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Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm

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Speaker 1: still at weem Citty and for your usual host, James Kirby.

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Speaker 1: I'm a financial advisor and host of my own podcast, Investopoly,

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Speaker 1: and I'm honored to be your host for today's episode.

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Speaker 1: I've got some really surprising numbers to share with you folks.

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Speaker 1: Over the past five months, so since February, new investment

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Speaker 1: loan volume has increased by forty seven percent, So investment

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Speaker 1: lending is now at a record high. No surprising that

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Speaker 1: Western Australia, South Australia and New South Wales lead that charge,

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Speaker 1: although lending and Victoria wasn't too bad either, So this

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Speaker 1: comes as a real surprise to me given the current backdrop.

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Speaker 1: And the current backdrop is we've got interest rates almost

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Speaker 1: at two decade highs, so hasn't been this high since

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Speaker 1: twenty two thousand and seven. We've got new interest only

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Speaker 1: loans have fallen from four twenty percent of all new

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Speaker 1: loans in twenty seventeen to just about ten percent today,

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Speaker 1: so investors really aren't borrowing on interest only basis. Then

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Speaker 1: we've got higher property taxes, land taxes, levy surcharges all

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Speaker 1: those sorts of things, and of course tendancy rules over

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Speaker 1: the last few years have become a lot stricter with

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Speaker 1: things like notice periods and limits on rent hikes and

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Speaker 1: those sorts of things. So I was really surprised that

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Speaker 1: the investor market is running so hot. An organization called

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Speaker 1: Property Investment Professionals of Australia or PIPPER for short, produces

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Speaker 1: an investor survey every year. This year's survey was released

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Speaker 1: on Friday and included responses from about thirteen hundred investors.

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Speaker 1: I wanted to share some key highlights from that survey,

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Speaker 1: So the first one is fourteen percent of investors sold

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Speaker 1: at least one property last year. Now about forty percent

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Speaker 1: of those investors held that asset for more than ten years,

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Speaker 1: so there's a bit of cashing in that some of

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Speaker 1: that equity. The main reasons for selling were increase holding

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Speaker 1: costs and increase land tax and government charges. Most of

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Speaker 1: the sales occurred in Queensland, although Victoria wasn't too far

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Speaker 1: behind that. Although fewer investors sold in Victoria in the

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Speaker 1: last year than the previous year twenty two percent versus

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Speaker 1: twenty five percent, general investor sentiment is down. That's probably

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Speaker 1: no surprise or it's not really in line with the

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Speaker 1: figures though. Forty six percent of investors think now is

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Speaker 1: a good time to invest, compared to sixty two percent

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Speaker 1: back in twenty twenty one, and the biggest concern for

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Speaker 1: investors is government interference things like rent freezers, those sorts

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Speaker 1: of things. Regarding holding costs, eighty percent of landlords said

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Speaker 1: they would pass on those higher holding costs to renters

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Speaker 1: and thirteen percent said they would consider selling as a

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Speaker 1: result of higher holding costs, So we know those holding

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Speaker 1: costs ultimately aren't good for renters, and surprisingly Melbourne is

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Speaker 1: considered the best pace to invest now. Of course, a

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Speaker 1: healthy property investment market is critical for a couple of reasons. Firstly,

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Speaker 1: private investors in Australia provide about ninety percent of rental

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Speaker 1: accommodation and secondly they make up about a third of

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Speaker 1: the market in terms of buyers. The other two thirds

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Speaker 1: own occupiers. Of course, so today I wanted to delve

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Speaker 1: into this data and explore what is driving this hot

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Speaker 1: property investor market in Australia and then also how should

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Speaker 1: investors navigate some of the current challenges and I've got

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Speaker 1: a perfect guest to do that. He's a licensed real

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Speaker 1: estate agent in many states of Australia, a qualified mortgage broker,

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Speaker 1: founder of Empower Wealth, host of the Property Couch podcast

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Speaker 1: and chair of the not for profit organization Property Investor

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Speaker 1: Council of Australia. Boy, that is a mouthful. It's his

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Speaker 1: first time on the show. Welcome Ben Kingsley, Thank you, Stuart.

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Speaker 2: Thanks for having me my pleasure. Ben.

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Speaker 1: Let's start with the dramatic rise in investment lending. Was

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Speaker 1: it a surprise to you? And I'll be really interested

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Speaker 1: in your thoughts around what is driving this, what is

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Speaker 1: the demographic of the investors and geographically where are they investing?

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Speaker 3: Yeah, so I think more broadly, am I surprised that

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Speaker 3: probably prices have continued to grow in most parts of

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Speaker 3: Australia given those thirteen rate rises that we've seen. The

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Speaker 3: short answer to that is yes. But then when you

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Speaker 3: look under that, obviously we're also talking about the situation

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Speaker 3: where we have strong employment and strong government employment in

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Speaker 3: education and health services, so that certainly meant that we

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Speaker 3: haven't had that typical correction that we would normally get.

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Speaker 3: But when I look at the numbers of forty seven

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Speaker 3: percent increase over a five year period. I do want

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Speaker 3: to put that into some context.

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Speaker 2: So what I look at when.

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Speaker 3: I look at that, I look at the batch of time,

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Speaker 3: and so inside that period, we saw in twenty twenty

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Speaker 3: one into twenty twenty two we had this rocketing property

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Speaker 3: price boom on the back of record low interest rates.

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Speaker 3: And I think when we look at that data over

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Speaker 3: that five year period, we're still catching that very strong

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Speaker 3: growth level in that earlier stage. So that's showing up

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Speaker 3: in the numbers. So when we start to think about

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Speaker 3: the base effect and what's happening in this current time,

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Speaker 3: we are definitely starting to see a slowing in those numbers. Well,

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Speaker 3: the numbers still look good because the base effect over

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Speaker 3: the last twelve months is also quite low because we

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Speaker 3: bottomed out off the back of that previous boom that

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Speaker 3: we had at the back of COVID. So what attempt

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Speaker 3: to interpret into that data, Because this has been puzzling.

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Speaker 2: Meat Stuart for a while.

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Speaker 3: I feel like the demographic is so those PROPERIT investors

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Speaker 3: that might have been investing for the decades and those

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Speaker 3: older propert investors. I suspect some of those are taking

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Speaker 3: profits and cashing out. We saw that a little bit

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Speaker 3: in the survey results that we got from Pipper as well.

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Speaker 3: And I think that the new demographic that so the

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Speaker 3: new investor that's coming in is that next generation of investor,

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Speaker 3: but they are very focused in on being forced into

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Speaker 3: that affordability belt because of the borrowing power restrictions we've

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Speaker 3: got in place and those types of things. So it

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Speaker 3: really is quite an interesting dynamic that we've got in

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Speaker 3: the market at the moment.

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Speaker 1: Yeah, because when you look at the loan volume is

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Speaker 1: based on loan sizes, right, so it's the amount of

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Speaker 1: money that's really moving into that property market. And I

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Speaker 1: don't know you probably saw it, Ben, but CBA released

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Speaker 1: a really interesting slide in their results in terms of

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Speaker 1: who's doing that borrowing in terms of average family size income,

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Speaker 1: and it showed that very wealthy people family incomes I

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Speaker 1: can't remember, it's something like two hundred and fifty or

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Speaker 1: three hundred thousand or above were responsible for most of

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Speaker 1: the borrowing there. So you suggesting that that volume is

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Speaker 1: really driven by two cohorts. If you like a cohort

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Speaker 1: that's not really impacted by borrowing capacity and the cohort

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Speaker 1: that is impacted by borrowing capacity that's forced to go

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Speaker 1: into a lower price point.

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Speaker 3: No doubt there has been investors who might be wanting

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Speaker 3: to add to their portfolio and just simply can't because

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Speaker 3: the borrowing power restrictions that are currently in plays through

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Speaker 3: the three percent buff rate are tapping them out of that.

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Speaker 3: And so that does mean that obviously the people who

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Speaker 3: can invest are usually the higher income earner. So I

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Speaker 3: definitely feel like we're seeing a bit of that in

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Speaker 3: terms of there is some green shoots in that sort

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Speaker 3: of younger demographic that really young aspiring sort of early

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Speaker 3: twenties to mid twenties that are attempting in the market,

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Speaker 3: but they are very much reliant on higher rental income

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Speaker 3: to be able to get into that market. But they

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Speaker 3: are definitely forced into that sort of entry level, so

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Speaker 3: call it sort of four hundred thousand is the sort

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Speaker 3: of price point that they're hunting, And unfortunately, the nine

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Speaker 3: intended consequences of that is that puts pressure in the

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Speaker 3: first home buyer market in those particular states and territory.

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Speaker 2: So that's what we've seen.

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Speaker 3: The more affordable states are performing very well compared to

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Speaker 3: your more traditional New South Wales and Victoria or Sydney

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Speaker 3: Melbourne markets where probably prices are significantly high.

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Speaker 1: And the interest only lending has a big impact too, right,

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Speaker 1: because if you're an invest in your borrow on an

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Speaker 1: interest only basis, then you're holding costs as substand actually

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Speaker 1: lower than say someone that's forced to or decides to

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Speaker 1: make principal interest three payments on their loan. Those numbers

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Speaker 1: are pretty stark. Well, what's your advice typically to investors

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Speaker 1: and particularly investors that want to get into the market,

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Speaker 1: is it interest only or principal interest free payments?

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Speaker 3: To your point, haven't seen them fall from traditionally forty

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Speaker 3: percent now down to ten percent in the last seven years.

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Speaker 2: It's really clear to me that.

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Speaker 3: This has been a manufactured result of macro credential interference

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Speaker 3: in the marketplace. So let me explain that a little bit. Firstly,

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Speaker 3: what we've seen is when APPRA basically came in and

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Speaker 3: put a throttle on the amount of interest only lending

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Speaker 3: and then the amount of investment lending that you could

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Speaker 3: get on your book, So they've started to manipulate that.

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Speaker 3: The banks then said, if you're going to manipulate the

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Speaker 3: ability for us to grow our business, we're going to

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Speaker 3: start charging a premium for that.

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Speaker 2: Type of product.

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Speaker 3: So effectively we started to see price buffers or increases

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Speaker 3: in the interest rates if you are going for an

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Speaker 3: investment loan, and then if you're going for an interest

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Speaker 3: only investment loan on top of that, we basically all

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Speaker 3: that happens.

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Speaker 2: So the unintended consequences of those types of.

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Speaker 3: Actions are that if you take out alone over thirty years,

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Speaker 3: but you've got a five year interest only period, then

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Speaker 3: the repayment but the repayment calculations potentially be based on

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Speaker 3: twenty five years instead of thirty years p and I

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Speaker 3: and obviously the holding costs are higher, so it is

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Speaker 3: manipulating on a case by case basis more people into

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Speaker 3: taking a P and I loan potentially over a thirty

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Speaker 3: year period as opposed to traditionally, what we would have done,

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Speaker 3: say ten fifteen years ago, for an investor is their

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Speaker 3: owner occupied debt, the non deductible debt, we would make

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Speaker 3: that P and I, but we're to have interest only

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Speaker 3: on their investment, which was their deductible debt. So now

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Speaker 3: because of that separation or that cost base, it really

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Speaker 3: does come down to doing a case by case number

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Speaker 3: analysis to see whether it's worthwhile doing interest only or

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Speaker 3: worthwhile doing.

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Speaker 2: P and I.

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Speaker 3: And in this particular case, it does look like P

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Speaker 3: and I is winning because of that price differential in

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Speaker 3: those interest rates.

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Speaker 1: So in your experience with your clients, do you see

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Speaker 1: more borrowers going on P and I for investors have?

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Speaker 2: Yeah, we do, we do.

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Speaker 3: I mean that has been that trend up until before

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Speaker 3: we saw those sort of market manipulations, it wasn't the trend.

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Speaker 3: We'd probably do ninety nine percent of those loans interest

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Speaker 3: only on the investment side, but we're starting to do

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Speaker 3: a little bit more based on what does that mean

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Speaker 3: for borrowing power? What does that mean for the cost

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Speaker 3: of funds? Because if it means that the investor can't

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Speaker 3: accumulate more properties in a quicker period of time and

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Speaker 3: we have to wait that little bit of extra time

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Speaker 3: to get that additional borrowing power, then we're potentially better

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Speaker 3: off going P and I to just make those holding

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Speaker 3: costs a little bit lower.

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Speaker 1: So what would your advice be to investors and obviously

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Speaker 1: listeners for this podcast, they're obviously interested in the property market,

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Speaker 1: whether they're in there already or looking to get in there.

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Speaker 1: Would you what sort of balancing act would you make

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Speaker 1: between minimizing the holding costs in return for maximizing your

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Speaker 1: budget to get into the market versus trying to minimize

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Speaker 1: those holding costs as much as possible, even if those

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Speaker 1: there's a consequence associated with obviously perspective.

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Speaker 2: Yeah, two points to it.

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Speaker 3: There's trade offs everywhere in what we're talking about here,

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Speaker 3: and I think that's why it really is advantageous to

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Speaker 3: get some professional advice and having you look at your

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Speaker 3: personal circumstances. So we always try to with our modeling,

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Speaker 3: we try and make sure that we're optimizing. We're optimizing

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Speaker 3: also based on risk profile and risk appetite and then

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Speaker 3: any of those changes in those circumstances. So if we

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Speaker 3: can model to get an optimized purchase price at a

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Speaker 3: certain level and that sort of fits into those cash

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Speaker 3: flow levels, and we can potentially give that p and

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Speaker 3: I we may look at that, but would also have

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Speaker 3: a look at the consequences of interest only in terms

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Speaker 3: of whether that allows us to get the second or

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Speaker 3: third property. I'm mean, we're not an aggressive advisory firm.

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Speaker 3: We're very passive in terms of how we like to

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Speaker 3: treat our customers. So two or three really good properties

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Speaker 3: over a long period of time supplementary to super means

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Speaker 3: that hopefully that customer in retirement will be self funded,

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Speaker 3: they'll have a nice passive income coming off their enroll

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Speaker 3: as well as they're super deliver a very comfortable retirement.

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Speaker 2: Yeah.

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Speaker 1: Great, let's talk about investor sentiment now, and we've seen

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Speaker 1: that come off in those Pipper results, which isn't surprising

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Speaker 1: of course, given the backdrop of all the changes that

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Speaker 1: have occurred, and particularly higher taxes, especially in Victoria. I

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Speaker 1: did some work on holding costs a little while ago

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Speaker 1: and looked at historically. I used to when I was

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Speaker 1: doing projections for clients, used to assume that our expenses

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Speaker 1: would be about twenty five percent of grosser intal income,

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Speaker 1: which would account for all expenses such as management and

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Speaker 1: maintenance and rates and insurance and those sorts of things.

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Speaker 1: Now I've seen that rise to thirty thirty five percent.

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Speaker 1: What's your experience, Ben, Have you done any work on this, Yeah.

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Speaker 2: No, one hundred percent.

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Speaker 3: They've definitely risen and that has been a gain part

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Speaker 3: of these unintended consequences when you get regulation and minimum

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Speaker 3: standards and high not only just interest rack costs, but

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Speaker 3: also I think what you're referring to is interests and

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Speaker 3: all of the sort of compliance costs in terms of

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Speaker 3: getting the gas permits and all of those types of

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Speaker 3: things in terms of safety certificates, and all of those costs,

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Speaker 3: and even the property management fees are increasing off the

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Speaker 3: back of the higher level of regulations and rules that

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Speaker 3: they need to administer to Yeah, it's definitely been clear

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Speaker 3: that it has happened, and that is obviously putting a

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Speaker 3: game further pressure on the owner of the property running

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Speaker 3: their small private rental accommodation business, and they're passing on

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Speaker 3: some of those costs to the renters.

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Speaker 1: Yeah, and I want to ask you about how investors

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Speaker 1: or your advice to investors navigate some of those changes

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Speaker 1: before I do that. Of course, some of these changes

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Speaker 1: are necessary. It's important to protect renters and renters' rights,

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Speaker 1: of course, and there are I'm sure some land lords

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Speaker 1: out there that aren't fair and aren't providing accommodation that

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Speaker 1: is of a sufficient standard. And as a government, and

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Speaker 1: obviously this is a problem that we've all got state

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Speaker 1: based reading here, But how do government sort of navigate

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Speaker 1: that they've got to find a balance between protecting renters

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Speaker 1: but also making sure we're still attracting private investors into

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Speaker 1: the market.

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Speaker 3: Yeah, and it really is a strong debate that's going

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Speaker 3: on between the sort of both parties. We want a

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Speaker 3: symbiotic relationship between the customer being the renter and obviously

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Speaker 3: the business owner. The business owner wants a satisfied customer

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Speaker 3: being the renter in their property and experiencing quiet and

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Speaker 3: safe enjoyment of the property. But ultimately we also want

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Speaker 3: to make sure that in the event that there is

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Speaker 3: difficulties in running that relationship and they have conflict, how

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Speaker 3: do we resolve those types of things. And that's the

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Speaker 3: fear that we've got at the moment in terms of

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Speaker 3: what's happening around these tendency reforms and basically where the

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Speaker 3: owner does feel like they're losing a lot of control

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Speaker 3: over their business. And that comes to your points toward

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Speaker 3: around the future investment and the confidence in terms of

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Speaker 3: wanting to come into the property investment space versus. I mean,

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Speaker 3: at the end of the day, the household has a

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Speaker 3: choice about where they invest. They can go and invest

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Speaker 3: in ETFs or the share market directly, or they can

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Speaker 3: invest in rental accommodation through commercial or residential, which is

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Speaker 3: what we're talking about. So I'm really concerned about the

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Speaker 3: level of reforms that are taking place, and it's certainly

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Speaker 3: affecting the sentiment and confidence for future supply of that

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Speaker 3: those investment dollars coming in and we're talking about tens

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Speaker 3: of billions of dollars here, Stuart, in terms of that's

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Speaker 3: on an annual basis, that's what it equates to, right,

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Speaker 3: So if those states or territories overreach when it comes

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Speaker 3: to the reforms that they put in place, the unintended

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Speaker 3: consequences are we don't get that supply. And when you

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Speaker 3: don't get that supply, you obviously then start to see

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Speaker 3: this rental crisis getting worse, the political pressures associated with that,

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Speaker 3: but also higher rents being passed on to those tenants

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Speaker 3: because of all of these additional costs that we're being

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Speaker 3: experienced by these reforms.

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Speaker 1: Yeah, and as any experience to invest will tell you,

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Speaker 1: there's one thing that doesn't change is change in itself

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Speaker 1: of course, so it's ever changing. So what would your

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Speaker 1: advice be as a season investing yourself, what would your

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Speaker 1: advice be to new investors getting into the market or

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Speaker 1: contemplating investing in property and maybe s get off by

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Speaker 1: some of these changes.

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Speaker 2: Yeah.

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Speaker 3: So I've been doing this for thirty odd years, but

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Speaker 3: I've never seen the concentration of a reform like we're

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Speaker 3: seeing at the moment. So I can look at evidence

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Speaker 3: that's happening internationally in terms of places where they've tried

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Speaker 3: to introduce things like rental freezers and even banning negative

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Speaker 3: gearing like what's happened in New Zealand, and now they're

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Speaker 3: reversing out of those positions because they started to again

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Speaker 3: realize that at the end of the day, the only

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Speaker 3: way you can increase supply is either through private investment,

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Speaker 3: which is obviously what mom and dad investors do, or

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Speaker 3: it's through government investment, and that is very expensive.

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Speaker 2: So private investment is usually more efficient.

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Speaker 3: And so ultimately what we do see is over those

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Speaker 3: sort of decades that I've been doing it, there might

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Speaker 3: be an over correction that occurs, and so we recorrect.

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Speaker 2: Back to getting that balance right.

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Speaker 3: And then over that longer period of time, we've seen

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Speaker 3: obviously property prices perform very well in those sort of

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Speaker 3: more affluent areas and through economic activity, and that ultimately

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Speaker 3: ends up in the land values in those particular areas.

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Speaker 2: So it really is quite.

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Speaker 3: Concerning for me that it's becoming a political hot potato

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Speaker 3: as opposed to having a bit of common sense around

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Speaker 3: the fact that if we want to get this suppli

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Speaker 3: to market, we've got to make sure that there's confidence

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Speaker 3: of supply and not too many reforms that are going

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Speaker 3: to come in that's going to cause any type of

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Speaker 3: concern for those investors. It's very expensive to actually invest

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Speaker 3: in residential property in terms of the cost to get

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Speaker 3: in with stamp duty and all those set up costs,

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Speaker 3: and also the exit costs associated with that as well.

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Speaker 3: We want long term investors in the market that can

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Speaker 3: provide ample amount of private rental accommodation to accommodate effectively

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Speaker 3: the ninety percent of the population that we're happy to

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Speaker 3: engage in a contract and have that safe and quiet

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Speaker 3: enjoyment the proberty as opposed to what we're seeing right

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Speaker 3: now is reforms for potentially the ten percent of the

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Speaker 3: marketplace which are having challenging times, and we're looking to

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Speaker 3: potentially ramp up the levels of power that those people have,

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Speaker 3: but it's affecting the other ninety percent of the market

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Speaker 3: that was working quite smoothly. I think you can see

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Speaker 3: there that I'm a bit more of a free market

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Speaker 3: operator than and someone who likes to see lots of

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Speaker 3: reform and regulation coming in to this particular space.

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Speaker 1: Yeah, and I think that's I think I agree with

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Speaker 1: your observation in terms of the amount of changes that

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Speaker 1: have occurred both within lending and then with property in

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Speaker 1: of itself in terms of how to affects tenants and

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Speaker 1: also landlords has been significant over the last seven years.

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Speaker 1: But we can't back away from the fact that really

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Speaker 1: probably the only way they're going to solve the rental crisis,

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Speaker 1: or at least a big proportion of it, is attracting

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Speaker 1: morevate investors into the market. And I think as investors ourselves,

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Speaker 1: we can take some soulves from that that this may

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Speaker 1: be just a point in time situation. Anyway, that's very interesting.

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Speaker 1: We're going to take a short break and that's exactly

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Speaker 1: what I want to talk to Ben about when we return,

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Speaker 1: so we back in a moment. Hello and welcome back

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Speaker 1: to The Australian's Money Puzzle podcast. I'm Stuart Weems and

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Speaker 1: I'm talking to Ben Kingsley, founder of Empower Wealth and

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Speaker 1: Chair of the Property Investors Council of Australia, so Ben.

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Speaker 1: In our first segment we talked about the fact that

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Speaker 1: private investors are supplying a lot of rental accommodation in Australia,

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Speaker 1: so they're going to be a very important part of

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Speaker 1: the solution moving forward. And whilst that might not be

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Speaker 1: obvious to particularly new investors at the moment it just

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Speaker 1: all looks like downside and risk, the reality that's true

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Speaker 1: now if we reflect back on how do we solve

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Speaker 1: this rental crisis. Of course, the government's talked about a

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Speaker 1: couple of different lis that it can pull in terms

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Speaker 1: of building more dwellings, more property. So hopefully the thesis

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Speaker 1: around that is obviously the higher the supply, the cooler

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Speaker 1: prices might be, the greater the supply of rental accommodation

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Speaker 1: they'll be. Of course, there's then also trying to increase

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Speaker 1: density in areas that have already built up, So I'd

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Speaker 1: like to ask you a little bit about that. So

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Speaker 1: let's start with the supply thing, and I guess the

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Speaker 1: cornerstone of the government's idea is really this National Housing

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Speaker 1: Accord of the target of building a million homes in

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Speaker 1: the next five years. How is that going to Firstly,

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Speaker 1: what do you think about that? And then secondly, how

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Speaker 1: is that going to impact investors from a returns perspective

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Speaker 1: and then from a decision making perspective should they be

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Speaker 1: should they change their decisions the result of this policy?

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Speaker 2: Sure?

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Speaker 3: I think this is probably the really interesting part of

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Speaker 3: the question. And before I answer that, what I want

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Speaker 3: to say is how do we get here? Like why

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Speaker 3: are we now seeing these ten billion dollar pledge and

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Speaker 3: all this money being thrown at the solution? And that's because, unfortunately,

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Speaker 3: what we have seen is the deterioration of that private investment.

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Speaker 3: Let me share with you some of those stats from

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Speaker 3: the ATO and I like the ATO stats because effectively

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Speaker 3: that's all the tax returns that go in. Now, the

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Speaker 3: data is a little bit lagged, but it really does

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Speaker 3: start to show a trend. So let me give you

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Speaker 3: a bit of an idea. In the last five years,

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Speaker 3: so from financial year eighteen to the latest data at

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Speaker 3: the end of financial year twenty twenty two, what we've

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Speaker 3: seen is there's been an increase of one point zero

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Speaker 3: two percent, or on average, around twenty two thousand individuals

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Speaker 3: who have been investing. So we've got about two point

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Speaker 3: three million property investors in Australia and so that's growing

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Speaker 3: on average at twenty two thousand.

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Speaker 2: Now, if we go and have a.

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Speaker 3: Look at the previous five years before that, it was

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Speaker 3: growing at three percent, or an average of sixty thousand

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Speaker 3: additional investors every year. So it was meeting that population

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Speaker 3: movement and they were creating critical supply of rental accommodation.

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Speaker 2: The previous five years.

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Speaker 3: Before that, you know, sort of from two thousand and

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Speaker 3: eight to two thousands, it was also growing at an

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Speaker 3: average sixty thousand dollars per year, and the previous five

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Speaker 3: years before that it was going at four percent or

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Speaker 3: fifty six thousand per year. So we are now at

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Speaker 3: a stage where there is a deterring number of investors

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Speaker 3: coming into the market. So what does that, unfortunately mean

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Speaker 3: The government has to come in and throw the checkbook

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Speaker 3: at it. And that's exactly what we've got is a

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Speaker 3: scenario of the government coming in throwing the checkbook at it.

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Speaker 3: When if they hadn't started to implement the Appera macro credentials,

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Speaker 3: if they hadn't started doing all the reforms, and they

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Speaker 3: had to let the free market operate as a free

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Speaker 3: market should. Then all of this money that the government's

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Speaker 3: throwing at it, and all of the higher taxes that

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Speaker 3: we have to then charge or the higher debt that

441
00:22:49,560 --> 00:22:52,560
Speaker 3: the governments have to take on is a byproduct of

442
00:22:52,720 --> 00:22:55,840
Speaker 3: poor policy and poor decisions that are being made. And

443
00:22:55,880 --> 00:22:59,479
Speaker 3: so this is what really gets me obviously frustrated in

444
00:22:59,560 --> 00:23:01,560
Speaker 3: terms of that story. So are they going to meet

445
00:23:01,600 --> 00:23:04,400
Speaker 3: their targets of one point two million properties? No, they're

446
00:23:04,400 --> 00:23:06,359
Speaker 3: definitely not going to meet that. And if we have

447
00:23:06,440 --> 00:23:09,000
Speaker 3: a look at also some of the other legislation that's

448
00:23:09,040 --> 00:23:12,480
Speaker 3: also been changing over the past few decades, we've now

449
00:23:12,560 --> 00:23:15,600
Speaker 3: got so much of the onuses on the developer to

450
00:23:15,680 --> 00:23:19,640
Speaker 3: actually build all of the supplementary infrastructure in the greenfield

451
00:23:19,680 --> 00:23:22,600
Speaker 3: areas and the parks and the gardens and the upkeeps

452
00:23:22,640 --> 00:23:24,880
Speaker 3: of those types of things that all flows into the.

453
00:23:24,800 --> 00:23:26,439
Speaker 2: Property prices of the land.

454
00:23:26,560 --> 00:23:29,360
Speaker 3: So we're now starting to see thirty five to fifty

455
00:23:29,400 --> 00:23:34,320
Speaker 3: percent of the land value all being government taxes and charges. Now,

456
00:23:34,359 --> 00:23:37,160
Speaker 3: that's not going to help with affordability. If the government

457
00:23:37,200 --> 00:23:40,320
Speaker 3: can't provide that basic infrastructure, that's going to be around

458
00:23:40,359 --> 00:23:44,080
Speaker 3: for decades. But unfortunately, to get these green field estates built,

459
00:23:44,320 --> 00:23:47,119
Speaker 3: they need the developer needs to put the money up

460
00:23:47,240 --> 00:23:50,080
Speaker 3: upfront to be able to develop all of those. So

461
00:23:50,400 --> 00:23:53,359
Speaker 3: we've got so many problems when it comes to the

462
00:23:53,400 --> 00:23:56,880
Speaker 3: way in which the regulators and the decisions that we're

463
00:23:56,920 --> 00:24:01,479
Speaker 3: making around supply of land and availabilit and the value

464
00:24:01,520 --> 00:24:03,760
Speaker 3: of that land based on all of these fees and

465
00:24:03,880 --> 00:24:07,040
Speaker 3: charges that are constantly being levied on to the developers

466
00:24:07,040 --> 00:24:10,399
Speaker 3: and levied on to investors to keep the economy running

467
00:24:10,440 --> 00:24:12,800
Speaker 3: and keeping the revenue in the cup and pockets because

468
00:24:12,840 --> 00:24:14,399
Speaker 3: they keep wanting to spend all this money.

469
00:24:15,200 --> 00:24:16,879
Speaker 1: Yeah, So if I turn it on its head and

470
00:24:16,920 --> 00:24:18,960
Speaker 1: think about it, then from an investor's point of view,

471
00:24:18,960 --> 00:24:20,720
Speaker 1: I guess what you're saying is there's no chance of

472
00:24:20,760 --> 00:24:23,359
Speaker 1: their meeting their target in terms of an influxive supply

473
00:24:23,440 --> 00:24:28,040
Speaker 1: of new dwellings. And notwithstanding, because of exactly how you've

474
00:24:28,480 --> 00:24:30,800
Speaker 1: stipulated that developers have to pay for a lot of

475
00:24:30,800 --> 00:24:34,400
Speaker 1: this infrastructure, that the price of new dwellings isn't going

476
00:24:34,440 --> 00:24:36,359
Speaker 1: to be any cheaper than what they are what it

477
00:24:36,480 --> 00:24:39,960
Speaker 1: is today. And so I guess, from an investor's point

478
00:24:40,000 --> 00:24:43,640
Speaker 1: of view, that's good news, isn't It's a supplied demand

479
00:24:43,680 --> 00:24:47,640
Speaker 1: sort of argument that then the existing stock should benefit

480
00:24:47,680 --> 00:24:51,960
Speaker 1: from price growth irrespective of these policies or the desire,

481
00:24:52,440 --> 00:24:54,440
Speaker 1: the political desire to build more.

482
00:24:54,920 --> 00:24:57,600
Speaker 3: Yeah, I agree with that to a point. Because of

483
00:24:57,680 --> 00:25:02,080
Speaker 3: government intervention, it's very true that it makes supply constraint.

484
00:25:02,240 --> 00:25:05,199
Speaker 3: Demands is usually there, so that puts pressure on price.

485
00:25:05,720 --> 00:25:10,240
Speaker 3: But I'd much prefer the value of the investment to

486
00:25:10,359 --> 00:25:14,400
Speaker 3: appreciate based on economic activity and economic prosperity and growth.

487
00:25:14,640 --> 00:25:17,320
Speaker 3: So in other words, because once you keep doing this

488
00:25:17,400 --> 00:25:21,639
Speaker 3: through a restricted marketplace, then unfortunately you then start to

489
00:25:21,640 --> 00:25:25,040
Speaker 3: see the government again getting into the market and manipulating

490
00:25:25,080 --> 00:25:27,639
Speaker 3: the other side of the equation, and they're starting to

491
00:25:27,680 --> 00:25:31,240
Speaker 3: introduce things like a twelve month annual reviews on rents,

492
00:25:31,280 --> 00:25:34,080
Speaker 3: and there's always going to be pressure politically in terms

493
00:25:34,080 --> 00:25:37,959
Speaker 3: of maybe rental freezers like we saw during COVID and

494
00:25:38,000 --> 00:25:40,840
Speaker 3: those types of things. It just makes no sense to

495
00:25:40,840 --> 00:25:43,320
Speaker 3: me at all that we would continue to try to

496
00:25:43,440 --> 00:25:46,919
Speaker 3: keep putting layer of regulation on regulation to try and

497
00:25:46,960 --> 00:25:50,960
Speaker 3: fix a problem that's easily solved in terms of less regulation,

498
00:25:51,480 --> 00:25:53,960
Speaker 3: less red tape and let the market determine what that

499
00:25:54,040 --> 00:25:58,040
Speaker 3: will be, and then ultimately that creates prosperity and jobs

500
00:25:58,080 --> 00:26:01,240
Speaker 3: and opportunities. When those new homes are built, there's people

501
00:26:01,240 --> 00:26:04,680
Speaker 3: move into those homes, there's new jobs in those local areas.

502
00:26:05,119 --> 00:26:08,760
Speaker 3: That is how economic prosperity works. It doesn't work through

503
00:26:09,119 --> 00:26:12,360
Speaker 3: constant government intervention and all of these sort of mechanisms

504
00:26:12,400 --> 00:26:15,840
Speaker 3: that you know, the macro prudential mechanisms that really do

505
00:26:16,160 --> 00:26:20,040
Speaker 3: slow down the ability and confidence to invest over the

506
00:26:20,160 --> 00:26:23,440
Speaker 3: longer term. And you and a big advocate steward of

507
00:26:23,480 --> 00:26:26,840
Speaker 3: investing for the decades, not necessarily for a couple of years.

508
00:26:26,840 --> 00:26:30,040
Speaker 3: And that's the sort of economic prosperity that's going to

509
00:26:30,119 --> 00:26:34,520
Speaker 3: drive future long term price growth of land and ultimately

510
00:26:34,520 --> 00:26:35,800
Speaker 3: those improvements on the land.

511
00:26:36,440 --> 00:26:36,720
Speaker 2: Yeah.

512
00:26:36,800 --> 00:26:38,720
Speaker 1: I don't disagree with you. I just don't think it's

513
00:26:38,720 --> 00:26:42,080
Speaker 1: going to happen. So from an investor perspective, I'm not

514
00:26:42,160 --> 00:26:45,760
Speaker 1: too perturbed by the desire to build more. Let's just

515
00:26:45,760 --> 00:26:50,960
Speaker 1: talk very briefly about trying to change density in established areas.

516
00:26:51,000 --> 00:26:53,960
Speaker 1: I was really interested to read a letter that are

517
00:26:54,080 --> 00:26:57,720
Speaker 1: very large, the largest council in Melbourne sent to its

518
00:26:57,760 --> 00:27:01,720
Speaker 1: occupants to say that the Victoria governments instructed them and

519
00:27:01,760 --> 00:27:04,600
Speaker 1: this is just an example, instructed them to increase the

520
00:27:04,680 --> 00:27:09,400
Speaker 1: number of dwellings in that locality about twenty fifty by

521
00:27:09,480 --> 00:27:12,720
Speaker 1: about sixty seven thousand dwellings, and there's about seventy thousand

522
00:27:12,800 --> 00:27:16,280
Speaker 1: dwellings in the area, also double the density in that

523
00:27:16,320 --> 00:27:19,440
Speaker 1: particular area. And the state government's obviously trying to take

524
00:27:19,800 --> 00:27:22,399
Speaker 1: a little bit more power away from the councils in

525
00:27:22,440 --> 00:27:25,720
Speaker 1: terms of approving this sort of stuff. And I think

526
00:27:25,760 --> 00:27:28,320
Speaker 1: I read I try to find this article, but I

527
00:27:28,359 --> 00:27:30,560
Speaker 1: read about twenty years ago in a paper to say

528
00:27:30,800 --> 00:27:33,880
Speaker 1: someone did a study and to sist that actually density

529
00:27:33,880 --> 00:27:38,960
Speaker 1: hasn't changed in our blue chip suburbs for many decades,

530
00:27:39,680 --> 00:27:42,200
Speaker 1: which is a concern. What do you think if I'm

531
00:27:42,200 --> 00:27:46,640
Speaker 1: an investor in those localities will density Do you think

532
00:27:46,760 --> 00:27:49,640
Speaker 1: density will change over time or do you think they'll

533
00:27:49,920 --> 00:27:51,560
Speaker 1: this will be just another failed attempt.

534
00:27:52,040 --> 00:27:54,000
Speaker 3: I think there's really no choice that we need to

535
00:27:54,000 --> 00:27:58,680
Speaker 3: start thinking about how we appropriately add density. And as

536
00:27:58,680 --> 00:28:02,280
Speaker 3: opposed to I got a similar letter in my municipality

537
00:28:02,320 --> 00:28:05,480
Speaker 3: as well. And there's winners and losers in terms of

538
00:28:05,560 --> 00:28:08,399
Speaker 3: street blocks about where they say, this is the area

539
00:28:08,440 --> 00:28:10,480
Speaker 3: here and now you can start building blocks of flats

540
00:28:10,920 --> 00:28:11,960
Speaker 3: right now.

541
00:28:12,040 --> 00:28:13,840
Speaker 2: So there is there are winners and losers.

542
00:28:13,880 --> 00:28:16,320
Speaker 3: From an investment point of view, when you think about

543
00:28:16,560 --> 00:28:20,399
Speaker 3: a rezoning story, then the productive use of that land

544
00:28:20,800 --> 00:28:24,320
Speaker 3: has a potentially higher value, so that there might be

545
00:28:24,359 --> 00:28:28,440
Speaker 3: a windfall associated with that as well. But what we've

546
00:28:28,440 --> 00:28:31,359
Speaker 3: also got to understand in some of these areas that

547
00:28:31,880 --> 00:28:35,960
Speaker 3: owner occupiers have invested their money to live in these

548
00:28:36,000 --> 00:28:40,880
Speaker 3: locations is in some respects because of the restrictions around

549
00:28:41,040 --> 00:28:43,280
Speaker 3: planning guidelines and what can be built there. So they

550
00:28:43,320 --> 00:28:46,760
Speaker 3: love their amenity, they love their exclusivitiveness, and that's fine,

551
00:28:46,800 --> 00:28:50,800
Speaker 3: and that's what again creates that underlying land value around

552
00:28:50,880 --> 00:28:53,920
Speaker 3: that exclusivity or scarcity of that land. So I've been

553
00:28:53,960 --> 00:28:56,320
Speaker 3: a big advocate of that over decades, and I know

554
00:28:56,400 --> 00:28:58,640
Speaker 3: you have as well, shield in terms of that's why

555
00:28:58,760 --> 00:29:02,440
Speaker 3: land so close to large urban development areas is so

556
00:29:03,360 --> 00:29:06,320
Speaker 3: exclusive and worth so much per square meter. But if

557
00:29:06,320 --> 00:29:08,760
Speaker 3: you then overlay that sort of density story on that,

558
00:29:08,960 --> 00:29:11,000
Speaker 3: there will be some winners and losers when it comes

559
00:29:11,040 --> 00:29:13,520
Speaker 3: to that story. So if you're sitting on a nice

560
00:29:13,560 --> 00:29:16,520
Speaker 3: past of land and you get the opportunity instead of

561
00:29:16,560 --> 00:29:19,320
Speaker 3: turning that one into two, to turning that one into

562
00:29:19,440 --> 00:29:22,040
Speaker 3: a block of ten flats, From an investment point of view,

563
00:29:22,080 --> 00:29:24,080
Speaker 3: if you can find the capital to do that, that

564
00:29:24,120 --> 00:29:27,040
Speaker 3: could be a significant uplift in terms of the profitability

565
00:29:27,040 --> 00:29:29,040
Speaker 3: and the income you could get off that property. But

566
00:29:29,120 --> 00:29:30,840
Speaker 3: I do see it from the other side of the coin,

567
00:29:30,880 --> 00:29:33,680
Speaker 3: and that is that seventy percent of the people that

568
00:29:33,720 --> 00:29:35,000
Speaker 3: are going to be affected are going to be the

569
00:29:35,080 --> 00:29:38,520
Speaker 3: unoccupiers in that particular location. So I see the argument

570
00:29:38,600 --> 00:29:41,479
Speaker 3: always being difficult, and that's why my view on this.

571
00:29:42,360 --> 00:29:44,240
Speaker 3: I've had a sort of policy idea on this for

572
00:29:44,280 --> 00:29:46,640
Speaker 3: a long time, and that is that if you have

573
00:29:46,720 --> 00:29:49,560
Speaker 3: a percentage rule, So here's an example. If you have

574
00:29:49,960 --> 00:29:53,680
Speaker 3: a street that has just freestanding single homes on that street,

575
00:29:53,960 --> 00:29:55,720
Speaker 3: you can have what we call the one percent rule,

576
00:29:55,960 --> 00:29:58,280
Speaker 3: So anything on that street, you can turn one percent

577
00:29:58,280 --> 00:30:01,239
Speaker 3: of the properties on that street into duplexus. And if

578
00:30:01,280 --> 00:30:03,280
Speaker 3: you've got a rule that you're allowed duplexus, you can

579
00:30:03,320 --> 00:30:06,320
Speaker 3: turn one percent of those into townhouses ie three to

580
00:30:06,360 --> 00:30:08,960
Speaker 3: the site. So what you're doing is you're doing it sensibly,

581
00:30:09,280 --> 00:30:11,760
Speaker 3: and it still gives you plenty of ample places around

582
00:30:12,240 --> 00:30:14,240
Speaker 3: the city to be able to keep adding to that.

583
00:30:14,280 --> 00:30:16,240
Speaker 3: But what you aren't going to be doing is adding

584
00:30:16,520 --> 00:30:19,880
Speaker 3: six blocks of high rise apartments or medium density apartments

585
00:30:19,880 --> 00:30:23,280
Speaker 3: in three streets, which then just make those streets untenable

586
00:30:23,320 --> 00:30:26,680
Speaker 3: to live because of parking, traffic, noise, all of those

587
00:30:26,720 --> 00:30:28,360
Speaker 3: other things. So I think that's going to be the

588
00:30:28,400 --> 00:30:31,520
Speaker 3: political backlash that we're going to see from silly policy

589
00:30:31,560 --> 00:30:34,040
Speaker 3: like that. But the one percent rule is something that

590
00:30:34,080 --> 00:30:38,200
Speaker 3: you would think nimbism wouldn't necessarily push back on because

591
00:30:38,240 --> 00:30:41,280
Speaker 3: if they know that streets already had that allocation, well

592
00:30:41,280 --> 00:30:42,800
Speaker 3: then they look at the next street and that sort

593
00:30:42,800 --> 00:30:45,640
Speaker 3: of balances out how quickly we build that density up.

594
00:30:46,440 --> 00:30:49,040
Speaker 1: Yeah, I think again from an investor's point of view,

595
00:30:49,080 --> 00:30:51,120
Speaker 1: and that's what we're here to really talk about, is

596
00:30:51,200 --> 00:30:54,080
Speaker 1: I think it's going to be a net positive if

597
00:30:54,120 --> 00:30:56,760
Speaker 1: they do increase densities. He said that the land becomes

598
00:30:56,800 --> 00:31:00,440
Speaker 1: more productive and arguably more valuable. See, we're going to

599
00:31:00,480 --> 00:31:02,440
Speaker 1: take a short break and when we come back, we're

600
00:31:02,440 --> 00:31:05,280
Speaker 1: going to answer a listener question about renting out your home.

601
00:31:05,720 --> 00:31:13,520
Speaker 1: Back with you in a moment. Hello and welcome back

602
00:31:13,520 --> 00:31:16,200
Speaker 1: to The Australian's Money Puzzle podcast. I'm Stuart Weems and

603
00:31:16,200 --> 00:31:19,160
Speaker 1: I'm talking to Ben Kingsley, the founder of Empower Wealth

604
00:31:19,200 --> 00:31:22,640
Speaker 1: and chair of the Property Investors Counsel of Australia, Ben,

605
00:31:22,680 --> 00:31:24,400
Speaker 1: I just want to ask you one more question before

606
00:31:24,400 --> 00:31:27,800
Speaker 1: we get into a listener question, and it's related to

607
00:31:27,840 --> 00:31:31,440
Speaker 1: obviously you're trying to attract more private investors to the market,

608
00:31:31,440 --> 00:31:34,320
Speaker 1: which I think ultimately a government, whether it's this government

609
00:31:34,360 --> 00:31:36,840
Speaker 1: or the next one, whatever it might be, will need

610
00:31:36,880 --> 00:31:41,000
Speaker 1: to do to really create some economic prosperity because we

611
00:31:41,080 --> 00:31:45,480
Speaker 1: need to increase of continue to increase our population economic growth,

612
00:31:45,480 --> 00:31:48,120
Speaker 1: and we need people to be able to have houses

613
00:31:48,160 --> 00:31:50,920
Speaker 1: to do that. Do you have any good ideas that

614
00:31:50,960 --> 00:31:55,160
Speaker 1: they could implement to attract more private investors to the market.

615
00:31:55,720 --> 00:31:58,320
Speaker 3: I think that the number one thing that they need

616
00:31:58,360 --> 00:32:01,280
Speaker 3: to do is give us confidence that they're not going

617
00:32:01,320 --> 00:32:04,960
Speaker 3: to keep changing the rules. Like in any sort of industry,

618
00:32:05,440 --> 00:32:08,880
Speaker 3: when there's uncertaint year around government policy, there's a lack

619
00:32:08,920 --> 00:32:11,440
Speaker 3: of investment. People basically sit on their hands and make

620
00:32:11,520 --> 00:32:15,320
Speaker 3: no investment. So we need assureties around that. We also

621
00:32:15,560 --> 00:32:16,880
Speaker 3: need to then look at, okay, what.

622
00:32:16,840 --> 00:32:19,080
Speaker 2: Are the incentives to attract our.

623
00:32:18,960 --> 00:32:21,480
Speaker 3: Investment dollars in So I couldn't agree with you more Stuart,

624
00:32:21,800 --> 00:32:25,080
Speaker 3: in respect of it's just unavoidable that there's no way

625
00:32:25,160 --> 00:32:28,800
Speaker 3: known that builds to rent or super funds or government

626
00:32:28,920 --> 00:32:31,760
Speaker 3: are going to build the supply that we need, So

627
00:32:31,880 --> 00:32:34,800
Speaker 3: private rental accommodation must be in the mix, and it

628
00:32:34,840 --> 00:32:39,160
Speaker 3: will consistently be the biggest portion of the mix. So

629
00:32:39,320 --> 00:32:41,360
Speaker 3: you've got to make sure that the incentive is there.

630
00:32:41,720 --> 00:32:43,360
Speaker 3: And so if I look at an example of what

631
00:32:43,400 --> 00:32:47,120
Speaker 3: Western Australia did recently in terms of it attracting from

632
00:32:47,240 --> 00:32:50,800
Speaker 3: short term rental accommodation into longer term rental accommodation, they

633
00:32:50,840 --> 00:32:54,120
Speaker 3: offered a ten thousand dollars incentive to move that product

634
00:32:54,200 --> 00:32:56,880
Speaker 3: or that stock out a short term into long term.

635
00:32:57,080 --> 00:32:59,600
Speaker 3: So any of those types of things would be really important.

636
00:33:00,000 --> 00:33:03,280
Speaker 3: It would also start to say to government, it's counterintuitive

637
00:33:03,360 --> 00:33:06,160
Speaker 3: what you're doing about higher taxes and charges. Yes, you've

638
00:33:06,160 --> 00:33:08,160
Speaker 3: got a lot of debt to pay off, but ultimately

639
00:33:08,160 --> 00:33:10,400
Speaker 3: you've got to keep growing that economic pie. The situation

640
00:33:10,680 --> 00:33:14,000
Speaker 3: here in Victoria where we saw the land tax increases

641
00:33:14,000 --> 00:33:18,200
Speaker 3: and another six hundred and fifteen thousand investors experienced land

642
00:33:18,240 --> 00:33:21,640
Speaker 3: tax bills for the very first time this year, that's

643
00:33:21,680 --> 00:33:25,080
Speaker 3: a disincentive. And so ultimately higher land taxes and higher

644
00:33:25,120 --> 00:33:27,480
Speaker 3: holding cost means that at the end of the day,

645
00:33:27,480 --> 00:33:30,000
Speaker 3: the investor is collecting rent and giving it out to

646
00:33:30,040 --> 00:33:32,920
Speaker 3: everybody else it needs to. We need to make sure

647
00:33:33,080 --> 00:33:35,880
Speaker 3: that there's enough return on investment for those investors. So

648
00:33:36,280 --> 00:33:40,400
Speaker 3: start thinking about how you would incentivize that investment. And

649
00:33:40,400 --> 00:33:42,400
Speaker 3: you're not going to do that through high taxes and charges.

650
00:33:42,720 --> 00:33:45,120
Speaker 3: And then you've got to take negative gearing and capital

651
00:33:45,160 --> 00:33:48,520
Speaker 3: gains tax changes off the table, because again, if we

652
00:33:48,560 --> 00:33:51,600
Speaker 3: don't get that confidence of supply and that confidence of

653
00:33:51,840 --> 00:33:54,760
Speaker 3: what's going to happen, we'll see this can continue to

654
00:33:54,840 --> 00:33:57,720
Speaker 3: be challenging for some investors in some markets.

655
00:33:58,120 --> 00:34:01,080
Speaker 1: Yeah, I like the idea in embargo. Any changes would

656
00:34:01,080 --> 00:34:04,360
Speaker 1: give investors a bit more confidence. Okay, let's get into

657
00:34:04,400 --> 00:34:07,160
Speaker 1: a question here from Sam, and I'll read it out

658
00:34:07,200 --> 00:34:08,840
Speaker 1: to your Ben and then you'll give you the difficult

659
00:34:08,880 --> 00:34:12,840
Speaker 1: task of answering. And of course it's a twofold anyway.

660
00:34:12,880 --> 00:34:15,799
Speaker 1: Sam writes, suppose one was to move out of their

661
00:34:15,880 --> 00:34:18,400
Speaker 1: princial place of residence and rent it out, but not

662
00:34:18,480 --> 00:34:21,720
Speaker 1: tell their home loan provider, so still pay the cheaper

663
00:34:21,800 --> 00:34:24,319
Speaker 1: rate on their loan. This mass must happen all the time.

664
00:34:24,400 --> 00:34:28,399
Speaker 1: Any adverse consequences resulting from this, and then he goes

665
00:34:28,440 --> 00:34:30,520
Speaker 1: on to say, now suppose that person wanted to go

666
00:34:30,560 --> 00:34:34,000
Speaker 1: and buy a new primary place of residence before selling

667
00:34:34,040 --> 00:34:36,600
Speaker 1: their old one. Do they need to declare the original

668
00:34:36,640 --> 00:34:40,000
Speaker 1: loan when applying for a new one. I would assume yes.

669
00:34:40,239 --> 00:34:42,920
Speaker 1: And what about the fact that their old one is

670
00:34:43,120 --> 00:34:45,359
Speaker 1: a home loan rather than investment loan.

671
00:34:46,600 --> 00:34:47,920
Speaker 2: Yeah, it's a good question, Sam.

672
00:34:48,000 --> 00:34:52,879
Speaker 3: Look, if you read your mortgage documentation, the bank has

673
00:34:52,920 --> 00:34:56,000
Speaker 3: a right to be informed and kept informed about any

674
00:34:56,239 --> 00:35:00,920
Speaker 3: significant changes to your circumstances. If you don't form that bank,

675
00:35:01,000 --> 00:35:04,200
Speaker 3: then potentially one could argue that you're in breach of contract.

676
00:35:04,640 --> 00:35:05,480
Speaker 2: And we do know that.

677
00:35:05,520 --> 00:35:08,160
Speaker 3: Obviously, some people might just be naive or not be

678
00:35:08,239 --> 00:35:11,080
Speaker 3: aware of that, and so their circumstances change and they

679
00:35:11,080 --> 00:35:14,239
Speaker 3: don't tell the lender. Then ultimately they still might be

680
00:35:14,440 --> 00:35:17,759
Speaker 3: achieving the higher or better interest rate, the cheaper interest rate.

681
00:35:18,200 --> 00:35:20,920
Speaker 3: But in theory, they're meant to be informed. And what

682
00:35:21,000 --> 00:35:23,319
Speaker 3: we are now starting to see is some lenders are

683
00:35:23,320 --> 00:35:29,200
Speaker 3: doing data matches with certain data companies around rental alerts

684
00:35:29,239 --> 00:35:32,160
Speaker 3: of properties that are being rented, and they're contacting those

685
00:35:32,280 --> 00:35:35,160
Speaker 3: owners and basically saying, is it true that your property

686
00:35:35,200 --> 00:35:37,000
Speaker 3: is now an investment property. If it is, then we're

687
00:35:37,000 --> 00:35:40,480
Speaker 3: going to adjust your interest rate to the appropriate interest

688
00:35:40,560 --> 00:35:43,120
Speaker 3: rate and change the status of your property from a

689
00:35:43,120 --> 00:35:46,239
Speaker 3: principal place of residence loan into an investment loan.

690
00:35:46,560 --> 00:35:48,799
Speaker 2: So that's part one of that, Part two of that.

691
00:35:49,120 --> 00:35:51,439
Speaker 3: When it comes to your principal place of residence, there's

692
00:35:51,440 --> 00:35:55,160
Speaker 3: two components there. One is obviously a tax component, and really,

693
00:35:55,160 --> 00:35:58,040
Speaker 3: from the tax officer's point of view, keeping them informed

694
00:35:58,120 --> 00:36:01,600
Speaker 3: or declaring principal place of residence is only a moment

695
00:36:01,640 --> 00:36:03,120
Speaker 3: in time that you may need to do that. They're

696
00:36:03,120 --> 00:36:06,480
Speaker 3: interested in terms of making sure that you're appropriately apportioning

697
00:36:06,480 --> 00:36:09,840
Speaker 3: any interest cost as a deduction against any investment property

698
00:36:09,840 --> 00:36:13,560
Speaker 3: associated with that. But coming back to the lender story, Yeah,

699
00:36:13,800 --> 00:36:16,680
Speaker 3: as you're putting your application in, you don't want to

700
00:36:16,680 --> 00:36:19,880
Speaker 3: be committing any type of fraud or any type of

701
00:36:20,200 --> 00:36:23,880
Speaker 3: misinformation on your loan application. So one hundred percent you

702
00:36:23,960 --> 00:36:26,360
Speaker 3: need to be upfront and thorough. And if you're working

703
00:36:26,400 --> 00:36:30,040
Speaker 3: with a broker or someone who says let's not necessarily

704
00:36:30,200 --> 00:36:32,200
Speaker 3: tell them the truth, the whole truth, and nothing but

705
00:36:32,320 --> 00:36:35,799
Speaker 3: the truth, then be very careful there because you are

706
00:36:35,920 --> 00:36:38,960
Speaker 3: in cohorts with that broker in terms of committing fraud.

707
00:36:39,000 --> 00:36:41,480
Speaker 3: And so I would always say play a straight that

708
00:36:41,680 --> 00:36:44,560
Speaker 3: tell the truth, because that's effectively what needs to be

709
00:36:44,560 --> 00:36:47,480
Speaker 3: in play now. And if your lender is then too

710
00:36:47,560 --> 00:36:50,319
Speaker 3: expensive based on that, and you want to prove a point,

711
00:36:50,360 --> 00:36:52,319
Speaker 3: then go and shop around, use your broker to shop

712
00:36:52,360 --> 00:36:54,799
Speaker 3: around for a better lender that's going to give you

713
00:36:54,840 --> 00:36:57,759
Speaker 3: a cheaper rate or maybe not even charge you for

714
00:36:57,840 --> 00:37:01,000
Speaker 3: having an investment loan versus a print place a residence loan.

715
00:37:01,040 --> 00:37:03,120
Speaker 3: And there are some of those lenders who are coming

716
00:37:03,160 --> 00:37:05,360
Speaker 3: out with more and more of those products, and it

717
00:37:05,400 --> 00:37:08,680
Speaker 3: does frustrate me that investors have to pay a premium

718
00:37:08,680 --> 00:37:12,440
Speaker 3: when there's no factual evidence to suggest that an invest

719
00:37:12,480 --> 00:37:16,600
Speaker 3: alone is more riskier than an owner occupier alone.

720
00:37:16,600 --> 00:37:18,319
Speaker 2: In fact, the evidence suggests the.

721
00:37:18,280 --> 00:37:21,279
Speaker 3: Other way, that more owner occupied loans go bad than

722
00:37:21,280 --> 00:37:22,560
Speaker 3: investor loans go bad.

723
00:37:22,560 --> 00:37:26,000
Speaker 2: But unfortunately APRA doesn't see it that way, and the

724
00:37:26,080 --> 00:37:28,200
Speaker 2: lenders are taking advantage of that opportunity.

725
00:37:28,960 --> 00:37:31,840
Speaker 1: Yeah, good advice, Ben. If a broker or a lender

726
00:37:31,840 --> 00:37:33,960
Speaker 1: in a branch suggests that you shouldn't be open and

727
00:37:34,000 --> 00:37:37,319
Speaker 1: honest about declaring your assets and liabilities, don't deal with

728
00:37:37,360 --> 00:37:40,480
Speaker 1: that person would be my advice. That's really interesting, Ben,

729
00:37:40,520 --> 00:37:42,480
Speaker 1: Thanks so much for coming on the show. And sharing

730
00:37:42,520 --> 00:37:46,359
Speaker 1: your insights and advice. I'm sure our listeners definitely enjoyed it.

731
00:37:46,800 --> 00:37:49,040
Speaker 1: And just a reminder, folks, if you have any questions

732
00:37:49,120 --> 00:37:51,360
Speaker 1: or feedback, we'd love to hear from you. The email

733
00:37:51,480 --> 00:37:54,080
Speaker 1: is the Money Puzzle at the Australian dot com dot au.

734
00:37:54,520 --> 00:37:57,759
Speaker 1: Please keep those questions coming. James Gerard will be back

735
00:37:57,840 --> 00:38:00,759
Speaker 1: with you on Thursday, and I'll be back next Tuesday

736
00:38:01,200 --> 00:38:04,360
Speaker 1: of another interesting show lined up to explore what economic

737
00:38:04,400 --> 00:38:08,080
Speaker 1: fundamentals we need to be concerned with as investors. I

738
00:38:08,120 --> 00:38:10,040
Speaker 1: really hope you enjoyed today's show and if you have,

739
00:38:10,200 --> 00:38:13,160
Speaker 1: please share it. I've been Stuart Weens and until next week,

740
00:38:13,200 --> 00:38:13,719
Speaker 1: by for now,