1 00:00:09,680 --> 00:00:13,080 Speaker 1: Hello and welcome to the Australians Money Puzzle podcast. I'm 2 00:00:13,160 --> 00:00:16,480 Speaker 1: James Kirby. Welcome aboard everybody. Now, so far this year 3 00:00:16,520 --> 00:00:18,759 Speaker 1: has been all about the share markets, which really have 4 00:00:18,840 --> 00:00:23,440 Speaker 1: been running hot for some time, and property really having 5 00:00:23,440 --> 00:00:26,040 Speaker 1: something of a soft period, certainly in the first few 6 00:00:26,079 --> 00:00:28,920 Speaker 1: months of the calendar year twenty twenty five. But in 7 00:00:28,960 --> 00:00:33,879 Speaker 1: recent weeks we are seeing signs that the Australian property 8 00:00:33,920 --> 00:00:37,839 Speaker 1: market may be ready to rebound, especially in the larger cities. 9 00:00:38,080 --> 00:00:41,680 Speaker 1: My guest today is Louis Christopher of the SQM Research Group, 10 00:00:41,720 --> 00:00:45,720 Speaker 1: and he is on the record saying the horse is 11 00:00:45,760 --> 00:00:49,440 Speaker 1: about to bolt. The horse is about to bolt. Discuss 12 00:00:49,560 --> 00:00:51,839 Speaker 1: how are you, Louis, Yeah, nice to. 13 00:00:51,800 --> 00:00:54,640 Speaker 2: Be with you once again, James and your audience. Yes, 14 00:00:54,920 --> 00:00:59,240 Speaker 2: I did starke that over the weakend imagine media mast head. 15 00:00:59,640 --> 00:01:02,520 Speaker 2: And the reason why I stated is because it's becoming 16 00:01:02,600 --> 00:01:06,640 Speaker 2: quite apparent now that auction clearance rates are firming in 17 00:01:06,840 --> 00:01:11,559 Speaker 2: Sydney and Melbourne. At least they've been firming really since 18 00:01:11,920 --> 00:01:15,320 Speaker 2: the month of May, and I believe they will continue 19 00:01:15,360 --> 00:01:17,840 Speaker 2: to firm as we get into the second half of 20 00:01:17,920 --> 00:01:19,240 Speaker 2: twenty twenty five. 21 00:01:19,959 --> 00:01:23,559 Speaker 1: Now, just tell our listeners what those rates, those auction 22 00:01:23,600 --> 00:01:27,920 Speaker 1: clearance rates being the percentage that are sold on the 23 00:01:27,959 --> 00:01:31,880 Speaker 1: weekend when they go up for sale, Like what's healthy? 24 00:01:32,160 --> 00:01:34,880 Speaker 1: Where are they at? What's healthy and where have they been. 25 00:01:35,880 --> 00:01:38,880 Speaker 2: Well well, James, There's different methodologies out there. There's a 26 00:01:38,959 --> 00:01:41,800 Speaker 2: number of providers that provide including s Q and Research, 27 00:01:41,840 --> 00:01:45,560 Speaker 2: and we generally have a more conservative methodology employed for 28 00:01:45,600 --> 00:01:48,920 Speaker 2: these auction clearance rates. But in a nutshell, it's meant 29 00:01:49,000 --> 00:01:53,920 Speaker 2: to represent the proportion of properties which are sold versus 30 00:01:54,520 --> 00:01:59,600 Speaker 2: the number of properties scheduled for auction for the PEERI concern. 31 00:02:00,040 --> 00:02:03,840 Speaker 2: Usually the monitoring period is for the past week through 32 00:02:03,920 --> 00:02:09,160 Speaker 2: to the weekend, and preliminary measurements of clearance rates for 33 00:02:09,639 --> 00:02:14,360 Speaker 2: the past weeks through the last weekend suggests the clearance 34 00:02:14,440 --> 00:02:16,760 Speaker 2: rates were hovering in the sixty to seventy percent our 35 00:02:16,800 --> 00:02:21,200 Speaker 2: mark for Sydney and Melbourne. Now our more conservative measure 36 00:02:22,240 --> 00:02:26,600 Speaker 2: has clearence rates hovering now just by in the fifty 37 00:02:26,600 --> 00:02:31,160 Speaker 2: percent range. And historically when we've seen clearance rates on 38 00:02:31,360 --> 00:02:36,080 Speaker 2: our measurements hit fifty percent and rising, it's generally meant 39 00:02:36,080 --> 00:02:39,600 Speaker 2: that the housing market is starting to show acceleration. In 40 00:02:39,639 --> 00:02:42,639 Speaker 2: other words, housing prices are rising. 41 00:02:43,200 --> 00:02:45,840 Speaker 1: Okay, so, so you've seen the signs of improved temple 42 00:02:45,919 --> 00:02:48,520 Speaker 1: and just as supposed to put it into context, the 43 00:02:48,680 --> 00:02:52,680 Speaker 1: Cautality groups long time core logic, they say that national 44 00:02:52,680 --> 00:02:56,320 Speaker 1: hall prices are of five point eight percent year to deed, 45 00:02:56,400 --> 00:02:58,880 Speaker 1: that's not bad, just above the long term average. So 46 00:03:00,120 --> 00:03:04,359 Speaker 1: looking at it a bit more closely, Louis, I assume 47 00:03:04,400 --> 00:03:06,960 Speaker 1: what's really changing is that Sydney and Melbourne are coming 48 00:03:07,040 --> 00:03:07,720 Speaker 1: to the party. 49 00:03:08,960 --> 00:03:13,359 Speaker 2: That is correct, James, Yes, I believe housing prices are 50 00:03:13,480 --> 00:03:16,359 Speaker 2: now rising again in Sydney and Melbourne. They have been 51 00:03:16,480 --> 00:03:20,600 Speaker 2: rising essentially since the start of the year, but I 52 00:03:20,639 --> 00:03:24,480 Speaker 2: think the rate of growth has started to accelerate, particularly 53 00:03:24,520 --> 00:03:25,960 Speaker 2: since the last rate cut. 54 00:03:26,720 --> 00:03:30,320 Speaker 1: Okay, so if we've got average or so so far 55 00:03:30,440 --> 00:03:34,920 Speaker 1: this year, and we know that the big cities were 56 00:03:34,960 --> 00:03:37,440 Speaker 1: soft for some time, I mean, could we actually have 57 00:03:37,440 --> 00:03:41,760 Speaker 1: a better than average year across property prices residential prices nationwide? 58 00:03:43,040 --> 00:03:46,720 Speaker 2: Our forecast for calendar year twenty twenty five is that 59 00:03:46,880 --> 00:03:50,640 Speaker 2: capital city housing prices will rise somewhere between six to 60 00:03:50,680 --> 00:03:54,320 Speaker 2: ten percent. We had that forecast out from the start 61 00:03:54,360 --> 00:03:57,520 Speaker 2: of the year and we're feeling more and more confident 62 00:03:57,560 --> 00:03:59,960 Speaker 2: at that. Our forecast is actually going to come in. 63 00:04:00,480 --> 00:04:03,520 Speaker 1: So this swing factor is interest rates? Is it really 64 00:04:03,680 --> 00:04:05,880 Speaker 1: is that this outstanding issue that's changed. 65 00:04:06,120 --> 00:04:09,480 Speaker 2: It's a combination of two factors in our view, James, Yes, 66 00:04:09,640 --> 00:04:14,240 Speaker 2: interest rates definitely having an impact upon borrowing power and 67 00:04:14,360 --> 00:04:19,560 Speaker 2: purchasing power, especially for first home buyers. Second, too, that 68 00:04:20,080 --> 00:04:24,640 Speaker 2: we're still recording very strong population growth rates, so underlying 69 00:04:24,720 --> 00:04:30,920 Speaker 2: demand for accommodation across the country continues to increase, and 70 00:04:31,000 --> 00:04:35,400 Speaker 2: that's up against real constraints on the supply side. So 71 00:04:35,680 --> 00:04:39,919 Speaker 2: for this calendar year, we're likely to only build somewhere 72 00:04:40,040 --> 00:04:43,359 Speaker 2: around one hundred and fifty thousand new dwellings for the 73 00:04:43,440 --> 00:04:47,680 Speaker 2: calendar year, that's the likely number. But the population is 74 00:04:47,839 --> 00:04:51,240 Speaker 2: likely to expand by probably just under five hundred thousand 75 00:04:51,279 --> 00:04:55,600 Speaker 2: people for the calendar year. And clearly those two don't match. 76 00:04:55,400 --> 00:04:58,640 Speaker 1: Well, they don't match well. Yeah, I see. The other 77 00:04:58,680 --> 00:05:01,479 Speaker 1: thing that struck me that the question over the whole 78 00:05:01,520 --> 00:05:05,920 Speaker 1: thing was that properly stock at auction is at a 79 00:05:05,960 --> 00:05:10,239 Speaker 1: five year low. So we are at that point perhaps 80 00:05:10,279 --> 00:05:12,400 Speaker 1: where the market is getting better. Most people don't realize 81 00:05:12,400 --> 00:05:14,360 Speaker 1: it yet when they do realize that the property stock 82 00:05:14,400 --> 00:05:15,000 Speaker 1: will flood in. 83 00:05:17,600 --> 00:05:21,280 Speaker 2: Look, I think on our numbers, James, we're actually recording 84 00:05:21,360 --> 00:05:25,320 Speaker 2: better listing counts than that, especially for Sydney and Melbourne, 85 00:05:25,320 --> 00:05:29,200 Speaker 2: so we're not recording record lows and listings for Sydney Melbourne. 86 00:05:29,240 --> 00:05:32,040 Speaker 2: We have been recording record lows for listings in Perth 87 00:05:32,640 --> 00:05:36,640 Speaker 2: and in Adelaide, but for Sydney Melbourne we're actually back 88 00:05:36,680 --> 00:05:40,359 Speaker 2: to more normal long term averages after a period of 89 00:05:40,440 --> 00:05:42,280 Speaker 2: being at near record lows. 90 00:05:43,040 --> 00:05:45,760 Speaker 1: Okay, so that is what you would expect with the 91 00:05:45,800 --> 00:05:48,880 Speaker 1: market starting to improve that people would also what I'm 92 00:05:48,920 --> 00:05:51,160 Speaker 1: really driving at, is there any risk of overhang that 93 00:05:51,160 --> 00:05:53,440 Speaker 1: there will be properly stock will come on and soften 94 00:05:53,480 --> 00:05:54,520 Speaker 1: these numbers. 95 00:05:55,560 --> 00:05:59,880 Speaker 2: Not likely, James, As mentioned before, where we've been suffering 96 00:06:00,120 --> 00:06:03,440 Speaker 2: a multi year supply constraint which has been driven by 97 00:06:03,520 --> 00:06:05,880 Speaker 2: a host of factors. And when I look at the 98 00:06:05,880 --> 00:06:09,279 Speaker 2: building approval numbers, which is a leading indicator of new activity, 99 00:06:09,480 --> 00:06:11,680 Speaker 2: there's been a little bit of a pickup, but it's 100 00:06:11,839 --> 00:06:14,360 Speaker 2: not enough to suggest we're going to have an oversupply 101 00:06:14,560 --> 00:06:18,960 Speaker 2: situation in the housing market. Now, We've still got an 102 00:06:19,520 --> 00:06:24,039 Speaker 2: undersupply situation in housing market. One great example of that's 103 00:06:24,040 --> 00:06:26,800 Speaker 2: what's been happening in the rental market. We as a 104 00:06:26,839 --> 00:06:29,960 Speaker 2: research house, are still recording rental vacancy rates under two 105 00:06:30,040 --> 00:06:32,919 Speaker 2: percent for most of the nation, and that is a 106 00:06:33,160 --> 00:06:38,120 Speaker 2: signal that basically the rental market, he's still favoring landlords 107 00:06:38,120 --> 00:06:42,679 Speaker 2: over tenants, and it's obviously suggestive of a market which 108 00:06:42,880 --> 00:06:44,080 Speaker 2: is in shortage. 109 00:06:45,960 --> 00:06:48,560 Speaker 1: So Louis I mean the thing about for investors, the 110 00:06:48,640 --> 00:06:53,560 Speaker 1: yields have been improving post covered those years. They're improved 111 00:06:53,880 --> 00:06:55,800 Speaker 1: for the first time in a long time. What's the 112 00:06:55,839 --> 00:06:59,120 Speaker 1: picture now for investors in terms of rented yields. 113 00:07:00,560 --> 00:07:06,080 Speaker 2: Yes, rental yields increased over the period twenty twenty two 114 00:07:06,520 --> 00:07:11,880 Speaker 2: through to about twenty twenty four inclusive. And the primary 115 00:07:11,920 --> 00:07:14,960 Speaker 2: reason why we had an increase in rental yields was 116 00:07:15,000 --> 00:07:19,280 Speaker 2: the rise in interest rates per se, So investors were 117 00:07:19,320 --> 00:07:25,080 Speaker 2: demanding a higher return for their properties to compensate themselves 118 00:07:25,080 --> 00:07:28,320 Speaker 2: for the higher interest rate environment. And how they were 119 00:07:28,320 --> 00:07:31,080 Speaker 2: demanding that was effectively they were less in the market. 120 00:07:31,440 --> 00:07:34,160 Speaker 2: So rental a rising while housing prices weren't doing that 121 00:07:34,240 --> 00:07:37,320 Speaker 2: much at all, and that pushes up rental yields. Now, 122 00:07:37,360 --> 00:07:41,200 Speaker 2: of late, we've seen the stabilization and rental yields for 123 00:07:41,320 --> 00:07:45,360 Speaker 2: most parts of the country where housing prices are rising 124 00:07:45,840 --> 00:07:48,560 Speaker 2: at the same rate that rents are, and that has 125 00:07:48,640 --> 00:07:52,200 Speaker 2: meant a stabilization of rental yields. What this has meant 126 00:07:52,240 --> 00:07:54,760 Speaker 2: over all, though, is yes, rental yields are stabilized, but 127 00:07:54,800 --> 00:07:58,920 Speaker 2: there's still above long term averages and so there is 128 00:07:58,960 --> 00:08:01,160 Speaker 2: a bit of an enticement. Now we're getting interest right 129 00:08:01,200 --> 00:08:05,960 Speaker 2: cuts for investors the take advantage of these above long 130 00:08:06,040 --> 00:08:09,120 Speaker 2: term average rental yields and coming to the marketplace. 131 00:08:10,280 --> 00:08:12,400 Speaker 1: Yeah, so in many ways it sounds like it sounds 132 00:08:12,400 --> 00:08:16,520 Speaker 1: like pretty good conditions for the confident investor. That you've 133 00:08:16,560 --> 00:08:20,400 Speaker 1: got riates on coming down, you've got stable rental use, 134 00:08:20,440 --> 00:08:23,520 Speaker 1: you've got stable price growth both running more or less 135 00:08:23,520 --> 00:08:26,240 Speaker 1: long term averager even better. But of course the tempo 136 00:08:26,360 --> 00:08:28,720 Speaker 1: is approved, as you say, as you mentioned at the start, 137 00:08:28,720 --> 00:08:30,840 Speaker 1: the clearance rates kind of prove that. All right, we'll 138 00:08:30,880 --> 00:08:32,200 Speaker 1: take a show break and we will come back and 139 00:08:32,240 --> 00:08:34,760 Speaker 1: look at it from the investor point of view, and 140 00:08:34,800 --> 00:08:36,840 Speaker 1: we look at it in terms of where the action 141 00:08:36,960 --> 00:08:39,920 Speaker 1: may be, and we'll also cover the issue of apartment losses, 142 00:08:39,920 --> 00:08:42,080 Speaker 1: which have been a big issue on the show in 143 00:08:42,080 --> 00:08:54,200 Speaker 1: recent times. Back in the moment, one of the things, 144 00:08:54,240 --> 00:08:56,440 Speaker 1: louis when we were talking in the first segment. It 145 00:08:56,480 --> 00:09:01,000 Speaker 1: does sound good, but on closer inspections this market's quite 146 00:09:01,600 --> 00:09:07,560 Speaker 1: patchy still. You've had strong markets in Brisbane, Perth Athlete 147 00:09:07,640 --> 00:09:10,680 Speaker 1: soft market, Sydney and Melbourne. You've had very good numbers 148 00:09:10,720 --> 00:09:13,640 Speaker 1: on houses standardone houses, but some very soft markets in 149 00:09:13,679 --> 00:09:18,240 Speaker 1: apartments in the big cities, particularly Melbourne. What's the outlook 150 00:09:18,280 --> 00:09:19,680 Speaker 1: do you think for that picture? Do we get a 151 00:09:19,679 --> 00:09:20,679 Speaker 1: continuation of that? 152 00:09:21,440 --> 00:09:25,000 Speaker 2: Yes, Melbourne's been a very interesting market on the apartment side. 153 00:09:25,040 --> 00:09:30,920 Speaker 2: So we've definitely seen underperformance on apartment prices for the 154 00:09:31,000 --> 00:09:35,000 Speaker 2: last four to five years now in Melbourne. And I've 155 00:09:35,080 --> 00:09:39,160 Speaker 2: noted there's been a number of groups of contact our office, 156 00:09:39,160 --> 00:09:41,959 Speaker 2: for example, who think it's a great time to maybe 157 00:09:42,000 --> 00:09:44,520 Speaker 2: buy it because rental yields are higher in Melbourne. But 158 00:09:44,559 --> 00:09:47,400 Speaker 2: I think we need to consider, well, why have Melbourne 159 00:09:47,440 --> 00:09:51,280 Speaker 2: units been underperforming to begin with? What has actually driven that? 160 00:09:52,200 --> 00:09:57,520 Speaker 2: And to an extent, Melbourne's actually had some success increasing 161 00:09:57,559 --> 00:10:02,120 Speaker 2: the supply side of high density apartments over the last 162 00:10:02,160 --> 00:10:05,640 Speaker 2: three years, much better than say what's been happening on 163 00:10:05,679 --> 00:10:09,080 Speaker 2: the supply side in Sydney and in Brisbane and Adelaide 164 00:10:09,120 --> 00:10:12,800 Speaker 2: and pur Melbourne's had some success in getting some more 165 00:10:12,880 --> 00:10:15,280 Speaker 2: dwellings built now that might be one of the reasons 166 00:10:15,360 --> 00:10:19,439 Speaker 2: for it, and so on the flip side. That's a 167 00:10:19,480 --> 00:10:21,680 Speaker 2: positive thing for rent it's no question about that. But 168 00:10:21,760 --> 00:10:25,720 Speaker 2: it has been so great for investors. Will this continue 169 00:10:25,720 --> 00:10:28,880 Speaker 2: going forward in tones of relatively good supply in the 170 00:10:28,920 --> 00:10:31,840 Speaker 2: Melbourne market, I'm not so sure. I'm not so sure. 171 00:10:32,320 --> 00:10:35,840 Speaker 2: And I note that the rental yields were recording in 172 00:10:35,880 --> 00:10:38,960 Speaker 2: the Melbourne UNI market are the heis they've ever been 173 00:10:39,040 --> 00:10:42,720 Speaker 2: since we started records in two thousand and nine. So 174 00:10:42,960 --> 00:10:45,360 Speaker 2: when you look at the straight out fundamentals in terms 175 00:10:45,360 --> 00:10:47,920 Speaker 2: of the data the rental yields, it's suggesting that Melbourne 176 00:10:48,000 --> 00:10:51,600 Speaker 2: units could be a goodbye right now. I'm unsure where 177 00:10:51,640 --> 00:10:53,240 Speaker 2: it is. I'm not putting my hat on to say 178 00:10:53,280 --> 00:10:56,040 Speaker 2: you must buy where you should buy Melbourne units right now. 179 00:10:56,080 --> 00:10:59,560 Speaker 2: I think there's still challenges with the state economy, with 180 00:11:00,120 --> 00:11:03,560 Speaker 2: local councils in Melbourne, and with the state government in 181 00:11:03,640 --> 00:11:08,079 Speaker 2: terms of taxation surrounding property investing. But nevertheless, the facts 182 00:11:08,080 --> 00:11:11,440 Speaker 2: are the facts. If you were to buy in Melbourne now, 183 00:11:11,800 --> 00:11:13,880 Speaker 2: you'll be getting in the historically high yield. 184 00:11:14,440 --> 00:11:17,760 Speaker 1: What are those years compared to what a person might expect. 185 00:11:17,800 --> 00:11:21,240 Speaker 1: I'm assuming they used to be two and three percent. 186 00:11:22,240 --> 00:11:22,880 Speaker 1: What are they now? 187 00:11:24,080 --> 00:11:28,760 Speaker 2: Yes, Melbourne units, the average gross rental yield as a 188 00:11:28,880 --> 00:11:33,960 Speaker 2: July twenty twenty five was four point eight percent. Now 189 00:11:34,040 --> 00:11:38,360 Speaker 2: the long term marriage we've got it is about four 190 00:11:38,400 --> 00:11:42,800 Speaker 2: point two percent, so we're about six hundred bases points 191 00:11:42,800 --> 00:11:44,239 Speaker 2: above the long term average. 192 00:11:46,000 --> 00:11:48,160 Speaker 1: Do they like years for country towns? Aren't they accepted 193 00:11:48,200 --> 00:11:50,240 Speaker 1: to city of five million? I mean, from a face 194 00:11:50,320 --> 00:11:53,960 Speaker 1: value would seem to be a really good investment scenario. 195 00:11:54,040 --> 00:11:57,440 Speaker 1: But you did mention concerns, particularly around state taxes. 196 00:11:59,080 --> 00:12:02,640 Speaker 2: Yeah, that's right, I mean things you know. I think 197 00:12:03,120 --> 00:12:07,719 Speaker 2: I'm a strong believer that the housing markets across not 198 00:12:07,760 --> 00:12:10,680 Speaker 2: just Australia, but across the world that develops world, have 199 00:12:10,800 --> 00:12:16,160 Speaker 2: become increasingly efficient. In other words, the markets quickly pricing 200 00:12:16,240 --> 00:12:19,480 Speaker 2: what is known in the marketplace, all the pros and 201 00:12:19,600 --> 00:12:24,120 Speaker 2: cons to invest in. And yes, as mentioned, I think 202 00:12:24,160 --> 00:12:29,080 Speaker 2: these elevated yields in Melbourne units have occurred because we've 203 00:12:29,120 --> 00:12:33,000 Speaker 2: seen a better supply response and we've also seen a 204 00:12:33,040 --> 00:12:36,320 Speaker 2: situation where investors have been a little bit more cautious 205 00:12:36,320 --> 00:12:40,400 Speaker 2: about buying into the Victorian state economy. 206 00:12:41,240 --> 00:12:44,160 Speaker 1: Yeah, yeah, I wonder is that. So I suppose the 207 00:12:44,240 --> 00:12:46,520 Speaker 1: Bellion dollar question is whether it's structural, whether the moment 208 00:12:46,600 --> 00:12:48,920 Speaker 1: becomes this city where there's got good years and poor 209 00:12:48,960 --> 00:12:50,240 Speaker 1: growth because of the supply. 210 00:12:51,520 --> 00:12:55,120 Speaker 2: Potentially it could that's definitely factor in all less we 211 00:12:55,200 --> 00:12:59,240 Speaker 2: must we must note population growth still running strong, and 212 00:12:59,280 --> 00:13:02,920 Speaker 2: it's still running strong for the state of Victoria. So 213 00:13:03,200 --> 00:13:08,599 Speaker 2: absorption rates for new stock are relatively high in Victoria, 214 00:13:09,280 --> 00:13:14,679 Speaker 2: and so there is the possibility, and probably it's more 215 00:13:14,720 --> 00:13:18,760 Speaker 2: than the possibility that we will actually see rental yields 216 00:13:18,840 --> 00:13:22,800 Speaker 2: fall from here, especially with the rate cuts, and so 217 00:13:23,320 --> 00:13:26,720 Speaker 2: that would mean prices would be rising for Melbourne units. 218 00:13:26,760 --> 00:13:30,240 Speaker 2: And I think we will see price rises for Melbourne 219 00:13:30,320 --> 00:13:32,160 Speaker 2: units in the second half of this year. 220 00:13:33,400 --> 00:13:38,160 Speaker 1: Okay, that's really interesting. So in terms of bargain hunting, 221 00:13:38,400 --> 00:13:40,800 Speaker 1: it would seem to be the place to do so, 222 00:13:40,960 --> 00:13:43,120 Speaker 1: but you're still skeptical. It's interest if you have people 223 00:13:43,120 --> 00:13:45,200 Speaker 1: on the show who openly say this is a bargain. 224 00:13:45,240 --> 00:13:46,640 Speaker 1: This is a city of five million people. 225 00:13:47,120 --> 00:13:50,200 Speaker 2: Probably fair to say, James, we're cautious. But I think overall, 226 00:13:50,240 --> 00:13:53,160 Speaker 2: for the overall housing market for our largest cities, we're 227 00:13:53,200 --> 00:13:56,920 Speaker 2: becoming more and more bullish given the rate cuts, given 228 00:13:56,920 --> 00:14:00,000 Speaker 2: what we're seeing in auction clearance rates overall. 229 00:14:00,000 --> 00:14:02,920 Speaker 1: Okay, well, what I have you want? It's your if 230 00:14:02,920 --> 00:14:04,440 Speaker 1: you could. If I said to you, I want you 231 00:14:04,480 --> 00:14:07,720 Speaker 1: to buy an investment property and if you like, and 232 00:14:07,760 --> 00:14:10,240 Speaker 1: you have to do it in the next month, I 233 00:14:10,280 --> 00:14:11,960 Speaker 1: want you to think in terms of regions, where would 234 00:14:11,960 --> 00:14:12,400 Speaker 1: you be looking. 235 00:14:13,760 --> 00:14:19,760 Speaker 2: Ah, I've been stating for a number of years now, 236 00:14:19,760 --> 00:14:22,520 Speaker 2: ever since the announcement of the twenty thirty two Winter 237 00:14:22,600 --> 00:14:26,400 Speaker 2: Olympics that we have that I have a view that 238 00:14:26,520 --> 00:14:30,640 Speaker 2: Brisbane's likely to outperform other capital cities over that period 239 00:14:30,680 --> 00:14:34,760 Speaker 2: through to the opening of the Olympics. And I retain 240 00:14:34,920 --> 00:14:37,680 Speaker 2: that few that doesn't mean it's going to outperform in 241 00:14:37,840 --> 00:14:42,400 Speaker 2: all periods, but for the entire period it is likely 242 00:14:42,480 --> 00:14:46,600 Speaker 2: to outperform. And I think for this year Brisbane's likely 243 00:14:46,640 --> 00:14:50,400 Speaker 2: to record perhaps slower capital growth or capital growth that's 244 00:14:50,440 --> 00:14:53,440 Speaker 2: in line with Sydney and Melbourne, but the expectation is 245 00:14:53,480 --> 00:14:56,800 Speaker 2: still there. Brisbane is going to outperform through to the 246 00:14:56,840 --> 00:15:00,000 Speaker 2: twenty thirty two Winter Olympics. And the reason why I 247 00:15:00,120 --> 00:15:02,520 Speaker 2: say that it's not so much the infrastructure that's going 248 00:15:02,560 --> 00:15:05,440 Speaker 2: into the winter Olympics, so not the Winter Olympics, the 249 00:15:05,440 --> 00:15:11,480 Speaker 2: Summer Olympics. It's the strong overall population, right, You wouldn't 250 00:15:11,480 --> 00:15:13,440 Speaker 2: want to do Winter Olympics in prison, that's sure. 251 00:15:14,600 --> 00:15:16,560 Speaker 1: You're ord enough to remember the run up to the 252 00:15:16,560 --> 00:15:20,280 Speaker 1: Cydny Olympics, I imagine, and the extraordinary property market in Sydney. 253 00:15:20,720 --> 00:15:23,200 Speaker 2: Well, that's right, and that run up to the summer 254 00:15:23,280 --> 00:15:27,600 Speaker 2: the two thousand Summer Olympics, between essentially nineteen ninety three 255 00:15:27,640 --> 00:15:31,560 Speaker 2: to the two thousand city did actually outperform most other 256 00:15:31,720 --> 00:15:33,200 Speaker 2: capital cities over that time. 257 00:15:34,280 --> 00:15:36,800 Speaker 1: Yes, yes it did, and I suppose to be fair 258 00:15:36,840 --> 00:15:39,040 Speaker 1: to everyone listening, it's also worth having a look what 259 00:15:39,120 --> 00:15:42,160 Speaker 1: happened after two thousand where Sydney underperformed for a while 260 00:15:42,160 --> 00:15:44,600 Speaker 1: because you had that amazing pull forward. But from an 261 00:15:44,600 --> 00:15:47,000 Speaker 1: investment point of view, there's plenty of time in it. Okay, 262 00:15:47,160 --> 00:15:49,080 Speaker 1: really interesting answer, Louie, Thank you very much. We have 263 00:15:49,160 --> 00:15:52,320 Speaker 1: some really good questions and they're actually quite focused on 264 00:15:52,400 --> 00:15:54,520 Speaker 1: property and property investments, so we will be back in 265 00:15:54,560 --> 00:16:06,960 Speaker 1: a minute. Hello, Welcome back to the Australian's Money Puzzle podcast, 266 00:16:07,080 --> 00:16:11,440 Speaker 1: James Covey with Louis Christopher from SQM Research. Louis one 267 00:16:11,440 --> 00:16:15,440 Speaker 1: of the voices independent voices on the property market. And 268 00:16:15,480 --> 00:16:17,200 Speaker 1: that's why I love having him on the show, because 269 00:16:17,200 --> 00:16:22,040 Speaker 1: he's not selling, he is examining, and that gives us 270 00:16:22,040 --> 00:16:25,080 Speaker 1: a great sort of independent view on helicopter view of 271 00:16:25,120 --> 00:16:30,040 Speaker 1: the market. Nathan says on the performance of apartments, in 272 00:16:30,080 --> 00:16:33,160 Speaker 1: line with the wider discussion you raised around tax reform, 273 00:16:33,480 --> 00:16:36,680 Speaker 1: do you think the treasure may consider tax incentives for 274 00:16:36,760 --> 00:16:40,080 Speaker 1: people to buy apartments as opposed to houses as one 275 00:16:40,120 --> 00:16:46,280 Speaker 1: measure to combat the housing crisis. That's a really interesting idea. 276 00:16:47,360 --> 00:16:50,560 Speaker 1: There is no rules on all these grants, on all 277 00:16:50,640 --> 00:16:55,600 Speaker 1: these incentives stretching from first home super saver, first home 278 00:16:55,640 --> 00:17:00,760 Speaker 1: buyer guarantee, shared equity. They don't ever frenzy between the two. 279 00:17:00,880 --> 00:17:03,680 Speaker 1: Do they do it as I'm as I know they don't. 280 00:17:04,200 --> 00:17:07,159 Speaker 2: No, they don't. And James, I have a personal fundamental 281 00:17:07,200 --> 00:17:11,639 Speaker 2: issue with taxes, which I think are to property taxes 282 00:17:11,680 --> 00:17:13,480 Speaker 2: which I think are too high to begin with and 283 00:17:13,560 --> 00:17:19,240 Speaker 2: discourage new property development. Being overlaid with subsidies sounds awfully 284 00:17:19,240 --> 00:17:21,240 Speaker 2: inefficient to meet, James. 285 00:17:21,200 --> 00:17:24,000 Speaker 1: Right, you're saying, yeah, yeah, you've got high taxes and 286 00:17:24,040 --> 00:17:26,640 Speaker 1: then you put in lots of incentives, which is. 287 00:17:26,640 --> 00:17:29,360 Speaker 2: Like, yeah, that's exactly right. When you see a new 288 00:17:29,480 --> 00:17:32,000 Speaker 2: dwelling out there, whether it be a new home or 289 00:17:32,040 --> 00:17:36,560 Speaker 2: a new apartment, you can assume, depending on the state, 290 00:17:37,000 --> 00:17:40,040 Speaker 2: that thirty to forty percent of the cost of that 291 00:17:40,160 --> 00:17:44,800 Speaker 2: new dwelling is being driven by taxes. It's all. It's 292 00:17:44,840 --> 00:17:46,399 Speaker 2: you know, thirty to forty percent of the cost of 293 00:17:46,440 --> 00:17:50,600 Speaker 2: that dwelling is taxes. Why is it so high? And 294 00:17:50,680 --> 00:17:55,800 Speaker 2: I'm talking about a combination of local taxes, state taxes, 295 00:17:56,119 --> 00:18:00,920 Speaker 2: federal taxes. That's what that's basically what's baked into the 296 00:18:00,960 --> 00:18:03,800 Speaker 2: cost of every new home you see, and it just 297 00:18:03,840 --> 00:18:05,840 Speaker 2: seems to be way too high to meet. 298 00:18:06,560 --> 00:18:08,920 Speaker 1: A stamp duty the outstanding tax. 299 00:18:09,640 --> 00:18:12,560 Speaker 2: Stamp duty yep, stamp duty would be one as you know, 300 00:18:12,640 --> 00:18:16,159 Speaker 2: like rates as well, the cost of you know, local 301 00:18:16,200 --> 00:18:19,679 Speaker 2: council approving a development and everything that they want in 302 00:18:19,760 --> 00:18:24,240 Speaker 2: return to get a development up. On average, you know, 303 00:18:24,760 --> 00:18:27,120 Speaker 2: thirty to forty percent of the cost of a new 304 00:18:27,200 --> 00:18:30,479 Speaker 2: dwelling has been driven by taxes. And that's what in 305 00:18:30,520 --> 00:18:33,360 Speaker 2: my view, we've got to try and aim for over 306 00:18:33,400 --> 00:18:37,080 Speaker 2: the long term, real taxation reform so we can get 307 00:18:37,160 --> 00:18:40,280 Speaker 2: those costs down. And if we were to do that, 308 00:18:40,840 --> 00:18:44,320 Speaker 2: I think we would see an increase in supply from developers. Now, 309 00:18:44,320 --> 00:18:46,399 Speaker 2: there's a few other things we need to do, and 310 00:18:46,440 --> 00:18:48,439 Speaker 2: I think when it comes to builders and developers, you've 311 00:18:48,440 --> 00:18:49,639 Speaker 2: got to have a bit of a carrot and a 312 00:18:49,680 --> 00:18:53,640 Speaker 2: stick approach towards that industry. The stick being it, if 313 00:18:53,720 --> 00:18:56,840 Speaker 2: they do not build quality buildings, they really need to 314 00:18:56,840 --> 00:19:00,800 Speaker 2: be punished. But the carrot also being that, Okay, if 315 00:19:00,800 --> 00:19:03,720 Speaker 2: I can build quality, let's get that bride given point 316 00:19:03,800 --> 00:19:07,440 Speaker 2: down and that should increase the supply side for the country. 317 00:19:08,320 --> 00:19:11,320 Speaker 1: Okay, Well, yes, no sign of any of that coming through. 318 00:19:11,359 --> 00:19:13,840 Speaker 1: There is a big tax, big tax get together later 319 00:19:14,000 --> 00:19:17,040 Speaker 1: in the year, which everyone has high hopes for. I 320 00:19:17,960 --> 00:19:21,159 Speaker 1: don't know certainly from what the attempts so far in 321 00:19:21,200 --> 00:19:24,320 Speaker 1: the top property area for both federal labor and in 322 00:19:24,359 --> 00:19:26,600 Speaker 1: the States, I wouldn't be holding my bread. 323 00:19:26,840 --> 00:19:29,520 Speaker 2: I would to day the jains. I'm merely studying what 324 00:19:29,560 --> 00:19:31,960 Speaker 2: should happen, But what will happen will either not a factor? 325 00:19:33,240 --> 00:19:36,760 Speaker 1: Yes, all right, Bruce and Paul say on realized gains, 326 00:19:37,119 --> 00:19:39,440 Speaker 1: Bruce says, I strongly disagree with both the taxing of 327 00:19:39,560 --> 00:19:43,399 Speaker 1: unrealized gains and not indexing this new supertax. However, some 328 00:19:43,440 --> 00:19:45,679 Speaker 1: people have raised the issue of council rates as an 329 00:19:45,760 --> 00:19:49,920 Speaker 1: example of present day taxing of unrealized gains. You were 330 00:19:49,920 --> 00:19:53,320 Speaker 1: not impressed with this in comparison. Could you please elaborate 331 00:19:53,400 --> 00:19:57,680 Speaker 1: what was your main objection? Okay, So the predominant narrative 332 00:19:57,760 --> 00:19:59,840 Speaker 1: right on the supertax is that it's never been done 333 00:19:59,880 --> 00:20:03,439 Speaker 1: with for unrealized gains in such a fashion core to 334 00:20:03,640 --> 00:20:06,119 Speaker 1: the taxing. Putting it into the tax system is not 335 00:20:06,160 --> 00:20:08,720 Speaker 1: a good thing, and if it unworsted, it might expand 336 00:20:08,760 --> 00:20:11,159 Speaker 1: if you like. And then people say, well, you know, 337 00:20:11,200 --> 00:20:14,639 Speaker 1: on property, you've got unrealized gain taxes, you've got counseled rich, 338 00:20:14,720 --> 00:20:18,000 Speaker 1: you've got land tax I would just say, yes, you do. 339 00:20:19,080 --> 00:20:23,320 Speaker 1: But they are very much based on intrinsic value of property, 340 00:20:23,400 --> 00:20:26,240 Speaker 1: which is where the valuation has lifted from A to B. 341 00:20:26,440 --> 00:20:29,600 Speaker 1: The property is standing there, it's bricks and mortar. It's 342 00:20:29,640 --> 00:20:35,760 Speaker 1: pretty reliable. In the new supertax, a person could buy bitcoin, 343 00:20:35,880 --> 00:20:38,040 Speaker 1: they could buy a gold miner, they could buy a 344 00:20:38,080 --> 00:20:42,080 Speaker 1: startup that the price of that could quadruple. They would 345 00:20:42,080 --> 00:20:44,960 Speaker 1: be hit with a tax bill for that quadrupling in 346 00:20:45,240 --> 00:20:49,200 Speaker 1: entirely theoretical paper gains. The following year the thing falls 347 00:20:49,240 --> 00:20:55,960 Speaker 1: by fifty percent, and you see the problems. It's very illogical, 348 00:20:56,720 --> 00:21:00,000 Speaker 1: inefficient to put mildly tax. It's going on unrealized gains, 349 00:21:00,080 --> 00:21:03,440 Speaker 1: and all sorts of unexpected and unintended consequences will occur. 350 00:21:03,520 --> 00:21:06,760 Speaker 1: We're already seeing them in this super tax. It's hitting 351 00:21:08,160 --> 00:21:10,240 Speaker 1: people are starting to realize. It'll hit frank dividends, it'll 352 00:21:10,280 --> 00:21:14,160 Speaker 1: hit narratives and super it'll hit private pension payments. Because 353 00:21:14,200 --> 00:21:20,800 Speaker 1: it's unrealized gains, it's a very broad, crude measure of 354 00:21:20,920 --> 00:21:25,080 Speaker 1: how people's finances are changing. Do you think Louis. 355 00:21:25,480 --> 00:21:28,440 Speaker 2: James couldn't have said it better myself? Look, I think 356 00:21:28,480 --> 00:21:31,680 Speaker 2: when it comes to the new super tax proposal, I've 357 00:21:31,720 --> 00:21:35,199 Speaker 2: generally taken a view that look, it's understandable why the 358 00:21:35,280 --> 00:21:37,560 Speaker 2: rate would be increased to thirty percent for those who 359 00:21:37,600 --> 00:21:40,280 Speaker 2: are sitting on over three million dollars. I've had three 360 00:21:40,359 --> 00:21:43,600 Speaker 2: issues with it. The issue, as you've rightly pointed out, 361 00:21:43,600 --> 00:21:47,240 Speaker 2: the paper games, which I think will be very inefficient. 362 00:21:47,320 --> 00:21:49,119 Speaker 2: And then the other issue I have, which has been 363 00:21:49,200 --> 00:21:51,480 Speaker 2: raised more and more in the media, is the fact 364 00:21:51,520 --> 00:21:54,240 Speaker 2: that the three million dollars is not going to be indexed, 365 00:21:54,480 --> 00:21:58,520 Speaker 2: not initially anyway, And so that means that over the 366 00:21:58,560 --> 00:22:01,439 Speaker 2: long term, assuming that three mens dolls is not adjusted, 367 00:22:01,960 --> 00:22:05,000 Speaker 2: you will see the average income earn or the average 368 00:22:05,000 --> 00:22:09,879 Speaker 2: supervaluation balance being impacted by this additional tax. 369 00:22:10,200 --> 00:22:12,560 Speaker 1: Will it keep the serf managed super funds away from 370 00:22:12,640 --> 00:22:13,440 Speaker 1: property investment? 371 00:22:14,080 --> 00:22:16,880 Speaker 2: Yeah, it could, It could absolutely. 372 00:22:16,680 --> 00:22:18,720 Speaker 1: Because it's so liquid. It's kind of a sitting dock 373 00:22:18,800 --> 00:22:22,679 Speaker 1: for on realized gains tax, isn't it. 374 00:22:22,119 --> 00:22:25,280 Speaker 2: It is it is now that said though, look, it's 375 00:22:25,280 --> 00:22:29,159 Speaker 2: pretty easy to get evaluation these days on a residential 376 00:22:29,200 --> 00:22:33,960 Speaker 2: property in particular, so and those valuations are reasonably reliable 377 00:22:34,600 --> 00:22:38,119 Speaker 2: and they generally tend to be fairly stable, So you know, 378 00:22:38,160 --> 00:22:39,919 Speaker 2: that's probably one thing in a positive and you know, 379 00:22:39,960 --> 00:22:42,320 Speaker 2: I take your take on board what you said that 380 00:22:42,400 --> 00:22:44,680 Speaker 2: your comment surrounding, for example, be coin and things which 381 00:22:44,720 --> 00:22:47,560 Speaker 2: are more volatile, and I agree with you one hundred percent. 382 00:22:47,760 --> 00:22:51,679 Speaker 1: It's interesting that property people are being relatively quiet in 383 00:22:51,720 --> 00:22:53,160 Speaker 1: relation to this super tax. 384 00:22:54,040 --> 00:22:54,520 Speaker 2: So far. 385 00:22:55,000 --> 00:22:58,320 Speaker 1: Most of the complaints and protests are from for fairly 386 00:22:58,320 --> 00:23:01,400 Speaker 1: obvious corners, if one managers Jeff Wilson, a self managed 387 00:23:01,440 --> 00:23:04,439 Speaker 1: super funds association peter Burg as people like that very 388 00:23:04,520 --> 00:23:09,080 Speaker 1: much out on front. But the property. The property sector 389 00:23:09,119 --> 00:23:11,040 Speaker 1: has been fairly quiet about it. But I would have 390 00:23:11,080 --> 00:23:13,360 Speaker 1: thought that if this gets in and as you say, 391 00:23:13,400 --> 00:23:16,920 Speaker 1: it's not indexed, and everyone's calling for it to be indexed, 392 00:23:16,960 --> 00:23:19,600 Speaker 1: I mean, the ACTU is calling for it to be indexed, 393 00:23:20,200 --> 00:23:21,960 Speaker 1: but the government seem to be set in their ways 394 00:23:21,960 --> 00:23:25,360 Speaker 1: that they won't index it, then mathematically more people will 395 00:23:25,400 --> 00:23:28,480 Speaker 1: be caught very quickly. And in property terms, three million 396 00:23:28,600 --> 00:23:29,960 Speaker 1: is not a gigantic number anymore. 397 00:23:30,119 --> 00:23:33,399 Speaker 2: No, that's exactly. Three million dollars is not a gigantic number. 398 00:23:33,640 --> 00:23:38,040 Speaker 2: But the proportion of self managed super fund investors who 399 00:23:38,119 --> 00:23:41,040 Speaker 2: are invested in properly compared to all buys and all 400 00:23:41,080 --> 00:23:44,960 Speaker 2: line owners is actually quite small relative to say your 401 00:23:45,040 --> 00:23:49,639 Speaker 2: suburban advisor or fund manager, where you know a lot 402 00:23:49,920 --> 00:23:54,600 Speaker 2: of their fund is made up of a superannuation investors. 403 00:23:55,800 --> 00:23:58,920 Speaker 1: Yes, well, of course, call a chicken and egg there. 404 00:23:58,960 --> 00:24:02,000 Speaker 1: I mean, the super funds would be much more keen 405 00:24:02,000 --> 00:24:04,320 Speaker 1: on property if there was a bit of if there 406 00:24:04,359 --> 00:24:06,000 Speaker 1: was a bit of a market, and if the banks 407 00:24:06,000 --> 00:24:08,200 Speaker 1: would offer some loans. At the moment they have to 408 00:24:08,200 --> 00:24:10,280 Speaker 1: pay the highest loans in the market, the highest lending 409 00:24:10,359 --> 00:24:13,000 Speaker 1: rates in the market, and there's a constant threat over 410 00:24:13,040 --> 00:24:17,439 Speaker 1: the whole area of borrowing for property in Super, and 411 00:24:17,520 --> 00:24:20,120 Speaker 1: it never goes away. It comes and goes and people, 412 00:24:20,359 --> 00:24:22,399 Speaker 1: you know, every year it's sort of under threat. So 413 00:24:22,680 --> 00:24:25,240 Speaker 1: you've got the fact that it may not be allowed forever. 414 00:24:25,520 --> 00:24:28,040 Speaker 1: You've got the fact that there isn't much of a market, 415 00:24:28,080 --> 00:24:31,919 Speaker 1: so you've got to pay top donor for borrowing inside Super, 416 00:24:31,960 --> 00:24:34,159 Speaker 1: and your negative gearing isn't as good. So I suppose 417 00:24:34,200 --> 00:24:36,200 Speaker 1: in a way there's a sort of explanation why super 418 00:24:36,280 --> 00:24:38,560 Speaker 1: self managed Super isn't as big in property as we 419 00:24:38,680 --> 00:24:43,399 Speaker 1: might reasonably expect. We'll see. I wonder got feeling I 420 00:24:43,440 --> 00:24:47,639 Speaker 1: think they'll indexes as a sort of a as a 421 00:24:47,680 --> 00:24:51,439 Speaker 1: sort of a sp basically to increasingly loud protests. But 422 00:24:51,480 --> 00:24:53,600 Speaker 1: then they'll push ahead on on realliance. What do you think. 423 00:24:53,800 --> 00:24:56,080 Speaker 2: I think there'll be a compromise some way, James, and 424 00:24:56,119 --> 00:24:59,600 Speaker 2: the compromise, the logical compromise would be indexation with three 425 00:24:59,680 --> 00:25:00,200 Speaker 2: other things free. 426 00:25:00,640 --> 00:25:02,679 Speaker 1: Right. But we'll see. If someone said to me the 427 00:25:02,680 --> 00:25:04,720 Speaker 1: other day, everything gets indexed in the end, and I said, no, 428 00:25:04,800 --> 00:25:08,040 Speaker 1: it doesn't actually not. So there's a division. Two ninety 429 00:25:08,000 --> 00:25:11,159 Speaker 1: three super Text, the high income Supertext. It started with 430 00:25:11,200 --> 00:25:13,760 Speaker 1: no indexing and it's running for twelve years. It's ever 431 00:25:13,760 --> 00:25:18,680 Speaker 1: been indexed, so don't assume that this will happen. We'll see. Hey, Louie, 432 00:25:18,800 --> 00:25:20,560 Speaker 1: thank you very much for being on the show. Terrific 433 00:25:20,560 --> 00:25:22,399 Speaker 1: to have you, Great to get that helicopter view on 434 00:25:22,440 --> 00:25:23,760 Speaker 1: the investment property market. 435 00:25:24,080 --> 00:25:27,439 Speaker 2: Great to be with you and your audience once again, James, terrific. 436 00:25:27,480 --> 00:25:30,359 Speaker 1: That was Louis Christopher of the SQM group. And let's 437 00:25:30,400 --> 00:25:33,520 Speaker 1: see if Louie's got it right and the market is turning, 438 00:25:33,840 --> 00:25:35,520 Speaker 1: we will be keeping a very close eye on it 439 00:25:35,560 --> 00:25:38,560 Speaker 1: the weeks ahead. Let's have some more correspondence the Money 440 00:25:38,560 --> 00:25:41,680 Speaker 1: Puzzle at the Australian dot com dot au. Talk to 441 00:25:41,720 --> 00:25:42,120 Speaker 1: you soon.