1 00:00:10,310 --> 00:00:13,290 Speaker 1: Hello and welcome to the Australian's Money Puzzle podcast. I'm 2 00:00:13,330 --> 00:00:16,180 Speaker 1: Stuart Weems, sitting in for your usual host, James Kirby. 3 00:00:16,890 --> 00:00:20,360 Speaker 1: I'm a financial advisor and host of my own podcast, Investopoly, 4 00:00:20,380 --> 00:00:23,020 Speaker 1: and I'm honoured to be your host for today's episode. 5 00:00:23,860 --> 00:00:26,540 Speaker 1: I've got some really surprising numbers to share with you folks. 6 00:00:27,160 --> 00:00:31,080 Speaker 1: Over the past five months, so since February, new investment 7 00:00:31,140 --> 00:00:36,030 Speaker 1: loan volume has increased by 47%. So investment lending is 8 00:00:36,190 --> 00:00:39,809 Speaker 1: now at a record high, No surprising that Western Australia, 9 00:00:39,870 --> 00:00:42,680 Speaker 1: South Australia and New South Wales lead that charge, although 10 00:00:43,260 --> 00:00:46,459 Speaker 1: lending in Victoria wasn't too bad either. So this comes 11 00:00:46,520 --> 00:00:49,080 Speaker 1: as a real surprise to me given the current backdrop. 12 00:00:49,600 --> 00:00:52,460 Speaker 1: And the current backdrop is we've got interest rates almost 13 00:00:52,500 --> 00:00:55,130 Speaker 1: at two-decade highs, so it hasn't been this high since 2007. 14 00:00:55,130 --> 00:00:59,970 Speaker 1: We've got new interest-only loans have fallen from 40% of 15 00:00:59,990 --> 00:01:01,690 Speaker 1: all new loans in 2017 to just about 10% today. 16 00:01:06,450 --> 00:01:10,410 Speaker 1: So investors really aren't borrowing on interest-only basis. Then we've 17 00:01:10,430 --> 00:01:13,980 Speaker 1: got higher property taxes, land taxes, levies, surcharges, all those 18 00:01:14,020 --> 00:01:17,080 Speaker 1: sorts of things. And of course, tenancy rules over the 19 00:01:17,100 --> 00:01:19,100 Speaker 1: last few years have become a lot stricter with things 20 00:01:19,140 --> 00:01:22,459 Speaker 1: like notice periods and limits on rent hikes and those 21 00:01:22,500 --> 00:01:25,640 Speaker 1: sorts of things. So I was really surprised that the 22 00:01:25,700 --> 00:01:30,590 Speaker 1: investor market is running so hot. An organisation called Property 23 00:01:30,630 --> 00:01:34,550 Speaker 1: Investment Professionals of Australia, or PIPA for short, produces an 24 00:01:34,590 --> 00:01:38,660 Speaker 1: investor survey every year. This year's survey was released on 25 00:01:38,720 --> 00:01:43,000 Speaker 1: Friday and included responses from about 1,300 investors. I wanted 26 00:01:43,040 --> 00:01:46,270 Speaker 1: to share some key highlights from that survey. So the 27 00:01:46,280 --> 00:01:50,030 Speaker 1: first one is 14% of investors sold at least one 28 00:01:50,070 --> 00:01:53,930 Speaker 1: property last year. Now about 40% of those investors held 29 00:01:53,950 --> 00:01:57,110 Speaker 1: that asset for more than 10 years, so there's a 30 00:01:57,130 --> 00:02:00,060 Speaker 1: bit of cash in some of that equity. But the 31 00:02:00,100 --> 00:02:04,180 Speaker 1: main reasons for selling were increased holding costs and increased 32 00:02:04,240 --> 00:02:07,940 Speaker 1: land tax and government charges. Most of the sales occurred 33 00:02:08,000 --> 00:02:12,580 Speaker 1: in Queensland, although Victoria wasn't too far behind that, although 34 00:02:13,160 --> 00:02:16,179 Speaker 1: fewer investors sold in Victoria in the last year than 35 00:02:16,220 --> 00:02:23,419 Speaker 1: the previous year, 22% versus 25%. General investor sentiment is down. 36 00:02:23,460 --> 00:02:26,019 Speaker 1: That's probably no surprise, or it's not really in line 37 00:02:26,040 --> 00:02:29,640 Speaker 1: with the figures, though. 46% of investors think now is 38 00:02:29,680 --> 00:02:34,060 Speaker 1: a good time to invest compared to 62% back in 2021. 39 00:02:34,940 --> 00:02:38,709 Speaker 1: And the biggest concern for investors is government interference, things 40 00:02:38,750 --> 00:02:44,070 Speaker 1: like rent freezes, those sorts of things. Regarding holding costs, 80% 41 00:02:44,070 --> 00:02:46,710 Speaker 1: of landlords said they would pass on those higher holding 42 00:02:46,730 --> 00:02:50,810 Speaker 1: costs to renters, and 13% said they would consider selling 43 00:02:50,880 --> 00:02:53,519 Speaker 1: as a result of higher holding costs. So we know 44 00:02:53,560 --> 00:02:58,320 Speaker 1: those holding costs ultimately aren't good for renters. And surprisingly, 45 00:02:58,600 --> 00:03:02,059 Speaker 1: Melbourne is considered the best place to invest because Now, 46 00:03:02,160 --> 00:03:05,239 Speaker 1: of course, a healthy property investment market is critical for 47 00:03:05,260 --> 00:03:08,980 Speaker 1: a couple of reasons. Firstly, private investors in Australia provide 48 00:03:09,000 --> 00:03:13,000 Speaker 1: about 90% of rental accommodation. And secondly, they make up 49 00:03:13,060 --> 00:03:16,120 Speaker 1: about a third of the market in terms of buyers. 50 00:03:16,520 --> 00:03:20,100 Speaker 1: The other two thirds are own occupiers, of course. So 51 00:03:20,160 --> 00:03:22,380 Speaker 1: today I wanted to delve into this data and explore 52 00:03:22,540 --> 00:03:26,119 Speaker 1: what is driving this hot property investor market in Australia. 53 00:03:26,780 --> 00:03:29,840 Speaker 1: And then also, how should investors navigate some of the 54 00:03:29,880 --> 00:03:33,019 Speaker 1: current challenges? And I've got a perfect guest to do that. 55 00:03:33,540 --> 00:03:36,600 Speaker 1: He's a licensed real estate agent in many states of Australia, 56 00:03:37,060 --> 00:03:41,620 Speaker 1: a qualified mortgage broker, founder of Empower Wealth, host of 57 00:03:41,680 --> 00:03:46,210 Speaker 1: the Property Couch podcast, and chair of the not-for-profit organization, 58 00:03:46,370 --> 00:03:49,930 Speaker 1: Property Investor Council of Australia. Boy, that is a mouthful. 59 00:03:50,130 --> 00:03:52,790 Speaker 1: It's his first time on the show. Welcome, Ben Kingsley. 60 00:03:53,290 --> 00:03:54,880 Speaker 2: Thank you, Stuart. Thanks for having me. 61 00:03:55,680 --> 00:03:58,830 Speaker 1: My pleasure. Ben, let's start with the dramatic rise in 62 00:03:59,030 --> 00:04:02,130 Speaker 1: investment lending. Was it a surprise to you? And I'd 63 00:04:02,150 --> 00:04:06,050 Speaker 1: be really interested in your thoughts around what is driving this? 64 00:04:06,110 --> 00:04:09,790 Speaker 1: What is the demographic of the investors? And geographically, where 65 00:04:09,810 --> 00:04:10,590 Speaker 1: are they investing? 66 00:04:11,170 --> 00:04:13,570 Speaker 3: Yeah, so I think more broadly, am I surprised that 67 00:04:13,620 --> 00:04:16,700 Speaker 3: property prices have continued to grow in most parts of Australia, 68 00:04:17,460 --> 00:04:19,860 Speaker 3: given those 13 rate rises that we've seen? The short 69 00:04:19,920 --> 00:04:22,080 Speaker 3: answer to that is yes. But then when you look 70 00:04:22,140 --> 00:04:25,060 Speaker 3: under that, obviously, we're also talking about the situation where 71 00:04:25,080 --> 00:04:29,880 Speaker 3: we have strong employment and strong government employment in education 72 00:04:29,920 --> 00:04:32,820 Speaker 3: and health services. So that certainly meant that we haven't 73 00:04:32,860 --> 00:04:35,600 Speaker 3: had that typical correction that we would normally get. But 74 00:04:35,620 --> 00:04:38,620 Speaker 3: when I look at the numbers of 47% increase over 75 00:04:38,640 --> 00:04:40,880 Speaker 3: a five-year period, I do want to put that into 76 00:04:40,960 --> 00:04:44,000 Speaker 3: some context. So when I look at that, I look 77 00:04:44,020 --> 00:04:47,230 Speaker 3: at the batch of time. And so inside that period, 78 00:04:47,290 --> 00:04:51,790 Speaker 3: we saw in 2021 into 2022, we had this rocketing 79 00:04:52,210 --> 00:04:55,980 Speaker 3: property price boom on the back of record low interest rates. 80 00:04:56,020 --> 00:04:58,170 Speaker 3: And I think when we look at that data over 81 00:04:58,230 --> 00:05:01,849 Speaker 3: that five-year period, we're still catching that very strong growth 82 00:05:01,910 --> 00:05:04,409 Speaker 3: level in that earlier stage. So that's showing up in 83 00:05:04,430 --> 00:05:06,950 Speaker 3: the numbers. So when we start to think about the 84 00:05:07,010 --> 00:05:10,410 Speaker 3: base effect and what's happening in this current time, we 85 00:05:10,490 --> 00:05:13,800 Speaker 3: are definitely starting to see a slowing in those numbers. Well, 86 00:05:13,960 --> 00:05:15,840 Speaker 3: the numbers still look good because the base effect over 87 00:05:15,860 --> 00:05:18,240 Speaker 3: the last 12 months is also quite low because we 88 00:05:18,279 --> 00:05:21,060 Speaker 3: bottomed out off the back of that previous boom that 89 00:05:21,080 --> 00:05:23,740 Speaker 3: we had at the back of COVID. So What I 90 00:05:24,100 --> 00:05:27,200 Speaker 3: tend to interpret into that data, because this has been 91 00:05:27,240 --> 00:05:30,620 Speaker 3: puzzling me, Stuart, for a while, I feel like the 92 00:05:30,660 --> 00:05:33,520 Speaker 3: demographic is, so those property investors that might have been 93 00:05:33,550 --> 00:05:37,029 Speaker 3: investing for the decades and those older property investors, I 94 00:05:37,089 --> 00:05:40,510 Speaker 3: suspect some of those are taking profits and cashing out. 95 00:05:40,529 --> 00:05:42,370 Speaker 3: We saw that a little bit in the survey results 96 00:05:42,410 --> 00:05:44,870 Speaker 3: that we got from PIPA as well. And I think 97 00:05:44,950 --> 00:05:47,839 Speaker 3: that the new demographic, so the new investor that's coming in, 98 00:05:48,210 --> 00:05:49,710 Speaker 3: is that next generation investor. 99 00:05:49,730 --> 00:05:51,410 Speaker 2: But they are very. 100 00:05:51,170 --> 00:05:56,320 Speaker 3: Focused in on being forced into that affordability belt because 101 00:05:56,440 --> 00:05:59,060 Speaker 3: of the borrowing power restrictions we've got in place and 102 00:05:59,100 --> 00:06:01,060 Speaker 3: those types of things. So it really is quite an 103 00:06:01,140 --> 00:06:04,060 Speaker 3: interesting dynamic that we've got in the market at the moment. 104 00:06:04,940 --> 00:06:07,400 Speaker 1: Yeah, because when you look at the loan volume, it's 105 00:06:07,440 --> 00:06:10,160 Speaker 1: based on loan sizes, right? So it's the amount of 106 00:06:10,300 --> 00:06:13,850 Speaker 1: money that's really moving into that property market. And I 107 00:06:13,890 --> 00:06:16,990 Speaker 1: don't know, you probably saw it, Ben, but CBA released 108 00:06:17,150 --> 00:06:20,730 Speaker 1: a really interesting slide in their results in terms of 109 00:06:20,810 --> 00:06:24,430 Speaker 1: who's doing that borrowing, in terms of average family size income. 110 00:06:24,529 --> 00:06:28,140 Speaker 1: And it showed that very wealthy people, family incomes, I 111 00:06:28,180 --> 00:06:32,540 Speaker 1: can't remember, something like $ 250, 000 or $ 300, 000 or above, were 112 00:06:32,660 --> 00:06:37,220 Speaker 1: responsible for most of the borrowing there. So are you 113 00:06:37,260 --> 00:06:41,750 Speaker 1: suggesting that that volume is really driven by two cohorts, 114 00:06:41,830 --> 00:06:44,190 Speaker 1: if you like, a cohort that's not really impacted by 115 00:06:44,610 --> 00:06:47,849 Speaker 1: borrowing capacity and the cohort that is impacted by borrowing 116 00:06:47,870 --> 00:06:51,030 Speaker 1: capacity that's forced it to go into a lower price point? 117 00:06:51,270 --> 00:06:54,690 Speaker 3: Yeah, no doubt there has been investors who might be 118 00:06:54,730 --> 00:06:57,010 Speaker 3: wanting to add to their portfolio and just simply can't 119 00:06:57,050 --> 00:07:00,270 Speaker 3: because the borrowing power restrictions that are currently in place 120 00:07:00,290 --> 00:07:02,969 Speaker 3: through the 3% buffer rate are tapping them out of that. 121 00:07:03,350 --> 00:07:05,930 Speaker 3: And so that does mean that obviously the people who 122 00:07:05,990 --> 00:07:08,370 Speaker 3: can invest are usually the higher income earners. So I 123 00:07:08,430 --> 00:07:11,070 Speaker 3: definitely feel like we're seeing a bit of that. In 124 00:07:11,130 --> 00:07:13,710 Speaker 3: terms of, there is some green shoots in that sort 125 00:07:13,730 --> 00:07:17,290 Speaker 3: of younger demographic, that really young aspiring investor sort of 126 00:07:17,400 --> 00:07:20,230 Speaker 3: early 20s to mid 20s that are attempting to get 127 00:07:20,250 --> 00:07:22,350 Speaker 3: in the market, but they are very much reliant on 128 00:07:22,450 --> 00:07:26,010 Speaker 3: higher rental income to be able to get into that market. 129 00:07:26,370 --> 00:07:28,369 Speaker 3: But they are definitely forced into that sort. 130 00:07:28,250 --> 00:07:28,890 Speaker 2: Of entry level. 131 00:07:29,250 --> 00:07:32,250 Speaker 3: So call it sort of 400,000 as the sort of 132 00:07:32,370 --> 00:07:36,310 Speaker 3: price point that they're hunting. And unfortunately, the unintended consequences 133 00:07:36,330 --> 00:07:38,380 Speaker 3: of that is that puts pressure in the first home 134 00:07:38,400 --> 00:07:41,180 Speaker 3: buyer market in those particular states and territories. So that's 135 00:07:41,220 --> 00:07:44,640 Speaker 3: why we've seen the more affordable states performing very well 136 00:07:44,720 --> 00:07:47,560 Speaker 3: compared to your more traditional New South Wales and Victoria 137 00:07:47,900 --> 00:07:51,330 Speaker 3: or Sydney and Melbourne markets where property prices are significantly higher. 138 00:07:52,770 --> 00:07:55,230 Speaker 1: And the interest-only lending has a big impact too, right? 139 00:07:55,270 --> 00:07:57,430 Speaker 1: Because if you're an investor and you borrow on an 140 00:07:57,490 --> 00:08:01,300 Speaker 1: interest-only basis, then your holding cost is substantially lower than 141 00:08:01,360 --> 00:08:04,860 Speaker 1: say someone that's forced to or decides to make principal 142 00:08:04,900 --> 00:08:08,580 Speaker 1: interest repayments on their loan. Those numbers are pretty stark. 143 00:08:08,960 --> 00:08:12,280 Speaker 1: What's your advice typically to investors and particularly investors that 144 00:08:12,320 --> 00:08:14,320 Speaker 1: want to get into the market? Is it interest only 145 00:08:14,400 --> 00:08:15,940 Speaker 1: or principal interest repayments? 146 00:08:16,040 --> 00:08:19,020 Speaker 3: To your point, I haven't seen them fall from traditionally 40% 147 00:08:19,020 --> 00:08:21,400 Speaker 3: now down to 10% in the last seven years. 148 00:08:21,940 --> 00:08:25,310 Speaker 2: It's really clear to me that this has been a manufactured. 149 00:08:25,800 --> 00:08:29,970 Speaker 3: result of macro prudential interference in the marketplace. So let 150 00:08:29,990 --> 00:08:32,710 Speaker 3: me explain that a little bit. Firstly, what we've seen 151 00:08:32,790 --> 00:08:35,070 Speaker 3: is when APRA basically came in and put a throttle 152 00:08:35,230 --> 00:08:38,080 Speaker 3: on the amount of interest only lending and then the 153 00:08:38,120 --> 00:08:40,200 Speaker 3: amount of investment lending that you could get on your book. 154 00:08:40,240 --> 00:08:42,700 Speaker 3: So they've started to manipulate that. The banks then said, 155 00:08:42,720 --> 00:08:44,500 Speaker 3: if you're going to manipulate the ability for us to 156 00:08:44,559 --> 00:08:47,140 Speaker 3: grow our business, we're going to start charging a premium 157 00:08:47,500 --> 00:08:48,440 Speaker 3: for that type of product. 158 00:08:48,500 --> 00:08:50,459 Speaker 2: So effectively, we started. 159 00:08:50,140 --> 00:08:53,510 Speaker 3: To see price buffers or increases in the interest rates 160 00:08:53,900 --> 00:08:56,280 Speaker 3: if you are going for an investment loan. And then 161 00:08:56,320 --> 00:08:58,780 Speaker 3: if you're going for an interest-only investment loan on top 162 00:08:58,820 --> 00:09:01,429 Speaker 3: of that, we basically saw that happen. So the unintended 163 00:09:01,490 --> 00:09:04,830 Speaker 3: consequences of those types of actions are that if you 164 00:09:04,929 --> 00:09:06,850 Speaker 3: take out a loan over 30 years, but you've got 165 00:09:06,870 --> 00:09:11,890 Speaker 3: a five-year interest-only period, then the repayment calculations potentially be 166 00:09:11,929 --> 00:09:14,309 Speaker 3: based on 25 years instead of 30 years P & I. 167 00:09:14,700 --> 00:09:16,280 Speaker 2: And obviously the holding costs are higher. 168 00:09:16,640 --> 00:09:21,660 Speaker 3: So it is manipulating on a case-by-case basis, more people into... 169 00:09:21,770 --> 00:09:24,670 Speaker 3: taking a P & I loan, potentially over a 30-year period, 170 00:09:25,070 --> 00:09:27,890 Speaker 3: as opposed to traditionally what we would have done, say, 10, 171 00:09:27,890 --> 00:09:31,579 Speaker 3: 15 years ago for an investor, is their owner-occupied debt, 172 00:09:31,600 --> 00:09:33,559 Speaker 3: their non-deductible debt, we would make that P & I, 173 00:09:33,860 --> 00:09:35,959 Speaker 3: but we'd have interest only on their investment. 174 00:09:35,980 --> 00:09:37,099 Speaker 2: Which was their deductible debt. 175 00:09:37,460 --> 00:09:40,000 Speaker 3: So now, because of that separation or that cost base, 176 00:09:40,040 --> 00:09:42,810 Speaker 3: it really does come down to doing a case-by-case number 177 00:09:42,850 --> 00:09:46,690 Speaker 3: analysis to see whether it's worthwhile doing interest only or 178 00:09:46,730 --> 00:09:48,870 Speaker 3: worthwhile doing P & I. And in this particular case, 179 00:09:48,890 --> 00:09:51,150 Speaker 3: it does look like P & I is winning because 180 00:09:51,190 --> 00:09:53,240 Speaker 3: of that price differential in those interest rates. 181 00:09:54,040 --> 00:09:56,620 Speaker 1: So in your experience with your clients, do you see 182 00:09:56,700 --> 00:10:00,220 Speaker 1: more borrowers going on P & I for investors of course? 183 00:10:00,620 --> 00:10:01,580 Speaker 2: Yeah, we do. We do. 184 00:10:01,640 --> 00:10:04,200 Speaker 3: I mean, that has been that trend up until before 185 00:10:04,240 --> 00:10:07,140 Speaker 3: we saw those sort of market manipulations. 186 00:10:07,520 --> 00:10:08,350 Speaker 2: It wasn't the trend. 187 00:10:08,370 --> 00:10:12,229 Speaker 3: We'd probably do 99% of those loans interest only on 188 00:10:12,270 --> 00:10:14,589 Speaker 3: the investment side, but we're starting to do a little 189 00:10:14,630 --> 00:10:18,050 Speaker 3: bit more based on what does that mean for borrowing power? 190 00:10:18,110 --> 00:10:20,750 Speaker 3: What does that mean for the cost of funds. Because 191 00:10:20,760 --> 00:10:25,010 Speaker 3: if it means that the investor can't accumulate more properties 192 00:10:25,050 --> 00:10:26,690 Speaker 3: in a quicker period of time, and we have to 193 00:10:26,730 --> 00:10:28,690 Speaker 3: wait that little bit of extra time to get that 194 00:10:28,730 --> 00:10:32,310 Speaker 3: additional borrowing power, then we're potentially better off going P & 195 00:10:31,670 --> 00:10:34,630 Speaker 3: I to just make those holding costs a little bit lower. 196 00:10:35,710 --> 00:10:38,329 Speaker 1: So what would your advice be to investors and obviously 197 00:10:38,390 --> 00:10:42,360 Speaker 1: listeners for this podcast? They're obviously interested in the property market, 198 00:10:42,400 --> 00:10:45,040 Speaker 1: whether they're in there already or looking to get in there. 199 00:10:45,080 --> 00:10:48,339 Speaker 1: Would you What sort of balancing act would you make 200 00:10:48,400 --> 00:10:52,460 Speaker 1: between minimising the holding costs in return for maximising your 201 00:10:52,480 --> 00:10:55,660 Speaker 1: budget to get into the market versus trying to minimise 202 00:10:55,679 --> 00:10:58,199 Speaker 1: those holding costs as much as possible, even if there's 203 00:10:58,220 --> 00:11:00,880 Speaker 1: a consequence associated with obviously budget perspective? 204 00:11:01,240 --> 00:11:04,480 Speaker 3: Yeah, to your point, Stuart, there's trade-offs everywhere in what 205 00:11:04,520 --> 00:11:06,380 Speaker 3: we're talking about here. And I think that's why it 206 00:11:06,460 --> 00:11:10,580 Speaker 3: really is advantageous to get some professional advice and have 207 00:11:10,620 --> 00:11:14,400 Speaker 3: a look at your personal circumstances. So we always try to, 208 00:11:14,420 --> 00:11:16,630 Speaker 3: with our modelling process, We try and make sure that 209 00:11:16,670 --> 00:11:20,689 Speaker 3: we're optimising, but we're optimising also based on risk profile 210 00:11:20,809 --> 00:11:23,820 Speaker 3: and risk appetite and then any of those changes in 211 00:11:23,890 --> 00:11:27,339 Speaker 3: those circumstances. So if we can model to get an 212 00:11:27,400 --> 00:11:30,860 Speaker 3: optimised purchase price at a certain level and that sort 213 00:11:30,880 --> 00:11:33,500 Speaker 3: of fits into those cash flow levels and we can 214 00:11:33,540 --> 00:11:35,819 Speaker 3: potentially get that P & I, we may look at that, 215 00:11:36,400 --> 00:11:38,099 Speaker 3: but we'd also have a look at the consequences of 216 00:11:38,160 --> 00:11:41,320 Speaker 3: interest only in terms of whether that allows us to 217 00:11:41,360 --> 00:11:43,350 Speaker 3: get the second or third property. 218 00:11:43,390 --> 00:11:46,189 Speaker 2: I mean, we're not an aggressive advisory firm. 219 00:11:46,210 --> 00:11:48,850 Speaker 3: We're very passive in terms of how we like to 220 00:11:48,890 --> 00:11:49,590 Speaker 3: treat our customers. 221 00:11:49,610 --> 00:11:51,699 Speaker 2: So two or three really good properties. 222 00:11:51,760 --> 00:11:55,420 Speaker 3: Over a long period of time, supplementary to super, means 223 00:11:55,460 --> 00:11:58,520 Speaker 3: that hopefully that customer in retirement will be self-funded. They'll 224 00:11:58,540 --> 00:12:01,330 Speaker 3: have a nice passive income coming off their enroll, as 225 00:12:01,370 --> 00:12:04,150 Speaker 3: well as their super to live a very comfortable retirement. 226 00:12:05,300 --> 00:12:05,699 Speaker 2: Yeah, great. 227 00:12:05,720 --> 00:12:08,829 Speaker 1: Let's talk about investor sentiment now. And we've seen that 228 00:12:08,880 --> 00:12:11,850 Speaker 1: come off in those PIPA results, which isn't surprising, of course, 229 00:12:11,890 --> 00:12:14,510 Speaker 1: given the backdrop of all the changes that have occurred 230 00:12:14,630 --> 00:12:19,090 Speaker 1: and particularly higher taxes, especially in Victoria. I did some 231 00:12:19,130 --> 00:12:23,470 Speaker 1: work on holding costs a little while ago and looked at, historically, 232 00:12:23,510 --> 00:12:26,630 Speaker 1: I used to, when I was doing projections for clients, 233 00:12:27,230 --> 00:12:30,390 Speaker 1: used to assume that our expenses would be about 25% 234 00:12:30,390 --> 00:12:34,330 Speaker 1: of gross rental income. which would account for all expenses 235 00:12:34,370 --> 00:12:37,989 Speaker 1: such as management and maintenance and rates and insurance and 236 00:12:38,050 --> 00:12:42,449 Speaker 1: those sorts of things. Now, I've seen that rise to 30%, 35%. 237 00:12:42,450 --> 00:12:44,969 Speaker 1: What's your experience, Ben? Have you done any work on this? 238 00:12:45,390 --> 00:12:47,990 Speaker 2: Yeah, no, 100%. They've definitely risen. 239 00:12:48,210 --> 00:12:52,460 Speaker 3: And that has been, again, part of these unintended consequences 240 00:12:52,550 --> 00:12:57,300 Speaker 3: when you get regulation and minimum standards and higher, not 241 00:12:57,360 --> 00:12:59,830 Speaker 3: only just interest rate costs, but also I think what 242 00:12:59,870 --> 00:13:02,270 Speaker 3: you're referring to is interests and all of the sort 243 00:13:02,290 --> 00:13:05,890 Speaker 3: of compliance costs in terms of getting the gas permits 244 00:13:05,950 --> 00:13:07,530 Speaker 3: and all of those types of things in terms of 245 00:13:07,610 --> 00:13:11,100 Speaker 3: safety certificates and all of those costs. And even the 246 00:13:11,150 --> 00:13:14,740 Speaker 3: property management fees are increasing off the back of the 247 00:13:14,840 --> 00:13:18,179 Speaker 3: higher level of regulations and rules that they need to 248 00:13:18,240 --> 00:13:18,939 Speaker 3: administer to. 249 00:13:19,080 --> 00:13:22,040 Speaker 2: Yeah, it's definitely been clear that has happened. 250 00:13:22,120 --> 00:13:25,840 Speaker 3: And that is obviously putting, again, further pressure on the 251 00:13:25,980 --> 00:13:29,179 Speaker 3: owner of the property running their small private rental accommodation business. 252 00:13:29,860 --> 00:13:33,900 Speaker 2: And they're passing on some of those costs to the renters. Yeah. 253 00:13:33,980 --> 00:13:35,640 Speaker 1: And I want to ask you about how investors or 254 00:13:35,660 --> 00:13:38,650 Speaker 1: your advice to investors navigate some of those changes. Before 255 00:13:38,670 --> 00:13:42,790 Speaker 1: I do that, of course, some of these changes are necessary. 256 00:13:42,809 --> 00:13:46,010 Speaker 1: It's important to protect renters and renters' rights, of course. 257 00:13:46,210 --> 00:13:49,470 Speaker 1: And there are, I'm sure, some landlords out there that 258 00:13:49,960 --> 00:13:54,220 Speaker 1: aren't fair and aren't providing accommodation that is of a 259 00:13:54,480 --> 00:13:57,710 Speaker 1: sufficient standard. So How does a government, and obviously this 260 00:13:57,770 --> 00:14:00,750 Speaker 1: is a problem that we've all got state-based regulation here, 261 00:14:01,390 --> 00:14:03,809 Speaker 1: but how do governments sort of navigate that? They've got 262 00:14:03,830 --> 00:14:07,870 Speaker 1: to find a balance between protecting renters, but also making 263 00:14:07,929 --> 00:14:10,830 Speaker 1: sure we're still attracting private investors into the market. 264 00:14:11,530 --> 00:14:14,850 Speaker 3: Yeah, and it really is a strong debate that's going 265 00:14:14,950 --> 00:14:17,150 Speaker 3: on between the sort of both parties. We want a 266 00:14:17,210 --> 00:14:21,700 Speaker 3: symbiotic relationship between the customer being the renter and obviously 267 00:14:21,740 --> 00:14:25,010 Speaker 3: the business owner. The business owner wants a satisfied customer 268 00:14:25,050 --> 00:14:28,410 Speaker 3: being the renter in their property and experiencing quiet and 269 00:14:28,500 --> 00:14:29,780 Speaker 3: safe enjoyment. 270 00:14:29,340 --> 00:14:29,900 Speaker 2: Of the property. 271 00:14:30,320 --> 00:14:32,840 Speaker 3: But ultimately, we also want to make sure that in 272 00:14:32,880 --> 00:14:36,239 Speaker 3: the event that there is difficulties in running that relationship 273 00:14:36,420 --> 00:14:39,600 Speaker 3: and they have conflict, how do we resolve those types 274 00:14:39,620 --> 00:14:41,380 Speaker 3: of things? And that's the fear that we've got at 275 00:14:41,420 --> 00:14:44,360 Speaker 3: the moment in terms of what's happening around these tenancy 276 00:14:44,400 --> 00:14:47,810 Speaker 3: reforms and basically where the owner does feel like they're 277 00:14:47,850 --> 00:14:55,910 Speaker 3: losing a the future investment and the confidence in terms 278 00:14:55,950 --> 00:14:59,050 Speaker 3: of wanting to come into the property investment space versus, 279 00:14:59,110 --> 00:15:00,810 Speaker 3: I mean, at the end of the day, the household 280 00:15:00,870 --> 00:15:02,750 Speaker 3: has a choice about where they invest. They can go 281 00:15:02,810 --> 00:15:05,450 Speaker 3: and invest in ETFs or the share market directly, or 282 00:15:05,490 --> 00:15:09,360 Speaker 3: they can invest in rental accommodation through commercial or residential, 283 00:15:09,400 --> 00:15:12,620 Speaker 3: which is what we're talking about. So I'm really concerned 284 00:15:12,680 --> 00:15:15,300 Speaker 3: about the level of reforms that are taking place, and 285 00:15:15,340 --> 00:15:19,440 Speaker 3: it's certainly affecting the sentiment and confidence of for future 286 00:15:19,480 --> 00:15:23,000 Speaker 3: supply of those investment dollars coming in. And we're talking 287 00:15:23,040 --> 00:15:25,980 Speaker 3: about tens of billions of dollars here, Stuart, in terms 288 00:15:26,060 --> 00:15:29,140 Speaker 3: of that's on an annual basis. That's what it equates to, right? 289 00:15:29,180 --> 00:15:33,760 Speaker 3: So if those states or territories overreach when it comes 290 00:15:33,820 --> 00:15:36,620 Speaker 3: to the reforms that they put in place, the unintended 291 00:15:36,660 --> 00:15:39,810 Speaker 3: consequences are we don't get that supply. And when you 292 00:15:39,830 --> 00:15:42,870 Speaker 3: don't get that supply, you obviously then start to see 293 00:15:43,130 --> 00:15:47,130 Speaker 3: this rental crisis getting worse, the political pressures associated with that. 294 00:15:47,440 --> 00:15:50,540 Speaker 3: but also higher rents being passed on to those tenants 295 00:15:50,580 --> 00:15:54,330 Speaker 3: because of all of these additional costs that were being 296 00:15:54,410 --> 00:15:56,150 Speaker 3: experienced by these reforms. 297 00:15:57,210 --> 00:15:57,450 Speaker 2: Yeah. 298 00:15:57,610 --> 00:16:00,870 Speaker 1: And as any experienced investor will tell you, there's one 299 00:16:00,890 --> 00:16:03,770 Speaker 1: thing that doesn't change is change in itself, of course. 300 00:16:03,830 --> 00:16:07,690 Speaker 1: So it's ever changing. So what would your advice be 301 00:16:07,810 --> 00:16:11,109 Speaker 1: as a seasoned investor yourself? What would your advice be 302 00:16:11,210 --> 00:16:14,530 Speaker 1: to new investors getting into the market or contemplating investing 303 00:16:15,010 --> 00:16:18,430 Speaker 1: investing in property and maybe scared off by some of 304 00:16:18,460 --> 00:16:19,030 Speaker 1: these changes? 305 00:16:19,510 --> 00:16:22,180 Speaker 3: Yeah, so I've been doing this for 30 odd years, 306 00:16:22,220 --> 00:16:27,320 Speaker 3: but I've never seen the concentration of a reform like 307 00:16:27,360 --> 00:16:30,480 Speaker 3: we're seeing at the moment. So I can look at 308 00:16:30,640 --> 00:16:34,720 Speaker 3: evidence that's happening internationally in terms of places where they've 309 00:16:34,760 --> 00:16:38,500 Speaker 3: tried to introduce things like rental freezers and even banning 310 00:16:38,540 --> 00:16:40,710 Speaker 3: negative gearing like what's happened in New Zealand. And now 311 00:16:40,780 --> 00:16:44,960 Speaker 3: they're reversing out of those positions because they started to, again, 312 00:16:45,100 --> 00:16:47,800 Speaker 3: realise that at the end of the day, the only 313 00:16:47,860 --> 00:16:53,000 Speaker 3: way you can increase supply is either through private investment, 314 00:16:53,160 --> 00:16:56,080 Speaker 3: which is obviously what mum and dad investors do, or 315 00:16:56,280 --> 00:17:00,260 Speaker 3: it's through government investment. And that is very expensive. So 316 00:17:00,320 --> 00:17:03,970 Speaker 3: private investment is usually more efficient. And so ultimately, what 317 00:17:04,010 --> 00:17:06,510 Speaker 3: we do see is over those sort of decades that 318 00:17:06,530 --> 00:17:09,850 Speaker 3: I've been doing it, there might be an overcorrection that occurs. 319 00:17:09,890 --> 00:17:12,770 Speaker 3: And so we recorrect back to getting that balance right. 320 00:17:12,830 --> 00:17:15,790 Speaker 3: And then over that longer period of time, we've seen 321 00:17:15,830 --> 00:17:19,750 Speaker 3: obviously property prices perform very well in those sort of 322 00:17:19,970 --> 00:17:24,030 Speaker 3: more affluent areas and through economic activity. And that ultimately 323 00:17:24,109 --> 00:17:26,629 Speaker 3: ends up in the land values in those particular areas. 324 00:17:26,690 --> 00:17:29,909 Speaker 3: So it really is quite concerning for me that it's 325 00:17:29,970 --> 00:17:33,879 Speaker 3: becoming a political hot potato, as opposed to having a 326 00:17:33,880 --> 00:17:36,260 Speaker 3: bit of common sense around the fact that if we 327 00:17:36,300 --> 00:17:38,419 Speaker 3: want to get this supply to market, we've got to 328 00:17:38,460 --> 00:17:42,220 Speaker 3: make sure that the there's confidence of supply and not 329 00:17:42,260 --> 00:17:44,340 Speaker 3: too many reforms that are going to come in that's 330 00:17:44,359 --> 00:17:46,859 Speaker 3: going to cause any type of concern for those investors. 331 00:17:46,920 --> 00:17:50,700 Speaker 3: It's very expensive to actually invest in residential property in 332 00:17:50,760 --> 00:17:52,800 Speaker 3: terms of the cost to get in with stamp duty 333 00:17:52,820 --> 00:17:54,940 Speaker 3: and all of those setup costs and also the exit 334 00:17:54,980 --> 00:17:57,980 Speaker 3: costs associated with that as well. We want long-term investors 335 00:17:58,020 --> 00:18:01,510 Speaker 3: in the market that can provide ample amounts of private 336 00:18:01,570 --> 00:18:06,129 Speaker 3: rental accommodation to accommodate effectively the 90% of the population 337 00:18:06,150 --> 00:18:08,969 Speaker 3: who are happy to engage in a contract and have 338 00:18:09,010 --> 00:18:11,430 Speaker 3: that safe and quiet enjoyment of the property, as opposed 339 00:18:11,490 --> 00:18:14,530 Speaker 3: to what we're seeing right now is reforms for potentially 340 00:18:14,570 --> 00:18:18,129 Speaker 3: the 10% of the marketplace, which are having challenging times. 341 00:18:18,530 --> 00:18:21,369 Speaker 3: And we're looking to potentially ramp up the levels of 342 00:18:21,470 --> 00:18:24,869 Speaker 3: power that those people have, but it's affecting the other 90% 343 00:18:24,869 --> 00:18:27,660 Speaker 3: of the market that was working quite smoothly. I think 344 00:18:27,680 --> 00:18:29,020 Speaker 3: you can see there that I'm a bit more of 345 00:18:29,080 --> 00:18:32,220 Speaker 3: a free market operator than someone who likes to see 346 00:18:32,260 --> 00:18:35,700 Speaker 3: lots of reform and regulation coming in to this particular space. 347 00:18:36,470 --> 00:18:39,030 Speaker 1: Yeah, and I think I agree with your observation in 348 00:18:39,090 --> 00:18:41,530 Speaker 1: terms of the amount of changes that have occurred both 349 00:18:41,590 --> 00:18:44,980 Speaker 1: within lending and then with property in of itself in 350 00:18:45,060 --> 00:18:48,200 Speaker 1: terms of how it affects tenants and also landlords has 351 00:18:48,240 --> 00:18:51,420 Speaker 1: been significant over the last seven years. But we can't 352 00:18:51,480 --> 00:18:55,160 Speaker 1: back away from the fact that really probably the only 353 00:18:55,220 --> 00:18:57,810 Speaker 1: way they're going to solve the rental crisis, or at 354 00:18:57,850 --> 00:19:00,210 Speaker 1: least a big proportion of it, is attracting more private 355 00:19:00,250 --> 00:19:03,640 Speaker 1: investors into the markets. And I think as investors ourselves, 356 00:19:03,680 --> 00:19:06,010 Speaker 1: we can take some solace from that, that this may 357 00:19:06,070 --> 00:19:09,650 Speaker 1: be just a point in time situation. Anyway, that's very interesting. 358 00:19:09,690 --> 00:19:11,830 Speaker 1: We're going to take a short break and that's exactly 359 00:19:11,850 --> 00:19:13,909 Speaker 1: what I want to talk to Ben about when we return. 360 00:19:13,930 --> 00:19:21,780 Speaker 1: So we'll be back in a moment. Hello and welcome 361 00:19:21,800 --> 00:19:24,540 Speaker 1: back to the Australian's Money Puzzle Podcast. I'm Stuart Williams 362 00:19:24,619 --> 00:19:27,460 Speaker 1: and I'm talking to Ben Kingsley, founder of Empower Wealth 363 00:19:27,660 --> 00:19:31,680 Speaker 1: and chair of the Property Investors Council of Australia. So, Ben, 364 00:19:31,820 --> 00:19:34,280 Speaker 1: in our first segment, we talked about the fact that 365 00:19:34,600 --> 00:19:38,310 Speaker 1: private investors are supplying a lot of rental accommodation in Australia. 366 00:19:38,890 --> 00:19:42,730 Speaker 1: So they're going to be a very important part of 367 00:19:42,810 --> 00:19:45,669 Speaker 1: the solution moving forward. And whilst that might not be 368 00:19:45,750 --> 00:19:48,610 Speaker 1: obvious to particularly new investors at the moment, it just 369 00:19:48,670 --> 00:19:52,879 Speaker 1: all looks like downside opportunities. and risk, the reality that's true. Now, 370 00:19:52,970 --> 00:19:55,720 Speaker 1: if we reflect back on how do we solve this 371 00:19:55,800 --> 00:19:59,420 Speaker 1: rental crisis, of course, the government's talked about a couple 372 00:19:59,460 --> 00:20:01,700 Speaker 1: of different levers that it can pull in terms of 373 00:20:02,260 --> 00:20:06,900 Speaker 1: building more dwellings, more property. So hopefully the thesis around 374 00:20:06,940 --> 00:20:09,920 Speaker 1: that is obviously the higher the supply, the cooler prices 375 00:20:09,980 --> 00:20:12,679 Speaker 1: might be and the greater the supply of rental accommodation 376 00:20:12,720 --> 00:20:17,400 Speaker 1: there'll be. Of course, there's then also trying to increase 377 00:20:17,420 --> 00:20:20,080 Speaker 1: density in areas that have already built up. So I'd 378 00:20:20,100 --> 00:20:21,439 Speaker 1: like to ask you a little bit about that. So 379 00:20:21,480 --> 00:20:23,399 Speaker 1: let's start with the supply thing. And I guess the 380 00:20:23,460 --> 00:20:27,430 Speaker 1: cornerstone of the government's idea is really this national housing 381 00:20:27,470 --> 00:20:30,690 Speaker 1: accord of the target of building a million homes in 382 00:20:30,869 --> 00:20:35,420 Speaker 1: the next five years. how is that going to, firstly, 383 00:20:35,600 --> 00:20:37,400 Speaker 1: what do you think about that? And then secondly, how 384 00:20:37,460 --> 00:20:42,330 Speaker 1: is that going to impact investors from a returns perspective 385 00:20:42,390 --> 00:20:46,870 Speaker 1: and then from a decision-making perspective? Should they change their 386 00:20:46,890 --> 00:20:48,750 Speaker 1: decisions as a result of this policy? 387 00:20:49,910 --> 00:20:52,730 Speaker 3: Stuart, I think this is probably the really interesting part 388 00:20:52,770 --> 00:20:54,980 Speaker 3: of the question. And before I answer that, what I 389 00:20:55,000 --> 00:20:56,940 Speaker 3: want to say is, how did we get here? Like, 390 00:20:57,359 --> 00:21:00,300 Speaker 3: why are we now seeing these $ 10 billion pledges and 391 00:21:00,380 --> 00:21:03,540 Speaker 3: all this money being thrown at the solution? And that's 392 00:21:03,580 --> 00:21:07,459 Speaker 3: because unfortunately what we have seen is a deterioration of 393 00:21:07,540 --> 00:21:10,260 Speaker 3: that private investment. Let me share with you some of 394 00:21:10,300 --> 00:21:12,600 Speaker 3: those stats from the ATO. And I like the ATO 395 00:21:12,640 --> 00:21:15,899 Speaker 3: stats because effectively that's all the tax returns that go in. 396 00:21:16,280 --> 00:21:18,740 Speaker 3: Now the data is a little bit lagged, but it 397 00:21:18,780 --> 00:21:20,340 Speaker 3: really does start to show a trend. 398 00:21:20,400 --> 00:21:21,760 Speaker 2: So let me give you a bit of an idea. 399 00:21:21,859 --> 00:21:26,480 Speaker 3: In the last five years, so from financial year 18 400 00:21:26,480 --> 00:21:30,449 Speaker 3: to the latest data at the end of financial year 2022, 401 00:21:30,450 --> 00:21:33,650 Speaker 3: what we've seen is there's been an increase of 1.02% 402 00:21:33,650 --> 00:21:41,300 Speaker 3: or on average around 22,000 individuals who have been investing. 403 00:21:41,380 --> 00:21:44,960 Speaker 3: So we've got about 2.3 million property investors in Australia. 404 00:21:45,380 --> 00:21:48,379 Speaker 3: And so that's growing on average at 22,000. Now, if 405 00:21:48,420 --> 00:21:50,119 Speaker 3: we go and have a look at the previous five 406 00:21:50,160 --> 00:21:52,920 Speaker 3: years before that, it was growing at 3% or an 407 00:21:52,980 --> 00:21:56,459 Speaker 3: average of 60,000 additional investors every year. So it was 408 00:21:56,540 --> 00:22:00,510 Speaker 3: meeting that population movement. And now we're creating the critical 409 00:22:00,609 --> 00:22:04,670 Speaker 3: supply of rental accommodation. The previous five years before that, 410 00:22:05,050 --> 00:22:08,450 Speaker 3: sort of from 2008 to 2012, it was also growing 411 00:22:08,470 --> 00:22:08,810 Speaker 3: at an. 412 00:22:08,810 --> 00:22:11,030 Speaker 2: Average $ 60, 000 per year. 413 00:22:11,369 --> 00:22:13,570 Speaker 3: And the previous five years before that, it was growing 414 00:22:13,609 --> 00:22:17,350 Speaker 3: at 4% or $ 56, 000 per year. So we are now 415 00:22:17,810 --> 00:22:20,830 Speaker 3: at a stage where there is a deteriorating number of 416 00:22:21,230 --> 00:22:24,670 Speaker 3: investors coming into the market. So what does that unfortunately mean? 417 00:22:25,030 --> 00:22:26,990 Speaker 3: The government has to come in and throw the checkbook 418 00:22:27,030 --> 00:22:29,220 Speaker 3: at it. And that's exactly what we've got is a 419 00:22:29,260 --> 00:22:32,429 Speaker 3: scenario of the government coming in and throwing the checkbook 420 00:22:32,470 --> 00:22:35,550 Speaker 3: at it. When if they hadn't have started to implement 421 00:22:35,609 --> 00:22:38,649 Speaker 3: the APRA macro credentials, if they hadn't started doing all 422 00:22:38,670 --> 00:22:41,190 Speaker 3: the reforms and they had to let the free market 423 00:22:41,230 --> 00:22:43,820 Speaker 3: operate as a free market should, then all of this 424 00:22:43,920 --> 00:22:45,800 Speaker 3: money that the government's throwing at it and all of 425 00:22:45,859 --> 00:22:48,639 Speaker 3: the higher taxes that we have to then charge or 426 00:22:48,680 --> 00:22:50,719 Speaker 3: the higher debt that the governments have to take on 427 00:22:51,200 --> 00:22:54,959 Speaker 3: is a byproduct of poor policy. and poor decisions that 428 00:22:55,000 --> 00:22:57,520 Speaker 3: are being made. And so this is what really gets 429 00:22:57,560 --> 00:23:00,919 Speaker 3: me obviously frustrated in terms of that story. So are 430 00:23:00,940 --> 00:23:03,880 Speaker 3: they going to meet their targets of 1.2 million properties? No, 431 00:23:04,220 --> 00:23:06,270 Speaker 3: they're definitely not going to meet that. And if we 432 00:23:06,310 --> 00:23:08,490 Speaker 3: have a look at also some of the other legislation 433 00:23:08,830 --> 00:23:12,250 Speaker 3: that's also been changing over the past few decades, we've 434 00:23:12,290 --> 00:23:14,590 Speaker 3: now got so much of the onus is on the 435 00:23:14,630 --> 00:23:18,830 Speaker 3: developer to actually build all of the supplementary infrastructure in 436 00:23:18,869 --> 00:23:22,030 Speaker 3: the greenfield areas. and the parks and the gardens and 437 00:23:22,050 --> 00:23:24,750 Speaker 3: the upkeeps of those types of things, that all flows. 438 00:23:24,440 --> 00:23:26,459 Speaker 2: Into the property prices of the land. 439 00:23:26,540 --> 00:23:30,320 Speaker 3: So we're now starting to see 35% to 50% of 440 00:23:30,380 --> 00:23:34,320 Speaker 3: the land value, all being government taxes and charges. Now, 441 00:23:34,340 --> 00:23:37,129 Speaker 3: that's not going to help with affordability if the government 442 00:23:37,170 --> 00:23:40,290 Speaker 3: can't provide that basic infrastructure that's going to be around 443 00:23:40,330 --> 00:23:43,950 Speaker 3: for decades. But unfortunately, to get these greenfield estates built, 444 00:23:44,350 --> 00:23:47,770 Speaker 3: the developer needs to put the money up up front 445 00:23:48,210 --> 00:23:50,580 Speaker 3: to be able to develop all of those. So we've 446 00:23:50,619 --> 00:23:53,680 Speaker 3: got so many problems when it comes to the way 447 00:23:53,720 --> 00:23:57,260 Speaker 3: in which the regulators and the decisions that we're making 448 00:23:57,320 --> 00:24:01,560 Speaker 3: around supply of land and availability and the value of 449 00:24:01,600 --> 00:24:04,200 Speaker 3: that land based on all of these fees and charges 450 00:24:04,220 --> 00:24:07,169 Speaker 3: that are constantly being levied on to the developers and 451 00:24:07,190 --> 00:24:10,550 Speaker 3: levied on to investors to keep the economy running and 452 00:24:10,590 --> 00:24:13,130 Speaker 3: keeping the revenue in the government pockets because they keep 453 00:24:13,150 --> 00:24:14,270 Speaker 3: wanting to spend all this money. 454 00:24:14,290 --> 00:24:16,929 Speaker 1: Yeah, so if I turn it on its head and 455 00:24:16,970 --> 00:24:18,930 Speaker 1: think about it then from an investor's point of view, 456 00:24:18,950 --> 00:24:20,730 Speaker 1: I guess what you're saying is there's no chance that 457 00:24:20,770 --> 00:24:22,970 Speaker 1: they're meeting their target in terms of an influx of 458 00:24:23,030 --> 00:24:27,689 Speaker 1: supply of new dwellings. And notwithstanding, because of exactly how 459 00:24:27,710 --> 00:24:30,659 Speaker 1: you've stipulated that developers have to pay for a lot 460 00:24:30,680 --> 00:24:34,140 Speaker 1: of this infrastructure, that the price of new dwellings isn't 461 00:24:34,180 --> 00:24:37,080 Speaker 1: going to be any cheaper than what it is today. 462 00:24:37,760 --> 00:24:40,399 Speaker 1: And so I guess from an investor's point of view... 463 00:24:41,540 --> 00:24:43,939 Speaker 1: That's good news, isn't it? It's a supply-demand sort of 464 00:24:44,040 --> 00:24:48,460 Speaker 1: argument that then the existing stock should benefit from price growth, 465 00:24:48,560 --> 00:24:53,649 Speaker 1: irrespective of these policies or the desire, the political desire 466 00:24:53,770 --> 00:24:54,390 Speaker 1: to build more. 467 00:24:54,950 --> 00:24:57,669 Speaker 3: Yeah, I agree with that to a point. Because of 468 00:24:57,710 --> 00:25:02,090 Speaker 3: government intervention, it's very true that it makes supply constraint, 469 00:25:02,270 --> 00:25:04,440 Speaker 3: demand is usually there, so that puts. 470 00:25:04,280 --> 00:25:06,840 Speaker 2: Pressure on price. But I'd much prefer. 471 00:25:07,840 --> 00:25:12,020 Speaker 3: the value of the investment to appreciate based on economic 472 00:25:12,100 --> 00:25:15,359 Speaker 3: activity and economic prosperity and growth. So in other words, 473 00:25:15,740 --> 00:25:19,590 Speaker 3: because once you keep doing this through a restricted marketplace, 474 00:25:20,050 --> 00:25:22,790 Speaker 3: then unfortunately, you then start to see the government again 475 00:25:22,850 --> 00:25:25,770 Speaker 3: getting into the market and manipulating the other side of 476 00:25:25,790 --> 00:25:28,990 Speaker 3: the equation. And they're starting to introduce things like a 477 00:25:29,010 --> 00:25:32,330 Speaker 3: 12-month annual reviews on rents. And there's always going to 478 00:25:32,359 --> 00:25:36,000 Speaker 3: be pressure politically in terms of maybe rental freezes like 479 00:25:36,020 --> 00:25:37,220 Speaker 3: we saw during COVID. 480 00:25:37,859 --> 00:25:38,880 Speaker 2: And those types of things. 481 00:25:39,400 --> 00:25:41,900 Speaker 3: It just makes no sense to me at all that 482 00:25:41,940 --> 00:25:44,879 Speaker 3: we would continue to try to keep putting layer of 483 00:25:44,980 --> 00:25:47,890 Speaker 3: regulation on regulation to try and fix a problem that's 484 00:25:48,090 --> 00:25:52,210 Speaker 3: easily solved in terms of less regulation, less red tape, 485 00:25:52,310 --> 00:25:54,830 Speaker 3: and let the market determine what that will be. And 486 00:25:54,869 --> 00:25:59,679 Speaker 3: then ultimately, that creates prosperity and jobs and opportunities. When 487 00:25:59,720 --> 00:26:02,160 Speaker 3: those new homes are built, there's people moving to those homes. 488 00:26:02,420 --> 00:26:05,760 Speaker 3: There's new jobs in those local areas. That is how 489 00:26:05,840 --> 00:26:10,419 Speaker 3: economic prosperity works. It doesn't work through constant government intervention 490 00:26:10,810 --> 00:26:13,030 Speaker 3: and all of these sort of mechanisms that, you know, 491 00:26:13,090 --> 00:26:17,450 Speaker 3: the macro prudential mechanisms that really do slow down the 492 00:26:17,510 --> 00:26:20,949 Speaker 3: ability and confidence to invest over the longer term. And 493 00:26:21,250 --> 00:26:24,810 Speaker 3: you and I are big advocates of investing for the decades, 494 00:26:24,869 --> 00:26:27,330 Speaker 3: not necessarily for a couple of years. And that's the 495 00:26:27,369 --> 00:26:31,359 Speaker 3: sort of economic prosperity that's going to drive future long 496 00:26:31,430 --> 00:26:35,359 Speaker 3: term price growth of land and ultimately those improvements on 497 00:26:35,400 --> 00:26:35,720 Speaker 3: the land. 498 00:26:36,470 --> 00:26:38,510 Speaker 1: Yeah, I don't disagree with you. I just don't think 499 00:26:38,570 --> 00:26:41,909 Speaker 1: it's going to happen. So from an investor perspective, I'm 500 00:26:41,950 --> 00:26:45,560 Speaker 1: not too perturbed by the desire to build more. Let's 501 00:26:45,600 --> 00:26:49,860 Speaker 1: just talk very briefly about trying to change density in 502 00:26:50,100 --> 00:26:52,720 Speaker 1: established areas. I was really interested to read a letter 503 00:26:53,300 --> 00:26:58,330 Speaker 1: that the largest council in Melbourne sent to its occupants 504 00:26:59,050 --> 00:27:01,909 Speaker 1: to say that the Victorian governments instructed them, and this 505 00:27:01,970 --> 00:27:04,930 Speaker 1: is just an example, instructed them to increase the number 506 00:27:04,970 --> 00:27:10,330 Speaker 1: of dwellings in that locality by about 2050 by about 507 00:27:10,330 --> 00:27:13,750 Speaker 1: 67,000 dwellings and there's about 70,000 dwellings in the area 508 00:27:13,830 --> 00:27:17,210 Speaker 1: as well so double the density in that particular area 509 00:27:17,359 --> 00:27:20,080 Speaker 1: and the state government's obviously trying to take a little 510 00:27:20,100 --> 00:27:22,760 Speaker 1: bit more power away from the councils in terms of 511 00:27:22,820 --> 00:27:26,040 Speaker 1: approving this sort of stuff and I think I read 512 00:27:26,080 --> 00:27:28,510 Speaker 1: a I try to find this article, but I read 513 00:27:28,530 --> 00:27:31,070 Speaker 1: about 20 years ago in a paper to say, someone 514 00:27:31,090 --> 00:27:34,630 Speaker 1: did a study to suggest that actually density hasn't changed 515 00:27:34,670 --> 00:27:40,080 Speaker 1: in our blue chip suburbs for many decades, which is 516 00:27:40,220 --> 00:27:43,000 Speaker 1: a concern. What do you think, if I'm an investor 517 00:27:43,080 --> 00:27:47,480 Speaker 1: in those localities, will density, do you think density will 518 00:27:47,520 --> 00:27:50,359 Speaker 1: change over time? Or do you think this will be 519 00:27:50,400 --> 00:27:51,850 Speaker 1: just another failed attempt? 520 00:27:52,070 --> 00:27:53,970 Speaker 3: I think there's really no choice that we need to 521 00:27:54,010 --> 00:27:58,639 Speaker 3: start thinking about how we appropriately add density in as 522 00:27:58,700 --> 00:28:02,280 Speaker 3: opposed to, I got a similar letter in my municipality 523 00:28:02,320 --> 00:28:05,500 Speaker 3: as well. And there's winners and losers in terms of 524 00:28:05,580 --> 00:28:08,380 Speaker 3: street blocks about where they say, this is the area 525 00:28:08,420 --> 00:28:12,020 Speaker 3: here and now you can start building blocks of flats. Now, 526 00:28:12,060 --> 00:28:14,820 Speaker 3: so there are winners and losers from an investment point 527 00:28:14,859 --> 00:28:18,399 Speaker 3: of view. When you think about a rezoning story there, 528 00:28:18,619 --> 00:28:21,630 Speaker 3: then the productive use of that land has a potentially 529 00:28:21,790 --> 00:28:26,540 Speaker 3: higher value. So there might be a windfall associated with 530 00:28:26,600 --> 00:28:29,680 Speaker 3: that as well. But what we've also got to understand 531 00:28:29,859 --> 00:28:34,580 Speaker 3: in some of these areas that owner-occupiers have invested their 532 00:28:34,640 --> 00:28:38,060 Speaker 3: money to live in these locations is in some respects 533 00:28:38,120 --> 00:28:42,400 Speaker 3: because of the restrictions around planning guidelines and what can 534 00:28:42,420 --> 00:28:44,820 Speaker 3: be built there. So they love their amenity, they love 535 00:28:44,860 --> 00:28:48,270 Speaker 3: their exclusiveness, and that's fine. And that's what, again, creates 536 00:28:48,310 --> 00:28:52,330 Speaker 3: that underlying land value around that exclusivity or scarcity of 537 00:28:52,370 --> 00:28:54,930 Speaker 3: that land. So I've been a big advocate of that 538 00:28:55,030 --> 00:28:57,210 Speaker 3: over decades. And I know you have as well, Shield, 539 00:28:57,250 --> 00:29:00,630 Speaker 3: in terms of that's why land so close to large 540 00:29:00,890 --> 00:29:04,820 Speaker 3: urban development areas is so exclusive and worth so much 541 00:29:04,880 --> 00:29:07,540 Speaker 3: per square metre. But if you then overlay that sort 542 00:29:07,560 --> 00:29:09,980 Speaker 3: of density story on that, there will be some winners 543 00:29:10,020 --> 00:29:11,960 Speaker 3: and losers when it comes to that story. So if 544 00:29:11,980 --> 00:29:15,180 Speaker 3: you're sitting on a nice parcel of land and you 545 00:29:15,200 --> 00:29:17,860 Speaker 3: get the opportunity, instead of turning that one into two, 546 00:29:18,240 --> 00:29:20,530 Speaker 3: to turning that one into a block of 10 flats 547 00:29:20,550 --> 00:29:22,340 Speaker 3: and From an investment point of view, if you can 548 00:29:22,400 --> 00:29:24,520 Speaker 3: find the capital to do that, that could be a 549 00:29:24,760 --> 00:29:27,550 Speaker 3: significant uplift in terms of the profitability and income that 550 00:29:27,570 --> 00:29:29,610 Speaker 3: you could get off that property. But I do see 551 00:29:29,630 --> 00:29:31,090 Speaker 3: it from the other side of the coin, and that 552 00:29:31,130 --> 00:29:34,050 Speaker 3: is that 70% of the people that are gonna be 553 00:29:34,090 --> 00:29:36,090 Speaker 3: affected are going to be the owner occupiers in that 554 00:29:36,130 --> 00:29:39,550 Speaker 3: particular location. So I see the argument always being difficult. 555 00:29:39,910 --> 00:29:41,470 Speaker 2: And that's why my view on this. 556 00:29:41,890 --> 00:29:44,230 Speaker 3: I've had a sort of policy idea on this for 557 00:29:44,250 --> 00:29:46,670 Speaker 3: a long time. And that is that if you have 558 00:29:46,710 --> 00:29:49,600 Speaker 3: a percentage rule, so here's an example. If you have 559 00:29:50,020 --> 00:29:53,640 Speaker 3: a street that has just freestanding single homes on that street, 560 00:29:54,020 --> 00:29:56,160 Speaker 3: you can have what we call the 1% rule. So 561 00:29:56,280 --> 00:29:58,460 Speaker 3: anything on that street, you can turn 1% of the 562 00:29:58,500 --> 00:30:01,570 Speaker 3: properties on that street into duplexes. And if you've got 563 00:30:01,590 --> 00:30:03,630 Speaker 3: a rule that you're allowed duplexes, you can turn 1% 564 00:30:03,630 --> 00:30:05,970 Speaker 3: of those into townhouses, i.e. 565 00:30:05,990 --> 00:30:06,650 Speaker 2: Three to the site. 566 00:30:06,990 --> 00:30:09,410 Speaker 3: So what you're doing is you're doing it sensibly, and 567 00:30:09,450 --> 00:30:12,340 Speaker 3: it still gives you plenty of ample places around the 568 00:30:12,380 --> 00:30:14,400 Speaker 3: city to be able to keep adding to that. But 569 00:30:14,420 --> 00:30:16,800 Speaker 3: what you aren't going to be doing is adding six 570 00:30:16,880 --> 00:30:20,900 Speaker 3: blocks of high-rise apartments or medium-density apartments in three streets, 571 00:30:20,920 --> 00:30:23,950 Speaker 3: which then just make those streets untenable to live because 572 00:30:23,990 --> 00:30:27,240 Speaker 3: of parking, traffic, Noise, all of those other things. So 573 00:30:27,310 --> 00:30:29,530 Speaker 3: I think that's going to be the political backlash that 574 00:30:29,550 --> 00:30:31,990 Speaker 3: we're going to see from silly policy like that. But 575 00:30:32,010 --> 00:30:35,130 Speaker 3: the 1% rule is something that you would think NIMBYism 576 00:30:35,490 --> 00:30:38,920 Speaker 3: wouldn't necessarily push back on because if they know that 577 00:30:38,980 --> 00:30:41,760 Speaker 3: streets already had that allocation, well, then they look at 578 00:30:41,780 --> 00:30:43,940 Speaker 3: the next street and that sort of balances out how 579 00:30:44,010 --> 00:30:45,510 Speaker 3: quickly we build that density up. 580 00:30:46,480 --> 00:30:48,980 Speaker 1: Yeah, I think, again, from an investor's point of view, 581 00:30:49,100 --> 00:30:51,180 Speaker 1: and that's what we're here to really talk about, is 582 00:30:51,200 --> 00:30:53,800 Speaker 1: I think it's going to be a net positive. If 583 00:30:54,080 --> 00:30:56,740 Speaker 1: they do increase density, as you said, the land becomes 584 00:30:56,780 --> 00:30:58,590 Speaker 1: more productive and arguably more valuable. 585 00:30:59,660 --> 00:31:00,140 Speaker 2: Very interesting. 586 00:31:00,160 --> 00:31:01,810 Speaker 1: We're going to take a short break, and when we 587 00:31:01,850 --> 00:31:04,310 Speaker 1: come back, we're going to answer a listener question about 588 00:31:04,370 --> 00:31:06,590 Speaker 1: renting out your home. Back with you in a moment. 589 00:31:12,680 --> 00:31:15,240 Speaker 1: Hello and welcome back to the Australian's Money Puzzle podcast. 590 00:31:15,320 --> 00:31:17,870 Speaker 1: I'm Stuart Weems and I'm talking to Ben Kingsley, the 591 00:31:18,050 --> 00:31:20,930 Speaker 1: founder of Empower Wealth and chair of the Property Investors 592 00:31:20,950 --> 00:31:23,410 Speaker 1: Council of Australia. Ben, I just want to ask you 593 00:31:23,490 --> 00:31:26,110 Speaker 1: one more question before we get into a listener question. 594 00:31:26,130 --> 00:31:26,370 Speaker 2: Sure. 595 00:31:27,030 --> 00:31:29,430 Speaker 1: And it's related to obviously you're trying to attract more 596 00:31:29,950 --> 00:31:33,470 Speaker 1: private investors to the market, which I think ultimately a government, 597 00:31:33,490 --> 00:31:35,320 Speaker 1: whether it's this government or the next one, whatever it 598 00:31:35,360 --> 00:31:39,560 Speaker 1: might be, will need to do to really create some 599 00:31:39,660 --> 00:31:44,490 Speaker 1: economic prosperity because we need to continue to increase our population, 600 00:31:44,830 --> 00:31:47,310 Speaker 1: economic growth, and we need people to be able to 601 00:31:47,350 --> 00:31:50,050 Speaker 1: have houses to do that. Do you have any good 602 00:31:50,170 --> 00:31:54,550 Speaker 1: ideas that they could implement to attract more private investors 603 00:31:54,590 --> 00:31:55,130 Speaker 1: to the market? 604 00:31:55,750 --> 00:31:58,290 Speaker 3: I think that the number one thing that they need 605 00:31:58,330 --> 00:32:01,300 Speaker 3: to do is give us confidence that they're not going 606 00:32:01,320 --> 00:32:04,940 Speaker 3: to keep changing the rules. Like in any sort of industry, 607 00:32:05,460 --> 00:32:09,440 Speaker 3: when there's uncertainty around government policy, there's a lack of investment. 608 00:32:09,500 --> 00:32:12,140 Speaker 3: People basically sit on their hands and make no investment. 609 00:32:12,180 --> 00:32:15,860 Speaker 3: So we need assurities around that. We also need to 610 00:32:15,900 --> 00:32:18,720 Speaker 3: then look at, okay, what are the incentives to attract 611 00:32:18,810 --> 00:32:19,900 Speaker 3: our investment dollars in? 612 00:32:19,960 --> 00:32:22,270 Speaker 2: So I couldn't agree with you more, Stuart, in respect 613 00:32:22,350 --> 00:32:24,030 Speaker 2: of it's just unavoidable. 614 00:32:24,330 --> 00:32:27,330 Speaker 3: There's no way known that build to rent or super 615 00:32:27,390 --> 00:32:30,729 Speaker 3: funds or government are going to build the supply that 616 00:32:30,770 --> 00:32:34,340 Speaker 3: we need. So private rental accommodation must be in the 617 00:32:34,390 --> 00:32:38,190 Speaker 3: mix and it will consistently be the biggest portion of 618 00:32:38,230 --> 00:32:40,370 Speaker 3: the mix. So you've got to make sure that the 619 00:32:40,430 --> 00:32:42,650 Speaker 3: incentive is there. And so if I look at an 620 00:32:42,730 --> 00:32:45,780 Speaker 3: example of what Western Australia did recently, in terms of 621 00:32:45,800 --> 00:32:50,840 Speaker 3: attracting from short-term rental accommodation into longer-term rental accommodation, they 622 00:32:50,880 --> 00:32:54,380 Speaker 3: offered a $ 10, 000 incentive to move that product or that 623 00:32:54,440 --> 00:32:56,660 Speaker 3: stock out of short-term into long-term. 624 00:32:57,120 --> 00:32:59,470 Speaker 2: So any of those types of things would be really important. 625 00:32:59,890 --> 00:33:03,270 Speaker 3: I would also start to say to governments, it's counterintuitive 626 00:33:03,330 --> 00:33:06,150 Speaker 3: what you're doing about higher taxes and charges. Yes, you've 627 00:33:06,170 --> 00:33:08,210 Speaker 3: got a lot of debt to pay off, but ultimately 628 00:33:08,230 --> 00:33:10,510 Speaker 3: you've got to keep growing that economic pie. The situation 629 00:33:10,730 --> 00:33:13,990 Speaker 3: here in Victoria, where we saw the land tax increases 630 00:33:14,030 --> 00:33:19,510 Speaker 3: and another 615,000 investors experienced land tax bills for the 631 00:33:19,550 --> 00:33:23,130 Speaker 3: very first time this year, that's a disincentive. And so 632 00:33:23,190 --> 00:33:26,510 Speaker 3: ultimately higher land taxes and higher holding costs means that 633 00:33:26,810 --> 00:33:28,970 Speaker 3: at the end of the day, the investor is collecting 634 00:33:29,040 --> 00:33:32,170 Speaker 3: rent and giving it out to everybody else. we need 635 00:33:32,190 --> 00:33:34,930 Speaker 3: to make sure that there's enough return on investment for 636 00:33:34,950 --> 00:33:39,710 Speaker 3: those investors. So start thinking about how you would incentivise 637 00:33:39,730 --> 00:33:41,300 Speaker 3: that investment. And you're not going to do that through 638 00:33:41,340 --> 00:33:43,540 Speaker 3: higher taxes and charges. And then you've got to take 639 00:33:43,620 --> 00:33:47,260 Speaker 3: negative gearing and capital gains tax changes off the table. 640 00:33:47,300 --> 00:33:50,380 Speaker 3: Because again, if we don't get that confidence of supply 641 00:33:50,720 --> 00:33:53,420 Speaker 3: and that confidence of what's going to happen, we'll see 642 00:33:53,460 --> 00:33:57,560 Speaker 3: this continue to be challenging for some investors in some markets. 643 00:33:58,170 --> 00:34:00,810 Speaker 1: Yeah, I like the idea. An embargo on any changes 644 00:34:00,850 --> 00:34:04,120 Speaker 1: would give investors a bit more confidence. Okay, let's get 645 00:34:04,150 --> 00:34:07,000 Speaker 1: into a question here from Sam. And I'll read it 646 00:34:07,060 --> 00:34:08,400 Speaker 1: out to you, Ben, and then I'll give you the 647 00:34:08,440 --> 00:34:12,819 Speaker 1: difficult task of answering it, of course. It's twofold. Anyway, 648 00:34:12,860 --> 00:34:15,860 Speaker 1: Sam writes, suppose one was to move out of their 649 00:34:15,980 --> 00:34:18,430 Speaker 1: principal place of residence and rent it out but not 650 00:34:18,489 --> 00:34:21,770 Speaker 1: tell their home loan provider, so still pay the cheaper 651 00:34:21,790 --> 00:34:24,310 Speaker 1: rate on their loan. This must happen all the time. 652 00:34:24,489 --> 00:34:28,359 Speaker 1: Any adverse consequences? resulting from this? And then he goes 653 00:34:28,440 --> 00:34:30,600 Speaker 1: on to say, now suppose that person wanted to go 654 00:34:30,620 --> 00:34:34,000 Speaker 1: and buy a new primary place of residence before selling 655 00:34:34,020 --> 00:34:36,540 Speaker 1: their old one. Do they need to declare the original 656 00:34:36,600 --> 00:34:40,049 Speaker 1: loan when applying for a new one? I would assume yes. 657 00:34:40,300 --> 00:34:42,969 Speaker 1: And what about the fact that their old one is 658 00:34:43,270 --> 00:34:45,330 Speaker 1: a home loan rather than an investment loan? 659 00:34:45,350 --> 00:34:49,630 Speaker 3: Yeah, it's a good question, Sam. Look, if you read 660 00:34:49,810 --> 00:34:53,730 Speaker 3: your mortgage documentation, the bank has a right to be 661 00:34:53,810 --> 00:34:58,530 Speaker 3: informed and kept informed about any significant changes to your circumstances. 662 00:34:59,190 --> 00:35:02,489 Speaker 3: If you don't inform that bank, then potentially one could 663 00:35:02,550 --> 00:35:05,150 Speaker 3: argue that you're in breach of contract. And we do 664 00:35:05,190 --> 00:35:07,890 Speaker 3: know that obviously some people might just be naive or 665 00:35:07,969 --> 00:35:10,810 Speaker 3: not be aware of that. And so their circumstances change 666 00:35:10,850 --> 00:35:13,830 Speaker 3: and they don't tell the lender, then ultimately they still 667 00:35:13,870 --> 00:35:16,820 Speaker 3: might be achieving the higher or better interest rate, the 668 00:35:16,860 --> 00:35:20,620 Speaker 3: cheaper interest rate. But in theory, they're meant to be informed. 669 00:35:20,700 --> 00:35:22,819 Speaker 3: And what we are now starting to see is some 670 00:35:22,860 --> 00:35:27,170 Speaker 3: lenders are doing data matches with certain data companies around 671 00:35:27,630 --> 00:35:30,850 Speaker 3: rental alerts of properties that are being rented. And they're 672 00:35:30,910 --> 00:35:34,690 Speaker 3: contacting those owners and basically saying, is it true that 673 00:35:34,710 --> 00:35:36,590 Speaker 3: your property is now an investment property? If it is, 674 00:35:36,630 --> 00:35:39,570 Speaker 3: then we're going to adjust your interest rate to the 675 00:35:39,650 --> 00:35:42,840 Speaker 3: appropriate interest rate and change the status of your property 676 00:35:42,860 --> 00:35:46,200 Speaker 3: from a principal place of residence loan into an investment loan. 677 00:35:46,620 --> 00:35:47,899 Speaker 2: So that's part one of that. 678 00:35:48,040 --> 00:35:50,180 Speaker 3: Part two of that, when it comes to your principal 679 00:35:50,200 --> 00:35:53,060 Speaker 3: place of residence, there's two components there. One is obviously 680 00:35:53,120 --> 00:35:56,319 Speaker 3: a tax component and really from the tax officer's point 681 00:35:56,340 --> 00:35:59,440 Speaker 3: of view, keeping them informed or declaring principal place of 682 00:35:59,480 --> 00:36:02,359 Speaker 3: residence is only a moment in time that you may 683 00:36:02,380 --> 00:36:04,840 Speaker 3: need to do that. They're interested in terms of making 684 00:36:04,900 --> 00:36:08,050 Speaker 3: sure that you're appropriately apportioning any interest cost as a 685 00:36:08,070 --> 00:36:11,450 Speaker 3: deduction against an investment property associated with that. But coming 686 00:36:11,510 --> 00:36:14,489 Speaker 3: back to the lender story, yeah, as you're putting your 687 00:36:14,510 --> 00:36:17,569 Speaker 3: application in, you don't want to be committing any type 688 00:36:17,610 --> 00:36:22,310 Speaker 3: of fraud or any type of misinformation on your loan application. 689 00:36:22,350 --> 00:36:25,640 Speaker 3: So 100% you need to be upfront and thorough. And 690 00:36:25,680 --> 00:36:28,720 Speaker 3: if you're working with a broker or someone who says, 691 00:36:28,800 --> 00:36:31,700 Speaker 3: let's not necessarily tell them the truth, the whole truth 692 00:36:31,739 --> 00:36:34,589 Speaker 3: and nothing but the truth, then be very careful there 693 00:36:34,630 --> 00:36:38,130 Speaker 3: because you are in cohorts with that broker in terms 694 00:36:38,190 --> 00:36:41,009 Speaker 3: of committing fraud. And so I would always say, play 695 00:36:41,030 --> 00:36:44,049 Speaker 3: a straight bat, tell the truth, because that's effectively what 696 00:36:44,110 --> 00:36:46,410 Speaker 3: needs to be in play. Now, and if your lender 697 00:36:46,489 --> 00:36:49,690 Speaker 3: is then too expensive based on that, and you want 698 00:36:49,710 --> 00:36:51,529 Speaker 3: to prove a point, then go and shop around. Use 699 00:36:51,550 --> 00:36:54,270 Speaker 3: your broker to shop around for a better lender that's 700 00:36:54,290 --> 00:36:56,380 Speaker 3: going to give you a cheaper rate, or maybe not 701 00:36:56,430 --> 00:36:59,700 Speaker 3: even charge you for having an investment loan versus a 702 00:36:59,739 --> 00:37:02,120 Speaker 3: principal place of residence loan. And there are some of 703 00:37:02,160 --> 00:37:04,500 Speaker 3: those lenders who are coming out with more and more 704 00:37:04,540 --> 00:37:07,620 Speaker 3: of those products. And it does frustrate me that investors 705 00:37:07,640 --> 00:37:10,830 Speaker 3: have to pay a premium when there's no factual evidence 706 00:37:10,890 --> 00:37:15,410 Speaker 3: to suggest that an investor loan is more riskier than 707 00:37:15,450 --> 00:37:18,569 Speaker 3: an owner-occupier loan. In fact, the evidence suggests the other way. 708 00:37:19,050 --> 00:37:22,500 Speaker 3: that more owner-occupied loans go bad than investor loans go bad. 709 00:37:22,540 --> 00:37:26,040 Speaker 3: But unfortunately, APRA doesn't see it that way and the 710 00:37:26,080 --> 00:37:28,100 Speaker 3: lenders are taking advantage of that opportunity. 711 00:37:28,980 --> 00:37:30,120 Speaker 2: Yeah, good advice, Ben. 712 00:37:30,300 --> 00:37:32,820 Speaker 1: If a broker or a lender in a branch suggests 713 00:37:32,840 --> 00:37:35,520 Speaker 1: that you shouldn't be open and honest about declaring your 714 00:37:35,600 --> 00:37:38,100 Speaker 1: assets and liabilities, don't deal with that person would be 715 00:37:38,140 --> 00:37:41,259 Speaker 1: my advice. That's really interesting, Ben. Thanks so much for 716 00:37:41,300 --> 00:37:43,680 Speaker 1: coming on the show and sharing your insights and advice. 717 00:37:43,739 --> 00:37:47,940 Speaker 1: I'm sure our listeners definitely enjoyed it. And just a reminder, folks, 718 00:37:47,980 --> 00:37:50,120 Speaker 1: if you have any questions or feedback, we'd love to 719 00:37:50,160 --> 00:37:54,839 Speaker 1: hear from you. The email is themoneypuzzle at theaustralian.com.au. Please 720 00:37:54,880 --> 00:37:57,940 Speaker 1: keep those questions coming. James Girard will be back with 721 00:37:57,980 --> 00:38:01,360 Speaker 1: you on Thursday, and I'll be back next Tuesday. I've 722 00:38:01,380 --> 00:38:05,060 Speaker 1: another interesting show lined up to explore what economic fundamentals 723 00:38:05,100 --> 00:38:08,339 Speaker 1: we need to be concerned with as investors. I really 724 00:38:08,380 --> 00:38:10,520 Speaker 1: hope you enjoyed today's show, and if you have, please 725 00:38:10,560 --> 00:38:13,080 Speaker 1: share it. I've been Stuart Williams, and until next week, 726 00:38:13,239 --> 00:38:13,640 Speaker 1: bye for now. 727 00:38:16,590 --> 00:38:17,969 Speaker 3: Thank you.