaker 1: they want in the place they want, but can't afford 208 00:10:38,320 --> 00:10:40,960 Speaker 1: to buy an investment property, and do so in order 209 00:10:41,000 --> 00:10:43,280 Speaker 1: to get a foothold in the market in order to 210 00:10:43,320 --> 00:10:47,280 Speaker 1: access negative gearing. But inside this report it almost implied 211 00:10:47,320 --> 00:10:50,680 Speaker 1: that layer of the market are regular losers, didn't it, Stuart, 212 00:10:50,760 --> 00:10:53,040 Speaker 1: because of the time frame that they spend. Do you 213 00:10:53,120 --> 00:10:54,559 Speaker 1: want to explain what's happening there? 214 00:10:55,120 --> 00:10:58,800 Speaker 4: Well, they sort of concluded that half of investment property 215 00:10:58,800 --> 00:11:01,600 Speaker 4: owners sold within it two year periods, So sold within 216 00:11:01,920 --> 00:11:05,120 Speaker 4: a short two year period. I didn't delve into the data. 217 00:11:05,120 --> 00:11:07,480 Speaker 4: It doesn't make any sense to me, certainly not. That's 218 00:11:07,520 --> 00:11:10,360 Speaker 4: not our experience. I think we've got a pretty wide 219 00:11:10,440 --> 00:11:13,040 Speaker 4: data set to sort of lean on, and it doesn't 220 00:11:13,080 --> 00:11:15,400 Speaker 4: stand to logic, if you buy and sell within a 221 00:11:15,400 --> 00:11:17,600 Speaker 4: two year period, you've got entry and exit costs. 222 00:11:17,679 --> 00:11:19,400 Speaker 1: You're probably going to lose money, aren't you. 223 00:11:19,400 --> 00:11:20,720 Speaker 3: You're almost certainly going to lose money. 224 00:11:20,800 --> 00:11:22,839 Speaker 4: Yeah, it's a difficult thing, but you know, if we 225 00:11:22,920 --> 00:11:26,400 Speaker 4: got to rent invest in, it's a really interesting strategy 226 00:11:26,400 --> 00:11:28,959 Speaker 4: and it does garnish I guess, more attention in a 227 00:11:29,080 --> 00:11:33,160 Speaker 4: market that becomes less and less affordable, and particularly maybe 228 00:11:33,160 --> 00:11:35,080 Speaker 4: with the backdrop of trying to have your cake and 229 00:11:35,120 --> 00:11:37,679 Speaker 4: eat it too, which we know in life isn't always 230 00:11:37,720 --> 00:11:41,280 Speaker 4: possible and in fact really possible. So you know that's 231 00:11:41,360 --> 00:11:43,320 Speaker 4: I think the appeal, James, is that I don't have 232 00:11:43,400 --> 00:11:45,800 Speaker 4: to make any compromises in terms of where I live. 233 00:11:46,440 --> 00:11:48,800 Speaker 4: But then I feel like I can also build wealth 234 00:11:48,840 --> 00:11:51,800 Speaker 4: and have some sort of property ownership as well. And 235 00:11:51,840 --> 00:11:55,040 Speaker 4: it feels like you're ticking both those boxes. And certainly 236 00:11:55,040 --> 00:11:58,199 Speaker 4: in the short term, you know, from a cash flow perspective, 237 00:11:58,240 --> 00:12:00,880 Speaker 4: it can be cheaper because I can go and rent 238 00:12:01,240 --> 00:12:02,760 Speaker 4: a house that might be worth one and a half 239 00:12:02,800 --> 00:12:04,720 Speaker 4: million dollars and I might be paying a two percent 240 00:12:04,760 --> 00:12:07,280 Speaker 4: rental yield. You know, that's all I'm paying to live 241 00:12:07,320 --> 00:12:11,240 Speaker 4: in that property. I don't have to pay for counsel rates, insurance, 242 00:12:11,400 --> 00:12:13,240 Speaker 4: I don't have to do any property maintenance. 243 00:12:13,480 --> 00:12:15,280 Speaker 3: On the face of it, you go, that's pretty cheap. 244 00:12:15,880 --> 00:12:18,920 Speaker 4: But the problem is the longer term outcomes of being 245 00:12:19,120 --> 00:12:24,360 Speaker 4: a lifelong rent investor, because you're going to carry that commitment, 246 00:12:24,440 --> 00:12:28,439 Speaker 4: that rent commitment, throughout your entire life, including and most 247 00:12:28,480 --> 00:12:32,559 Speaker 4: importantly into retirement, which means it's going to drain your 248 00:12:32,559 --> 00:12:33,200 Speaker 4: asset pool. 249 00:12:33,800 --> 00:12:35,040 Speaker 2: So let's just split it in two. 250 00:12:35,160 --> 00:12:39,000 Speaker 1: You are of the view it's not a great approach, 251 00:12:39,280 --> 00:12:44,280 Speaker 1: despite an increasingly popular approach. Can you break your critique 252 00:12:44,360 --> 00:12:49,600 Speaker 1: of it as an investment technique if you like, for 253 00:12:49,640 --> 00:12:53,520 Speaker 1: pre retirees, ordinary people working and then for retirees the 254 00:12:53,600 --> 00:12:55,680 Speaker 1: distinct issues for both those two camps. 255 00:12:55,960 --> 00:12:58,679 Speaker 4: Yes, So for pre retirees and particularly people that we 256 00:12:58,720 --> 00:13:01,920 Speaker 4: would call a cumulate, people that are trying to build 257 00:13:02,360 --> 00:13:05,719 Speaker 4: enough wealth so that they have some financial independence and 258 00:13:05,800 --> 00:13:09,199 Speaker 4: can retire, it can work in some scenarios. If I'm 259 00:13:09,240 --> 00:13:12,080 Speaker 4: moving around for work, I need a lot of flexibility, 260 00:13:12,800 --> 00:13:15,800 Speaker 4: or because of work, I'm living an area that wouldn't 261 00:13:15,800 --> 00:13:18,000 Speaker 4: otherwise make a good investment. You know, it's not a 262 00:13:18,000 --> 00:13:21,040 Speaker 4: good area to own property in Rent investing can work 263 00:13:21,160 --> 00:13:25,360 Speaker 4: fine in that situation, but for most people the family 264 00:13:25,400 --> 00:13:29,079 Speaker 4: home can be indirectly one of their best investments, particularly 265 00:13:29,080 --> 00:13:32,679 Speaker 4: on after tax basis. You've spoken a lot, James about 266 00:13:32,679 --> 00:13:36,120 Speaker 4: the tax system really rewards the homeowner because there's no 267 00:13:36,200 --> 00:13:37,199 Speaker 4: capital gains tax. 268 00:13:37,440 --> 00:13:41,000 Speaker 1: Yes, it's biased in favor of the homeowner at every age. 269 00:13:41,160 --> 00:13:43,480 Speaker 4: Yeah, And there's not a lot of tax free things 270 00:13:43,480 --> 00:13:46,840 Speaker 4: in life, right, so we should probably take one when 271 00:13:46,840 --> 00:13:49,960 Speaker 4: the opportunity arises. And the other thing I find is 272 00:13:50,000 --> 00:13:53,160 Speaker 4: that whilst people are happy to rent at one particular 273 00:13:53,200 --> 00:13:56,560 Speaker 4: stage of life, almost always they turn around to me 274 00:13:56,600 --> 00:13:58,480 Speaker 4: and say, Stuart, Okay, we want to buy a home. 275 00:13:58,480 --> 00:14:01,680 Speaker 4: We're sick of renting. We want to make modifications to 276 00:14:01,800 --> 00:14:04,640 Speaker 4: our home. We don't want the uncertainty of being forced 277 00:14:04,640 --> 00:14:06,440 Speaker 4: out of the area because now our kids go to 278 00:14:06,480 --> 00:14:08,760 Speaker 4: school and they love this school, and we don't want 279 00:14:08,800 --> 00:14:11,400 Speaker 4: to spend a lot of time traveling. So at some 280 00:14:11,559 --> 00:14:13,520 Speaker 4: point people turn around and go, I want to own 281 00:14:13,559 --> 00:14:14,120 Speaker 4: my own home. 282 00:14:14,400 --> 00:14:14,559 Speaker 3: Now. 283 00:14:14,600 --> 00:14:16,960 Speaker 4: What happens if you've been renting investing for the last 284 00:14:16,960 --> 00:14:19,280 Speaker 4: decade or more and then you turn around and think, oh, 285 00:14:19,400 --> 00:14:21,280 Speaker 4: now I want to buy a home. You might have 286 00:14:21,520 --> 00:14:25,040 Speaker 4: exhausted all your borrowing capacity on investment properties, and in 287 00:14:25,080 --> 00:14:26,600 Speaker 4: that case, then you need to go and sell all 288 00:14:26,680 --> 00:14:28,400 Speaker 4: those properties so that you can afford to go and 289 00:14:28,440 --> 00:14:29,000 Speaker 4: buy a home. 290 00:14:29,200 --> 00:14:32,400 Speaker 1: Oh yeah, that's a really important point. So you want 291 00:14:32,440 --> 00:14:34,680 Speaker 1: to get to mortgage and they say, well, listen, you're 292 00:14:34,720 --> 00:14:38,920 Speaker 1: already stretched. Yeah, we can't throw you another nine hundred 293 00:14:38,920 --> 00:14:39,440 Speaker 1: thousand dollars. 294 00:14:39,520 --> 00:14:41,480 Speaker 4: So it's almost you've got to throw the baby out 295 00:14:41,480 --> 00:14:44,600 Speaker 4: with the bath water and almost not start again per se. 296 00:14:44,680 --> 00:14:47,880 Speaker 4: But you know, destroy a lot of well through transactional costs, 297 00:14:47,880 --> 00:14:51,080 Speaker 4: capital gains, tax, all those sorts of things. Yes, so 298 00:14:51,400 --> 00:14:54,680 Speaker 4: that's the sort of pre retiree. But post retirement, this 299 00:14:54,720 --> 00:14:57,240 Speaker 4: is when it really becomes a problem. Because if I 300 00:14:57,320 --> 00:14:59,920 Speaker 4: need say one hundred thousand dollars a year for generally 301 00:15:00,080 --> 00:15:03,360 Speaker 4: the expenses, which is probably a target for most people, 302 00:15:03,840 --> 00:15:06,240 Speaker 4: Let's say then I need another fifty thousand dollars to 303 00:15:06,280 --> 00:15:09,080 Speaker 4: pay my rental expense, it means it means I need 304 00:15:09,120 --> 00:15:11,280 Speaker 4: to draw one hundred and fifty thousand dollars from my 305 00:15:11,440 --> 00:15:15,120 Speaker 4: retirement asset pool. So compared to someone that's a homeowner, 306 00:15:15,240 --> 00:15:18,560 Speaker 4: I need fifty percent more assets. But if I've used 307 00:15:18,600 --> 00:15:21,760 Speaker 4: property to build all my wealth, that's an a liquid 308 00:15:21,800 --> 00:15:26,160 Speaker 4: asset that provides me relatively low income neative expenses. There's 309 00:15:26,160 --> 00:15:30,600 Speaker 4: always maintenance, land tax, all these sorts of things. So therefore, 310 00:15:30,760 --> 00:15:32,840 Speaker 4: if I'm a rent investor, I'm going to need to 311 00:15:32,840 --> 00:15:35,320 Speaker 4: go and sell those properties in retirement, which means then 312 00:15:35,360 --> 00:15:38,040 Speaker 4: I crystallize a whole bunch of capital gains tax. Because 313 00:15:38,440 --> 00:15:40,840 Speaker 4: I can't progressively sell a property like I can a 314 00:15:40,880 --> 00:15:44,600 Speaker 4: share portfolio or super I've got a whole thing in 315 00:15:44,640 --> 00:15:45,440 Speaker 4: one tax year. 316 00:15:45,600 --> 00:15:48,320 Speaker 1: Well, what do your tax FREEK status as a retiree 317 00:15:48,480 --> 00:15:48,800 Speaker 1: help you? 318 00:15:49,320 --> 00:15:51,360 Speaker 4: Help you a little bit, But hopefully you've made a 319 00:15:51,440 --> 00:15:54,400 Speaker 4: huge gain, so you can save a little bit of 320 00:15:54,440 --> 00:15:57,320 Speaker 4: money by spreading it across maybe you and your spouse 321 00:15:57,400 --> 00:15:59,520 Speaker 4: in terms of the capital gain. But you're still going 322 00:15:59,520 --> 00:16:02,000 Speaker 4: to pay a large amount of capital gains tax. 323 00:16:01,840 --> 00:16:04,000 Speaker 1: Because it wasn't held and you're super fund. It was 324 00:16:04,040 --> 00:16:05,120 Speaker 1: held outside of super. 325 00:16:05,400 --> 00:16:08,120 Speaker 4: Yeah, and because you've got to sol the whole asset 326 00:16:08,200 --> 00:16:10,560 Speaker 4: all at once, whereas with a share portfolio, I can 327 00:16:10,600 --> 00:16:13,920 Speaker 4: sell twenty thirty forty thousand dollars of stocks each year 328 00:16:14,600 --> 00:16:16,320 Speaker 4: and not pay very much tax at all. 329 00:16:16,600 --> 00:16:17,800 Speaker 2: Gee, that's really interesting. 330 00:16:17,920 --> 00:16:19,640 Speaker 1: Can I ask you, just going back on the report 331 00:16:19,720 --> 00:16:22,680 Speaker 1: that said half of all investment properties, a sawt within 332 00:16:22,760 --> 00:16:25,960 Speaker 1: two years that the holders of them, Even if it 333 00:16:26,000 --> 00:16:29,000 Speaker 1: isn't entirely true, but let's say it substantially. So do 334 00:16:29,040 --> 00:16:32,080 Speaker 1: you think that's rent vestors there right there, selling earlier 335 00:16:32,160 --> 00:16:32,760 Speaker 1: than they should. 336 00:16:33,280 --> 00:16:36,160 Speaker 4: It's hard to say that the situations I've had, James 337 00:16:36,160 --> 00:16:38,880 Speaker 4: that rent vestors tend to do it for more than 338 00:16:39,040 --> 00:16:41,120 Speaker 4: two years. You know, they tend to do it for 339 00:16:41,200 --> 00:16:43,880 Speaker 4: five to ten years before they then work out or 340 00:16:43,960 --> 00:16:46,480 Speaker 4: change their mind that hey, they want to become a 341 00:16:46,520 --> 00:16:47,280 Speaker 4: home owner. 342 00:16:47,880 --> 00:16:48,640 Speaker 3: Because you make a. 343 00:16:48,600 --> 00:16:51,080 Speaker 4: Commitment to that strategy, there's a lot of costs associate 344 00:16:51,080 --> 00:16:53,800 Speaker 4: obviously buying property, stampgedy, all those sorts of things. You 345 00:16:53,800 --> 00:16:55,480 Speaker 4: don't want to turn around and change your mind. 346 00:16:55,600 --> 00:16:58,120 Speaker 1: It would suggest they're doing it pretty fast, like mid twenties, 347 00:16:58,440 --> 00:16:59,840 Speaker 1: mid twenties starting. 348 00:17:00,200 --> 00:17:02,600 Speaker 4: Yep, they tend to be younger people as well, and 349 00:17:02,640 --> 00:17:05,800 Speaker 4: I guess a pre family you know that having the 350 00:17:05,840 --> 00:17:09,760 Speaker 4: security of a home is less important depending on their situation. 351 00:17:10,040 --> 00:17:12,679 Speaker 4: But look like at everything, it's going to suit some people, 352 00:17:12,800 --> 00:17:15,000 Speaker 4: but I think the vast majority it's probably not going 353 00:17:15,040 --> 00:17:18,000 Speaker 4: to suit. And it might suit some people during different 354 00:17:18,000 --> 00:17:21,520 Speaker 4: stages of their life. For example, buying your kind of 355 00:17:21,600 --> 00:17:24,439 Speaker 4: forever home, if you like, and renting that out as 356 00:17:24,480 --> 00:17:28,400 Speaker 4: an investment property while you're younger, and using the negative 357 00:17:28,400 --> 00:17:31,119 Speaker 4: gearing to help you manage that debt, and then with 358 00:17:31,200 --> 00:17:34,440 Speaker 4: the idea to eventually occupying that property maybe in five 359 00:17:34,480 --> 00:17:36,880 Speaker 4: to ten years time. That's a great strategy, and that's 360 00:17:36,880 --> 00:17:40,240 Speaker 4: sort of a tiltson rent vestie, I guess, so it 361 00:17:40,280 --> 00:17:42,480 Speaker 4: can be used to some advantage, But I think at 362 00:17:42,480 --> 00:17:45,119 Speaker 4: some point you've got to ask yourself, how am I 363 00:17:45,160 --> 00:17:48,080 Speaker 4: going to fund the family home? Right and if you're 364 00:17:48,080 --> 00:17:50,119 Speaker 4: going to need to borrow to do that, you're probably 365 00:17:50,160 --> 00:17:52,800 Speaker 4: better off buying that family home as soon as possible 366 00:17:53,240 --> 00:17:55,080 Speaker 4: because you're going to have to If you delay it, 367 00:17:55,080 --> 00:17:56,800 Speaker 4: it's probably going to cost you more in ten or 368 00:17:56,840 --> 00:17:59,720 Speaker 4: twenty years time. And then also you're going to think about, well, 369 00:17:59,760 --> 00:18:01,960 Speaker 4: how does that impact my retirement as well. 370 00:18:02,280 --> 00:18:05,480 Speaker 1: That's really interesting. So you think renvesting really doesn't work 371 00:18:05,480 --> 00:18:07,480 Speaker 1: most for most people most of the time, with the 372 00:18:07,520 --> 00:18:09,480 Speaker 1: exception of when they actually which is not quite the 373 00:18:09,480 --> 00:18:12,040 Speaker 1: same thing, that they buy this house they've gone to 374 00:18:12,040 --> 00:18:14,439 Speaker 1: the plan to live in, and the price of that 375 00:18:14,480 --> 00:18:16,399 Speaker 1: long term would be they'd have to pay a bit 376 00:18:16,440 --> 00:18:18,840 Speaker 1: of capital gains on the years they didn't live in it, wouldn't. 377 00:18:18,480 --> 00:18:20,200 Speaker 3: They Yeah, that's right, Yeah they would. 378 00:18:20,280 --> 00:18:22,200 Speaker 2: I mean they'd have to ring the ATO and volunteer 379 00:18:22,280 --> 00:18:22,880 Speaker 2: that information. 380 00:18:23,720 --> 00:18:24,520 Speaker 3: Yeah, they would. 381 00:18:24,640 --> 00:18:26,680 Speaker 4: I mean they'd have to do that if they went 382 00:18:26,720 --> 00:18:28,720 Speaker 4: and sold the property, of course, And if they think 383 00:18:28,760 --> 00:18:31,160 Speaker 4: that's there forever home and they're going to live there 384 00:18:31,160 --> 00:18:32,640 Speaker 4: for the rest of their life, then they probably don't 385 00:18:32,640 --> 00:18:33,439 Speaker 4: really care about it. 386 00:18:33,480 --> 00:18:35,760 Speaker 1: Oh yeah, yes, to make that clear the day they 387 00:18:35,800 --> 00:18:39,159 Speaker 1: sell that property. So let's say they rent vested it, 388 00:18:39,200 --> 00:18:42,720 Speaker 1: which is the ugliest, most awkward term even by financial standards. 389 00:18:42,960 --> 00:18:46,199 Speaker 1: Let's say they rent vested it for ten years and 390 00:18:46,240 --> 00:18:49,800 Speaker 1: then they lived in it for twenty years, and they 391 00:18:49,880 --> 00:18:53,479 Speaker 1: sold it after thirty years. It would be capital gains 392 00:18:53,560 --> 00:18:55,520 Speaker 1: exempt for twenty of those years. 393 00:18:55,920 --> 00:18:56,560 Speaker 2: And though it's. 394 00:18:56,400 --> 00:18:58,520 Speaker 1: Complicated, don't worry, the tax people would have worked out how 395 00:18:58,560 --> 00:19:00,399 Speaker 1: much you will know that? 396 00:19:00,760 --> 00:19:02,359 Speaker 2: Yes, straight up, you the person. 397 00:19:02,640 --> 00:19:03,160 Speaker 3: That's right. 398 00:19:03,200 --> 00:19:05,880 Speaker 4: But the reverses, Well, if I don't buy that property 399 00:19:05,880 --> 00:19:08,440 Speaker 4: ten years sooner before I occupy it, it's going to 400 00:19:08,480 --> 00:19:10,560 Speaker 4: cost me a lot more in after tax dollars to 401 00:19:10,600 --> 00:19:13,480 Speaker 4: get into that market. And I think that would more 402 00:19:13,520 --> 00:19:17,120 Speaker 4: than outweigh the potential capital gains tax costs as well 403 00:19:17,160 --> 00:19:18,560 Speaker 4: as the negative gearing benefit. 404 00:19:19,200 --> 00:19:20,600 Speaker 2: Really good, very interesting. 405 00:19:20,680 --> 00:19:23,120 Speaker 1: Okay, we'll take your break, folks, and we'll be back 406 00:19:23,160 --> 00:19:27,360 Speaker 1: with some listener questions and comments from recent days. Back 407 00:19:27,359 --> 00:19:40,440 Speaker 1: in a moment, Hello, Welcome back to the Australians Money 408 00:19:40,440 --> 00:19:45,880 Speaker 1: Puzzle podcast. I'm James Kirby talking to Stuart wims w Emyss. 409 00:19:46,000 --> 00:19:49,000 Speaker 1: By the way, if you're wondering how that's spelt, now 410 00:19:49,280 --> 00:19:53,520 Speaker 1: a couple of comments. You will recall, folks that I 411 00:19:53,560 --> 00:19:57,159 Speaker 1: did something slightly different in recent weeks in that we 412 00:19:57,240 --> 00:20:01,840 Speaker 1: had two shows. One was About to Divorce with Nathan 413 00:20:01,960 --> 00:20:05,960 Speaker 1: Fradley and that was about the financial side of divorce 414 00:20:06,000 --> 00:20:09,080 Speaker 1: and trying to help anyone who cared to listen about 415 00:20:09,080 --> 00:20:13,720 Speaker 1: how to steer through the financial rocky voters of divorce. 416 00:20:14,119 --> 00:20:16,320 Speaker 1: And then we had a follow up show which was 417 00:20:16,600 --> 00:20:22,679 Speaker 1: The Tax Clinic and Akho Marquaus and her fascinating experiment 418 00:20:22,720 --> 00:20:24,560 Speaker 1: if you like, at the University of New South waliz 419 00:20:24,640 --> 00:20:28,479 Speaker 1: So she is running this clinic for people who are 420 00:20:28,560 --> 00:20:33,159 Speaker 1: mostly small business owners and business people or entrepreneurs or 421 00:20:33,160 --> 00:20:35,120 Speaker 1: people having a go in various ways who'll get into 422 00:20:35,160 --> 00:20:39,960 Speaker 1: all sorts of difficulty financially because of financial abuts basically, 423 00:20:40,400 --> 00:20:43,920 Speaker 1: and that clinic only works through referrals from other agencies, 424 00:20:43,920 --> 00:20:45,840 Speaker 1: which she's doing some really interesting work and gave us 425 00:20:45,840 --> 00:20:50,560 Speaker 1: a really interesting steer on those shows. Stephen says, thanks 426 00:20:50,640 --> 00:20:52,920 Speaker 1: very much for that episode. I am currently going through 427 00:20:52,920 --> 00:20:56,480 Speaker 1: a separation and eventually divorced. The episode was very beneficial. 428 00:20:56,760 --> 00:20:59,400 Speaker 1: It makes me even more grateful that my ex partner 429 00:20:59,440 --> 00:21:01,520 Speaker 1: and I are been kind to each other. I even 430 00:21:01,560 --> 00:21:04,959 Speaker 1: called her and suggested she considers stamp duty capital gains 431 00:21:05,080 --> 00:21:07,080 Speaker 1: as I'm staying with the house, something we had not 432 00:21:07,200 --> 00:21:11,000 Speaker 1: considered previously. Thank you very much, Steven and Peter adds, 433 00:21:11,200 --> 00:21:15,200 Speaker 1: thank you for the podcast talking about the tax clinic 434 00:21:15,720 --> 00:21:18,800 Speaker 1: and the previous episode on divorce. 435 00:21:19,680 --> 00:21:20,000 Speaker 2: Very good. 436 00:21:20,080 --> 00:21:23,520 Speaker 1: I'm glad that they were useful to you. As Peter says, 437 00:21:23,560 --> 00:21:26,560 Speaker 1: it's not often I hear about these areas and money shows. Yeah, well, 438 00:21:26,800 --> 00:21:29,840 Speaker 1: we're trying to capture all aspects here, not just when 439 00:21:29,840 --> 00:21:31,359 Speaker 1: things go right, but when things go wrong. 440 00:21:31,520 --> 00:21:31,960 Speaker 2: All right? 441 00:21:32,119 --> 00:21:35,240 Speaker 1: One final question from Lynn l Yn. She says, with 442 00:21:35,280 --> 00:21:41,040 Speaker 1: the twenty percent Hecht's discount now coming from the new government, 443 00:21:41,520 --> 00:21:42,640 Speaker 1: when will it commence? 444 00:21:42,800 --> 00:21:43,440 Speaker 2: Okay? Lynn? 445 00:21:43,480 --> 00:21:46,760 Speaker 1: Now, Stuart has some interesting things to tell you about 446 00:21:46,760 --> 00:21:50,040 Speaker 1: the Heck's discount. But we'll answer the question first of all, Stuart, 447 00:21:50,040 --> 00:21:51,480 Speaker 1: about when does it start. 448 00:21:52,040 --> 00:21:56,000 Speaker 4: It will be applied on one June twenty twenty five, so. 449 00:21:55,960 --> 00:21:57,480 Speaker 1: A couple of weeks. It's happening in a couple of 450 00:21:57,520 --> 00:21:59,200 Speaker 1: weeks time. It is the first of all these schemes 451 00:21:59,240 --> 00:22:00,119 Speaker 1: I imagine to kick in. 452 00:22:00,480 --> 00:22:03,040 Speaker 4: But of course the law hasn't even been interested into 453 00:22:03,080 --> 00:22:06,120 Speaker 4: Parliament yet, so they need to pass that, so it's 454 00:22:06,119 --> 00:22:08,320 Speaker 4: going to be backdated. Of course, I don't know when 455 00:22:08,720 --> 00:22:11,320 Speaker 4: Parliament seats, but they'll need to present that law, it'll 456 00:22:11,320 --> 00:22:14,119 Speaker 4: be approved, and then they'll reduce the debt before the 457 00:22:14,160 --> 00:22:16,240 Speaker 4: indexation is applied for this year. 458 00:22:16,359 --> 00:22:19,320 Speaker 1: By twenty percent, which is quite a cut. And I 459 00:22:19,320 --> 00:22:22,760 Speaker 1: imagine a successful political employ that was in the election 460 00:22:22,880 --> 00:22:24,920 Speaker 1: for if somebody was offered straight up a twenty percent 461 00:22:24,960 --> 00:22:25,760 Speaker 1: cut on their debt. 462 00:22:25,960 --> 00:22:27,399 Speaker 3: It's an off budget item. 463 00:22:27,520 --> 00:22:30,840 Speaker 1: To James, of course it is, what isn't It's a 464 00:22:30,880 --> 00:22:31,720 Speaker 1: bit of a free kick. 465 00:22:32,160 --> 00:22:34,520 Speaker 2: We all go into this off budget stuff, folks. 466 00:22:34,520 --> 00:22:37,080 Speaker 1: Except to say that more and more governments of offers 467 00:22:37,160 --> 00:22:39,880 Speaker 1: visions put these things off budgets and then they don't 468 00:22:39,920 --> 00:22:41,480 Speaker 1: come up in the budget and they don't seem to 469 00:22:41,480 --> 00:22:43,880 Speaker 1: be as troublesome when they're off budget as when they're 470 00:22:43,880 --> 00:22:47,320 Speaker 1: sitting there in the budget. Anyway, what people really want 471 00:22:47,320 --> 00:22:50,240 Speaker 1: to know is about this he's discount from the government. 472 00:22:50,359 --> 00:22:53,440 Speaker 1: So the new government promises they will deliver it whatever 473 00:22:53,440 --> 00:22:56,159 Speaker 1: your hex bill is. They were kind about twenty percent. 474 00:22:56,520 --> 00:22:59,679 Speaker 1: It would commence lynn on the first of June, but 475 00:23:00,000 --> 00:23:02,880 Speaker 1: you have to be backdated because the laws won't pass 476 00:23:02,880 --> 00:23:05,080 Speaker 1: for a while new parliament, et cetera. So let's say 477 00:23:05,080 --> 00:23:08,240 Speaker 1: in six months time the ATO when your hex bill 478 00:23:08,320 --> 00:23:10,480 Speaker 1: comes around, they will assess it and they will take 479 00:23:10,520 --> 00:23:12,840 Speaker 1: twenty percent off from the first of June and they'll 480 00:23:12,880 --> 00:23:14,960 Speaker 1: work all that out. There was another aspect of it. 481 00:23:14,960 --> 00:23:16,920 Speaker 1: You're reminded me of Stewart about hex What was that? 482 00:23:17,359 --> 00:23:21,080 Speaker 4: The ALP said that they will allow the banks to 483 00:23:21,200 --> 00:23:25,159 Speaker 4: ignore hex repayments when calculating someone's boring capacity. 484 00:23:25,600 --> 00:23:27,720 Speaker 3: Okay, which is a very. 485 00:23:27,560 --> 00:23:30,960 Speaker 4: Important issue because typically first home buyers, they tend to 486 00:23:31,000 --> 00:23:34,840 Speaker 4: be relatively tight on income and boring capacity as they're 487 00:23:34,840 --> 00:23:38,359 Speaker 4: starting their careers and these sorts of things, and HEX 488 00:23:38,440 --> 00:23:41,600 Speaker 4: repayments can be significant, up to ten percent of your 489 00:23:41,640 --> 00:23:44,800 Speaker 4: taxable income, so it can really dramatically as a commitment 490 00:23:45,320 --> 00:23:49,439 Speaker 4: reduce your boring capacity. And so the government's announced this, 491 00:23:49,560 --> 00:23:53,200 Speaker 4: and together with lower future interest rates hopefully and also 492 00:23:53,320 --> 00:23:57,520 Speaker 4: the government guarantee, it's almost a three pronged approach to 493 00:23:57,600 --> 00:24:02,040 Speaker 4: really improving the capacity for first home buyers. Now, the 494 00:24:02,080 --> 00:24:04,840 Speaker 4: banks haven't made any changes yet. Some of the banks 495 00:24:04,840 --> 00:24:07,520 Speaker 4: are kind of playing around with the fringes. If your 496 00:24:07,560 --> 00:24:10,280 Speaker 4: hexstet will be repaid within one to five years, they'll 497 00:24:10,280 --> 00:24:12,359 Speaker 4: shade it off a little bit. But if it's not 498 00:24:12,400 --> 00:24:15,080 Speaker 4: going to be repaid over the next five years, then 499 00:24:15,080 --> 00:24:17,840 Speaker 4: they're going to include the full kind of repayment amounts 500 00:24:17,840 --> 00:24:18,320 Speaker 4: if you like. 501 00:24:19,640 --> 00:24:21,919 Speaker 1: I see the phrasing enough that they will allow the 502 00:24:21,960 --> 00:24:26,320 Speaker 1: banks not to consider it. It's not quite to say 503 00:24:26,320 --> 00:24:28,560 Speaker 1: them as saying the banks are going to take it off. 504 00:24:28,960 --> 00:24:32,800 Speaker 4: No, but by law, the banks have to test affordability. 505 00:24:32,880 --> 00:24:35,840 Speaker 4: So by law, if they ignored a commitment, they would 506 00:24:35,880 --> 00:24:37,959 Speaker 4: be breaking the law. So what they're going to do 507 00:24:38,000 --> 00:24:40,240 Speaker 4: is say they would change the law. Now, let's remember 508 00:24:40,720 --> 00:24:43,040 Speaker 4: the banks are in the business of lending. They're in 509 00:24:43,080 --> 00:24:45,480 Speaker 4: the business of growing their loan book. I think they're 510 00:24:45,480 --> 00:24:47,720 Speaker 4: going to come to the party with this, maybe not 511 00:24:47,920 --> 00:24:50,880 Speaker 4: to the extent where we're going to ignore your complete heckstet. 512 00:24:51,280 --> 00:24:53,840 Speaker 4: But maybe they'll play around on the fringes with maybe 513 00:24:54,119 --> 00:24:58,119 Speaker 4: a lower buffer, for example, less living expenses. But I 514 00:24:58,160 --> 00:25:01,240 Speaker 4: think they will sort of come to the and extend 515 00:25:01,720 --> 00:25:04,399 Speaker 4: borrowing capacity for people that do have hex dates. 516 00:25:05,119 --> 00:25:08,040 Speaker 1: So you've got to improved borrowing capacity with the hexstead crowd. 517 00:25:08,920 --> 00:25:12,000 Speaker 1: You've got a five percent deposit for anyone buying your 518 00:25:12,000 --> 00:25:16,440 Speaker 1: first house, and you've got interest rates stopping into a 519 00:25:16,520 --> 00:25:19,800 Speaker 1: relatively steady housing market in from an economic point of 520 00:25:19,880 --> 00:25:21,960 Speaker 1: view or an investment point of view, really really interesting. 521 00:25:22,000 --> 00:25:28,480 Speaker 1: You know, NAB's economic team yesterday said it expects five 522 00:25:29,400 --> 00:25:33,480 Speaker 1: five rate cuts in the coming year, a double rate 523 00:25:33,560 --> 00:25:37,919 Speaker 1: cut in May, followed by a quarter point a quarter 524 00:25:38,840 --> 00:25:41,960 Speaker 1: BIPs you know, twenty five BIPs quarter percentage in July 525 00:25:42,240 --> 00:25:44,399 Speaker 1: and August and November and February. 526 00:25:45,160 --> 00:25:46,360 Speaker 2: Think about that. 527 00:25:46,359 --> 00:25:50,359 Speaker 1: That's going to bring your mortgage right down five ish. Okay, folks, 528 00:25:50,440 --> 00:25:53,000 Speaker 1: isn't that an interesting And that's just the start of it. Okay, 529 00:25:53,040 --> 00:25:55,959 Speaker 1: we'll open up this to markets, et cetera and super 530 00:25:56,200 --> 00:25:59,040 Speaker 1: in a few days time. That was Stuart Williams of 531 00:25:59,040 --> 00:26:01,240 Speaker 1: the pro Solution Group and by the way, I meant 532 00:26:01,240 --> 00:26:03,480 Speaker 1: to say, with the questions coming in, it's great to 533 00:26:03,480 --> 00:26:06,440 Speaker 1: get them. And I noticed, what are two clever listeners? 534 00:26:06,480 --> 00:26:07,440 Speaker 2: All our listeners are clever. 535 00:26:07,480 --> 00:26:10,240 Speaker 1: They're all above average, they're all about average investors. But 536 00:26:10,880 --> 00:26:13,840 Speaker 1: they put in two questions sometimes three. That is absolutely 537 00:26:13,920 --> 00:26:15,560 Speaker 1: fine if you go and make the effort of sending 538 00:26:15,560 --> 00:26:18,720 Speaker 1: in a question, send in two, send in three. I'll 539 00:26:18,920 --> 00:26:21,520 Speaker 1: just keep them short, but love to have more, so 540 00:26:21,800 --> 00:26:25,160 Speaker 1: use that opportunity. The email is the money Puzzle at 541 00:26:25,160 --> 00:26:29,919 Speaker 1: the Australian dot com dot au at. Today's show was 542 00:26:30,000 --> 00:26:32,560 Speaker 1: produced by Joshua Burton