WEBVTT - Melbourne property: Bargain basement or 'Loserville'? 0:00:09.320 --> 0:00:12.520 Hello and welcome to the Australians Money Becuzzle podcast. 0:00:12.680 --> 0:00:15.000 James Kurty here with the editor at The Australian. 0:00:15.080 --> 0:00:18.320 Welcome aboard everybody, and I have mister week. 0:00:18.400 --> 0:00:19.360 Thank you very much. 0:00:20.040 --> 0:00:24.000 James Girard who handled and ran the show. Two episodes 0:00:24.079 --> 0:00:26.280 last week, very good. I've listened to them both, very 0:00:26.360 --> 0:00:30.320 very interesting. I want to pick up something actually that 0:00:30.400 --> 0:00:33.720 we've been talking about on the show for some time. 0:00:34.080 --> 0:00:37.920 And look, this could be on the show. We talked 0:00:38.440 --> 0:00:41.680 this time last year and for a long time about 0:00:41.720 --> 0:00:44.640 how Perth, for instance, as a property investor, if you 0:00:44.680 --> 0:00:47.080 were prepared to invest. 0:00:46.760 --> 0:00:50.159 Interstate Perth was the market to be in. 0:00:50.240 --> 0:00:54.480 And you know, it really has been an exceptional market 0:00:54.640 --> 0:00:58.160 for anyone who did that, to the point actually that 0:00:58.320 --> 0:01:01.720 this week they're talking about parts of the market in overheating. 0:01:02.000 --> 0:01:05.319 It's a small market in relation to the bigger market 0:01:05.360 --> 0:01:08.240 I'm going to talk about today, which is Melbourne. So 0:01:08.319 --> 0:01:11.000 Melbourne's the second biggest market in the country. It's five 0:01:11.040 --> 0:01:15.679 million people. It's going to be bigger than Sydney relatively soon. 0:01:15.959 --> 0:01:18.919 It's a sort of inexorable march of the housing estates 0:01:18.920 --> 0:01:21.360 at the edges of the city, which can't happen in 0:01:21.400 --> 0:01:23.000 Sydney because of national forests. 0:01:23.600 --> 0:01:24.840 But what it means. 0:01:24.640 --> 0:01:28.039 Is that it should be a hot property market. 0:01:28.440 --> 0:01:28.800 It's not. 0:01:28.959 --> 0:01:32.160 It's the opposite. It's the weakest market in Australia. And 0:01:32.480 --> 0:01:34.800 the question from an investor point of view is now, 0:01:34.959 --> 0:01:37.319 is this the bargain not just of the year, but 0:01:37.440 --> 0:01:40.399 is this one of the real bargains perhaps of the 0:01:40.480 --> 0:01:45.680 decade in property for investors in Australia or actually is 0:01:45.959 --> 0:01:50.920 the state sinking as some would suggest and searching the 0:01:51.000 --> 0:01:53.559 numbers in property are pretty bad. It's the weakest price 0:01:53.640 --> 0:01:57.560 market increases, is the weakest in Australia. It is the 0:01:57.600 --> 0:02:01.680 weakest investment market. And beyond investors are leaving the state. 0:02:01.840 --> 0:02:05.360 And we see that right across all the news media 0:02:05.520 --> 0:02:08.040 reporting there quite faithfully in recent times. 0:02:08.120 --> 0:02:09.960 So I thought, well, let's have a look at that. 0:02:10.040 --> 0:02:12.320 Let's also have a look at immigration cuts, what they 0:02:12.400 --> 0:02:16.200 might do for property or do against property, and a 0:02:16.240 --> 0:02:18.000 few other issues that I want to pick up on 0:02:18.080 --> 0:02:20.680 with our guest today who is a regular on the show, 0:02:22.440 --> 0:02:26.600 Bruce Brammel of Bruce Brammel, Financial Financial Advisor, author and 0:02:26.840 --> 0:02:28.080 operator extraordinaire. 0:02:28.200 --> 0:02:31.639 How are you, Bruce, Well, thanks James yourself. 0:02:31.680 --> 0:02:35.720 Good, thank you. Well, you should know you've written books 0:02:35.760 --> 0:02:37.520 on this area. You're in the thick of it and 0:02:37.560 --> 0:02:42.240 you are in Melbourne based property and financial advisor. So 0:02:42.440 --> 0:02:45.600 Bruce Brammel, I put you on the hot season. I say, 0:02:47.000 --> 0:02:50.080 is this market just slowly thinking or is it actually 0:02:50.120 --> 0:02:54.200 an opportunity for investors all around Australia. It's the second 0:02:54.200 --> 0:02:57.120 biggest city and it's it's hanging behind everybody. Is it 0:02:57.200 --> 0:02:57.880 going to catch up? 0:02:59.160 --> 0:02:59.359 Look? 0:02:59.360 --> 0:03:03.440 I think inevitably it will. I'm probably a straw hats 0:03:03.440 --> 0:03:07.760 in winter sort of guy. It go to investment. I 0:03:07.760 --> 0:03:11.560 think in a relative sense Melbourne is probably undervalued at 0:03:11.560 --> 0:03:16.399 the moment from an investment Since James, I've only ever 0:03:17.560 --> 0:03:21.639 believed that there are three markets worthwhile pursuing because they've 0:03:21.639 --> 0:03:25.760 got economies that are big enough. When they are Sydney, Melbourne, Brisbane. 0:03:26.240 --> 0:03:29.679 At the moment the property prices are Sydney. 0:03:31.280 --> 0:03:34.120 What probably prices should be is Sydney big gap, Melbourne 0:03:34.160 --> 0:03:37.000 reasonable gap, Brisbane, followed by I don't really care too 0:03:37.080 --> 0:03:40.760 much after that but Adelaide. But there are the three 0:03:40.760 --> 0:03:43.600 property markets that I speak to clients about and that 0:03:43.600 --> 0:03:45.160 we are assist clients. 0:03:44.880 --> 0:03:45.320 Buying in. 0:03:46.960 --> 0:03:50.440 At the moment, the gap is Sydney big gap Brisbane 0:03:50.560 --> 0:03:55.120 and Melbourne is sitting third. Now in my opinion, that 0:03:55.320 --> 0:03:59.920 is a pricing error that's against the natural order of the. 0:04:01.160 --> 0:04:01.880 Natural order of things. 0:04:01.960 --> 0:04:05.480 Is Sydney big gap Melbourne gap reason gap to Brisbane. Now, 0:04:06.320 --> 0:04:12.880 back in about twenty fourteen, following the state government up 0:04:12.880 --> 0:04:15.840 there and they closing schools and they're shutting hospitals and 0:04:15.880 --> 0:04:19.600 sacking teachers and nurses, the same as Canada done in Melbourne. 0:04:19.640 --> 0:04:24.440 In the early mid nineties, Brisbane's property price fell to 0:04:24.520 --> 0:04:27.680 about fifth or six That was Sydney Melbourne. I think 0:04:27.720 --> 0:04:33.800 at the time it was sort of Perth, Camera Adelaide wherever. 0:04:33.960 --> 0:04:38.400 But Brisbane was sitting about fifth or sixth, and we said, well, 0:04:39.040 --> 0:04:42.080 there's a pricing are going on here. So through twenty fourteen, fifteen, 0:04:42.120 --> 0:04:46.840 sixteen seventeen, I think into eighteen, we've brought a lot 0:04:46.839 --> 0:04:52.440 of property with clients in Brisbane and that's proved to 0:04:52.440 --> 0:04:57.080 be corrects. Brisbane suddenly subsequently post twenty twenty and twenty 0:04:57.120 --> 0:04:59.479 twenty one started moving back into sort of third spot 0:04:59.480 --> 0:05:02.960 where it should and has now overtaken Melbourne in the 0:05:03.000 --> 0:05:03.640 last six months. 0:05:03.720 --> 0:05:06.000 Or so it is now sitting second. 0:05:07.640 --> 0:05:10.800 The natural order of things is out of Melbourne's Probably 0:05:10.839 --> 0:05:14.040 prices are being impacted by a bunch of things, including 0:05:14.920 --> 0:05:19.800 the land tax increases which have come through in recent time. 0:05:19.880 --> 0:05:22.279 It's only in the last few weeks or a month 0:05:22.640 --> 0:05:25.000 or so I think that the people started being started 0:05:25.000 --> 0:05:28.120 to hit with their bills. But obviously people been known 0:05:28.560 --> 0:05:30.359 have known that this was coming for some time and 0:05:30.400 --> 0:05:31.279 have been reacting to that. 0:05:31.640 --> 0:05:34.720 But you're getting basically you're getting higher interest rates and 0:05:34.839 --> 0:05:38.240 you're getting higher taxes combining the same time. 0:05:39.320 --> 0:05:41.159 I think for a lot of you know, there's a 0:05:41.160 --> 0:05:42.960 lot of people who have been hit with land tax 0:05:43.000 --> 0:05:47.000 for the first time in Melbourne. If you're an investor, 0:05:47.040 --> 0:05:50.560 when they dropped it from land tax from thresholder three 0:05:50.600 --> 0:05:52.720 hundred thousand to fifty thousand, it's just going to pick 0:05:52.760 --> 0:05:56.360 up anybody who has anybody. Yeah, but a lot of 0:05:56.400 --> 0:06:00.400 people who might have were already paying land tax multiple 0:06:00.400 --> 0:06:02.840 properties or something like that. You know, they're probably saying 0:06:02.839 --> 0:06:05.080 a doubling of the land tax that they are paying. 0:06:05.160 --> 0:06:08.640 And land tax is a tax deduction, so the state 0:06:08.680 --> 0:06:11.760 government receives the money, but you get back a portion 0:06:11.839 --> 0:06:16.000 of it from the from the federal government, so you know, 0:06:16.160 --> 0:06:18.440 but it's still it's an extra increase at the time 0:06:18.480 --> 0:06:22.159 of fire, inflation and higher interstrates or normal interest rates or. 0:06:22.200 --> 0:06:24.400 So if you were a marginal, if you were only 0:06:24.440 --> 0:06:26.760 hanging on, it could push you out. 0:06:27.880 --> 0:06:28.080 Yeah. 0:06:28.080 --> 0:06:30.400 Absolutely, I think that's what we're saying in Melbourne at 0:06:30.440 --> 0:06:33.640 the moment, in particular. You know, people who are seeing 0:06:33.640 --> 0:06:37.560 those those higher costs of things. It starts having, it's 0:06:37.560 --> 0:06:39.719 having more. Is it part of having an impact that 0:06:39.760 --> 0:06:44.000 Your question is is it a bargain of our time 0:06:44.240 --> 0:06:47.600 or people who are buying are they are they loss? 0:06:48.480 --> 0:06:50.320 I think sort of medium to long term. I think 0:06:50.400 --> 0:06:54.000 Melbourne is probably underpriced in a relative sense compared to 0:06:54.040 --> 0:06:55.960 the other term markets which we would invest in, which 0:06:55.960 --> 0:06:56.640 is Sydney in Britain. 0:06:57.320 --> 0:07:02.120 Okay, so but you don't TechEd in the way that 0:07:02.160 --> 0:07:08.279 you detected and encouraged investors who were open to investing 0:07:08.320 --> 0:07:12.560 anywhere in the country into Brisbane. Are you at the 0:07:12.560 --> 0:07:15.040 start of that process now or has it even begune 0:07:16.240 --> 0:07:20.640 investing in Brisbane investing in Melbourne? Melbourne on the basis 0:07:20.680 --> 0:07:22.440 that the natural order will restore itself. 0:07:22.840 --> 0:07:24.800 Yeah, yep, that's that's one of the reasons. So there 0:07:24.840 --> 0:07:27.480 was a period back I think it was two. 0:07:27.280 --> 0:07:30.760 Thousand and one, two three, somewhere around there where. 0:07:32.320 --> 0:07:33.840 The city or might have been the late nineties. I 0:07:33.840 --> 0:07:36.760 think it was early noughties where where Melbourne got within 0:07:36.880 --> 0:07:40.600 three thousand dollars of Sydney. Yeah, I think it was 0:07:40.600 --> 0:07:42.440 three hundred and six versus surrounding and three or maybe 0:07:42.440 --> 0:07:44.679 thro round and three versus three hundred for median property price. 0:07:44.720 --> 0:07:47.720 And that was another signal that the natural order things 0:07:47.720 --> 0:07:51.360 should be Sydney big gap, Melbourne reasonable gap to And 0:07:51.360 --> 0:07:55.400 that was probably a screaming buy time for Sydney property 0:07:55.400 --> 0:07:57.960 prices because in a relative all, in a relative sense, 0:07:58.000 --> 0:08:00.880 so relative sense they had to pick up and sure 0:08:00.960 --> 0:08:02.520 enough for data wasn't a financial law. 0:08:02.680 --> 0:08:05.120 It's almost still still a journalist. 0:08:05.160 --> 0:08:08.840 But there there are times where you just say the 0:08:08.920 --> 0:08:11.120 natural order of things fall out of place, and I 0:08:11.200 --> 0:08:13.800 think we're probably in one of those situations now with Melbourne. 0:08:14.040 --> 0:08:15.080 That's really interesting. 0:08:15.200 --> 0:08:18.120 It's like it's like the property version of the of 0:08:18.160 --> 0:08:20.640 the share market. Isn't this where they have the reversion 0:08:20.640 --> 0:08:24.520 to the mean, and that that can be a very 0:08:24.560 --> 0:08:27.840 reliable way through for value investors and the other thing, 0:08:27.880 --> 0:08:32.080 of course, is that interstate investing is so much easier now. 0:08:32.240 --> 0:08:34.800 I mean, you really had to be quite a sophisticated 0:08:34.800 --> 0:08:38.200 operator once upon time to do that, but these days, 0:08:39.000 --> 0:08:42.520 with everything online and digital, et cetera, it is not 0:08:42.800 --> 0:08:45.960 difficult at all. I have done it, and the difference 0:08:46.280 --> 0:08:48.360 in fact it was Brisbane, and the difference between having 0:08:48.440 --> 0:08:51.600 a properly investment properly in Melbourne and Brisbane was very 0:08:51.800 --> 0:08:55.640 very very little. When I sold that properly, there was 0:08:55.679 --> 0:09:00.200 it was. There was some particular state differences, but they 0:09:00.200 --> 0:09:02.760 were not significant at all. And I think more and 0:09:02.840 --> 0:09:05.439 more people are are doing that and that notion I 0:09:05.480 --> 0:09:09.160 think we can be in the active investor in property books. 0:09:09.880 --> 0:09:12.560 I'm sure a lot of our listeners are of this. 0:09:14.080 --> 0:09:15.440 Frame of mind that they are. 0:09:15.400 --> 0:09:17.920 Agnostic if you like, as to where the property is, 0:09:18.679 --> 0:09:22.600 and if you take that strict investment criteria and that approach, 0:09:22.720 --> 0:09:26.120 then I think it is definitely worth having a look 0:09:26.160 --> 0:09:28.679 at the Melbourne market now in the way that we 0:09:28.679 --> 0:09:31.839 were talking about looking at Earth a year a year 0:09:31.880 --> 0:09:34.920 and a half ago. Okay, one other thing I suppose 0:09:34.960 --> 0:09:39.360 on the big picture, Bruce for property, if you take 0:09:39.360 --> 0:09:43.960 it that the prices how home prices in particular, and 0:09:44.000 --> 0:09:46.840 the entire and the entire economy, if you like, have 0:09:46.960 --> 0:09:52.000 been underpinned by immigration and immigration numbers, and it does 0:09:52.080 --> 0:09:56.160 explain to a significant degree the the one percent vacancy 0:09:56.240 --> 0:10:01.880 rates and the relatively strong price increases in homes, even 0:10:01.920 --> 0:10:06.760 though rates were going up all through that process. Then 0:10:06.960 --> 0:10:11.440 if there's immigration cuts and they are starting now with 0:10:11.880 --> 0:10:14.920 two things, an attempt to bring the broad number back 0:10:14.960 --> 0:10:17.720 to traditional sort of levels rather than from the exceptional 0:10:17.800 --> 0:10:20.680 levels they were at post COVID, and a big cutback, 0:10:20.720 --> 0:10:24.920 big cutback in international students, which is already hitting share market. 0:10:24.920 --> 0:10:28.800 For instance, IDP, the big, the big private education down 0:10:28.840 --> 0:10:31.760 by a third or so, about two thousand jobs already 0:10:31.840 --> 0:10:35.000 lost in that sector of private education. But for a 0:10:35.080 --> 0:10:40.360 property investor, do you think it will hit property prices? 0:10:40.360 --> 0:10:43.320 And where might it hit property prices? 0:10:43.360 --> 0:10:44.880 Immigration reduction? 0:10:45.520 --> 0:10:49.520 Yeah, so you started off this question was talking about 0:10:49.520 --> 0:10:54.080 the big picture, So there's no direct correlation between. 0:10:53.760 --> 0:10:55.679 One thing moving on the next. 0:10:55.679 --> 0:11:00.360 But at the moment, the biggest problem is supply can't 0:11:00.360 --> 0:11:03.640 be increased. They're struggling to increase supply. There there are 0:11:04.120 --> 0:11:07.760 restrictions on supply. Getting you properly on board so what 0:11:08.080 --> 0:11:12.200 can they control asing governments, as in federal government, they 0:11:12.240 --> 0:11:15.360 can control demand, and part of that demand comes from 0:11:16.200 --> 0:11:18.440 bringing in how many hundreds of thousands of people that 0:11:18.440 --> 0:11:20.000 we bring into the country each year. 0:11:19.880 --> 0:11:20.200 So. 0:11:22.160 --> 0:11:25.960 Reducing the number by whatever it is, tens of thousands 0:11:26.240 --> 0:11:29.040 but one hundred thousand, whatever the case may be, will 0:11:30.360 --> 0:11:33.720 slow down the increase in demand for the property. That's 0:11:33.760 --> 0:11:34.600 sort of basic. 0:11:34.320 --> 0:11:38.200 Economics one O one, and that should we should have 0:11:38.240 --> 0:11:38.720 an impact. 0:11:38.800 --> 0:11:40.920 Doesn't mean the properly prices are going to fall, No, 0:11:41.080 --> 0:11:43.800 it doesn't mean that that's going to happen normally. You've 0:11:43.800 --> 0:11:45.199 got to have a couple of things line up to 0:11:45.640 --> 0:11:49.439 forth property prices to fall. But it certainly takes upward 0:11:49.440 --> 0:11:52.520 pressure some of the upward pressure. You take out one 0:11:52.600 --> 0:11:55.040 hundred thousand people a year for the next two years, 0:11:55.040 --> 0:11:56.800 five years, or whatever, then there's you've got an extra 0:11:57.720 --> 0:12:02.959 two thousand and five hundred thousand fewer people needing to 0:12:04.320 --> 0:12:08.120 find a place to live. So it should have an impact. 0:12:08.160 --> 0:12:12.000 It might just slow the rate of growth of probably prices, 0:12:12.080 --> 0:12:14.880 It might make them stagnate, it might make them go backwards, 0:12:14.960 --> 0:12:18.200 But does it hit property prices. It will have an 0:12:18.240 --> 0:12:20.520 impact on property prices. It doesn't mean it's going to 0:12:20.559 --> 0:12:23.160 make it go backwards. It might just having an impact 0:12:23.200 --> 0:12:26.240 on property prices and just slow the what might have 0:12:26.360 --> 0:12:30.000 happened from nine percent growth per year down to six 0:12:30.040 --> 0:12:33.000 percent growth per year, or it might have been negative. 0:12:33.800 --> 0:12:38.320 So yes, you know, you take away some demands. It 0:12:38.360 --> 0:12:41.000 has to have an impact on property prices, but it 0:12:41.040 --> 0:12:42.080 doesn't mean it's going to fall. 0:12:42.480 --> 0:12:45.360 Okay, Now, as an advisor, tell me about your clients, 0:12:45.360 --> 0:12:48.040 do they do they if they're looking at the numbers, 0:12:48.080 --> 0:12:52.400 they see that the property prices are running broadly similar 0:12:52.400 --> 0:12:55.360 to sub prices. At the moment, the ASX is going 0:12:55.360 --> 0:12:57.079 to come in at about nine percent for the year. 0:12:57.120 --> 0:13:01.640 Any chucking dividends and there's you're certainly on thirteen percent. 0:13:01.720 --> 0:13:04.280 So better than property again for the second here in 0:13:04.280 --> 0:13:08.000 a row. But property doing better than most people would 0:13:08.040 --> 0:13:11.080 have fought with the rates and not falling though that 0:13:11.160 --> 0:13:14.560 people had expected that they would. So when you get 0:13:14.640 --> 0:13:16.760 when you get the glance in the door and there 0:13:16.760 --> 0:13:20.040 are active investors, they have a broad portfolio. 0:13:19.480 --> 0:13:21.280 Are they what's the mood? 0:13:21.320 --> 0:13:23.960 Are they inmfessed the fact that property is still is 0:13:24.000 --> 0:13:27.520 still going up onto these conditions, and what did they 0:13:27.720 --> 0:13:29.400 is there any sense of bout outcut they have. 0:13:31.120 --> 0:13:35.840 Yeah, sort of a fewer conversations about I guess about 0:13:35.960 --> 0:13:39.920 new money but going into investment markets than there might 0:13:39.960 --> 0:13:44.960 have been in times gone past or but it seems 0:13:45.000 --> 0:13:47.559 to be picking up again, as in it was quite. 0:13:48.960 --> 0:13:52.120 More about managing what you had and making adjustments to 0:13:52.120 --> 0:13:52.880 what you had. 0:13:53.360 --> 0:13:55.280 Certainly, you know during COVID there was a period there 0:13:55.280 --> 0:13:58.200 with the same don't that's obviously three four what are 0:13:58.200 --> 0:14:01.720 we four years ago now? And coming out of that 0:14:01.760 --> 0:14:03.800 there seem to be some opportunities and there were. 0:14:05.320 --> 0:14:07.400 The same thing straw hats in winter. 0:14:09.960 --> 0:14:12.520 You try to buy assets when they're undervalued rather than 0:14:12.920 --> 0:14:15.800 when they might be a reasonable valuation or even a 0:14:15.800 --> 0:14:21.080 full valuation. And you know, that's what you're constantly trying 0:14:21.080 --> 0:14:25.360 to do as an investor. If you're making active investment decisions, 0:14:25.360 --> 0:14:29.960 which property residential property has to be an active decision. 0:14:30.680 --> 0:14:32.400 You can't index. You can't index it. 0:14:33.760 --> 0:14:37.360 So I think in recent times people are sort of okay, 0:14:38.120 --> 0:14:40.680 you know, I will manage to get through the higher 0:14:40.680 --> 0:14:42.880 industrates for those people that have I'm not saying this 0:14:43.000 --> 0:14:45.320 is everybody by any stretch of the imagination. There's more 0:14:45.320 --> 0:14:50.120 pain out there than there is people seeing things very positively. 0:14:50.160 --> 0:14:52.920 But for those people who are seeing it positively and 0:14:52.920 --> 0:14:56.920 they're looking to to do some investing, property is not 0:14:57.000 --> 0:14:59.880 right for everybody. It scares a lot of people off 0:14:59.880 --> 0:15:02.640 to talking about death and tenants and all the things 0:15:02.640 --> 0:15:04.160 that necessarily. 0:15:03.600 --> 0:15:04.360 Come with property. 0:15:04.800 --> 0:15:07.680 But for those people who are comfortable with the debts 0:15:07.720 --> 0:15:11.360 with dealing with tenants, with constant changes to the laws 0:15:11.400 --> 0:15:14.480 and in regards to what landlords are going to provide, 0:15:14.520 --> 0:15:19.440 then there's the potential to get into property. But anybody 0:15:19.480 --> 0:15:22.560 who's getting into property needs to understand that you really 0:15:22.600 --> 0:15:25.360 have to have a mindset of buying a property for forever, 0:15:26.400 --> 0:15:28.240 or at least having your head ten years. 0:15:28.240 --> 0:15:30.960 Why because the costs of getting into and out of 0:15:30.960 --> 0:15:35.120 property are in Australia fairly obsaane. 0:15:35.280 --> 0:15:38.240 You're talking years ten years as your benchmark. 0:15:38.320 --> 0:15:42.160 Ten years, yeah, percent rough lyag you will take to 0:15:42.200 --> 0:15:46.800 get into a property, particularly in Victoria, South Australia. Surprise 0:15:46.880 --> 0:15:49.720 the other day to time at certain places more expensive 0:15:49.720 --> 0:15:52.400 than Victoria, but get somewhere between sort of four and 0:15:52.720 --> 0:15:54.360 four and six percent stamp. 0:15:54.200 --> 0:15:56.760 Duty is to get in to get out of the property. 0:15:56.800 --> 0:15:59.960 You've got about three percent in agencies and marketing, advertised 0:16:00.120 --> 0:16:02.160 and all those other things there. So the cost you're 0:16:02.160 --> 0:16:04.760 getting into an out of a property is seven to 0:16:04.760 --> 0:16:09.680 ten percent, so you're very difficult back money on that 0:16:09.720 --> 0:16:12.040 in the short term. Property needs to be a medium 0:16:12.120 --> 0:16:16.240 term investment. Well long term it needs to be a 0:16:16.240 --> 0:16:18.920 long term investment. It depends on how you say made 0:16:18.960 --> 0:16:22.080 him a long term But anybody that's going on to properly, 0:16:22.120 --> 0:16:23.920 I say, you've got to have a minimum of ten years, 0:16:23.920 --> 0:16:27.280 but the preferable hole in time for properties forever. 0:16:27.960 --> 0:16:30.720 Okay, we'll hold that thought right there. 0:16:31.000 --> 0:16:34.280 We'll take short break and we'll come back pick up 0:16:34.280 --> 0:16:37.880 on that issue. Hello and welcome back to the Australians 0:16:37.880 --> 0:16:40.960 Money Puzzle podcast. I'm James Kirkby, the Wealth editor at 0:16:41.000 --> 0:16:44.520 The Australian. I'm talking to Bruce Bramble, who is a 0:16:44.520 --> 0:16:49.400 financial advisor and author and regular contributor to news Corps 0:16:50.560 --> 0:16:55.040 in the area of investment and wealth, and we were 0:16:55.080 --> 0:16:57.040 just talking just repeat the number of you would Bruce. 0:16:57.120 --> 0:17:02.480 It was really interesting about buying proper five your costs, 0:17:02.520 --> 0:17:06.280 whatever the cost of the property is, five percent of 0:17:06.359 --> 0:17:09.320 that cost is going to be you need five percent 0:17:09.359 --> 0:17:11.480 of that cost going in and you need about three 0:17:11.480 --> 0:17:13.280 percent going out of the far side, is that what 0:17:13.320 --> 0:17:13.879 you were saying? 0:17:14.480 --> 0:17:17.400 Yeah, roughly, Yeah, somewhere we're going four and six probably 0:17:17.480 --> 0:17:21.119 north about north of five, largely five five and a 0:17:21.160 --> 0:17:23.920 half percent to get in the sand duty's and potentially 0:17:23.920 --> 0:17:26.000 if you're using advis advocate another two percent on top 0:17:26.040 --> 0:17:29.480 of that roughly some of them flat feet, but around 0:17:29.480 --> 0:17:30.680 that five to six percent mark. 0:17:30.720 --> 0:17:31.400 And to get out. 0:17:31.560 --> 0:17:35.520 You know, the cost of selling advertising agents charged about 0:17:35.600 --> 0:17:36.400 one point five. 0:17:36.200 --> 0:17:38.280 To two percent plus JC, so it's a good portion 0:17:38.320 --> 0:17:38.480 of it. 0:17:38.560 --> 0:17:41.200 But then you've got advertising and marketing and some other 0:17:41.280 --> 0:17:42.960 costs and conveyancing and whatever. 0:17:42.720 --> 0:17:43.399 Else on top of that. 0:17:43.480 --> 0:17:46.440 Tope, yes, you you're to get out, you're probably around 0:17:46.440 --> 0:17:48.000 that three somewhere between two and a half and three 0:17:48.000 --> 0:17:49.720 and a half percent most of the time to get 0:17:49.760 --> 0:17:51.720 out of to get out of a property. 0:17:51.760 --> 0:17:53.560 So yeah, that's very very interesting. 0:17:53.600 --> 0:17:56.280 As you said, you can't index it. You it's a 0:17:56.359 --> 0:17:58.879 it's a big ticket acquisition and you have to go 0:17:58.960 --> 0:18:00.800 in boots and all the bass day every time. You 0:18:00.880 --> 0:18:02.560 can't buy a bit of a property as to say, 0:18:02.640 --> 0:18:06.000 or unfortunately it's not a bit of one. So one 0:18:06.000 --> 0:18:07.399 thing that's come up on the show before we go 0:18:07.440 --> 0:18:13.320 to questions is several people who who I do admire 0:18:13.560 --> 0:18:17.480 and respect on the show making the point that the 0:18:17.680 --> 0:18:23.879 units the house prices overshot through COVID and post COVID 0:18:24.440 --> 0:18:28.720 because of that whole thing of space being so exceptionally valued, 0:18:29.520 --> 0:18:32.280 personal space being so exceptionally valued when we were all 0:18:32.359 --> 0:18:35.600 locked in our homes, but that the units fell behind, 0:18:36.240 --> 0:18:40.439 way behind. And in that same theme of reversion to 0:18:40.480 --> 0:18:42.119 the mean that we're talking about, how the sort of 0:18:42.240 --> 0:18:47.720 natural order of things, the units haven't been doing as 0:18:47.800 --> 0:18:50.600 well as units normally do for some years, and there's 0:18:50.640 --> 0:18:53.840 a strong sense that they may catch up looking forward. 0:18:53.960 --> 0:18:55.840 If someone was coming to you and said I can 0:18:55.840 --> 0:18:59.040 buy a property anywhere in the country, I don't mind 0:18:59.040 --> 0:19:02.320 where I'm ready to go. The only thing I want 0:19:02.320 --> 0:19:04.959 to make a decision on is a unit over a house. 0:19:05.560 --> 0:19:08.200 I know the basics. I know that a unit is easier, 0:19:09.280 --> 0:19:13.399 it is costs less to buys is simply because they 0:19:13.440 --> 0:19:17.240 costs less, nothing to do with value. I know that 0:19:17.320 --> 0:19:20.000 they're less maintenance. I know homes are a standard on 0:19:20.040 --> 0:19:22.800 home is a lot more maintenance, and I have been 0:19:22.920 --> 0:19:27.199 hearing that units are set to do better per annum 0:19:27.240 --> 0:19:30.840 for a while than houses. In catching up post called 0:19:30.880 --> 0:19:32.560 but what would you say to that person? 0:19:33.320 --> 0:19:35.520 First of all times, we're going to ask you some 0:19:35.640 --> 0:19:40.880 definitional questions here if you don't mind. So your house 0:19:40.960 --> 0:19:42.879 is pretty simple, ass is a is a you know, 0:19:43.600 --> 0:19:47.160 a property or a building on land. There's no touching 0:19:47.600 --> 0:19:52.040 dale or whatever. Are you suggesting that a unit is 0:19:52.200 --> 0:19:54.520 more like medium density high than city where walls are 0:19:54.600 --> 0:19:57.000 touching and all that sort of stuff, because there's. 0:19:56.840 --> 0:19:59.560 I know that definite definition of units is very messy. 0:19:59.560 --> 0:20:02.120 It includes townhouses. It shouldn't. Let's just talk about apartments. 0:20:02.119 --> 0:20:02.720 Make it sense them. 0:20:02.880 --> 0:20:06.360 Yeah, okay, So I'd separate them into three so houses 0:20:07.320 --> 0:20:10.159 at the other end, apartments or flats, and in the 0:20:10.200 --> 0:20:13.479 middle is what I call units, which might be you know, 0:20:13.560 --> 0:20:15.920 the old quarter acre block that got split in. 0:20:15.960 --> 0:20:18.760 There's three sort of townhouse unity sort. 0:20:18.640 --> 0:20:19.840 Of things on it that might have a bit of 0:20:19.840 --> 0:20:22.840 common common area, but there's no real you know, they've 0:20:23.040 --> 0:20:24.760 got their own yard and they're not. 0:20:24.880 --> 0:20:28.720 They're not. So i'd sort of call those three. 0:20:28.800 --> 0:20:34.560 So from an investment perspective, again, I split property into 0:20:34.680 --> 0:20:37.639 two sorts of property, into a residential property to two 0:20:37.640 --> 0:20:39.880 short one is a home. Home is going to meet 0:20:39.880 --> 0:20:41.600 an emotional need that needs to be where you want 0:20:41.640 --> 0:20:44.760 to live, which might be you know, a lifestyle or 0:20:44.840 --> 0:20:47.320 near schools or near family or your work or something 0:20:47.359 --> 0:20:49.720 like that. That's homes need to meet need to meet 0:20:49.800 --> 0:20:53.040 emotional needs. An investment is about one thing and one 0:20:53.040 --> 0:20:56.120 thing only, and that is making money, and you want 0:20:56.160 --> 0:20:57.919 to maximize new chances of doing that. 0:20:58.119 --> 0:21:03.280 Now, I'm a very strong believer that the single one 0:21:03.320 --> 0:21:03.760 of the. 0:21:05.560 --> 0:21:10.359 Main ways that property appreciates in value is. 0:21:10.400 --> 0:21:11.560 Via land content. 0:21:12.880 --> 0:21:15.199 So minute we have one of the rules that we 0:21:15.280 --> 0:21:18.960 use for purchasing helping clients purchase property is minimum land 0:21:19.000 --> 0:21:22.360 content of thirty percent. That's specifically designed to knock out 0:21:23.280 --> 0:21:27.280 what we're just referring to as flats and apartments. Yes, 0:21:27.720 --> 0:21:33.240 because it is land that appreciates. Buildings depreciate. Buildings literally 0:21:33.640 --> 0:21:37.240 fall apart from the moment that you since before they're built, 0:21:37.240 --> 0:21:39.560 So you've got to spend an ever increasing amount of time. 0:21:39.640 --> 0:21:40.440