WEBVTT - Melbourne property rebound… it’s happening 0:00:11.520 --> 0:00:14.800 Hello, and welcome to The Australian's Money Puzzle podcast. I'm 0:00:14.920 --> 0:00:18.120 James Kirkby. Welcome aboard everybody. Now you know that in 0:00:18.160 --> 0:00:22.360 the property market this year has been one outstanding question. 0:00:24.280 --> 0:00:29.240 Is Melbourne a bargain or is this a city which 0:00:29.280 --> 0:00:32.440 is going to be stuck in the second division from 0:00:32.479 --> 0:00:35.479 a property perspective from now on? And we touched on 0:00:35.560 --> 0:00:40.040 this issue more than once in recent shows. And we 0:00:40.159 --> 0:00:43.080 know also that property taxes hit Melbourne heard last year, 0:00:43.280 --> 0:00:45.800 and the question is will we see nationwide property taxes 0:00:45.840 --> 0:00:48.159 this year? We look at that as well. But first 0:00:48.600 --> 0:00:53.440 we're going to investigate are the numbers telling us anything 0:00:53.560 --> 0:00:57.600 now in mid twenty twenty five and has this station? 0:00:57.800 --> 0:01:01.280 Has this city turned really interesting? My guest is Stuart 0:01:01.320 --> 0:01:04.080 Whims of the pro Solution Group, something of an expert 0:01:04.120 --> 0:01:06.840 on this veccin question. How are you, Stuart? 0:01:07.800 --> 0:01:09.880 I'm really well, James. Thanks for having me back. 0:01:10.400 --> 0:01:11.840 It's great to have you back. You know what I 0:01:11.840 --> 0:01:14.160 want to I can't think if I think of anybody 0:01:14.160 --> 0:01:19.679 who has sort of articulated how bad Melbourne prices have 0:01:19.800 --> 0:01:23.200 been on every measure, it's been you. And so why 0:01:23.200 --> 0:01:27.560 don't you tell us just in a snapshot from a 0:01:27.640 --> 0:01:30.880 numbers perspective, how poor this city has been compared to 0:01:30.920 --> 0:01:33.240 what it should be over said the last ten years. 0:01:33.280 --> 0:01:35.720 And by the way, folks, the figures go back ten years. 0:01:35.720 --> 0:01:37.200 This is not a one year thing. This is a 0:01:37.240 --> 0:01:37.920 decade long. 0:01:39.080 --> 0:01:41.080 And I think that's a good point to kick off 0:01:41.120 --> 0:01:44.720 for James, because a lot of common tree is quite 0:01:44.760 --> 0:01:48.640 short term, whereas when we look at ETFs and other investments, 0:01:48.960 --> 0:01:52.160 quite often we're presented with, you know, what's happened over one, 0:01:52.320 --> 0:01:54.920 five and ten years and allows us, you know, to 0:01:54.960 --> 0:01:57.160 weigh up short, medium and long term returns. I think 0:01:57.160 --> 0:01:59.600 we should be doing the same in the property market 0:01:59.640 --> 0:02:03.320 as well. I mean, the numbers are pretty ordinary over 0:02:04.080 --> 0:02:06.400 a ten year period, and this is just the median 0:02:06.800 --> 0:02:11.760 house value so excluding apartments is about half a percent 0:02:11.800 --> 0:02:15.120 per annum growth over the last ten years, or sorry, 0:02:15.120 --> 0:02:18.000 three percent growth over the last ten years. But we 0:02:18.120 --> 0:02:21.480 know that inflation's been about three percent as well, so 0:02:21.960 --> 0:02:26.160 in real terms native inflation, no change over a teen 0:02:26.240 --> 0:02:27.240 year period. 0:02:27.040 --> 0:02:32.160 And the nwide median is about six percent right well 0:02:32.160 --> 0:02:32.560 for ten. 0:02:32.520 --> 0:02:34.560 Years, so three percent above inflation. 0:02:34.800 --> 0:02:38.040 Yes, and that's on every measure. Then on the five 0:02:38.120 --> 0:02:41.200 year measure, Melbourne's five year numbers are hopeless, so less 0:02:41.200 --> 0:02:45.519 than one percent a year, and nationwide you know what 0:02:45.600 --> 0:02:50.400 we're doing ten that's extraordinary. And even right up to 0:02:50.600 --> 0:02:54.080 one year figures, the medium was east and Melbourne was 0:02:56.639 --> 0:02:58.639 zero in front of it, zero points six to five, 0:02:58.720 --> 0:03:01.359 so half percent, so it actually got it almost got worse, 0:03:01.639 --> 0:03:02.560 did for a mint? 0:03:03.120 --> 0:03:07.799 Yeah, over five years neative inflation, it's an approximate annualized 0:03:07.840 --> 0:03:11.000 decline of about three percent per annum, which means in 0:03:11.120 --> 0:03:14.720 real terms, house prices or median house price is fourteen 0:03:14.760 --> 0:03:19.360 percent lower today than it was five years ago. So 0:03:19.720 --> 0:03:21.760 in I mean, if you've been an investor in the market, 0:03:21.800 --> 0:03:24.680 hopefully you outperform the median. But if you're an investor 0:03:24.800 --> 0:03:28.079 in the Melbourne market, you know, like everything in a rising, 0:03:28.160 --> 0:03:31.440 title ships rise and vice versa, really hard to buck 0:03:31.480 --> 0:03:34.880 the trend. When the trend is you know, property prices 0:03:34.920 --> 0:03:37.640 are ten to fifteen percent lower in real terms than 0:03:37.680 --> 0:03:38.920 they were five years ago. 0:03:39.120 --> 0:03:41.520 And they were just add folks, you know this is houses, right, 0:03:41.560 --> 0:03:44.960 which is the best apartments one in five per selling 0:03:45.000 --> 0:03:47.440 at a loss. Okay, so we'll just park that for 0:03:47.480 --> 0:03:49.760 one mon We say, okay, well that's the recent history 0:03:49.800 --> 0:03:53.520 of what our listeners want to know from every stat 0:03:53.680 --> 0:03:56.960 including obviously in Victoria. But you know, it's interesting, Stuart. 0:03:57.000 --> 0:04:00.840 I had lunch with a financial advisor in last week 0:04:00.960 --> 0:04:06.240 and he said that all the action among these clients 0:04:06.960 --> 0:04:10.760 was will you should you buy in Melbourne? And some 0:04:10.840 --> 0:04:13.920 of them have been buying in Melbourne. Why wouldn't they 0:04:14.000 --> 0:04:17.839 when you well, on a strict metric of just looking 0:04:17.880 --> 0:04:20.679 at the numbers, if you're in Sydney and you've watched 0:04:21.040 --> 0:04:24.799 your prices tick along so nicely, say over five years 0:04:25.120 --> 0:04:28.280 at seven point six percent a year, which is pretty juicy, 0:04:28.720 --> 0:04:31.039 and you look at the other city in Melbourne, which 0:04:31.080 --> 0:04:34.839 is not that very different, and it's tracking at no percent. 0:04:34.960 --> 0:04:38.800 Basically it's doing nothing. Then it would seem but it's 0:04:38.880 --> 0:04:42.160 seemed for a long time to be a bargain. So 0:04:42.440 --> 0:04:44.960 here's a million dollar question that everyone's been hanging on for. 0:04:45.640 --> 0:04:49.560 Is there anything in the numbers now that suggests to 0:04:49.680 --> 0:04:53.120 us that a turn I believe, I'm sure you believe 0:04:53.120 --> 0:04:55.320 there will be a turn, But is there anything in 0:04:55.360 --> 0:04:58.880 the numbers that suggests a turn could be occurring? 0:05:00.080 --> 0:05:02.360 Yeah, it's certainly changed. At the beginning of this year, 0:05:02.480 --> 0:05:05.320 James and I should say, and we'll be familiar with 0:05:05.360 --> 0:05:09.600 this with all the discussion around Perth. Interstate investors are 0:05:09.600 --> 0:05:13.000 the first ones to re enter the market. It's always 0:05:13.000 --> 0:05:16.200 interstate investors, and we saw that in Perth. And if 0:05:16.200 --> 0:05:18.640 you speak to any buyers agents in Melbourne, they'll tell 0:05:18.680 --> 0:05:23.480 you that the majority of inquiry from investors are interstate investors. 0:05:24.000 --> 0:05:26.920 And I guess you know, probably because we've been beaten 0:05:27.000 --> 0:05:30.039 down in Melbourne in terms of how bad the government 0:05:30.120 --> 0:05:32.320 is and the debt and all these sorts of things, 0:05:32.760 --> 0:05:35.919 maybe we don't have that perspective that interstate investors do. 0:05:36.080 --> 0:05:41.039 But cautality produce a daily price index, and I quite 0:05:41.200 --> 0:05:46.200 like it relative to meeting house price movements because it 0:05:46.400 --> 0:05:50.320 uses a hedonic methodology, which means it's trying to compare 0:05:50.360 --> 0:05:53.000 apples with apples, so it's looking at land sized number 0:05:53.040 --> 0:05:56.320 of bedrooms and so forth, where a Meetian house price 0:05:56.360 --> 0:06:00.120 comparison really isn't a comparison of like with like. And 0:06:00.160 --> 0:06:02.000 so if we have a look at how that's tracking, 0:06:02.040 --> 0:06:05.200 it turned. In fact, all states started to turn positive 0:06:05.279 --> 0:06:08.599 in terms of growth early February this year and we're 0:06:08.640 --> 0:06:12.520 tracking about five point eight percent annualized growth in Melbourne 0:06:12.560 --> 0:06:15.320 between February and today, it's the last six months. To 0:06:15.360 --> 0:06:18.480 put that in context, Sydney's about six point one, Perth 0:06:18.520 --> 0:06:22.200 about seven point one. Adelaide's slowing down. It's three point nine, 0:06:22.240 --> 0:06:25.080 which is kind of interesting. Brisbane's the standout eight and 0:06:25.080 --> 0:06:28.080 a half percent, so they're all sort of six to 0:06:28.360 --> 0:06:31.440 eight percent really in that range. In Melbourne is in 0:06:31.480 --> 0:06:33.640 that range, which is very rare. We haven't seen that 0:06:33.680 --> 0:06:37.839 for five years, probably haven't really seen it for ten years. 0:06:38.240 --> 0:06:41.359 But I think when markets change, you know, it's the 0:06:41.480 --> 0:06:44.320 data lags a little bit, and so we'll see it 0:06:44.360 --> 0:06:46.960 in the data probably towards the end of this year 0:06:47.360 --> 0:06:50.960 in terms of compelling case. But the word is from 0:06:51.080 --> 0:06:55.760 buyers agencies that certainly demand is increased, so there's greater 0:06:55.800 --> 0:07:00.800 people going to open houses, inspections, more interest parties, more 0:07:00.800 --> 0:07:04.760 bidders at auction and so forth. There isn't any major 0:07:04.880 --> 0:07:08.760 price movements yet, but it's always that sort of activity 0:07:09.200 --> 0:07:11.040 that precedes price movements. 0:07:11.240 --> 0:07:14.760 So you're saying the Deadly index is now pretty good. 0:07:15.000 --> 0:07:21.160 It's showing six percent YEP for it's showing six percent 0:07:21.160 --> 0:07:24.960 annualized return over the last six months. So on that 0:07:25.000 --> 0:07:27.400 basis if it did what it's been doing everyd for 0:07:27.440 --> 0:07:30.640 the last six months. We're coming back, we're coming back 0:07:30.680 --> 0:07:34.640 into investible territory from the numbers. And then you're also 0:07:34.720 --> 0:07:37.200 saying that though this is harder to get data on 0:07:38.720 --> 0:07:44.920 the signals bitter numbers, the very tempo of the market 0:07:45.400 --> 0:07:48.920 is improving as well. Are you convinced by that those numbers. 0:07:49.400 --> 0:07:52.400 Are totally convinced? And we've seen it on the seller 0:07:52.440 --> 0:07:55.960 and buyer side, so James. So we've seen some clients 0:07:56.040 --> 0:08:01.560 sell apartments or houses and for whatever reason, for different reasons, 0:08:01.600 --> 0:08:04.280 and the results that have been able to achieve have 0:08:04.400 --> 0:08:08.920 been exceeded expectations, whereas again that hasn't happened for the 0:08:08.920 --> 0:08:10.960 really the last ten years, when we've had a client 0:08:11.000 --> 0:08:14.440 sell of property, normally we've been a bit disappointed with 0:08:14.480 --> 0:08:21.000 the results rather than pleasantly surprised. So definitely the market's changed. Definitely, 0:08:21.000 --> 0:08:25.000 we're starting to see green shoots of growth and it 0:08:25.000 --> 0:08:27.800 doesn't surprise me after ten years of no real growth. 0:08:27.920 --> 0:08:30.320 You know, there's always that pent up demand and also 0:08:30.360 --> 0:08:33.480 that when you look at relative performance, you know, Adelaide 0:08:33.480 --> 0:08:35.880 looks like it's cooling off a little bit. It's had 0:08:35.920 --> 0:08:39.239 a significant period of growth. You know, the best performing 0:08:39.880 --> 0:08:43.200 market across the capital city through to March Brisbane, I 0:08:43.200 --> 0:08:45.520 mean Brisbane. I think we will continue to kick along, 0:08:45.800 --> 0:08:50.479 albeit maybe a slower growth than in the past. And Sydney's, 0:08:50.520 --> 0:08:53.760 you know, from an affordability perspective, in terms of entry 0:08:53.840 --> 0:08:57.160 level investment grade property really difficult for most people. 0:08:57.920 --> 0:09:00.319 Oh well, that's a crucial point, isn't it. From the 0:09:00.360 --> 0:09:04.120 interstate perspective, can you tell us a little bit more 0:09:04.120 --> 0:09:06.120 about entry level differences? 0:09:06.920 --> 0:09:07.600 Yeah, certainly. 0:09:07.720 --> 0:09:07.800 So. 0:09:07.920 --> 0:09:10.040 If you want a house in Sydney and you're not 0:09:10.200 --> 0:09:14.800 prepared to make any compromise, any significant compromises, you're probably 0:09:14.840 --> 0:09:19.280 going to buy a cottage somewhere between five to ten 0:09:19.360 --> 0:09:21.960 kilometers from the city on one hundred and one hundred 0:09:22.000 --> 0:09:24.280 and fifty square meters. You're going to probably have to 0:09:24.320 --> 0:09:27.440 pay two to two and a half million for that property, 0:09:28.200 --> 0:09:32.920 whereas in Melbourne you can get something that fits similar description, 0:09:33.040 --> 0:09:37.000 maybe slightly larger land and your budget needs to be 0:09:37.040 --> 0:09:39.560 sort of one point one to one point two and above, 0:09:40.080 --> 0:09:44.000 say one one to one five for instance. So that's 0:09:44.040 --> 0:09:47.080 more manageable for a lot more people than what Sydney is. 0:09:47.480 --> 0:09:50.040 That gap is enormous. Can you recall when the gap 0:09:50.160 --> 0:09:51.160 was ever so big? 0:09:52.120 --> 0:09:55.240 No, I mean because Melbourne had a really strong run 0:09:55.360 --> 0:09:59.160 up until the last decade. Melbourne actually had quite a 0:09:59.200 --> 0:10:02.800 strong run in terms of property growth really between well 0:10:02.840 --> 0:10:07.080 starting ninety eighty until twenty fifteen or circle that amount. 0:10:07.480 --> 0:10:10.240 It was from memory about eight percent compounding or something, 0:10:10.280 --> 0:10:13.440 so it's above average. So we had a really strong 0:10:13.480 --> 0:10:16.160 market in Melbourne until that time. It's taken a breather, 0:10:16.400 --> 0:10:19.640 not a surprise. We know markets move in cycles, flatt 0:10:19.679 --> 0:10:23.800 and growth cycles, so no, but the gap is certainly significant. 0:10:24.160 --> 0:10:25.920 And I guess when we look at the other major 0:10:25.960 --> 0:10:29.360 capital city being Brisbane, people might be a bit reluctant to, 0:10:29.800 --> 0:10:32.559 you know, invest in Brisbane. After it's done almost twelve 0:10:32.559 --> 0:10:36.280 percent per annum after over five years, they might think, Okay, 0:10:36.280 --> 0:10:39.760 you've got the Olympics. There's a lot of positive sentiment still, but. 0:10:40.160 --> 0:10:41.880 Hard to keep that up with in a twelve percent 0:10:42.320 --> 0:10:43.600 pe it's not. 0:10:43.520 --> 0:10:45.240 Going to get that. That's definitely not going to keep up. 0:10:45.240 --> 0:10:47.560 But I think it'll still be positive right through to 0:10:47.640 --> 0:10:51.400 twenty thirty two, right through to the Olympics, because sentiment 0:10:51.559 --> 0:10:54.559 in the short run drives markets. But I don't think 0:10:54.559 --> 0:10:58.920 the Olympics fundamentally changes the market. So the fundamentals aren't changing, 0:10:58.960 --> 0:11:01.359 but I think the positive sentiment will continue. 0:11:01.760 --> 0:11:03.760 What we might do here, folks, and this is really good. 0:11:03.760 --> 0:11:05.280 Of what I wanted to get Stuart to do was 0:11:05.320 --> 0:11:08.520 to tell it to basically took us through strictly on 0:11:08.600 --> 0:11:12.439 the numbers, whether Melbourne looked like it had turned and 0:11:12.960 --> 0:11:16.280 the evidence, the hard evidence is actually that it is turning. 0:11:17.320 --> 0:11:19.880 Now we only have six months and it's only houses. 0:11:20.920 --> 0:11:24.440 But as as Stewart said, he's totally convinced that it 0:11:24.520 --> 0:11:26.920 is turning. And I think just if you're a believer 0:11:27.000 --> 0:11:30.360 in reversion to the mean, which I am, then you 0:11:30.480 --> 0:11:32.440 have to think that this is the start of it. Now, 0:11:32.480 --> 0:11:33.840 what do I do is just park it there for 0:11:33.880 --> 0:11:35.720 one moment. What I'm going to do, by the way, 0:11:35.800 --> 0:11:39.880 next next Tuesday, and this Cavallo is going to come 0:11:39.920 --> 0:11:41.720 on the show and she's going to talk about Melbourne 0:11:41.760 --> 0:11:45.520 deep dive right the actual city, the areas, the districts, 0:11:45.520 --> 0:11:47.600 if you're interested, I'm sure you are, and how it's 0:11:47.640 --> 0:11:50.120 going to how she thinks it's going to perform. But 0:11:50.160 --> 0:11:53.160 there's one big question which Stuart again has been very 0:11:53.160 --> 0:11:56.520 across and one of the perhaps one of the reasons 0:11:56.559 --> 0:12:01.600 that Melbourne's trough extended at least a year further than 0:12:02.160 --> 0:12:05.760 a reasonable person might expect, and it's got to do 0:12:05.880 --> 0:12:08.520 with tax and I think we will pick that up 0:12:08.520 --> 0:12:10.640 on the second part of the show because first of all, 0:12:10.760 --> 0:12:13.839 it's a hot issue remains an issue in Victoria, a 0:12:13.920 --> 0:12:16.160 cloud if you like, over a potential rebound there, but 0:12:16.200 --> 0:12:20.240 also something of a cloud over the wider market because 0:12:20.240 --> 0:12:24.760 it seems to me every second suggestion and submission going 0:12:24.760 --> 0:12:28.080 into this tax summit later this month from the government 0:12:28.600 --> 0:12:45.800 is going to hit property. We'll be back in a moment. Hello, 0:12:45.880 --> 0:12:48.920 Welcome back to The Australian's Money Puzzle podcast. I'm James 0:12:48.960 --> 0:12:51.400 Kirby and I'm talking to Stuart Weams of the pro 0:12:51.480 --> 0:12:54.720 Solution Group. Stewart is, among other things, a regular contributor 0:12:54.760 --> 0:12:58.240 of course to the Wealth vertical on The Australian, which 0:12:58.240 --> 0:13:00.839 I hope you have had a look and checked out. 0:13:00.880 --> 0:13:04.200 It was launched last week or into our second week. 0:13:04.200 --> 0:13:11.520 You'll see a lot more stories, commentary videos on wealth 0:13:11.559 --> 0:13:14.840 and of course the Money Postle is there and getting 0:13:14.920 --> 0:13:18.240 some oxygen which is great and I think you'll find 0:13:18.360 --> 0:13:21.080 that we've got a bigger team now on wealth and 0:13:21.120 --> 0:13:23.319 it's really I think it's something that the paper has 0:13:23.360 --> 0:13:25.599 really got behind, which is terrific and I'm delighted to 0:13:25.640 --> 0:13:29.200 see it now. Folks. We talked about property, and we 0:13:29.240 --> 0:13:31.960 talked about Victoria, and we talked briefly about tax and 0:13:31.960 --> 0:13:33.520 I want to put a couple of things to Stuart. 0:13:34.040 --> 0:13:38.120 The obvious question is whether Victoria itself, whether the tax 0:13:38.360 --> 0:13:45.720 regime there halted or extended the trough and the poor prices. Now, 0:13:46.080 --> 0:13:47.800 there's been a lot of noise around the tax in 0:13:47.840 --> 0:13:49.959 Victori because there's a lot of taxes. There's ten taxes. 0:13:50.000 --> 0:13:54.520 But actually you were saying on close inspection, hear this, folks, 0:13:54.760 --> 0:13:58.560 on closed inspection, Victoria's taxes aren't that bad for most 0:13:58.600 --> 0:13:59.679 people most of the time. 0:14:01.280 --> 0:14:03.360 Yeah, So I had to look, James, what happened over 0:14:03.360 --> 0:14:06.600 the last ten years in New South Wales, Victoria and 0:14:06.679 --> 0:14:10.679 Queensland to give some context around this. And certainly all 0:14:10.720 --> 0:14:12.640 the states are as bad as each other. I mean, 0:14:12.720 --> 0:14:15.079 that's the answer, and that's really I mean, that's where 0:14:15.120 --> 0:14:16.719 they get a lot of their tax revenue from that. 0:14:16.840 --> 0:14:19.760 But a big one, yeah, land tax and stamp giddy 0:14:20.280 --> 0:14:21.680 So if you look at the growth over the last 0:14:21.720 --> 0:14:25.359 ten years, New South Wales has increased land tax revenue 0:14:25.840 --> 0:14:29.760 by twelve point six percent compounding perannum over a teen 0:14:29.840 --> 0:14:33.680 year period, Queensland a little bit more, thirteen percent, and 0:14:34.160 --> 0:14:38.000 Victoria fifteen percent compounding each year on average over the 0:14:38.080 --> 0:14:41.360 last ten years. So certainly Victoria is the worst there, 0:14:42.120 --> 0:14:44.160 but not by a huge margin. Maybe not. I was 0:14:44.240 --> 0:14:45.160 kind of surprised by this. 0:14:45.360 --> 0:14:50.240 Yeah, So thirteen for Sydney and thirty in for Brisbane 0:14:50.320 --> 0:14:54.720 obviously and fifteenth Forts. So they're all been they've all 0:14:54.760 --> 0:14:56.920 been racking up the land taxas and of course they've 0:14:56.960 --> 0:14:59.520 been a top of prices have been They've become the 0:14:59.600 --> 0:15:04.400 key revenue your owner for governments. Okay, but picking up 0:15:04.440 --> 0:15:07.200 on what happened to Victoria and whether their land tax 0:15:08.240 --> 0:15:10.520 was much worse than other states didn't really martin it. 0:15:10.560 --> 0:15:13.320 I think the issue was the impression the state gave 0:15:14.200 --> 0:15:19.160 by introducing ten separate property taxes of perhaps seven of 0:15:19.160 --> 0:15:21.560 them are quite arcade, then most people will never pay them. 0:15:21.800 --> 0:15:24.720 But the impression they gave was that they were out 0:15:24.720 --> 0:15:28.320 to tax property and the outcome was that investor stead away. 0:15:29.360 --> 0:15:30.360 What do you think of that? Contention. 0:15:30.480 --> 0:15:34.320 First of all, one hundred percent is said in the 0:15:34.360 --> 0:15:38.520 short term sentiment rather than fundamental strives markets. And if 0:15:38.560 --> 0:15:41.760 you already own property in Queensland or New South Wales, 0:15:41.800 --> 0:15:44.880 you know, buying an additional investment property in that jurisdiction 0:15:45.280 --> 0:15:48.600 might actually give rise to a lot more land tax 0:15:48.640 --> 0:15:52.360 because it's a marginal rate system compared to say investing 0:15:52.400 --> 0:15:55.080 in Melbourne. But a lot of people have been dissuaded 0:15:55.120 --> 0:15:58.800 from investing in Melbourne because certainly the government has been 0:15:58.880 --> 0:16:02.960 out to tax property investors, which is true across the board. 0:16:03.360 --> 0:16:06.800 You by just experience the listeners the distinction you were 0:16:06.840 --> 0:16:09.120 making between the two states and the tax I've what 0:16:09.160 --> 0:16:10.320 the margin reate means. 0:16:11.040 --> 0:16:14.480 So we did a analysis. I remember it's probably about 0:16:14.480 --> 0:16:17.280 twelve months ago now for a client comparing you know, 0:16:17.400 --> 0:16:19.920 do you buy another investment property in Queensland or do 0:16:20.000 --> 0:16:23.360 you buy one in Melbourne? And the client already held 0:16:23.400 --> 0:16:26.920 an investment property in Queensland. And because it's in a 0:16:26.960 --> 0:16:29.600 marginal rate system, I think the first around six hundred 0:16:29.600 --> 0:16:32.640 thousand is tax free in Queensland and then as you 0:16:32.840 --> 0:16:35.320 climb in terms of land value, the higher the rate 0:16:35.360 --> 0:16:39.440 of tax. Much like our individual income tax rate system, 0:16:40.080 --> 0:16:42.280 and so we did the comparison just on a land 0:16:42.280 --> 0:16:44.760 and land tax is only one of many considerations, but 0:16:44.800 --> 0:16:48.680 we did the comparison. Although Victoria had introduced higher rates 0:16:48.680 --> 0:16:52.080 of land tax in a dollar value perspective, for this client, 0:16:52.120 --> 0:16:54.760 it was going to be cheaper to invest in Victoria 0:16:54.920 --> 0:16:57.720 compared to adding a second investment property in Queensland. 0:16:57.800 --> 0:16:58.520 Isn't that interesting? 0:16:59.760 --> 0:17:02.600 Yeah, So we've got to be conscious of these things, 0:17:02.640 --> 0:17:05.280 and we're not going to structure something purely around land tax. 0:17:05.680 --> 0:17:07.840 But I think looking at these numbers puts it all 0:17:07.880 --> 0:17:10.520 in context. And actually, James, they give us a four 0:17:10.600 --> 0:17:12.840 year projection of what they think is going to happen 0:17:12.920 --> 0:17:16.320 to land tax. So in New South Wales they're predicting 0:17:16.359 --> 0:17:19.399 a six percent increase per annum over the next four years, 0:17:20.040 --> 0:17:22.479 Victoria seven point eight so are just below eight percent, 0:17:23.240 --> 0:17:27.600 Queensland thirteen point one percent. So in four years time, 0:17:27.640 --> 0:17:30.880 if their projections are correct, Queensland will be the highest 0:17:31.080 --> 0:17:34.320 taxing state from a land tax perspective. So again, I 0:17:34.359 --> 0:17:36.040 guess it puts all in context, doesn't it. 0:17:36.400 --> 0:17:39.960 Whose projections are there? Again, Well, they're treasury, the state 0:17:40.040 --> 0:17:44.120 treasure or you're rocking budget yeah, you're rocky off the forward estimates. Yeah, 0:17:44.440 --> 0:17:47.320 well I certainly believe them, right. 0:17:47.200 --> 0:17:49.160 Yeah, Well they're not going to underplay it, are they. 0:17:49.440 --> 0:17:52.000 Yeah, no, they're not. Okay, now you heard it hear 0:17:52.080 --> 0:17:55.119 first folks. All right, So that's very interesting what we 0:17:55.160 --> 0:17:57.320 have we have been not the impression. Certainly the Queenslander 0:17:57.320 --> 0:17:59.320 is the little taxing steed and Victoria's a high one 0:17:59.400 --> 0:18:02.280 close and space suggests it's a closer run thing, and 0:18:02.359 --> 0:18:06.440 I think listeners would be worth knowing. Stuart's exercise looking 0:18:06.480 --> 0:18:09.760 at state budgets et cetera suggests that actually Queensland's going 0:18:09.800 --> 0:18:13.720 to race up and wanted champion here. Okay on tax Now, 0:18:13.800 --> 0:18:17.480 on the broader issue of nationwide tax the tax sum 0:18:17.480 --> 0:18:20.919 are coming up. Everyone's got two per spies about what 0:18:20.960 --> 0:18:23.040 they might do to property. It does seem property as 0:18:23.080 --> 0:18:28.600 are setting duck here, particularly homes, particularly negative gearing CGT. 0:18:28.720 --> 0:18:32.560 Every submission that I see suggests zoning, you know, zoning 0:18:32.600 --> 0:18:35.160 in basically wealth taxes, but wealth tax become de facto 0:18:35.160 --> 0:18:37.760 of property taxes many times. What do you think is 0:18:37.960 --> 0:18:39.359 coming down the line. 0:18:40.800 --> 0:18:42.480 Well, I mean there's been a lot of talk about 0:18:42.520 --> 0:18:47.520 capping negative gearing rather than abolishing it completely. And you know, 0:18:47.560 --> 0:18:51.560 of the times, James, I've seen some investors gear very 0:18:51.600 --> 0:18:54.359 heavily to the extent where which is kind of stupid, 0:18:54.440 --> 0:18:57.560 to the extent where they're taxable incoming zero and they're 0:18:57.600 --> 0:19:02.040 not paying any income tax whatsoever to me, So at 0:19:02.040 --> 0:19:03.879 the fringes, that doesn't make a lot of sense to me. 0:19:04.080 --> 0:19:07.240 I think a cap probably makes sense, and that cap 0:19:07.359 --> 0:19:10.600 probably should be a dollar cap. So maybe you can 0:19:10.600 --> 0:19:13.639 claim up to fifty thousand dollars per individual or something. 0:19:13.920 --> 0:19:16.120 Who knows what that number looks like. But I think 0:19:16.160 --> 0:19:19.240 having open ended to the extent where you could have 0:19:19.280 --> 0:19:23.359 a very high income earner aggressively gear to the extent 0:19:23.440 --> 0:19:26.240 that they pay no tax doesn't probably make a lot 0:19:26.280 --> 0:19:26.960 of sense. 0:19:27.280 --> 0:19:29.760 Right, So it's one of those extreme it's extreme with 0:19:29.840 --> 0:19:33.360 someone having you know, twenty million in a SMSF. It's 0:19:33.359 --> 0:19:38.399 an extreme yep, yeah, yeah, optimization for one of a 0:19:38.400 --> 0:19:40.680 better word of the rules. Yeah. 0:19:40.720 --> 0:19:42.639 And the federal government, I mean, they wouldn't like the 0:19:42.680 --> 0:19:44.879 increase in land tax either, by the way, because you 0:19:44.920 --> 0:19:47.720 can claim a tax doduction for it. So really the 0:19:47.760 --> 0:19:50.640 federal government is picking up what thirty or between thirty 0:19:50.640 --> 0:19:53.520 and fifty percent of the bill in terms of in 0:19:53.640 --> 0:19:57.240 terms of state land tax, So that's sort of problematic 0:19:57.280 --> 0:19:59.520 as well. You know, I think that it'd be great 0:19:59.760 --> 0:20:03.880 for the government to do something around affordable housing, more 0:20:03.920 --> 0:20:07.080 affordable housing, I should say, not affordable housing in the 0:20:07.119 --> 0:20:08.520 way we normally refer to it. 0:20:08.600 --> 0:20:11.040 So is there any market initiative they can take to 0:20:11.080 --> 0:20:13.040 do that. There's a very good question actually coming up 0:20:13.040 --> 0:20:15.080 in a moment to round this. We'll get to it 0:20:15.119 --> 0:20:17.680 in a second. But do you see anything they can 0:20:17.720 --> 0:20:18.359 do well. 0:20:18.200 --> 0:20:20.920 They had a few years ago, they had the National 0:20:20.960 --> 0:20:25.680 Rent Affordability Scheme NAZRA, where they gave some tax benefits 0:20:25.760 --> 0:20:29.800 if you rented a property twenty percent blow market value. Yes, yes, Well, 0:20:29.800 --> 0:20:32.640 maybe if they play around with negative gearing capital or something, 0:20:32.680 --> 0:20:36.520 maybe there's an additional incentive that they can give to investors, 0:20:36.520 --> 0:20:40.960 particularly investors that are renting out established property rather than building. You, 0:20:41.600 --> 0:20:45.040 because we're talking about we want to spread the extra 0:20:45.080 --> 0:20:49.080 supplier geographically, maybe they could do something like that, have 0:20:49.119 --> 0:20:51.760 a tax incentive if you decide to rent your property 0:20:51.760 --> 0:20:55.840 twenty percent below blow market and maybe even offer longer 0:20:56.320 --> 0:21:01.560 rent tendancy agreements to provide security for pans that might 0:21:01.600 --> 0:21:02.879 be a smart initiative. 0:21:03.359 --> 0:21:06.080 Yes, I certainly think they could explore, as you say, 0:21:06.640 --> 0:21:10.879 initiatives and investor incentives, and we just hope it doesn't 0:21:10.880 --> 0:21:15.520 become a sumbat about slashing investor incentives, because if you 0:21:15.520 --> 0:21:17.520 get the investor incentives right, you can really make a 0:21:17.560 --> 0:21:19.399 difference in a positive way. Think of the downside of 0:21:19.400 --> 0:21:21.720 the program for instance, which has been you know, has 0:21:21.920 --> 0:21:24.919 made a difference and it's an investment incentive. We'll come 0:21:24.960 --> 0:21:26.679 back to that in a moment, because we've got some 0:21:26.720 --> 0:21:40.919 great questions. All right, back in a moment. Hello, Welcome 0:21:40.960 --> 0:21:43.880 back to The Australian's Money Puzzle podcast. James Kirkby talking 0:21:43.880 --> 0:21:49.000 to Stuart Weems. Okay, Carl says, this is a really 0:21:49.040 --> 0:21:52.520 good question. I don't understand why governments are not doing 0:21:52.560 --> 0:21:55.680 more to enable people in inner city suburbs to build 0:21:55.720 --> 0:22:00.520 townhouses or other forms of medium density housing. It seems 0:22:00.560 --> 0:22:03.560 like we're missing that middle, the gap between high rise 0:22:03.560 --> 0:22:06.520 apartments and detached homs. And I know this one off 0:22:06.560 --> 0:22:08.800 all of the housing issues, but it's a big part 0:22:08.840 --> 0:22:11.960 of the solution. I completely agree with you, Karl. So 0:22:12.200 --> 0:22:15.280 you know, we think about certainly Melbourne and Sydney the 0:22:15.280 --> 0:22:18.200 fabric of the cities. We are starting to have apartment 0:22:18.320 --> 0:22:24.879 towers and houses very little in between, townhouses, great investments, 0:22:25.760 --> 0:22:30.760 law maintenance classified with houses I think really ultimately rather 0:22:30.800 --> 0:22:33.639 than apartments in the volosophy of things. Would you agree 0:22:33.680 --> 0:22:34.800