Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
Speaker 1: James Kirkby. Welcome aboard everybody. Now you know that in
Speaker 1: the property market this year has been one outstanding question.
Speaker 1: Is Melbourne a bargain or is this a city which
Speaker 1: is going to be stuck in the second division from
Speaker 1: a property perspective from now on? And we touched on
Speaker 1: this issue more than once in recent shows. And we
Speaker 1: know also that property taxes hit Melbourne heard last year,
Speaker 1: and the question is will we see nationwide property taxes
Speaker 1: this year? We look at that as well. But first
Speaker 1: we're going to investigate are the numbers telling us anything
Speaker 1: now in mid twenty twenty five and has this station?
Speaker 1: Has this city turned really interesting? My guest is Stuart
Speaker 1: Whims of the pro Solution Group, something of an expert
Speaker 1: on this veccin question. How are you, Stuart?
Speaker 2: I'm really well, James. Thanks for having me back.
Speaker 1: It's great to have you back. You know what I
Speaker 1: want to I can't think if I think of anybody
Speaker 1: who has sort of articulated how bad Melbourne prices have
Speaker 1: been on every measure, it's been you. And so why
Speaker 1: don't you tell us just in a snapshot from a
Speaker 1: numbers perspective, how poor this city has been compared to
Speaker 1: what it should be over said the last ten years.
Speaker 1: And by the way, folks, the figures go back ten years.
Speaker 1: This is not a one year thing. This is a
Speaker 1: decade long.
Speaker 2: And I think that's a good point to kick off
Speaker 2: for James, because a lot of common tree is quite
Speaker 2: short term, whereas when we look at ETFs and other investments,
Speaker 2: quite often we're presented with, you know, what's happened over one,
Speaker 2: five and ten years and allows us, you know, to
Speaker 2: weigh up short, medium and long term returns. I think
Speaker 2: we should be doing the same in the property market
Speaker 2: as well. I mean, the numbers are pretty ordinary over
Speaker 2: a ten year period, and this is just the median
Speaker 2: house value so excluding apartments is about half a percent
Speaker 2: per annum growth over the last ten years, or sorry,
Speaker 2: three percent growth over the last ten years. But we
Speaker 2: know that inflation's been about three percent as well, so
Speaker 2: in real terms native inflation, no change over a teen
Speaker 2: year period.
Speaker 1: And the nwide median is about six percent right well
Speaker 1: for ten.
Speaker 2: Years, so three percent above inflation.
Speaker 1: Yes, and that's on every measure. Then on the five
Speaker 1: year measure, Melbourne's five year numbers are hopeless, so less
Speaker 1: than one percent a year, and nationwide you know what
Speaker 1: we're doing ten that's extraordinary. And even right up to
Speaker 1: one year figures, the medium was east and Melbourne was
Speaker 1: zero in front of it, zero points six to five,
Speaker 1: so half percent, so it actually got it almost got worse,
Speaker 1: did for a mint?
Speaker 2: Yeah, over five years neative inflation, it's an approximate annualized
Speaker 2: decline of about three percent per annum, which means in
Speaker 2: real terms, house prices or median house price is fourteen
Speaker 2: percent lower today than it was five years ago. So
Speaker 2: in I mean, if you've been an investor in the market,
Speaker 2: hopefully you outperform the median. But if you're an investor
Speaker 2: in the Melbourne market, you know, like everything in a rising,
Speaker 2: title ships rise and vice versa, really hard to buck
Speaker 2: the trend. When the trend is you know, property prices
Speaker 2: are ten to fifteen percent lower in real terms than
Speaker 2: they were five years ago.
Speaker 1: And they were just add folks, you know this is houses, right,
Speaker 1: which is the best apartments one in five per selling
Speaker 1: at a loss. Okay, so we'll just park that for
Speaker 1: one mon We say, okay, well that's the recent history
Speaker 1: of what our listeners want to know from every stat
Speaker 1: including obviously in Victoria. But you know, it's interesting, Stuart.
Speaker 1: I had lunch with a financial advisor in last week
Speaker 1: and he said that all the action among these clients
Speaker 1: was will you should you buy in Melbourne? And some
Speaker 1: of them have been buying in Melbourne. Why wouldn't they
Speaker 1: when you well, on a strict metric of just looking
Speaker 1: at the numbers, if you're in Sydney and you've watched
Speaker 1: your prices tick along so nicely, say over five years
Speaker 1: at seven point six percent a year, which is pretty juicy,
Speaker 1: and you look at the other city in Melbourne, which
Speaker 1: is not that very different, and it's tracking at no percent.
Speaker 1: Basically it's doing nothing. Then it would seem but it's
Speaker 1: seemed for a long time to be a bargain. So
Speaker 1: here's a million dollar question that everyone's been hanging on for.
Speaker 1: Is there anything in the numbers now that suggests to
Speaker 1: us that a turn I believe, I'm sure you believe
Speaker 1: there will be a turn, But is there anything in
Speaker 1: the numbers that suggests a turn could be occurring?
Speaker 2: Yeah, it's certainly changed. At the beginning of this year,
Speaker 2: James and I should say, and we'll be familiar with
Speaker 2: this with all the discussion around Perth. Interstate investors are
Speaker 2: the first ones to re enter the market. It's always
Speaker 2: interstate investors, and we saw that in Perth. And if
Speaker 2: you speak to any buyers agents in Melbourne, they'll tell
Speaker 2: you that the majority of inquiry from investors are interstate investors.
Speaker 2: And I guess you know, probably because we've been beaten
Speaker 2: down in Melbourne in terms of how bad the government
Speaker 2: is and the debt and all these sorts of things,
Speaker 2: maybe we don't have that perspective that interstate investors do.
Speaker 2: But cautality produce a daily price index, and I quite
Speaker 2: like it relative to meeting house price movements because it
Speaker 2: uses a hedonic methodology, which means it's trying to compare
Speaker 2: apples with apples, so it's looking at land sized number
Speaker 2: of bedrooms and so forth, where a Meetian house price
Speaker 2: comparison really isn't a comparison of like with like. And
Speaker 2: so if we have a look at how that's tracking,
Speaker 2: it turned. In fact, all states started to turn positive
Speaker 2: in terms of growth early February this year and we're
Speaker 2: tracking about five point eight percent annualized growth in Melbourne
Speaker 2: between February and today, it's the last six months. To
Speaker 2: put that in context, Sydney's about six point one, Perth
Speaker 2: about seven point one. Adelaide's slowing down. It's three point nine,
Speaker 2: which is kind of interesting. Brisbane's the standout eight and
Speaker 2: a half percent, so they're all sort of six to
Speaker 2: eight percent really in that range. In Melbourne is in
Speaker 2: that range, which is very rare. We haven't seen that
Speaker 2: for five years, probably haven't really seen it for ten years.
Speaker 2: But I think when markets change, you know, it's the
Speaker 2: data lags a little bit, and so we'll see it
Speaker 2: in the data probably towards the end of this year
Speaker 2: in terms of compelling case. But the word is from
Speaker 2: buyers agencies that certainly demand is increased, so there's greater
Speaker 2: people going to open houses, inspections, more interest parties, more
Speaker 2: bidders at auction and so forth. There isn't any major
Speaker 2: price movements yet, but it's always that sort of activity
Speaker 2: that precedes price movements.
Speaker 1: So you're saying the Deadly index is now pretty good.
Speaker 1: It's showing six percent YEP for it's showing six percent
Speaker 1: annualized return over the last six months. So on that
Speaker 1: basis if it did what it's been doing everyd for
Speaker 1: the last six months. We're coming back, we're coming back
Speaker 1: into investible territory from the numbers. And then you're also
Speaker 1: saying that though this is harder to get data on
Speaker 1: the signals bitter numbers, the very tempo of the market
Speaker 1: is improving as well. Are you convinced by that those numbers.
Speaker 2: Are totally convinced? And we've seen it on the seller
Speaker 2: and buyer side, so James. So we've seen some clients
Speaker 2: sell apartments or houses and for whatever reason, for different reasons,
Speaker 2: and the results that have been able to achieve have
Speaker 2: been exceeded expectations, whereas again that hasn't happened for the
Speaker 2: really the last ten years, when we've had a client
Speaker 2: sell of property, normally we've been a bit disappointed with
Speaker 2: the results rather than pleasantly surprised. So definitely the market's changed. Definitely,
Speaker 2: we're starting to see green shoots of growth and it
Speaker 2: doesn't surprise me after ten years of no real growth.
Speaker 2: You know, there's always that pent up demand and also
Speaker 2: that when you look at relative performance, you know, Adelaide
Speaker 2: looks like it's cooling off a little bit. It's had
Speaker 2: a significant period of growth. You know, the best performing
Speaker 2: market across the capital city through to March Brisbane, I
Speaker 2: mean Brisbane. I think we will continue to kick along,
Speaker 2: albeit maybe a slower growth than in the past. And Sydney's,
Speaker 2: you know, from an affordability perspective, in terms of entry
Speaker 2: level investment grade property really difficult for most people.
Speaker 1: Oh well, that's a crucial point, isn't it. From the
Speaker 1: interstate perspective, can you tell us a little bit more
Speaker 1: about entry level differences?
Speaker 2: Yeah, certainly.
Speaker 1: So.
Speaker 2: If you want a house in Sydney and you're not
Speaker 2: prepared to make any compromise, any significant compromises, you're probably
Speaker 2: going to buy a cottage somewhere between five to ten
Speaker 2: kilometers from the city on one hundred and one hundred
Speaker 2: and fifty square meters. You're going to probably have to
Speaker 2: pay two to two and a half million for that property,
Speaker 2: whereas in Melbourne you can get something that fits similar description,
Speaker 2: maybe slightly larger land and your budget needs to be
Speaker 2: sort of one point one to one point two and above,
Speaker 2: say one one to one five for instance. So that's
Speaker 2: more manageable for a lot more people than what Sydney is.
Speaker 1: That gap is enormous. Can you recall when the gap
Speaker 1: was ever so big?
Speaker 2: No, I mean because Melbourne had a really strong run
Speaker 2: up until the last decade. Melbourne actually had quite a
Speaker 2: strong run in terms of property growth really between well
Speaker 2: starting ninety eighty until twenty fifteen or circle that amount.
Speaker 2: It was from memory about eight percent compounding or something,
Speaker 2: so it's above average. So we had a really strong
Speaker 2: market in Melbourne until that time. It's taken a breather,
Speaker 2: not a surprise. We know markets move in cycles, flatt
Speaker 2: and growth cycles, so no, but the gap is certainly significant.
Speaker 2: And I guess when we look at the other major
Speaker 2: capital city being Brisbane, people might be a bit reluctant to,
Speaker 2: you know, invest in Brisbane. After it's done almost twelve
Speaker 2: percent per annum after over five years, they might think, Okay,
Speaker 2: you've got the Olympics. There's a lot of positive sentiment still, but.
Speaker 1: Hard to keep that up with in a twelve percent
Speaker 1: pe it's not.
Speaker 2: Going to get that. That's definitely not going to keep up.
Speaker 2: But I think it'll still be positive right through to
Speaker 2: twenty thirty two, right through to the Olympics, because sentiment
Speaker 2: in the short run drives markets. But I don't think
Speaker 2: the Olympics fundamentally changes the market. So the fundamentals aren't changing,
Speaker 2: but I think the positive sentiment will continue.
Speaker 1: What we might do here, folks, and this is really good.
Speaker 1: Of what I wanted to get Stuart to do was
Speaker 1: to tell it to basically took us through strictly on
Speaker 1: the numbers, whether Melbourne looked like it had turned and
Speaker 1: the evidence, the hard evidence is actually that it is turning.
Speaker 1: Now we only have six months and it's only houses.
Speaker 1: But as as Stewart said, he's totally convinced that it
Speaker 1: is turning. And I think just if you're a believer
Speaker 1: in reversion to the mean, which I am, then you
Speaker 1: have to think that this is the start of it. Now,
Speaker 1: what do I do is just park it there for
Speaker 1: one moment. What I'm going to do, by the way,
Speaker 1: next next Tuesday, and this Cavallo is going to come
Speaker 1: on the show and she's going to talk about Melbourne
Speaker 1: deep dive right the actual city, the areas, the districts,
Speaker 1: if you're interested, I'm sure you are, and how it's
Speaker 1: going to how she thinks it's going to perform. But
Speaker 1: there's one big question which Stuart again has been very
Speaker 1: across and one of the perhaps one of the reasons
Speaker 1: that Melbourne's trough extended at least a year further than
Speaker 1: a reasonable person might expect, and it's got to do
Speaker 1: with tax and I think we will pick that up
Speaker 1: on the second part of the show because first of all,
Speaker 1: it's a hot issue remains an issue in Victoria, a
Speaker 1: cloud if you like, over a potential rebound there, but
Speaker 1: also something of a cloud over the wider market because
Speaker 1: it seems to me every second suggestion and submission going
Speaker 1: into this tax summit later this month from the government
Speaker 1: is going to hit property. We'll be back in a moment. Hello,
Speaker 1: Welcome back to The Australian's Money Puzzle podcast. I'm James
Speaker 1: Kirby and I'm talking to Stuart Weams of the pro
Speaker 1: Solution Group. Stewart is, among other things, a regular contributor
Speaker 1: of course to the Wealth vertical on The Australian, which
Speaker 1: I hope you have had a look and checked out.
Speaker 1: It was launched last week or into our second week.
Speaker 1: You'll see a lot more stories, commentary videos on wealth
Speaker 1: and of course the Money Postle is there and getting
Speaker 1: some oxygen which is great and I think you'll find
Speaker 1: that we've got a bigger team now on wealth and
Speaker 1: it's really I think it's something that the paper has
Speaker 1: really got behind, which is terrific and I'm delighted to
Speaker 1: see it now. Folks. We talked about property, and we
Speaker 1: talked about Victoria, and we talked briefly about tax and
Speaker 1: I want to put a couple of things to Stuart.
Speaker 1: The obvious question is whether Victoria itself, whether the tax
Speaker 1: regime there halted or extended the trough and the poor prices. Now,
Speaker 1: there's been a lot of noise around the tax in
Speaker 1: Victori because there's a lot of taxes. There's ten taxes.
Speaker 1: But actually you were saying on close inspection, hear this, folks,
Speaker 1: on closed inspection, Victoria's taxes aren't that bad for most
Speaker 1: people most of the time.
Speaker 2: Yeah, So I had to look, James, what happened over
Speaker 2: the last ten years in New South Wales, Victoria and
Speaker 2: Queensland to give some context around this. And certainly all
Speaker 2: the states are as bad as each other. I mean,
Speaker 2: that's the answer, and that's really I mean, that's where
Speaker 2: they get a lot of their tax revenue from that.
Speaker 2: But a big one, yeah, land tax and stamp giddy
Speaker 2: So if you look at the growth over the last
Speaker 2: ten years, New South Wales has increased land tax revenue
Speaker 2: by twelve point six percent compounding perannum over a teen
Speaker 2: year period, Queensland a little bit more, thirteen percent, and
Speaker 2: Victoria fifteen percent compounding each year on average over the
Speaker 2: last ten years. So certainly Victoria is the worst there,
Speaker 2: but not by a huge margin. Maybe not. I was
Speaker 2: kind of surprised by this.
Speaker 1: Yeah, So thirteen for Sydney and thirty in for Brisbane
Speaker 1: obviously and fifteenth Forts. So they're all been they've all
Speaker 1: been racking up the land taxas and of course they've
Speaker 1: been a top of prices have been They've become the
Speaker 1: key revenue your owner for governments. Okay, but picking up
Speaker 1: on what happened to Victoria and whether their land tax
Speaker 1: was much worse than other states didn't really martin it.
Speaker 1: I think the issue was the impression the state gave
Speaker 1: by introducing ten separate property taxes of perhaps seven of
Speaker 1: them are quite arcade, then most people will never pay them.
Speaker 1: But the impression they gave was that they were out
Speaker 1: to tax property and the outcome was that investor stead away.
Speaker 1: What do you think of that? Contention.
Speaker 2: First of all, one hundred percent is said in the
Speaker 2: short term sentiment rather than fundamental strives markets. And if
Speaker 2: you already own property in Queensland or New South Wales,
Speaker 2: you know, buying an additional investment property in that jurisdiction
Speaker 2: might actually give rise to a lot more land tax
Speaker 2: because it's a marginal rate system compared to say investing
Speaker 2: in Melbourne. But a lot of people have been dissuaded
Speaker 2: from investing in Melbourne because certainly the government has been
Speaker 2: out to tax property investors, which is true across the board.
Speaker 1: You by just experience the listeners the distinction you were
Speaker 1: making between the two states and the tax I've what
Speaker 1: the margin reate means.
Speaker 2: So we did a analysis. I remember it's probably about
Speaker 2: twelve months ago now for a client comparing you know,
Speaker 2: do you buy another investment property in Queensland or do
Speaker 2: you buy one in Melbourne? And the client already held
Speaker 2: an investment property in Queensland. And because it's in a
Speaker 2: marginal rate system, I think the first around six hundred
Speaker 2: thousand is tax free in Queensland and then as you
Speaker 2: climb in terms of land value, the higher the rate
Speaker 2: of tax. Much like our individual income tax rate system,
Speaker 2: and so we did the comparison just on a land
Speaker 2: and land tax is only one of many considerations, but
Speaker 2: we did the comparison. Although Victoria had introduced higher rates
Speaker 2: of land tax in a dollar value perspective, for this client,
Speaker 2: it was going to be cheaper to invest in Victoria
Speaker 2: compared to adding a second investment property in Queensland.
Speaker 1: Isn't that interesting?
Speaker 2: Yeah, So we've got to be conscious of these things,
Speaker 2: and we're not going to structure something purely around land tax.
Speaker 2: But I think looking at these numbers puts it all
Speaker 2: in context. And actually, James, they give us a four
Speaker 2: year projection of what they think is going to happen
Speaker 2: to land tax. So in New South Wales they're predicting
Speaker 2: a six percent increase per annum over the next four years,
Speaker 2: Victoria seven point eight so are just below eight percent,
Speaker 2: Queensland thirteen point one percent. So in four years time,
Speaker 2: if their projections are correct, Queensland will be the highest
Speaker 2: taxing state from a land tax perspective. So again, I
Speaker 2: guess it puts all in context, doesn't it.
Speaker 1: Whose projections are there? Again, Well, they're treasury, the state
Speaker 1: treasure or you're rocking budget yeah, you're rocky off the forward estimates. Yeah,
Speaker 1: well I certainly believe them, right.
Speaker 2: Yeah, Well they're not going to underplay it, are they.
Speaker 1: Yeah, no, they're not. Okay, now you heard it hear
Speaker 1: first folks. All right, So that's very interesting what we
Speaker 1: have we have been not the impression. Certainly the Queenslander
Speaker 1: is the little taxing steed and Victoria's a high one
Speaker 1: close and space suggests it's a closer run thing, and
Speaker 1: I think listeners would be worth knowing. Stuart's exercise looking
Speaker 1: at state budgets et cetera suggests that actually Queensland's going
Speaker 1: to race up and wanted champion here. Okay on tax Now,
Speaker 1: on the broader issue of nationwide tax the tax sum
Speaker 1: are coming up. Everyone's got two per spies about what
Speaker 1: they might do to property. It does seem property as
Speaker 1: are setting duck here, particularly homes, particularly negative gearing CGT.
Speaker 1: Every submission that I see suggests zoning, you know, zoning
Speaker 1: in basically wealth taxes, but wealth tax become de facto
Speaker 1: of property taxes many times. What do you think is
Speaker 1: coming down the line.
Speaker 2: Well, I mean there's been a lot of talk about
Speaker 2: capping negative gearing rather than abolishing it completely. And you know,
Speaker 2: of the times, James, I've seen some investors gear very
Speaker 2: heavily to the extent where which is kind of stupid,
Speaker 2: to the extent where they're taxable incoming zero and they're
Speaker 2: not paying any income tax whatsoever to me, So at
Speaker 2: the fringes, that doesn't make a lot of sense to me.
Speaker 2: I think a cap probably makes sense, and that cap
Speaker 2: probably should be a dollar cap. So maybe you can
Speaker 2: claim up to fifty thousand dollars per individual or something.
Speaker 2: Who knows what that number looks like. But I think
Speaker 2: having open ended to the extent where you could have
Speaker 2: a very high income earner aggressively gear to the extent
Speaker 2: that they pay no tax doesn't probably make a lot
Speaker 2: of sense.
Speaker 1: Right, So it's one of those extreme it's extreme with
Speaker 1: someone having you know, twenty million in a SMSF. It's
Speaker 1: an extreme yep, yeah, yeah, optimization for one of a
Speaker 1: better word of the rules. Yeah.
Speaker 2: And the federal government, I mean, they wouldn't like the
Speaker 2: increase in land tax either, by the way, because you
Speaker 2: can claim a tax doduction for it. So really the
Speaker 2: federal government is picking up what thirty or between thirty
Speaker 2: and fifty percent of the bill in terms of in
Speaker 2: terms of state land tax, So that's sort of problematic
Speaker 2: as well. You know, I think that it'd be great
Speaker 2: for the government to do something around affordable housing, more
Speaker 2: affordable housing, I should say, not affordable housing in the
Speaker 2: way we normally refer to it.
Speaker 1: So is there any market initiative they can take to
Speaker 1: do that. There's a very good question actually coming up
Speaker 1: in a moment to round this. We'll get to it
Speaker 1: in a second. But do you see anything they can
Speaker 1: do well.
Speaker 2: They had a few years ago, they had the National
Speaker 2: Rent Affordability Scheme NAZRA, where they gave some tax benefits
Speaker 2: if you rented a property twenty percent blow market value. Yes, yes, Well,
Speaker 2: maybe if they play around with negative gearing capital or something,
Speaker 2: maybe there's an additional incentive that they can give to investors,
Speaker 2: particularly investors that are renting out established property rather than building. You,
Speaker 2: because we're talking about we want to spread the extra
Speaker 2: supplier geographically, maybe they could do something like that, have
Speaker 2: a tax incentive if you decide to rent your property
Speaker 2: twenty percent below blow market and maybe even offer longer
Speaker 2: rent tendancy agreements to provide security for pans that might
Speaker 2: be a smart initiative.
Speaker 1: Yes, I certainly think they could explore, as you say,
Speaker 1: initiatives and investor incentives, and we just hope it doesn't
Speaker 1: become a sumbat about slashing investor incentives, because if you
Speaker 1: get the investor incentives right, you can really make a
Speaker 1: difference in a positive way. Think of the downside of
Speaker 1: the program for instance, which has been you know, has
Speaker 1: made a difference and it's an investment incentive. We'll come
Speaker 1: back to that in a moment, because we've got some
Speaker 1: great questions. All right, back in a moment. Hello, Welcome
Speaker 1: back to The Australian's Money Puzzle podcast. James Kirkby talking
Speaker 1: to Stuart Weems. Okay, Carl says, this is a really
Speaker 1: good question. I don't understand why governments are not doing
Speaker 1: more to enable people in inner city suburbs to build
Speaker 1: townhouses or other forms of medium density housing. It seems
Speaker 1: like we're missing that middle, the gap between high rise
Speaker 1: apartments and detached homs. And I know this one off
Speaker 1: all of the housing issues, but it's a big part
Speaker 1: of the solution. I completely agree with you, Karl. So
Speaker 1: you know, we think about certainly Melbourne and Sydney the
Speaker 1: fabric of the cities. We are starting to have apartment
Speaker 1: towers and houses very little in between, townhouses, great investments,
Speaker 1: law maintenance classified with houses I think really ultimately rather
Speaker 1: than apartments in the volosophy of things. Would you agree
Speaker 1: with that, Stuart.
Speaker 2: Yeah, And we're having this discussion. It's having this discussion
Speaker 2: yesterday with some people from the property industry talking about
Speaker 2: unwillingness of older people to downsize their homes just because
Speaker 2: they can't find something that they want to live in
Speaker 2: the location that they're in. So they don't necessarily want
Speaker 2: to go to a retirement village, of course, but you know,
Speaker 2: a large apartment complex doesn't necessarily suit them. They would
Speaker 2: like to downsize to something, you know, that's relatively attractive,
Speaker 2: but maybe a townhouse or something like that, or a
Speaker 2: villa unit style accommodation. But there really just aren't that
Speaker 2: many being built. The Gratton Institute did some work on
Speaker 2: this James earlier this year about the density of Australian's
Speaker 2: capital cities and tagged you know, Melbourne is probably one
Speaker 2: of the least dense cities of its size compared to
Speaker 2: cities around the world, and you know, Melbourne can spread out.
Speaker 1: You know.
Speaker 2: Of course where Sydney's got the challenge, they're going to
Speaker 2: have to face it either way because of course geographically
Speaker 2: they're yeah, they're hemmed in, so they've got to got
Speaker 2: to find a solution. It's interesting to say that both
Speaker 2: state governments Victoria and New South Wales have come up
Speaker 2: with some planning around this in terms of to try
Speaker 2: and streamline at townhouse and low rise construction. It only
Speaker 2: happened in March in Victoria and February in New South Wales,
Speaker 2: so it's early days to see whether that's going to happen.
Speaker 2: But one hundred percent there's got to be more density
Speaker 2: and that's good for existing investments to change because it
Speaker 2: increases the productive value of land. So anyone that's invested
Speaker 2: in those investment grade locations, Whilst we might think more
Speaker 2: density is bad news, it's actually good news. And because
Speaker 2: it does increase that underlying land.
Speaker 1: Value it yes, of course it does, yeah, which is
Speaker 1: what it's all about. Yeah, that's very interesting observation, and
Speaker 1: I would back it. One other thing, Carl. We're saying
Speaker 1: just about not that much in between. It's interesting. I
Speaker 1: saw Murvac an executive meet the point that forty percent
Speaker 1: of their apartment, says are to downsizers now, so they're
Speaker 1: obviously zoning in there are the sort of middle to
Speaker 1: upper end and creating property that those sort of people want,
Speaker 1: and as Carl is pointing out, it's not there. Really
Speaker 1: good question and thanks for picking it up, Stuart. Okay,
Speaker 1: there's a question from Steve and Dylan. They're on the
Speaker 1: same issue. If you'd like to read those questions.
Speaker 2: Yeah, okay. So Steve says, I'm an engineer who has
Speaker 2: experienced a highly unorthodoxed wealth management journey due to intergenerational
Speaker 2: wealth transfer, and it's attracted me to the financial advisory sector.
Speaker 2: I'm currently studying the graduate diploma of Financial planning. Can
Speaker 2: you offer some advice for a mid career professional transitioning
Speaker 2: into financial services? Noting that one of the breadcrumbs that
Speaker 2: led me down to this path was how frequently you
Speaker 2: state that financial advisors will be in short supply. Any
Speaker 2: advice would be greatly appreciated, and then Dylan goes on
Speaker 2: to ask, you know, what is the outlook for financial
Speaker 2: advisors and the financial advice industry and how may AI
Speaker 2: impact its future?
Speaker 1: Okay, terrific. We might put the AAI one's probably hard
Speaker 1: to tackle in the context of this show, in that
Speaker 1: we'll find ourselves drifting all over the place to every
Speaker 1: other conceivable practice of AI. I saw this morning a
Speaker 1: rating or bit writing some funeral FLMs using AI to
Speaker 1: write a bitcheries and it backfired badly. Okay, now you're
Speaker 1: in a great position to answer this, and we're flattered
Speaker 1: by the way on the show that we have people
Speaker 1: who are thinking about becoming financial advisors listening to the show,
Speaker 1: people who are training as financial advisors, which tells us
Speaker 1: that we're taking seriously, which is good. So Okay, I
Speaker 1: always say I am saying it's something I'm saying. The
Speaker 1: numbers are there. The financial advisory sector is shrinking, it's
Speaker 1: still shrinking. It went it actually got smaller this year.
Speaker 1: The number of whether the Australians have doubled, the number
Speaker 1: of financial advisors will be cut in half. You would
Speaker 1: think it's an opportunity for Steven dinnan. What do you
Speaker 1: have to tell them, Stuart.
Speaker 2: I think it's a great opportunity. I mean, you look
Speaker 2: at the projections around just superannuation industry. It's about over
Speaker 2: just a little over four trillion today by twenty thirty
Speaker 2: five ten years time, it's eight trillion, is the RBA projections.
Speaker 2: And then you have intergenerational wealth transfers, so baby boomers
Speaker 2: passing moneys on. I guess the three million dollar super
Speaker 2: tax will probably exacerbate that or bring it forward. So
Speaker 2: there's a lot of positive you know, sort of tail
Speaker 2: winds for the industry. And you know, the banning of commissions,
Speaker 2: which I think was back in twenty thirteen. James might
Speaker 2: you might know it better than me.
Speaker 1: It was pretty hein which was two sixteen. Yes, absolutely, yeah.
Speaker 2: It was the best thing that I think the country
Speaker 2: did for financial advice because before that we had commission
Speaker 2: based people and their core competency was really salesmanship. Today
Speaker 2: an advisor's core competency has to be advice. And the
Speaker 2: younger generation that's coming through, you know, in their thirties,
Speaker 2: are really engaged with it. They want to learn more
Speaker 2: about property. You know. Unfortunately, as Steve will find out,
Speaker 2: that the formal education has nothing about property, which is
Speaker 2: ridiculous given it's a major asset.
Speaker 1: I mean, the advisor qualifications, it's a listed securities, it's
Speaker 1: all that.
Speaker 2: It's all listed securities, insurance, all that sort of stuff
Speaker 2: nothing about property. So I think anyone getting into the industry,
Speaker 2: you know, they want to probably get some good work
Speaker 2: experience because that's really where you're going to learn the trade,
Speaker 2: I guess, and learn more about property and how it intersects.
Speaker 2: It's not all about property, but it's a missing part
Speaker 2: of the piece. And what I hope for the industry
Speaker 2: moving forward is that we have more asset class agnostic advisors,
Speaker 2: so that you can go to someone and say what
Speaker 2: combination of property and share should I have, and you're
Speaker 2: going to get impartial advice on them.
Speaker 1: Okay, I think that would be the best type of advisor.
Speaker 1: Of course, it would be the advisor who's maltias to,
Speaker 1: who has no biases, who doesn't say I really understand shares,
Speaker 1: so you should buy shares, or doesn't say I really
Speaker 1: understand property so you should buy property, which I'm sure
Speaker 1: happens very good.
Speaker 2: Okay.
Speaker 1: Final questions are from Don, and Don has led outs
Speaker 1: some pretty difficult questions on the new Supertax, but we'll
Speaker 1: try and bounce to them at speed because they are
Speaker 1: actually what most of them are, actually relatively easy to answer. Okay,
Speaker 1: He's first question, if you are over seventy five. Is
Speaker 1: it true that you can't use strategies such as recontribution etc.
Speaker 1: In relation to managing your super and the super tax
Speaker 1: I'll take that one on the answer on that one
Speaker 1: is that once you're over seventy five, you are restricted
Speaker 1: to a SGC super guarantee charge contributions and whatever is
Speaker 1: allowed in the very relative restricted area of downsizing where
Speaker 1: you'd have to sell the family home and you'd have
Speaker 1: to prove that you did that to get those later
Speaker 1: contributions into super, So that area is very limited to you,
Speaker 1: I would think, Don, And none of this, by the way,
Speaker 1: is advice. Is information only? Okay, Stuart? Are the rules
Speaker 1: different if yourself a super fund is fully in pension mode?
Speaker 1: Are the rules different? About? What the rules different?
Speaker 2: On?
Speaker 1: What does he mean there? I wonder?
Speaker 2: I don't know, maybe if it relates to the recontribution strategy.
Speaker 2: Maybe Don was asking whether you can still do the
Speaker 2: recontribution strategy if your self managed super funds in pension phase,
Speaker 2: and the answer is yes. A self managed super fund
Speaker 2: can have multiple pension accounts or accumulation account that will
Speaker 2: relate to one member, and it's very flexible in that regard.
Speaker 1: Yeah, what I thought. So, okay, does the fifteen percent
Speaker 1: extra tax on values over three million? Okay? What's talking
Speaker 1: about here is the new supertax, which is fifteen percent
Speaker 1: tax on earnings over on earnings on amounts above three million?
Speaker 1: Will it apply? Will pension withdrawals during the year be
Speaker 1: added to the year end value? In other words, he
Speaker 1: wants to know, in terms of their calculation computation stacking
Speaker 1: up to get to that three million figure, do pension
Speaker 1: withdrawals during the year Are they included? The answer is yes,
Speaker 1: of course there are.
Speaker 2: Yeah, so you can't magically avoid the tax just by
Speaker 2: withdrawing a little bit of money on the twenty ninth
Speaker 2: of June. They'll add that back to levy the tax.
Speaker 1: That's how the Frank dividend came in too, wasn't it
Speaker 1: that the Frank evident were basically rolled in there? So
Speaker 1: you've got to look very close. Yet, this is an
Speaker 1: extraordinary tax. It's a completely new tax. The reason there
Speaker 1: are so many questions is people have never been taxed
Speaker 1: on unrealized games before, and it has all sorts of consequences.
Speaker 1: Just like Darnas pointed out on for instances, your pension,
Speaker 1: our pension withdrawals included, Yes, they're added back. Are Frank
Speaker 1: dividend included, Yes, in a way they are. It takes
Speaker 1: some explaining, but take it from me that that your
Speaker 1: Frank dividend income is relevant to the computation of the
Speaker 1: number and all sorts of things coming up. For instance,
Speaker 1: another one the other day was about it works like
Speaker 1: it works like CGT. So it's a personal tax. So
Speaker 1: you get this bill and you can pay it yourself
Speaker 1: or your super fund must pay it. If you've got profits,
Speaker 1: they are tax If you've got losses, you don't get compensated.
Speaker 1: You can only carry them forward, which is all fine,
Speaker 1: But from Harrison's point of view, for instance, if you
Speaker 1: were unfortunate enough that in the end you were talking
Speaker 1: about in the state rather than your active super fund,
Speaker 1: your inherent tours would not get that. They'd get taxed.
Speaker 1: They'd get the tax buil for your profits, but your credits,
Speaker 1: if you had losses, would just be chucked in the win.
Speaker 1: They would have no value. So there's all. There are
Speaker 1: twenty different sort of outcomes here, which oftens like us
Speaker 1: find fascinating and most people and the more you dig
Speaker 1: into it, the more you realize, Oh my, this is
Speaker 1: one messy, sloppy tax that's just going to be a nightmare.
Speaker 2: I think it's like inheritance tax, James, like in the UK,
Speaker 2: no one actually pays it, Like no one's said the
Speaker 2: government's not going to raise any revenue from these unrealized
Speaker 2: gains tax because no one's going to pay it.
Speaker 1: But what's the number? I don't want to go in this.
Speaker 1: Oh yes it is, but I shouldn't guess on air.
Speaker 1: So so they are not going to raise anything like
Speaker 1: the amount they said they'd raise, Unlike the land tax
Speaker 1: forward estimate Stewart that you can't take seriously. Don't take
Speaker 1: the two nine six perceived income from the government seriously
Speaker 1: because unlike land tax, you can avoid the division two
Speaker 1: nine six terribly easy. You just simply ensure that you
Speaker 1: never get three million, or you ensure that it's split,
Speaker 1: or you ensure that it comes out before it hits
Speaker 1: three There's so many things you could do, not to
Speaker 1: mention valuations, which, gosh, guess what you can get a
Speaker 1: variety of them, I depend I imagine and depending on
Speaker 1: who you call, would that be? Is that an outrageous
Speaker 1: thing to say?
Speaker 2: No, it's not but there's got to go through an audit.
Speaker 2: So it depends on how flexible you're order to read.
Speaker 1: Yes, okay, it has to be, of course it does.
Speaker 1: But there would be shall we say there there would
Speaker 1: be variables around around unrealized valuations. Deffinitely, Yeah, for sure,
Speaker 1: you thought so. Okay, maybe we'll leave it at that
Speaker 1: for this week. Hey, Stuart, thank you very much for
Speaker 1: coming on the show. Very interesting. My pleasure is always
Speaker 1: I am just about convinced. Yes, I think that Melbourne
Speaker 1: has turned and I don't see anything to stop that
Speaker 1: turn extending. Now is if it can do it in
Speaker 1: this if we can do it in the middle of
Speaker 1: the winter season where the rates happened fallen yet to
Speaker 1: anything like they're supposed to, you have to think that
Speaker 1: the wind is behind those numbers. Okay, thanks Juart pro
Speaker 1: Solutions coming on the show, and thank you folks for
Speaker 1: everything in the way of correspondence. The email is the
Speaker 1: money Puzzle at the Australian dot com dot au. We'll
Speaker 1: hear from you soon.