WEBVTT - Your property questions answered 0:00:10.000 --> 0:00:12.960 Hello, and welcome to The Australian's Money Puzzle podcast. I'm 0:00:13.039 --> 0:00:16.599 James Kirby, the Wealth editor at the Australian. Welcome aboard everybody. 0:00:17.239 --> 0:00:19.759 I have to tell you that the inbox at our 0:00:20.000 --> 0:00:23.919 email here, the Money Puzzle at the Australian dot com 0:00:23.960 --> 0:00:28.639 dot au has something of an imbalance just now. We 0:00:28.720 --> 0:00:31.520 have a lot of questions on property and we have 0:00:31.640 --> 0:00:36.519 less questions, considerably less questions on the investment markets, which 0:00:37.000 --> 0:00:39.320 I find intriguing, I have to say, because I would 0:00:39.320 --> 0:00:41.839 have thought the investment markets were a little bit more 0:00:41.840 --> 0:00:46.040 complicated than property. But it's the property people who have 0:00:46.240 --> 0:00:49.559 been rolling in. So I feel compelled. Really, it being 0:00:49.600 --> 0:00:52.920 a Tuesday show when we have a property focus, I 0:00:52.960 --> 0:00:57.200 feel compelled to do a catch up on this and 0:00:57.280 --> 0:01:04.120 we will devote today's show toquestions from listeners which cover 0:01:04.240 --> 0:01:09.160 all aspects and are quite I've basically selected a handful 0:01:09.160 --> 0:01:11.959 of questions which really represent the sort of questions we're getting, 0:01:12.600 --> 0:01:15.120 and I think you'll find it very interesting to do 0:01:15.200 --> 0:01:18.800 such an exercise. I need someone with me, and I 0:01:18.880 --> 0:01:23.760 have chosen one of our most regular guests on the show, 0:01:24.120 --> 0:01:26.280 who I'm sure you're familiar with. Its Stuart Weams of 0:01:26.319 --> 0:01:27.920 the pro Solution Private Client Group. 0:01:28.080 --> 0:01:29.240 Hi Stuart, how are you? 0:01:30.000 --> 0:01:31.920 I'm really well, James, thanks for having me on. 0:01:32.200 --> 0:01:36.880 I have also had to go as editing these questions because, 0:01:36.920 --> 0:01:40.680 as you can see, some of them are rather lengthy. Look, folks, 0:01:40.959 --> 0:01:43.360 as I always say, keep the questions coming. Love to 0:01:43.400 --> 0:01:45.520 have them. You don't have to tell us your life story. 0:01:45.880 --> 0:01:47.840 If you want to, you can, but I will ed 0:01:47.920 --> 0:01:50.280 us that part of us and I'm going to try 0:01:50.320 --> 0:01:53.520 and zone in on the actual question itself just to 0:01:53.600 --> 0:01:57.120 keep the show rolling. Basically, Okay, well, look, why don't 0:01:57.600 --> 0:01:59.680 we get going? And what I'll do is we'll read 0:01:59.680 --> 0:02:03.680 them more turly. I might kick off with the first one. Interestingly, folks, 0:02:04.000 --> 0:02:07.400 this first question about the forty year mortgage is off 0:02:07.400 --> 0:02:10.520 the back of something I did in The Australian recently, 0:02:10.560 --> 0:02:13.760 which was off the back of a conversation none other 0:02:13.919 --> 0:02:16.959 than Stuart Williams, because he actually said to me a 0:02:17.000 --> 0:02:19.360 few days ago, Listen, you're gonna have a look at this. 0:02:19.360 --> 0:02:21.839 There's a forty year mortgage coming through the system. You've 0:02:21.840 --> 0:02:25.160 always been asking about this and here they are. So 0:02:25.520 --> 0:02:30.640 Andrew's question. Hi, longtime listener fan. The podcast read with 0:02:30.800 --> 0:02:34.920 interest your piece about the forty year mortgage in the Australian. 0:02:35.360 --> 0:02:38.720 I was wondering whether we are entering an era where 0:02:38.800 --> 0:02:41.959 people will not be expected to discharge their mortgages while 0:02:41.960 --> 0:02:45.399 they're working. Rather, they will only increase their equity during 0:02:45.440 --> 0:02:49.440 their working lives and then draw down on it to retire, 0:02:49.600 --> 0:02:54.200 using whatever equity remains until their home is returned almost 0:02:54.400 --> 0:02:59.600 entirely to the institution when they die. Somewhat dystopian, he says, 0:03:00.600 --> 0:03:06.400 but not unrealistic. Oh not onrealistic, Andrew. The figures show 0:03:06.639 --> 0:03:09.280 obviously that the number of people who are retiring with 0:03:09.360 --> 0:03:13.919 a mortgage is going through the roof. And similarly, and 0:03:14.520 --> 0:03:16.320 a kind of a logical link here, the number of 0:03:16.320 --> 0:03:19.040 people who take out a lump sum and use that 0:03:19.120 --> 0:03:22.520 lump sum to pay off the mortgage is increasing too. 0:03:22.560 --> 0:03:25.520 And it's one of the arguments for people say why 0:03:25.600 --> 0:03:28.560 you should be able to use SUPER to. 0:03:28.520 --> 0:03:29.040 Buy a home. 0:03:29.120 --> 0:03:32.600 What is the point of putting it all in SUPER, 0:03:32.680 --> 0:03:34.840 getting to the end of your working life, getting it 0:03:34.880 --> 0:03:37.240 back and putting it into the mortgage that you've for 0:03:37.360 --> 0:03:40.520 the interest rate has been collecting. That's just an argument 0:03:40.600 --> 0:03:42.800 that's out there at the moment. But on the more 0:03:42.840 --> 0:03:46.880 broader topic of this. To be specific, it was Pepper 0:03:46.920 --> 0:03:51.120 Loans that introduced this forty year mortgage. And there's always 0:03:51.200 --> 0:03:54.960 been long term mortgages thirty years or so often offered, 0:03:55.240 --> 0:03:57.800 or thirty five years often offered to doctors and lawyers 0:03:57.840 --> 0:04:00.560 under specialist funds, but not on general release. And I 0:04:00.560 --> 0:04:02.600 think that's what was very interesting. What do you think 0:04:02.640 --> 0:04:04.600 is to your number one? Will we see more of them? 0:04:04.680 --> 0:04:08.560 Number two? What use have there to our listeners? There's 0:04:08.560 --> 0:04:09.960 a forty year mortgage out there. 0:04:10.840 --> 0:04:14.000 I think the main use is really around boring capacity, James, 0:04:14.080 --> 0:04:19.279 rather than necessarily repaying over a forty year term. And 0:04:19.360 --> 0:04:22.480 that's you know, that kind of helps in a way affordability. 0:04:22.480 --> 0:04:25.960 I'm not saying houses become cheaper, but if my boring 0:04:25.960 --> 0:04:29.160 capacity increases and I've got the cash flow to meet it, 0:04:29.240 --> 0:04:32.880 because quite often, in fact, particularly at these interstrate settings, 0:04:33.400 --> 0:04:36.800 what someone is able to borrow in terms of what 0:04:36.839 --> 0:04:40.240 they can afford to borrow is quite often more than 0:04:40.279 --> 0:04:43.479 what the banks will lend them. And the reverses was true, 0:04:43.520 --> 0:04:45.520 you know a few years ago, when interest rates were 0:04:45.960 --> 0:04:48.320 really low and boring capacity was much higher than what 0:04:48.360 --> 0:04:53.000 people should or probably prudently should borrow. So a forty 0:04:53.040 --> 0:04:56.800 year mortgage, particularly when interest rates are at higher settings, 0:04:56.920 --> 0:05:00.760 will extend boring capacity and allow people to borrow more 0:05:00.800 --> 0:05:03.160 if it's safe and prudent for them to do so. 0:05:03.160 --> 0:05:05.279 So I think it's a I think it's a trend. 0:05:05.320 --> 0:05:09.600 We're working longer, we're living longer. And you know, it 0:05:09.680 --> 0:05:14.760 wasn't maybe less than two decades ago, the average mortgage 0:05:14.800 --> 0:05:18.000 term was twenty five years, and so you know, I 0:05:18.000 --> 0:05:20.800 think it will just trend upwards naturally, and I think 0:05:20.880 --> 0:05:24.119 thirty five for the banks will probably be the next stop. 0:05:24.160 --> 0:05:26.359 I think we're going to get there. But I like 0:05:26.440 --> 0:05:31.040 Andrew's observation, and I share Andrew's observation to some degree. 0:05:31.440 --> 0:05:34.000 Whereas you think back a few decades, it was, you know, 0:05:34.080 --> 0:05:36.600 going buy a home, work really hard to pay off 0:05:36.640 --> 0:05:39.280 the mortgage, and you'll probably live there for fifty or 0:05:39.320 --> 0:05:43.800 so years, where these days, I think people tend to 0:05:43.800 --> 0:05:47.200 be a bit more aspirational and understand that we're going 0:05:47.240 --> 0:05:49.480 to buy this home, then I'm going to upgrade, and 0:05:49.520 --> 0:05:52.320 m I upgrade a couple of times during my lifetime 0:05:52.360 --> 0:05:55.479 to league until I get to the location and type 0:05:55.520 --> 0:05:58.640 of property that I really want to occupy. And I 0:05:58.680 --> 0:06:03.000 think then the extension that James is a downsize strategy, 0:06:03.240 --> 0:06:05.960 which I think has a lot of merit. A down 0:06:06.400 --> 0:06:09.960 sized strategy includes going and buying a family home in 0:06:10.000 --> 0:06:13.080 a location that you make friends with, probably that you're 0:06:13.120 --> 0:06:15.479 not going to ever repay the mortgage down to zero. 0:06:16.400 --> 0:06:19.360 You occupy that location when you have children that are 0:06:19.400 --> 0:06:22.240 going to school and you want close proximity, work all 0:06:22.279 --> 0:06:25.440 those sorts of things, and then you sell that asset 0:06:26.040 --> 0:06:29.240 probably when the kids move out a home, reduce your debt, 0:06:29.360 --> 0:06:32.680 repay all your debt, go live somewhere else. And I 0:06:32.960 --> 0:06:35.200 like it because it forces you to buy a high 0:06:35.320 --> 0:06:38.279 quality asset. You're not going to pay any capital gains 0:06:38.320 --> 0:06:41.520 tax on the growth over that asset. And to some degree, 0:06:41.560 --> 0:06:44.159 it's a force savings mechanism. 0:06:43.760 --> 0:06:46.760 Right at its best when the people are using it 0:06:46.800 --> 0:06:49.680 sharply and smartly. Is there a logical end point here? 0:06:49.720 --> 0:06:51.640 Is there a point of which it gets ludicrous? I mean, 0:06:52.080 --> 0:06:55.119 if I'm thirty and I sign up for a forty 0:06:55.160 --> 0:06:58.880 year mortgage, I mean, I'll be seventy when I in theory. 0:06:59.200 --> 0:07:01.200 When I clear it, you're saying you're thinking about the 0:07:01.279 --> 0:07:03.919 wrong way. You're saying you're not going to clear this, 0:07:04.240 --> 0:07:05.920 You're certainly not going to pay it down in this 0:07:06.080 --> 0:07:10.080 sort of gradual way for forty years. That is not 0:07:10.200 --> 0:07:14.560 That is not how to optimize these purposes. Is that 0:07:14.920 --> 0:07:15.520 what you're saying? 0:07:16.440 --> 0:07:19.240 Oh yeah, I'm seeing more people, a greater number of 0:07:19.240 --> 0:07:22.280 people thinking along those lines that, aka, I want to 0:07:22.280 --> 0:07:24.520 go and buy in this blue chip suburb. The house 0:07:24.640 --> 0:07:26.400 is going to cost me a lot. You know, if 0:07:26.440 --> 0:07:29.400 all I did is put every cent towards repaying the mortgage, 0:07:29.400 --> 0:07:30.920 maybe I'm going to get there. But I know I 0:07:30.960 --> 0:07:33.560 want to invest in super and invest in other assets, 0:07:34.080 --> 0:07:35.520 and I know I'm not going to need this big 0:07:35.560 --> 0:07:37.800 family home. You know, when I retire, I don't need 0:07:37.840 --> 0:07:42.120 to be in that location anymore. And there's significant lifestyle 0:07:42.160 --> 0:07:45.080 benefits to you know, living in a prime location that 0:07:45.240 --> 0:07:47.840 is close to work, in school, and then it is 0:07:47.880 --> 0:07:50.400 all these sorts of things. I just think that more 0:07:50.440 --> 0:07:52.920 people are going to be attracted to that, and the 0:07:53.000 --> 0:07:54.920 idea that I'm going to go and buy a home, 0:07:55.120 --> 0:07:57.440 repay the mortgage, and live there for the next fifty years. 0:07:57.480 --> 0:08:00.880 I think that sort of situation's gone doesn't happen as 0:08:00.920 --> 0:08:01.440 much anymore. 0:08:01.440 --> 0:08:04.320 I suppose plain Devil's that's because here the danger is 0:08:04.360 --> 0:08:08.960 that someone says, oh, you know, we're struggling. We never received, 0:08:09.040 --> 0:08:12.000 as someone says, we never save, we're struggling to pay 0:08:12.040 --> 0:08:15.560 our mortgage because gosh, you know there's three cars out 0:08:15.600 --> 0:08:19.400 there that'll cost to bomb and whatever. The holiday homes 0:08:19.440 --> 0:08:22.600 needs a new dream pipe for something. And then they 0:08:22.640 --> 0:08:24.520 find out, oh, you know what, you could just push 0:08:24.560 --> 0:08:26.720 your mortgage out. You could just you know, it was 0:08:26.720 --> 0:08:28.720 supposed to be thirty years, but we can push it 0:08:28.760 --> 0:08:32.200 out of forty. And it's the classic kicking the can 0:08:32.240 --> 0:08:34.280 down the road. Is that the danger here that people 0:08:34.320 --> 0:08:35.320 will play it that way. 0:08:36.320 --> 0:08:38.480 You need to have a strategy, and you need to 0:08:38.520 --> 0:08:41.640 make friends with the worst outcome of that strategy and 0:08:41.640 --> 0:08:44.400 the worst outcome of a downsize the strategy is that 0:08:44.480 --> 0:08:46.560 you have to sell the house when you don't really 0:08:46.600 --> 0:08:48.960 want to, and you have to move to a different 0:08:49.000 --> 0:08:51.240 area if you and you might not really want to 0:08:51.320 --> 0:08:53.800 at that particular time. But if you can make friends 0:08:53.840 --> 0:08:55.760 with that, if you can say, we might be forced 0:08:55.760 --> 0:08:58.360 to sell when we're sixty or sixty five, and we 0:08:58.400 --> 0:09:01.760 would like to reduce our working hours or retire in full, 0:09:02.280 --> 0:09:04.400 and we realize we might have to go into a 0:09:04.440 --> 0:09:08.000 regional area or regional town, but that might be the 0:09:08.040 --> 0:09:10.960 consequence of our desire to sort of live in this 0:09:11.080 --> 0:09:13.960 location while the kids are younger or young I think, 0:09:14.080 --> 0:09:16.520 just make friends with those outcomes and if you can, 0:09:16.640 --> 0:09:19.000 if that's acceptable, if that's an acceptable outcome to you 0:09:19.000 --> 0:09:21.520 and you're willing to make that sacrifice, then great. But 0:09:21.559 --> 0:09:24.840 I think the people get into trouble when they don't 0:09:24.840 --> 0:09:26.800 make friends with that oka and then so then they 0:09:26.880 --> 0:09:29.080 try and force a result that might not be there. 0:09:29.120 --> 0:09:29.679 So if there's a. 0:09:29.679 --> 0:09:33.319 Change in income, change in situation, you have to sell 0:09:33.360 --> 0:09:36.280 before you need to. That's a consequence of this strategy. 0:09:36.679 --> 0:09:38.680 You just need to make friends with it, be rational 0:09:38.679 --> 0:09:39.040 about it. 0:09:39.040 --> 0:09:41.480 Irrationally yeah yeah, and have it as a strategy rather 0:09:41.520 --> 0:09:43.760 than a channel through which you can sort of kick 0:09:43.800 --> 0:09:47.120 obligations and further away. Not that the banks will complain 0:09:47.120 --> 0:09:49.400 about that, but you might find it a problem. Okay, 0:09:49.960 --> 0:09:52.360 very interesting, none of us. This, of course, my friends, 0:09:52.440 --> 0:09:54.959 is advice. It's information only. But thank you Andrew and 0:09:55.000 --> 0:09:56.600 all the Andrews out there. I hope that that was 0:09:56.679 --> 0:10:00.320 useful to you. The next question, which I'll get sure read, 0:10:00.800 --> 0:10:03.240 is about digital and this is really interesting folks. Now, 0:10:03.320 --> 0:10:06.000 this is where property and the share markets are crossover 0:10:06.760 --> 0:10:07.640 or fuse. 0:10:07.360 --> 0:10:07.800 If you like. 0:10:08.120 --> 0:10:10.880 And we don't cover this as much as i'd like to, 0:10:11.559 --> 0:10:16.360 but property listed property in the shape of property trusts 0:10:16.440 --> 0:10:18.920 or what they are now called as RITZ or the 0:10:19.000 --> 0:10:21.400 its is a very interesting area. It's a way that 0:10:21.440 --> 0:10:23.719 you can invest in property, particularly property you might never 0:10:23.800 --> 0:10:26.079 have invested in. I mean, you aren't likely to buy 0:10:26.080 --> 0:10:28.560 an office block. Maybe you will, but it's unlikely. I 0:10:28.559 --> 0:10:31.160 imagine if you're a listener. Similarly, you're probably not going 0:10:31.200 --> 0:10:33.280 to buy a data center. So maybe we'll have the 0:10:33.360 --> 0:10:34.560 question from George Steuart. 0:10:35.040 --> 0:10:39.160 Yeah, absolutely so, George writes. A newly established data center 0:10:39.240 --> 0:10:41.680 Digco is set to float on the AX on the 0:10:41.679 --> 0:10:44.959 twelfth of December twenty twenty four with a capital raising 0:10:45.040 --> 0:10:47.640 of two billion dollars. Its builders one of the biggest 0:10:47.640 --> 0:10:52.400 floats in years given its anticipated market cap based on 0:10:52.440 --> 0:10:55.640 a five to five dollars share price, The company is 0:10:55.679 --> 0:10:58.559 expected to be included in the AX two hundred d nexts. 0:10:59.200 --> 0:11:03.200 The majority of issued shares will be to retail shareholders, 0:11:03.200 --> 0:11:07.800 with an allocation to institutions. Having already closed over subscribed 0:11:08.520 --> 0:11:12.080 on the basis there should be additional demand from funds 0:11:12.160 --> 0:11:17.120 and ETFs index funds that replicate the ASX two hundred index. 0:11:17.880 --> 0:11:21.240 Given this, do you think Digiico will perform similarly to 0:11:21.320 --> 0:11:26.319 other large floats such as Guzman and Gomez. Guzman share 0:11:26.320 --> 0:11:29.160 price peaked at forty two dollars, up ninety percent from 0:11:29.200 --> 0:11:34.280 its twenty twenty two dollars share price offer, only days 0:11:34.280 --> 0:11:37.280 after it was announced that Guzman would be included in 0:11:37.320 --> 0:11:38.920 the AX two hundred index. 0:11:39.120 --> 0:11:42.120 Yes, very interesting to George, All very interesting. Okay, a 0:11:42.120 --> 0:11:45.120 few things there before we get into some details. It 0:11:45.440 --> 0:11:49.280 probably doesn't make much sense to compare Gosvindi Goelmez to 0:11:49.760 --> 0:11:53.520 a property trust like this property trust which is going 0:11:53.559 --> 0:11:56.920 to be the biggest flirt of the year, happening on Thursday, 0:11:57.040 --> 0:12:01.040 the tirth of December, and not far away. Guzmini Gomez 0:12:01.120 --> 0:12:06.160 is a peculiar stock. It seems to be a perfectly 0:12:06.200 --> 0:12:08.560 fine business. I would almost separate the business from the 0:12:08.559 --> 0:12:11.480 stock which is having a life of its own. And 0:12:11.679 --> 0:12:14.040 keep in mind that there is a very small number 0:12:14.080 --> 0:12:17.959 of what they call free shares out there on Guzmini Gomez, 0:12:18.000 --> 0:12:20.720 and when you have that, this share price can be 0:12:20.800 --> 0:12:23.520 very volatile, and it can run up easier or run 0:12:23.520 --> 0:12:26.280 down easier, and it ran up very easily for that 0:12:26.360 --> 0:12:31.360 stock when it happened. Now utterly separately to that, the 0:12:31.720 --> 0:12:35.200 ate that you mentioned, Digico is very interesting because it 0:12:35.320 --> 0:12:37.680 captures what we've been talking about on the show regularly 0:12:37.760 --> 0:12:41.360 for years, which is data centers, a boom area off 0:12:41.400 --> 0:12:45.800 the back of the explosion of data needs, particularly aligned 0:12:45.920 --> 0:12:48.800 with the creation, if you like, of artificial intelligence on 0:12:48.880 --> 0:12:53.040 a mass scale. The man behind Digitico is a guy 0:12:53.080 --> 0:12:55.680 called David de Pilla, who I expect will be a 0:12:55.679 --> 0:12:57.680 household name in a year or two if he keeps 0:12:57.720 --> 0:12:59.880 going at the pace he's going. He's a deal maker. 0:13:00.559 --> 0:13:02.440 He was once upon a time, I think with ubs. 0:13:02.600 --> 0:13:04.480 Is now out there on his own, backed by some 0:13:04.600 --> 0:13:09.360 very wealthy families and doing deals on a weekly basis across. 0:13:08.960 --> 0:13:10.000 All sorts of areas. 0:13:10.040 --> 0:13:12.240 But this is one of his This may be his 0:13:12.360 --> 0:13:15.320 signature dealer, one of them, which is what he captured 0:13:15.360 --> 0:13:18.199 the excitement over data centers, got bought a few of them, 0:13:18.240 --> 0:13:19.960 put them in a trust, put the trust up on 0:13:19.960 --> 0:13:22.440 the share market, and it's the biggest float of the year. 0:13:22.720 --> 0:13:25.520 I do expect it will do quite well. So we 0:13:25.600 --> 0:13:28.120 might talk first of all about that idea of getting 0:13:28.120 --> 0:13:32.160 into property Stewart through a trust. Do you see it 0:13:32.200 --> 0:13:34.840 as a completely different Someone comes into you and says, 0:13:34.880 --> 0:13:37.920 I want to buy property. Do they ever end up 0:13:37.960 --> 0:13:39.000 buying a property trust. 0:13:41.240 --> 0:13:43.400 One of the big one of the great things with 0:13:43.559 --> 0:13:47.400 property is in direct property is control. You have control 0:13:47.480 --> 0:13:49.640 over the asset. You have control. 0:13:49.920 --> 0:13:51.840 You can't paint the data center that you buy on 0:13:51.880 --> 0:13:52.679 the share market. 0:13:52.880 --> 0:13:54.520 Yeah, you can improve it. 0:13:55.720 --> 0:13:59.120 You know, you can assess its value. It's intrinsic value. 0:13:59.360 --> 0:14:01.959 And that makes a lot of people comfortable that you know, 0:14:01.960 --> 0:14:04.960 I'm going to pay million dollars for this residential property 0:14:05.040 --> 0:14:07.800 or commercial property, and you know, I'm pretty confident that 0:14:07.840 --> 0:14:11.280 it's worth a million dollars. Whereas with Reads, I mean 0:14:11.360 --> 0:14:14.840 they can trade at premiums or discounts to net tangible assets. 0:14:15.520 --> 0:14:18.760 You you've got to make some assumptions that the net 0:14:18.760 --> 0:14:23.600 tangible asset valuation is reasonable or realistic. And I mean 0:14:23.800 --> 0:14:25.760 you can put a big sort of question mark there 0:14:25.800 --> 0:14:29.040 and in some situations and they behave more like an 0:14:29.080 --> 0:14:32.120 equity than property. So what happens, and we've seen this 0:14:32.200 --> 0:14:35.120 with Reads perfectly over the last couple of years, particularly 0:14:35.160 --> 0:14:40.320 Australian reads, is that they fell a lot earlier than 0:14:40.760 --> 0:14:44.520 actual property valuations. Fel commercial property valuations fail. 0:14:44.560 --> 0:14:47.760 So you're saying they behave like shares more than direct. 0:14:47.440 --> 0:14:51.600 Property because I move on expectations rather than actual fundamentals. 0:14:51.720 --> 0:14:54.280 Now that there's some pros and cons to that, I'd 0:14:54.320 --> 0:14:56.200 like to address if I could, James, I mean one 0:14:56.280 --> 0:14:59.920 of the observations that George shared in terms of India 0:15:01.320 --> 0:15:05.200 and the potential demand coming from indexes. So there's been 0:15:05.240 --> 0:15:07.880 a lot of work around this in terms of what 0:15:07.920 --> 0:15:10.080 they call index premiums. 0:15:10.440 --> 0:15:12.680 We might just say to people just to give them 0:15:13.080 --> 0:15:16.400 a background on this, folks, It's like, if a company 0:15:17.400 --> 0:15:20.880 gets so big that it enters the top two hundred, 0:15:21.240 --> 0:15:23.360 then the theory is start a theory, it's a fact 0:15:23.400 --> 0:15:26.720 all those index funds that are ASX two hundred funds 0:15:27.200 --> 0:15:30.320 must buy the company, whether it doesn't matter whether it's good, bad, 0:15:30.400 --> 0:15:33.960 or hopeless. They must buy it now. So Stuart, you're 0:15:34.000 --> 0:15:35.840 going to tell us about some research around. 0:15:35.600 --> 0:15:39.160 This, Yes, exactly right. And so of course then the 0:15:39.200 --> 0:15:42.520 index providers announce, you know, two to four weeks before 0:15:42.600 --> 0:15:45.160 a company is added to an index that's going to happen. 0:15:45.600 --> 0:15:48.520 So the whole market knows that AKA Vanguard and Beta 0:15:48.560 --> 0:15:50.560 shares and so forth has to go on by this 0:15:50.920 --> 0:15:54.240 by this stock. So the research is that the stock 0:15:54.280 --> 0:15:58.560 appreciates by between three to seven percent sort of three 0:15:58.680 --> 0:16:01.840 weeks or so prior to being added to an index, 0:16:01.880 --> 0:16:05.000 and loss three to seven percent three weeks or so 0:16:05.600 --> 0:16:08.560 after being added to the index. And so the thesis 0:16:08.680 --> 0:16:12.440 is that index index funds are overpaying for these stocks, 0:16:12.480 --> 0:16:16.200 which I guess in isolation is true. Actually, the index 0:16:16.280 --> 0:16:20.760 funds have got really smart around their trading strategies. And 0:16:21.360 --> 0:16:25.480 when BHP consolidated its listing, it was dual listed in 0:16:25.520 --> 0:16:29.000 London and the AX. On the twenty eighth of January, 0:16:29.120 --> 0:16:33.400 it became solely listed on the AX. On that day 0:16:34.040 --> 0:16:37.160 BHP went from six point six of the ASEX two 0:16:37.280 --> 0:16:41.400 hundred index to eleven percent. So essentially the index funds 0:16:41.480 --> 0:16:44.880 had to buy a substantial amount of BHP on that day. 0:16:45.360 --> 0:16:48.240 In fact, on that day over fifteen billion dollars of 0:16:48.240 --> 0:16:49.360 BHP was traded. 0:16:49.560 --> 0:16:50.200 It's huge. 0:16:50.200 --> 0:16:54.040 It's the biggest day, particularly in one stock on the AX. 0:16:55.120 --> 0:16:57.400 But they didn't miss a beat and Vanguard we're all 0:16:57.400 --> 0:17:00.400 over it. We had a conversation about it a few 0:17:00.440 --> 0:17:04.639 weeks ago. So I you know, sometimes people make or 0:17:04.800 --> 0:17:07.920 have share concerns around these index funds are so big, 0:17:08.480 --> 0:17:10.479 you know how much trading are they doing? Do they 0:17:10.520 --> 0:17:13.520 affect the market, all these sorts of things. So I 0:17:13.520 --> 0:17:15.960 don't know. I wouldn't index arbitrage. I don't think I 0:17:16.000 --> 0:17:18.879 would be attracted to going buying this rate just because 0:17:18.880 --> 0:17:21.199 it's going to be included in the ASEX two hundred. 0:17:21.680 --> 0:17:23.560 But you've got to look at the fundamentals. 0:17:23.680 --> 0:17:26.720 Yes, very good but really good question, George, and a 0:17:26.920 --> 0:17:32.040 very interesting area. And of course David de Pillar has 0:17:32.200 --> 0:17:35.679 put those two things together. The excitement around outa centers 0:17:36.200 --> 0:17:39.960 the attraction of property to us at their best, and 0:17:40.000 --> 0:17:42.760 we'd find out just how good an idea it was 0:17:42.920 --> 0:17:45.440 on Thursday when he lists what's the biggest flout of 0:17:45.480 --> 0:18:01.000 the year on the Essex All Right back in the morning. Hello, 0:18:01.119 --> 0:18:04.320 Welcome back to the Australians Money Puzzle Podcast. I'm James Kirby. 0:18:04.359 --> 0:18:07.439 We're talking to Stuart Weems today of the pro Solution 0:18:07.520 --> 0:18:11.159 Private Clients Group, and I have taken the opportunity on 0:18:11.200 --> 0:18:13.320 this show basically to package up a lot of your 0:18:13.400 --> 0:18:19.360 questions because I want to not have many questions in 0:18:19.400 --> 0:18:21.320 the Christmas break. I'm sure you don't like to have 0:18:21.359 --> 0:18:24.800 your questions finished. Like everything else, everybody wants to have 0:18:24.840 --> 0:18:27.080 everything done by Christmas for some reason. Judging by the 0:18:27.080 --> 0:18:31.280 amount of sheer activity on my street this morning, I mean, 0:18:31.320 --> 0:18:33.480 there must have been someone working at every single and 0:18:33.640 --> 0:18:36.960 every single house seems to me except mine. 0:18:37.240 --> 0:18:40.920 Okay, so we have a question from Simone. Now. 0:18:40.960 --> 0:18:45.560 Simone is very much in the nature of the type 0:18:45.600 --> 0:18:50.040 of question a correspondent I mentioned earlier who gave us 0:18:50.040 --> 0:18:51.280 an awful lot of details, but. 0:18:51.240 --> 0:18:52.760 I have narrowed it down. 0:18:53.760 --> 0:18:55.800 Stewart has read the whole thing, which will be useful, 0:18:56.280 --> 0:18:59.280 and I've narrowed it down to her question. And it's 0:18:59.520 --> 0:19:03.359 interesting questions, very specific in some ways, but also it 0:19:03.440 --> 0:19:06.680 would be something that people come upon. Simone says, Hi, 0:19:06.760 --> 0:19:09.919 I've been listening to the podcast since two sixteen, and 0:19:10.000 --> 0:19:12.639 I wonder if I may ask a question. Of course 0:19:12.680 --> 0:19:15.159 you may. You've been listening for eight years. That is 0:19:15.200 --> 0:19:18.399 really something, and thank you, Simone. She says, no one 0:19:18.440 --> 0:19:19.960 has a clear answer for this, and putting me on 0:19:20.000 --> 0:19:22.960 the spot. Here, Stuart, here we go for the purpose 0:19:23.359 --> 0:19:28.800 of centerlink aged pension asset test. Would adding an adult 0:19:29.400 --> 0:19:34.600 child name in joint tendancy to the title of their 0:19:34.640 --> 0:19:39.320 primary place of residence be deemed a gift? Okay, let's 0:19:39.440 --> 0:19:43.120 run through that again for in terms of accessing the pension. Obviously, 0:19:44.080 --> 0:19:46.600 if she was to put an adult on the title 0:19:46.640 --> 0:19:49.359 of her primary place of residence, is that a gift? 0:19:49.760 --> 0:19:53.960 And secondly, would it impact eligibility for a full pension? 0:19:54.000 --> 0:19:57.119 I noticed for a full pension tricky question, but people 0:19:57.119 --> 0:20:00.600 would have often thought about this, I'm sure, and it's 0:20:00.600 --> 0:20:03.280 a way I suppose of defending themselves long term in 0:20:03.400 --> 0:20:06.760 terms of asset security, etc. We are giving advice here 0:20:06.760 --> 0:20:08.639 as to all the Simons in the world. What do 0:20:08.680 --> 0:20:09.840 you think Stuart. 0:20:11.080 --> 0:20:14.440 Well certainly obviously has an asset test to meet age 0:20:14.520 --> 0:20:17.360 pension limits, whether you get a full pension or part pension, 0:20:17.560 --> 0:20:22.800 and those asset limits are different for homeowners versus non homeowners. 0:20:22.840 --> 0:20:25.720 For single people, if you're a homeowner, you can have 0:20:25.840 --> 0:20:29.520 three hundred and fourteen thousand addition to your family home. 0:20:29.680 --> 0:20:31.920 If you're a non homeowner, you can have five hundred 0:20:31.920 --> 0:20:34.800 and sixty six thousand. Because you don't own a home, 0:20:34.840 --> 0:20:36.600 of course, you're going to have a little bit more 0:20:36.640 --> 0:20:40.200 cash in the bank, hopefully. In this situation, simone talks 0:20:40.240 --> 0:20:44.520 about adding a joint tenant onto a title, I'm going 0:20:44.560 --> 0:20:47.560 to assume that there's no she's not intimating that it's 0:20:47.560 --> 0:20:49.399 going to be sold, that that share is going to 0:20:49.400 --> 0:20:51.439 be sold for cash. Because it's sold for cash, then 0:20:51.480 --> 0:20:55.800 it would add to the asset test. There's rules around 0:20:55.840 --> 0:20:59.880 gifting that limits or have an impact on the pinch. 0:21:00.119 --> 0:21:02.280 So if you make a gift, that will be included 0:21:02.280 --> 0:21:04.240 in the asset base for that asset test. 0:21:04.280 --> 0:21:05.760 Is there a threshold on that gift. 0:21:06.720 --> 0:21:09.600 Yeah, ten thousand per year or thirty thousand over five 0:21:09.680 --> 0:21:12.280 years is the maximum you can give without it being 0:21:12.320 --> 0:21:16.480 added to the asset test. And so in this situation, 0:21:16.840 --> 0:21:20.680 if you were to essentially gift part of your home 0:21:20.920 --> 0:21:23.439 to a family member, that would be what's called a 0:21:23.480 --> 0:21:26.680 deprived asset and will be added to the asset test 0:21:26.840 --> 0:21:30.840