1 00:00:03,900 --> 00:00:06,300 Sean Aylmer: Welcome to the Fear and Greed Business Interview. I'm Sean Aylmer. 2 00:00:06,990 --> 00:00:10,110 Sean Aylmer: We talk about all kinds of investing on this podcast 3 00:00:10,110 --> 00:00:13,380 Sean Aylmer: and one of the most popular topics is always property 4 00:00:13,380 --> 00:00:16,710 Sean Aylmer: investing. But we've never really talked much about investing in 5 00:00:16,859 --> 00:00:20,430 Sean Aylmer: new builds, residential property built for an investor. It's an 6 00:00:20,430 --> 00:00:23,430 Sean Aylmer: interesting time for the discussion with core logic data showing 7 00:00:23,430 --> 00:00:26,880 Sean Aylmer: that house prices have now fully or almost fully recovered 8 00:00:26,880 --> 00:00:29,610 Sean Aylmer: from the post- COVID dip. They may indeed be heading 9 00:00:29,610 --> 00:00:33,509 Sean Aylmer: into record territory again. Daniel Hubbard is the group manager 10 00:00:33,570 --> 00:00:36,899 Sean Aylmer: investment at Metricon Homes, the biggest builder in Australia, and 11 00:00:36,900 --> 00:00:40,019 Sean Aylmer: a supporter of this podcast. Daniel, welcome to Fear and Greed. 12 00:00:40,440 --> 00:00:41,550 Daniel Hubbard: Thanks, Sean. Thanks for having me. 13 00:00:42,240 --> 00:00:46,348 Sean Aylmer: So I mean, we've seen the 13 rate rises since 14 00:00:46,348 --> 00:00:48,420 Sean Aylmer: last May. What's happening in the sector now as a 15 00:00:48,420 --> 00:00:50,550 Sean Aylmer: result of those rate rises? 16 00:00:51,150 --> 00:00:54,420 Daniel Hubbard: Yeah, look, a really interesting period, despite those rate rises 17 00:00:54,450 --> 00:00:57,390 Daniel Hubbard: and record inflation, the property market has remained really, really 18 00:00:57,390 --> 00:01:01,320 Daniel Hubbard: strong. As you mentioned, property prices over the last 12 19 00:01:01,350 --> 00:01:05,009 Daniel Hubbard: months have reclaimed the falls from 22, and in fact, 20 00:01:05,069 --> 00:01:08,069 Daniel Hubbard: capital city dwellings on average over the last 12 months 21 00:01:08,069 --> 00:01:11,550 Daniel Hubbard: have gone up 7. 8%. So strong demand driven by 22 00:01:11,699 --> 00:01:15,899 Daniel Hubbard: net overseas migration, a tight rental market, and of course 23 00:01:15,900 --> 00:01:18,810 Daniel Hubbard: a lack of supply. So what we're seeing is borrowing 24 00:01:18,810 --> 00:01:22,048 Daniel Hubbard: money is definitely harder for some people for sure, because 25 00:01:22,050 --> 00:01:24,988 Daniel Hubbard: of the significant rise in house prices and of course, 26 00:01:24,990 --> 00:01:27,450 Daniel Hubbard: the interest rates. But what we are seeing is, the 27 00:01:27,450 --> 00:01:30,480 Daniel Hubbard: appetite to purchase, whether it's for investment or owner- occupier 28 00:01:30,630 --> 00:01:35,730 Daniel Hubbard: is still very strong. Sentiment towards the property market is 29 00:01:35,730 --> 00:01:37,890 Daniel Hubbard: very strong. So it's really just a matter of an 30 00:01:37,890 --> 00:01:41,610 Daniel Hubbard: individual's ability to borrow at this time. But certainly sentiment 31 00:01:41,610 --> 00:01:42,660 Daniel Hubbard: and demand is very strong. 32 00:01:43,230 --> 00:01:46,440 Sean Aylmer: Okay. Now, like many sectors, construction's been through a challenging 33 00:01:46,440 --> 00:01:49,290 Sean Aylmer: time. Metricon I'm sure hasn't been immune to some of 34 00:01:49,290 --> 00:01:53,520 Sean Aylmer: those things, supply chains, for example, labor shortages, narrower margins. 35 00:01:53,580 --> 00:01:55,440 Sean Aylmer: Is the industry through the worst of it now? 36 00:01:56,070 --> 00:01:58,289 Daniel Hubbard: Yeah, look, Sean, we definitely are. We've definitely come out 37 00:01:58,290 --> 00:02:00,690 Daniel Hubbard: of the other side of it. Metricon is a business going very, 38 00:02:00,690 --> 00:02:04,979 Daniel Hubbard: very strong, really well navigated by our directors and management 39 00:02:04,980 --> 00:02:06,660 Daniel Hubbard: team, and of course all of our staff here over 40 00:02:06,660 --> 00:02:10,620 Daniel Hubbard: the last 18 months to two years. Definitely returning to 41 00:02:10,830 --> 00:02:14,250 Daniel Hubbard: normal levels in terms of supply and trades and those 42 00:02:14,250 --> 00:02:16,320 Daniel Hubbard: issues that were very challenging over the last couple of 43 00:02:16,320 --> 00:02:19,379 Daniel Hubbard: years. Obviously, unfortunately we saw a lot of builders not 44 00:02:19,380 --> 00:02:21,869 Daniel Hubbard: make it through that period. But we are entering into 45 00:02:21,870 --> 00:02:24,389 Daniel Hubbard: a more stable environment now. And certainly for us it's 46 00:02:24,389 --> 00:02:26,730 Daniel Hubbard: business as usual, which is great, because it was a 47 00:02:26,730 --> 00:02:27,990 Daniel Hubbard: tough couple of years for the industry. 48 00:02:28,560 --> 00:02:33,210 Sean Aylmer: Okay, so Metricon's right to go. Has there been a lot of change because of COVID and 49 00:02:33,210 --> 00:02:36,179 Sean Aylmer: because of the, well, initially we had the government subsidies 50 00:02:36,179 --> 00:02:38,159 Sean Aylmer: and then we had the downturn in it. Has it 51 00:02:39,240 --> 00:02:42,119 Sean Aylmer: made the industry more efficient or is it exactly the 52 00:02:42,119 --> 00:02:44,040 Sean Aylmer: same as it was in 2018, 2019? 53 00:02:44,940 --> 00:02:47,310 Daniel Hubbard: What I would think the main change would probably be, 54 00:02:47,580 --> 00:02:52,169 Daniel Hubbard: is not such a high volume, aggressive target based industry. 55 00:02:52,169 --> 00:02:55,500 Daniel Hubbard: I think right now sustainability and being around for the 56 00:02:55,500 --> 00:02:59,190 Daniel Hubbard: long term, providing good product, providing good service, and being 57 00:02:59,190 --> 00:03:02,010 Daniel Hubbard: a great builder. I think the change wouldn't be just 58 00:03:02,490 --> 00:03:04,561 Daniel Hubbard: in appetite for large volumes, it's more about being sustainable. 59 00:03:04,561 --> 00:03:08,730 Sean Aylmer: Okay. Metricon itself has a great reputation as being a 60 00:03:08,730 --> 00:03:12,929 Sean Aylmer: very good builder. How important is that to it? And 61 00:03:12,929 --> 00:03:15,719 Sean Aylmer: I'm not talking about the reputation, I actually mean being 62 00:03:15,719 --> 00:03:19,710 Sean Aylmer: a very good builder. Because the fly- by- nighters I'm 63 00:03:19,710 --> 00:03:22,260 Sean Aylmer: sure don't last, but it's a pretty competitive industry you're in. 64 00:03:22,770 --> 00:03:26,970 Daniel Hubbard: Yeah, look, it is. Our reputation is fantastic, obviously we've been around for 65 00:03:26,970 --> 00:03:30,419 Daniel Hubbard: 47 years. And when people are building a home and 66 00:03:30,419 --> 00:03:33,270 Daniel Hubbard: they're spending significant amounts of money, and of course they 67 00:03:33,270 --> 00:03:36,569 Daniel Hubbard: have to go through a construction process and all the variables 68 00:03:36,570 --> 00:03:39,180 Daniel Hubbard: there, as you say, they want to be with an 69 00:03:39,180 --> 00:03:43,080 Daniel Hubbard: organization that they can trust and certainly feel safe with. 70 00:03:43,350 --> 00:03:46,590 Daniel Hubbard: And I think without question, Metricon's been known as that 71 00:03:46,590 --> 00:03:49,529 Daniel Hubbard: kind of builder for a really long time. So yeah, 72 00:03:49,530 --> 00:03:52,440 Daniel Hubbard: it certainly is the reputation we have in the marketplace. 73 00:03:52,889 --> 00:04:02,250 Sean Aylmer: Stay with me, Daniel. We'll be back in a minute. I'm speaking 74 00:04:02,250 --> 00:04:07,170 Sean Aylmer: to Daniel Hubbard, group manager of investment at Metricon Homes. Okay, 75 00:04:07,170 --> 00:04:09,809 Sean Aylmer: now, I mentioned in the introduction that while this podcast 76 00:04:09,809 --> 00:04:12,360 Sean Aylmer: has talked a lot about property investment, we don't really 77 00:04:12,360 --> 00:04:15,660 Sean Aylmer: talk much about new builds. What are we talking about 78 00:04:15,660 --> 00:04:16,979 Sean Aylmer: here? Is it mostly off the plan? 79 00:04:17,279 --> 00:04:20,279 Daniel Hubbard: Yes, it is. Yeah, absolutely. So Invest by Metricon, which 80 00:04:20,279 --> 00:04:22,739 Daniel Hubbard: is a division of the business that I run, we 81 00:04:22,740 --> 00:04:26,039 Daniel Hubbard: work with people on guiding them through easy to understand 82 00:04:26,040 --> 00:04:30,870 Daniel Hubbard: property investment strategies. Unlike our retail business or traditional business 83 00:04:30,870 --> 00:04:32,670 Daniel Hubbard: where people will go in and build a home for 84 00:04:32,670 --> 00:04:36,150 Daniel Hubbard: themselves, it's all about the product, it's all about the 85 00:04:36,150 --> 00:04:39,448 Daniel Hubbard: actual house. With us, we start back a step, which 86 00:04:39,450 --> 00:04:41,609 Daniel Hubbard: is it's all about the strategy. How do you do 87 00:04:41,610 --> 00:04:44,610 Daniel Hubbard: this? How do you unlock your equity? How do you 88 00:04:44,700 --> 00:04:48,839 Daniel Hubbard: structure your finance? Understanding your tax position, and just understand 89 00:04:48,900 --> 00:04:51,150 Daniel Hubbard: the strategy and the mechanics of how to invest and 90 00:04:51,150 --> 00:04:54,300 Daniel Hubbard: how to lay the foundations for the future to be able to 91 00:04:54,300 --> 00:04:58,889 Daniel Hubbard: expand on your portfolio over time, ultimately building wealth for 92 00:04:58,889 --> 00:05:01,409 Daniel Hubbard: the future. In terms of the product, Sean, as you 93 00:05:01,410 --> 00:05:03,960 Daniel Hubbard: said, it is an off the plan situation. We'll source 94 00:05:03,960 --> 00:05:07,380 Daniel Hubbard: our clients land in high quality estates in high demand 95 00:05:07,380 --> 00:05:10,740 Daniel Hubbard: areas, and then construct them the home and provide a 96 00:05:10,740 --> 00:05:14,730 Daniel Hubbard: complete end- to- end service. So starting with the strategy, 97 00:05:14,940 --> 00:05:19,649 Daniel Hubbard: starting with the land acquisition, location, home design, and then 98 00:05:19,650 --> 00:05:22,919 Daniel Hubbard: all the way through construction. We guide people through the 99 00:05:22,920 --> 00:05:26,430 Daniel Hubbard: property management side of things. We have partners with depreciation 100 00:05:26,430 --> 00:05:31,589 Daniel Hubbard: schedules, finance, solicitors. So it's really holistic in terms of 101 00:05:31,589 --> 00:05:34,980 Daniel Hubbard: the offering. But yes, house and land packages off the 102 00:05:34,980 --> 00:05:37,830 Daniel Hubbard: plan in specifically acquired areas. 103 00:05:38,190 --> 00:05:41,909 Sean Aylmer: Okay. And most of your clients in your area, Daniel, 104 00:05:42,600 --> 00:05:47,130 Sean Aylmer: are they bigger clients, institutional, maybe family offices, that type 105 00:05:47,130 --> 00:05:48,630 Sean Aylmer: of thing, who are typically your client? 106 00:05:49,170 --> 00:05:51,809 Daniel Hubbard: Yeah, look, we have three main categories and I would 107 00:05:51,809 --> 00:05:55,680 Daniel Hubbard: say by far the biggest category is just your average 108 00:05:55,920 --> 00:05:59,219 Daniel Hubbard: everyday Australians, mums and dads who are out there that 109 00:05:59,789 --> 00:06:02,219 Daniel Hubbard: have the appetite to try and improve their financial future 110 00:06:02,220 --> 00:06:04,830 Daniel Hubbard: and looking for guidance on how to do. So that's 111 00:06:04,830 --> 00:06:09,719 Daniel Hubbard: a big portion of our client base. Of course, another 112 00:06:09,719 --> 00:06:12,868 Daniel Hubbard: section would be the sort of savvy professionals who are 113 00:06:12,870 --> 00:06:15,688 Daniel Hubbard: busy, they're time poor and they don't quite have the 114 00:06:15,690 --> 00:06:19,650 Daniel Hubbard: knowledge and they're looking for a professional organization to provide 115 00:06:19,650 --> 00:06:24,240 Daniel Hubbard: them with a really seamless service. Probably the smaller area 116 00:06:24,240 --> 00:06:26,969 Daniel Hubbard: of the market would be those that are very confident in their 117 00:06:26,970 --> 00:06:30,000 Daniel Hubbard: investment strategy. They know what they're doing from their strategy 118 00:06:30,000 --> 00:06:32,880 Daniel Hubbard: perspective and just want a good quality property to add 119 00:06:32,880 --> 00:06:36,479 Daniel Hubbard: to their portfolio. So it's quite a cross- section, broad 120 00:06:36,480 --> 00:06:39,870 Daniel Hubbard: appeal to all of those areas. But typically it's the 121 00:06:39,930 --> 00:06:43,110 Daniel Hubbard: mums and dads investors, everyday Australians who are wanting to 122 00:06:43,110 --> 00:06:46,319 Daniel Hubbard: build wealth for the future and are looking for a professional 123 00:06:46,320 --> 00:06:50,520 Daniel Hubbard: organization that they can trust and work with to guide 124 00:06:50,520 --> 00:06:51,660 Daniel Hubbard: them through the whole process. 125 00:06:52,230 --> 00:06:53,999 Sean Aylmer: Now, I'll just remind listeners, we are not an investment 126 00:06:53,999 --> 00:07:00,180 Sean Aylmer: podcast, so always seek your own professional advice if making investment decisions, including in property. Daniel, what are some 127 00:07:00,180 --> 00:07:03,359 Sean Aylmer: of the tax benefits of building new? Because you hear 128 00:07:03,360 --> 00:07:04,138 Sean Aylmer: a lot about that. 129 00:07:05,099 --> 00:07:08,700 Daniel Hubbard: Yeah, absolutely. So a big thing with new is the 130 00:07:08,700 --> 00:07:14,160 Daniel Hubbard: depreciation. You can claim your maximum depreciation both internally and 131 00:07:14,160 --> 00:07:17,100 Daniel Hubbard: externally on the build. So you've got the three main 132 00:07:17,100 --> 00:07:19,560 Daniel Hubbard: areas of deduction being the interest on the loan. Of 133 00:07:19,560 --> 00:07:22,440 Daniel Hubbard: course, all your property- related expenses, your rates, your water, 134 00:07:22,440 --> 00:07:26,819 Daniel Hubbard: your property management fees and insurance, et cetera, which those 135 00:07:26,820 --> 00:07:29,279 Daniel Hubbard: things you can claim on established or a new property. 136 00:07:29,520 --> 00:07:31,710 Daniel Hubbard: But the depreciation, as I said, if you're going into a 137 00:07:31,710 --> 00:07:35,280 Daniel Hubbard: new property, you can claim that maximum benefit, that maximum non- 138 00:07:35,280 --> 00:07:38,760 Daniel Hubbard: cash deduction, which makes a big difference to your tax 139 00:07:38,760 --> 00:07:42,030 Daniel Hubbard: return. And of course therefore, your out- of- pocket contribution 140 00:07:42,030 --> 00:07:43,470 Daniel Hubbard: towards servicing that loan. 141 00:07:44,190 --> 00:07:48,000 Sean Aylmer: What about prices? So we've talked about strategy and it's 142 00:07:48,000 --> 00:07:50,700 Sean Aylmer: important when you're investing in what you're talking about, that 143 00:07:50,700 --> 00:07:52,260 Sean Aylmer: you have a strategy. It's not just something that you 144 00:07:52,260 --> 00:07:54,540 Sean Aylmer: do off- handed. Presumably that strategy has got to be 145 00:07:54,540 --> 00:07:57,630 Sean Aylmer: part of an investment strategy or an investment portfolio. Is 146 00:07:57,630 --> 00:07:58,020 Sean Aylmer: that right? 147 00:07:58,020 --> 00:07:58,170 Daniel Hubbard: Yes, it is. Yeah. 148 00:07:59,400 --> 00:08:02,040 Sean Aylmer: And then you take in the tax considerations into it. 149 00:08:02,370 --> 00:08:06,029 Sean Aylmer: What about prices? How important is price? Because I'm sure 150 00:08:06,029 --> 00:08:09,570 Sean Aylmer: for many of us buying a place we're going to 151 00:08:09,570 --> 00:08:12,750 Sean Aylmer: live in, much of it's about price. Is price as 152 00:08:12,750 --> 00:08:13,950 Sean Aylmer: important in your world? 153 00:08:14,880 --> 00:08:17,759 Daniel Hubbard: Oh, look, it is, for a few reasons. One obviously 154 00:08:17,759 --> 00:08:21,360 Daniel Hubbard: is accessibility. What can the average person afford out in 155 00:08:21,360 --> 00:08:26,400 Daniel Hubbard: the marketplace? So typically we focus on property prices around 156 00:08:26,400 --> 00:08:29,190 Daniel Hubbard: the median house price. I've always tried to use that 157 00:08:29,190 --> 00:08:32,790 Daniel Hubbard: as a bit of a benchmark when investing. There's always 158 00:08:32,790 --> 00:08:36,929 Daniel Hubbard: broad appeal and appetite for affordable housing for people to 159 00:08:36,929 --> 00:08:40,799 Daniel Hubbard: buy, and of course affordable renting. So I always like 160 00:08:40,799 --> 00:08:43,289 Daniel Hubbard: the idea of sticking into that median house price. We 161 00:08:43,290 --> 00:08:46,890 Daniel Hubbard: want to find a blend of being in the right areas, 162 00:08:46,890 --> 00:08:50,429 Daniel Hubbard: but of course, trying to find the most accessible price 163 00:08:50,429 --> 00:08:51,150 Daniel Hubbard: point for people. 164 00:08:51,599 --> 00:08:54,270 Sean Aylmer: Okay. So what about the next 12 months, two years? 165 00:08:54,690 --> 00:08:57,030 Sean Aylmer: What do you think will happen in the industry? Is 166 00:08:57,030 --> 00:08:59,100 Sean Aylmer: it a good time to be investing in property? 167 00:09:00,090 --> 00:09:02,010 Daniel Hubbard: Oh, look, I definitely think it is. All of the 168 00:09:02,010 --> 00:09:05,309 Daniel Hubbard: forecasting and all of the data that I'm seeing is 169 00:09:05,309 --> 00:09:08,789 Daniel Hubbard: all very positive. Of course, there are slight variations in 170 00:09:08,790 --> 00:09:11,219 Daniel Hubbard: the outlook for the future. Some were forecasted a bit 171 00:09:11,219 --> 00:09:14,639 Daniel Hubbard: stronger than others. I definitely see good growth over the 172 00:09:14,639 --> 00:09:19,409 Daniel Hubbard: next few years and largely driven by population. Recent data 173 00:09:20,309 --> 00:09:24,630 Daniel Hubbard: is that Australia's population is forecasted to grow 1. 9 174 00:09:24,630 --> 00:09:28,950 Daniel Hubbard: million over the next five years. Net overseas migration last 175 00:09:28,950 --> 00:09:31,500 Daniel Hubbard: year came in just short of 500,000, which was more 176 00:09:31,500 --> 00:09:36,119 Daniel Hubbard: than double the 235, 000 that was forecasted in last October's 177 00:09:36,119 --> 00:09:40,199 Daniel Hubbard: budget. The Federal government has a target of 1. 2 178 00:09:40,200 --> 00:09:43,078 Daniel Hubbard: million homes being built in five years from 1st of 179 00:09:43,080 --> 00:09:46,889 Daniel Hubbard: July, '24 through to '29 and that equates to about 240, 180 00:09:46,889 --> 00:09:50,848 Daniel Hubbard: 000 per year, which historically in Australia has never been 181 00:09:50,849 --> 00:09:54,840 Daniel Hubbard: achieved in new dwellings. So with that in mind, supply 182 00:09:54,870 --> 00:09:56,850 Daniel Hubbard: is going to be a big issue moving forward. Over 183 00:09:56,850 --> 00:10:00,090 Daniel Hubbard: the last decade, the average number of annual dwelling completions 184 00:10:00,090 --> 00:10:03,990 Daniel Hubbard: was 190, 000. So to meet that 1. 2 million, 185 00:10:04,410 --> 00:10:06,929 Daniel Hubbard: we need to increase our current pace of building by 186 00:10:06,929 --> 00:10:11,730 Daniel Hubbard: almost 40%, which is currently around 170,000. So based on 187 00:10:11,730 --> 00:10:16,170 Daniel Hubbard: those supply fundamentals there, population growth and supply, that's going to 188 00:10:16,170 --> 00:10:18,510 Daniel Hubbard: really put quite a bit of strength in the market 189 00:10:18,510 --> 00:10:19,500 Daniel Hubbard: over the next few years, I believe. 190 00:10:20,370 --> 00:10:22,200 Sean Aylmer: Daniel, thank you for talking to Fear and Greed. 191 00:10:22,590 --> 00:10:23,760 Daniel Hubbard: You're welcome, Sean. Thanks for having me. 192 00:10:24,420 --> 00:10:27,719 Sean Aylmer: That was Daniel Hubbard, group manager of investment at Metricon Homes, 193 00:10:27,719 --> 00:10:31,108 Sean Aylmer: which is a great supporter of this podcast. This is the 194 00:10:31,110 --> 00:10:33,750 Sean Aylmer: Fear and Greed Business Interview. Remember, this is general information 195 00:10:33,750 --> 00:10:36,689 Sean Aylmer: only and you should seek professional advice before making investment 196 00:10:36,690 --> 00:10:39,238 Sean Aylmer: decisions. Join us every morning for the full episode of 197 00:10:39,240 --> 00:10:42,179 Sean Aylmer: Fear and Greed, Australia's best business podcast. I'm Sean Aylmer. 198 00:10:42,450 --> 00:10:43,200 Sean Aylmer: Enjoy your day.