WEBVTT - Here comes the property rebound 0:00:09.680 --> 0:00:13.080 Hello and welcome to the Australians Money Puzzle podcast. I'm 0:00:13.160 --> 0:00:16.480 James Kirby. Welcome aboard everybody. Now, so far this year 0:00:16.520 --> 0:00:18.759 has been all about the share markets, which really have 0:00:18.840 --> 0:00:23.440 been running hot for some time, and property really having 0:00:23.440 --> 0:00:26.040 something of a soft period, certainly in the first few 0:00:26.079 --> 0:00:28.920 months of the calendar year twenty twenty five. But in 0:00:28.960 --> 0:00:33.879 recent weeks we are seeing signs that the Australian property 0:00:33.920 --> 0:00:37.839 market may be ready to rebound, especially in the larger cities. 0:00:38.080 --> 0:00:41.680 My guest today is Louis Christopher of the SQM Research Group, 0:00:41.720 --> 0:00:45.720 and he is on the record saying the horse is 0:00:45.760 --> 0:00:49.440 about to bolt. The horse is about to bolt. Discuss 0:00:49.560 --> 0:00:51.839 how are you, Louis, Yeah, nice to. 0:00:51.800 --> 0:00:54.640 Be with you once again, James and your audience. Yes, 0:00:54.920 --> 0:00:59.240 I did starke that over the weakend imagine media mast head. 0:00:59.640 --> 0:01:02.520 And the reason why I stated is because it's becoming 0:01:02.600 --> 0:01:06.640 quite apparent now that auction clearance rates are firming in 0:01:06.840 --> 0:01:11.559 Sydney and Melbourne. At least they've been firming really since 0:01:11.920 --> 0:01:15.320 the month of May, and I believe they will continue 0:01:15.360 --> 0:01:17.840 to firm as we get into the second half of 0:01:17.920 --> 0:01:19.240 twenty twenty five. 0:01:19.959 --> 0:01:23.559 Now, just tell our listeners what those rates, those auction 0:01:23.600 --> 0:01:27.920 clearance rates being the percentage that are sold on the 0:01:27.959 --> 0:01:31.880 weekend when they go up for sale, Like what's healthy? 0:01:32.160 --> 0:01:34.880 Where are they at? What's healthy and where have they been. 0:01:35.880 --> 0:01:38.880 Well well, James, There's different methodologies out there. There's a 0:01:38.959 --> 0:01:41.800 number of providers that provide including s Q and Research, 0:01:41.840 --> 0:01:45.560 and we generally have a more conservative methodology employed for 0:01:45.600 --> 0:01:48.920 these auction clearance rates. But in a nutshell, it's meant 0:01:49.000 --> 0:01:53.920 to represent the proportion of properties which are sold versus 0:01:54.520 --> 0:01:59.600 the number of properties scheduled for auction for the PEERI concern. 0:02:00.040 --> 0:02:03.840 Usually the monitoring period is for the past week through 0:02:03.920 --> 0:02:09.160 to the weekend, and preliminary measurements of clearance rates for 0:02:09.639 --> 0:02:14.360 the past weeks through the last weekend suggests the clearance 0:02:14.440 --> 0:02:16.760 rates were hovering in the sixty to seventy percent our 0:02:16.800 --> 0:02:21.200 mark for Sydney and Melbourne. Now our more conservative measure 0:02:22.240 --> 0:02:26.600 has clearence rates hovering now just by in the fifty 0:02:26.600 --> 0:02:31.160 percent range. And historically when we've seen clearance rates on 0:02:31.360 --> 0:02:36.080 our measurements hit fifty percent and rising, it's generally meant 0:02:36.080 --> 0:02:39.600 that the housing market is starting to show acceleration. In 0:02:39.639 --> 0:02:42.639 other words, housing prices are rising. 0:02:43.200 --> 0:02:45.840 Okay, so, so you've seen the signs of improved temple 0:02:45.919 --> 0:02:48.520 and just as supposed to put it into context, the 0:02:48.680 --> 0:02:52.680 Cautality groups long time core logic, they say that national 0:02:52.680 --> 0:02:56.320 hall prices are of five point eight percent year to deed, 0:02:56.400 --> 0:02:58.880 that's not bad, just above the long term average. So 0:03:00.120 --> 0:03:04.359 looking at it a bit more closely, Louis, I assume 0:03:04.400 --> 0:03:06.960 what's really changing is that Sydney and Melbourne are coming 0:03:07.040 --> 0:03:07.720 to the party. 0:03:08.960 --> 0:03:13.359 That is correct, James, Yes, I believe housing prices are 0:03:13.480 --> 0:03:16.359 now rising again in Sydney and Melbourne. They have been 0:03:16.480 --> 0:03:20.600 rising essentially since the start of the year, but I 0:03:20.639 --> 0:03:24.480 think the rate of growth has started to accelerate, particularly 0:03:24.520 --> 0:03:25.960 since the last rate cut. 0:03:26.720 --> 0:03:30.320 Okay, so if we've got average or so so far 0:03:30.440 --> 0:03:34.920 this year, and we know that the big cities were 0:03:34.960 --> 0:03:37.440 soft for some time, I mean, could we actually have 0:03:37.440 --> 0:03:41.760 a better than average year across property prices residential prices nationwide? 0:03:43.040 --> 0:03:46.720 Our forecast for calendar year twenty twenty five is that 0:03:46.880 --> 0:03:50.640 capital city housing prices will rise somewhere between six to 0:03:50.680 --> 0:03:54.320 ten percent. We had that forecast out from the start 0:03:54.360 --> 0:03:57.520 of the year and we're feeling more and more confident 0:03:57.560 --> 0:03:59.960 at that. Our forecast is actually going to come in. 0:04:00.480 --> 0:04:03.520 So this swing factor is interest rates? Is it really 0:04:03.680 --> 0:04:05.880 is that this outstanding issue that's changed. 0:04:06.120 --> 0:04:09.480 It's a combination of two factors in our view, James, Yes, 0:04:09.640 --> 0:04:14.240 interest rates definitely having an impact upon borrowing power and 0:04:14.360 --> 0:04:19.560 purchasing power, especially for first home buyers. Second, too, that 0:04:20.080 --> 0:04:24.640 we're still recording very strong population growth rates, so underlying 0:04:24.720 --> 0:04:30.920 demand for accommodation across the country continues to increase, and 0:04:31.000 --> 0:04:35.400 that's up against real constraints on the supply side. So 0:04:35.680 --> 0:04:39.919 for this calendar year, we're likely to only build somewhere 0:04:40.040 --> 0:04:43.359 around one hundred and fifty thousand new dwellings for the 0:04:43.440 --> 0:04:47.680 calendar year, that's the likely number. But the population is 0:04:47.839 --> 0:04:51.240 likely to expand by probably just under five hundred thousand 0:04:51.279 --> 0:04:55.600 people for the calendar year. And clearly those two don't match. 0:04:55.400 --> 0:04:58.640 Well, they don't match well. Yeah, I see. The other 0:04:58.680 --> 0:05:01.479 thing that struck me that the question over the whole 0:05:01.520 --> 0:05:05.920 thing was that properly stock at auction is at a 0:05:05.960 --> 0:05:10.239 five year low. So we are at that point perhaps 0:05:10.279 --> 0:05:12.400 where the market is getting better. Most people don't realize 0:05:12.400 --> 0:05:14.360 it yet when they do realize that the property stock 0:05:14.400 --> 0:05:15.000 will flood in. 0:05:17.600 --> 0:05:21.280 Look, I think on our numbers, James, we're actually recording 0:05:21.360 --> 0:05:25.320 better listing counts than that, especially for Sydney and Melbourne, 0:05:25.320 --> 0:05:29.200 so we're not recording record lows and listings for Sydney Melbourne. 0:05:29.240 --> 0:05:32.040 We have been recording record lows for listings in Perth 0:05:32.640 --> 0:05:36.640 and in Adelaide, but for Sydney Melbourne we're actually back 0:05:36.680 --> 0:05:40.359 to more normal long term averages after a period of 0:05:40.440 --> 0:05:42.280 being at near record lows. 0:05:43.040 --> 0:05:45.760 Okay, so that is what you would expect with the 0:05:45.800 --> 0:05:48.880 market starting to improve that people would also what I'm 0:05:48.920 --> 0:05:51.160 really driving at, is there any risk of overhang that 0:05:51.160 --> 0:05:53.440 there will be properly stock will come on and soften 0:05:53.480 --> 0:05:54.520 these numbers. 0:05:55.560 --> 0:05:59.880 Not likely, James, As mentioned before, where we've been suffering 0:06:00.120 --> 0:06:03.440 a multi year supply constraint which has been driven by 0:06:03.520 --> 0:06:05.880 a host of factors. And when I look at the 0:06:05.880 --> 0:06:09.279 building approval numbers, which is a leading indicator of new activity, 0:06:09.480 --> 0:06:11.680 there's been a little bit of a pickup, but it's 0:06:11.839 --> 0:06:14.360 not enough to suggest we're going to have an oversupply 0:06:14.560 --> 0:06:18.960 situation in the housing market. Now, We've still got an 0:06:19.520 --> 0:06:24.039 undersupply situation in housing market. One great example of that's 0:06:24.040 --> 0:06:26.800 what's been happening in the rental market. We as a 0:06:26.839 --> 0:06:29.960 research house, are still recording rental vacancy rates under two 0:06:30.040 --> 0:06:32.919 percent for most of the nation, and that is a 0:06:33.160 --> 0:06:38.120 signal that basically the rental market, he's still favoring landlords 0:06:38.120 --> 0:06:42.679 over tenants, and it's obviously suggestive of a market which 0:06:42.880 --> 0:06:44.080 is in shortage. 0:06:45.960 --> 0:06:48.560 So Louis I mean the thing about for investors, the 0:06:48.640 --> 0:06:53.560 yields have been improving post covered those years. They're improved 0:06:53.880 --> 0:06:55.800 for the first time in a long time. What's the 0:06:55.839 --> 0:06:59.120 picture now for investors in terms of rented yields. 0:07:00.560 --> 0:07:06.080 Yes, rental yields increased over the period twenty twenty two 0:07:06.520 --> 0:07:11.880 through to about twenty twenty four inclusive. And the primary 0:07:11.920 --> 0:07:14.960 reason why we had an increase in rental yields was 0:07:15.000 --> 0:07:19.280 the rise in interest rates per se, So investors were 0:07:19.320 --> 0:07:25.080 demanding a higher return for their properties to compensate themselves 0:07:25.080 --> 0:07:28.320 for the higher interest rate environment. And how they were 0:07:28.320 --> 0:07:31.080 demanding that was effectively they were less in the market. 0:07:31.440 --> 0:07:34.160 So rental a rising while housing prices weren't doing that 0:07:34.240 --> 0:07:37.320 much at all, and that pushes up rental yields. Now, 0:07:37.360 --> 0:07:41.200 of late, we've seen the stabilization and rental yields for 0:07:41.320 --> 0:07:45.360 most parts of the country where housing prices are rising 0:07:45.840 --> 0:07:48.560 at the same rate that rents are, and that has 0:07:48.640 --> 0:07:52.200 meant a stabilization of rental yields. What this has meant 0:07:52.240 --> 0:07:54.760 over all, though, is yes, rental yields are stabilized, but 0:07:54.800 --> 0:07:58.920 there's still above long term averages and so there is 0:07:58.960 --> 0:08:01.160 a bit of an enticement. Now we're getting interest right 0:08:01.200 --> 0:08:05.960 cuts for investors the take advantage of these above long 0:08:06.040 --> 0:08:09.120 term average rental yields and coming to the marketplace. 0:08:10.280 --> 0:08:12.400 Yeah, so in many ways it sounds like it sounds 0:08:12.400 --> 0:08:16.520 like pretty good conditions for the confident investor. That you've 0:08:16.560 --> 0:08:20.400 got riates on coming down, you've got stable rental use, 0:08:20.440 --> 0:08:23.520 you've got stable price growth both running more or less 0:08:23.520 --> 0:08:26.240 long term averager even better. But of course the tempo 0:08:26.360 --> 0:08:28.720 is approved, as you say, as you mentioned at the start, 0:08:28.720 --> 0:08:30.840 the clearance rates kind of prove that. All right, we'll 0:08:30.880 --> 0:08:32.200 take a show break and we will come back and 0:08:32.240 --> 0:08:34.760 look at it from the investor point of view, and 0:08:34.800 --> 0:08:36.840 we look at it in terms of where the action 0:08:36.960 --> 0:08:39.920 may be, and we'll also cover the issue of apartment losses, 0:08:39.920 --> 0:08:42.080 which have been a big issue on the show in 0:08:42.080 --> 0:08:54.200 recent times. Back in the moment, one of the things, 0:08:54.240 --> 0:08:56.440 louis when we were talking in the first segment. It 0:08:56.480 --> 0:09:01.000 does sound good, but on closer inspections this market's quite 0:09:01.600 --> 0:09:07.560 patchy still. You've had strong markets in Brisbane, Perth Athlete 0:09:07.640 --> 0:09:10.680 soft market, Sydney and Melbourne. You've had very good numbers 0:09:10.720 --> 0:09:13.640 on houses standardone houses, but some very soft markets in 0:09:13.679 --> 0:09:18.240 apartments in the big cities, particularly Melbourne. What's the outlook 0:09:18.280 --> 0:09:19.680 do you think for that picture? Do we get a 0:09:19.679 --> 0:09:20.679 continuation of that? 0:09:21.440 --> 0:09:25.000 Yes, Melbourne's been a very interesting market on the apartment side. 0:09:25.040 --> 0:09:30.920 So we've definitely seen underperformance on apartment prices for the 0:09:31.000 --> 0:09:35.000 last four to five years now in Melbourne. And I've 0:09:35.080 --> 0:09:39.160 noted there's been a number of groups of contact our office, 0:09:39.160 --> 0:09:41.959 for example, who think it's a great time to maybe 0:09:42.000 --> 0:09:44.520 buy it because rental yields are higher in Melbourne. But 0:09:44.559 --> 0:09:47.400 I think we need to consider, well, why have Melbourne 0:09:47.440 --> 0:09:51.280 units been underperforming to begin with? What has actually driven that? 0:09:52.200 --> 0:09:57.520 And to an extent, Melbourne's actually had some success increasing 0:09:57.559 --> 0:10:02.120 the supply side of high density apartments over the last 0:10:02.160 --> 0:10:05.640 three years, much better than say what's been happening on 0:10:05.679 --> 0:10:09.080 the supply side in Sydney and in Brisbane and Adelaide 0:10:09.120 --> 0:10:12.800 and pur Melbourne's had some success in getting some more 0:10:12.880 --> 0:10:15.280 dwellings built now that might be one of the reasons 0:10:15.360 --> 0:10:19.439 for it, and so on the flip side. That's a 0:10:19.480 --> 0:10:21.680 positive thing for rent it's no question about that. But 0:10:21.760 --> 0:10:25.720 it has been so great for investors. Will this continue 0:10:25.720 --> 0:10:28.880 going forward in tones of relatively good supply in the 0:10:28.920 --> 0:10:31.840 Melbourne market, I'm not so sure. I'm not so sure. 0:10:32.320 --> 0:10:35.840 And I note that the rental yields were recording in 0:10:35.880 --> 0:10:38.960 the Melbourne UNI market are the heis they've ever been 0:10:39.040 --> 0:10:42.720 since we started records in two thousand and nine. So 0:10:42.960 --> 0:10:45.360 when you look at the straight out fundamentals in terms 0:10:45.360 --> 0:10:47.920 of the data the rental yields, it's suggesting that Melbourne 0:10:48.000 --> 0:10:51.600 units could be a goodbye right now. I'm unsure where 0:10:51.640 --> 0:10:53.240 it is. I'm not putting my hat on to say 0:10:53.280 --> 0:10:56.040 you must buy where you should buy Melbourne units right now. 0:10:56.080 --> 0:10:59.560 I think there's still challenges with the state economy, with 0:11:00.120 --> 0:11:03.560 local councils in Melbourne, and with the state government in 0:11:03.640 --> 0:11:08.079 terms of taxation surrounding property investing. But nevertheless, the facts 0:11:08.080 --> 0:11:11.440 are the facts. If you were to buy in Melbourne now, 0:11:11.800 --> 0:11:13.880 you'll be getting in the historically high yield. 0:11:14.440 --> 0:11:17.760 What are those years compared to what a person might expect. 0:11:17.800 --> 0:11:21.240 I'm assuming they used to be two and three percent. 0:11:22.240 --> 0:11:22.880 What are they now? 0:11:24.080 --> 0:11:28.760 Yes, Melbourne units, the average gross rental yield as a 0:11:28.880 --> 0:11:33.960 July twenty twenty five was four point eight percent. Now 0:11:34.040 --> 0:11:38.360 the long term marriage we've got it is about four 0:11:38.400 --> 0:11:42.800 point two percent, so we're about six hundred bases points 0:11:42.800 --> 0:11:44.239 above the long term average. 0:11:46.000 --> 0:11:48.160 Do they like years for country towns? Aren't they accepted 0:11:48.200 --> 0:11:50.240 to city of five million? I mean, from a face 0:11:50.320 --> 0:11:53.960 value would seem to be a really good investment scenario. 0:11:54.040 --> 0:11:57.440 But you did mention concerns, particularly around state taxes. 0:11:59.080 --> 0:12:02.640 Yeah, that's right, I mean things you know. I think 0:12:03.120 --> 0:12:07.719 I'm a strong believer that the housing markets across not 0:12:07.760 --> 0:12:10.680 just Australia, but across the world that develops world, have 0:12:10.800 --> 0:12:16.160 become increasingly efficient. In other words, the markets quickly pricing 0:12:16.240 --> 0:12:19.480 what is known in the marketplace, all the pros and 0:12:19.600 --> 0:12:24.120 cons to invest in. And yes, as mentioned, I think 0:12:24.160 --> 0:12:29.080 these elevated yields in Melbourne units have occurred because we've 0:12:29.120 --> 0:12:33.000 seen a better supply response and we've also seen a 0:12:33.040 --> 0:12:36.320 situation where investors have been a little bit more cautious 0:12:36.320 --> 0:12:40.400 about buying into the Victorian state economy. 0:12:41.240 --> 0:12:44.160 Yeah, yeah, I wonder is that. So I suppose the 0:12:44.240 --> 0:12:46.520 Bellion dollar question is whether it's structural, whether the moment 0:12:46.600 --> 0:12:48.920 becomes this city where there's got good years and poor 0:12:48.960 --> 0:12:50.240 growth because of the supply. 0:12:51.520 --> 0:12:55.120 Potentially it could that's definitely factor in all less we 0:12:55.200 --> 0:12:59.240 must we must note population growth still running strong, and 0:12:59.280 --> 0:13:02.920 it's still running strong for the state of Victoria. So 0:13:03.200 --> 0:13:08.599 absorption rates for new stock are relatively high in Victoria, 0:13:09.280 --> 0:13:14.679 and so there is the possibility, and probably it's more 0:13:14.720 --> 0:13:18.760 than the possibility that we will actually see rental yields 0:13:18.840 --> 0:13:22.800 fall from here, especially with the rate cuts, and so 0:13:23.320 --> 0:13:26.720 that would mean prices would be rising for Melbourne units. 0:13:26.760 --> 0:13:30.240 And I think we will see price rises for Melbourne 0:13:30.320 --> 0:13:32.160 units in the second half of this year. 0:13:33.400 --> 0:13:38.160 Okay, that's really interesting. So in terms of bargain hunting, 0:13:38.400 --> 0:13:40.800 it would seem to be the place to do so, 0:13:40.960 --> 0:13:43.120 but you're still skeptical. It's interest if you have people 0:13:43.120 --> 0:13:45.200 on the show who openly say this is a bargain. 0:13:45.240 --> 0:13:46.640 This is a city of five million people. 0:13:47.120 --> 0:13:50.200 Probably fair to say, James, we're cautious. But I think overall, 0:13:50.240 --> 0:13:53.160 for the overall housing market for our largest cities, we're 0:13:53.200 --> 0:13:56.920 becoming more and more bullish given the rate cuts, given 0:13:56.920 --> 0:14:00.000 what we're seeing in auction clearance rates overall. 0:14:00.000 --> 0:14:02.920 Okay, well, what I have you want? It's your if 0:14:02.920 --> 0:14:04.440 you could. If I said to you, I want you 0:14:04.480 --> 0:14:07.720 to buy an investment property and if you like, and 0:14:07.760 --> 0:14:10.240 you have to do it in the next month, I 0:14:10.280 --> 0:14:11.960 want you to think in terms of regions, where would 0:14:11.960 --> 0:14:12.400 you be looking. 0:14:13.760 --> 0:14:19.760 Ah, I've been stating for a number of years now, 0:14:19.760 --> 0:14:22.520 ever since the announcement of the twenty thirty two Winter 0:14:22.600 --> 0:14:26.400 Olympics that we have that I have a view that 0:14:26.520 --> 0:14:30.640 Brisbane's likely to outperform other capital cities over that period 0:14:30.680 --> 0:14:34.760 through to the opening of the Olympics. And I retain 0:14:34.920 --> 0:14:37.680 that few that doesn't mean it's going to outperform in 0:14:37.840 --> 0:14:42.400 all periods, but for the entire period it is likely 0:14:42.480 --> 0:14:46.600 to outperform. And I think for this year Brisbane's likely 0:14:46.640 --> 0:14:50.400 to record perhaps slower capital growth or capital growth that's 0:14:50.440 --> 0:14:53.440 in line with Sydney and Melbourne, but the expectation is 0:14:53.480 --> 0:14:56.800 still there. Brisbane is going to outperform through to the 0:14:56.840 --> 0:15:00.000 twenty thirty two Winter Olympics. And the reason why I 0:15:00.120 --> 0:15:02.520 say that it's not so much the infrastructure that's going 0:15:02.560 --> 0:15:05.440 into the winter Olympics, so not the Winter Olympics, the 0:15:05.440 --> 0:15:11.480 Summer Olympics. It's the strong overall population, right, You wouldn't 0:15:11.480 --> 0:15:13.440 want to do Winter Olympics in prison, that's sure. 0:15:14.600 --> 0:15:16.560 You're ord enough to remember the run up to the 0:15:16.560 --> 0:15:20.280 Cydny Olympics, I imagine, and the extraordinary property market in Sydney. 0:15:20.720 --> 0:15:23.200 Well, that's right, and that run up to the summer 0:15:23.280 --> 0:15:27.600 the two thousand Summer Olympics, between essentially nineteen ninety three 0:15:27.640 --> 0:15:31.560 to the two thousand city did actually outperform most other 0:15:31.720 --> 0:15:33.200 capital cities over that time. 0:15:34.280 --> 0:15:36.800 Yes, yes it did, and I suppose to be fair 0:15:36.840 --> 0:15:39.040 to everyone listening, it's also worth having a look what 0:15:39.120 --> 0:15:42.160 happened after two thousand where Sydney underperformed for a while 0:15:42.160 --> 0:15:44.600 because you had that amazing pull forward. But from an 0:15:44.600 --> 0:15:47.000 investment point of view, there's plenty of time in it. Okay, 0:15:47.160 --> 0:15:49.080 really interesting answer, Louie, Thank you very much. We have 0:15:49.160 --> 0:15:52.320 some really good questions and they're actually quite focused on 0:15:52.400 --> 0:15:54.520 property and property investments, so we will be back in 0:15:54.560 --> 0:16:06.960 a minute. Hello, Welcome back to the Australian's Money Puzzle podcast, 0:16:07.080 --> 0:16:11.440 James Covey with Louis Christopher from SQM Research. Louis one 0:16:11.440 --> 0:16:15.440 of the voices independent voices on the property market. And 0:16:15.480 --> 0:16:17.200 that's why I love having him on the show, because 0:16:17.200 --> 0:16:22.040 he's not selling, he is examining, and that gives us 0:16:22.040 --> 0:16:25.080 a great sort of independent view on helicopter view of 0:16:25.120 --> 0:16:30.040 the market. Nathan says on the performance of apartments, in 0:16:30.080 --> 0:16:33.160 line with the wider discussion you raised around tax reform, 0:16:33.480 --> 0:16:36.680 do you think the treasure may consider tax incentives for 0:16:36.760 --> 0:16:40.080 people to buy apartments as opposed to houses as one 0:16:40.120 --> 0:16:46.280 measure to combat the housing crisis. That's a really interesting idea. 0:16:47.360 --> 0:16:50.560 There is no rules on all these grants, on all 0:16:50.640 --> 0:16:55.600 these incentives stretching from first home super saver, first home 0:16:55.640 --> 0:17:00.760 buyer guarantee, shared equity. They don't ever frenzy between the two. 0:17:00.880 --> 0:17:03.680 Do they do it as I'm as I know they don't. 0:17:04.200 --> 0:17:07.159 No, they don't. And James, I have a personal fundamental 0:17:07.200 --> 0:17:11.639 issue with taxes, which I think are to property taxes 0:17:11.680 --> 0:17:13.480 which I think are too high to begin with and 0:17:13.560 --> 0:17:19.240 discourage new property development. Being overlaid with subsidies sounds awfully 0:17:19.240 --> 0:17:21.240 inefficient to meet, James. 0:17:21.200 --> 0:17:24.000 Right, you're saying, yeah, yeah, you've got high taxes and 0:17:24.040 --> 0:17:26.640 then you put in lots of incentives, which is. 0:17:26.640 --> 0:17:29.360 Like, yeah, that's exactly right. When you see a new 0:17:29.480 --> 0:17:32.000 dwelling out there, whether it be a new home or 0:17:32.040 --> 0:17:36.560 a new apartment, you can assume, depending on the state, 0:17:37.000 --> 0:17:40.040 that thirty to forty percent of the cost of that 0:17:40.160 --> 0:17:44.800 new dwelling is being driven by taxes. It's all. It's 0:17:44.840 --> 0:17:46.399 you know, thirty to forty percent of the cost of 0:17:46.440 --> 0:17:50.600 that dwelling is taxes. Why is it so high? And 0:17:50.680 --> 0:17:55.800 I'm talking about a combination of local taxes, state taxes, 0:17:56.119 --> 0:18:00.920 federal taxes. That's what that's basically what's baked into the 0:18:00.960 --> 0:18:03.800 cost of every new home you see, and it just 0:18:03.840 --> 0:18:05.840 seems to be way too high to meet. 0:18:06.560 --> 0:18:08.920 A stamp duty the outstanding tax. 0:18:09.640 --> 0:18:12.560 Stamp duty yep, stamp duty would be one as you know, 0:18:12.640 --> 0:18:16.159 like rates as well, the cost of you know, local 0:18:16.200 --> 0:18:19.679 council approving a development and everything that they want in 0:18:19.760 --> 0:18:24.240 return to get a development up. On average, you know, 0:18:24.760 --> 0:18:27.120 thirty to forty percent of the cost of a new 0:18:27.200 --> 0:18:30.479 dwelling has been driven by taxes. And that's what in 0:18:30.520 --> 0:18:33.360 my view, we've got to try and aim for over 0:18:33.400 --> 0:18:37.080 the long term, real taxation reform so we can get 0:18:37.160 --> 0:18:40.280 those costs down. And if we were to do that, 0:18:40.840 --> 0:18:44.320 I think we would see an increase in supply from developers. Now, 0:18:44.320 --> 0:18:46.399 there's a few other things we need to do, and 0:18:46.440 --> 0:18:48.439 I think when it comes to builders and developers, you've 0:18:48.440 --> 0:18:49.639 got to have a bit of a carrot and a 0:18:49.680 --> 0:18:53.640 stick approach towards that industry. The stick being it, if 0:18:53.720 --> 0:18:56.840 they do not build quality buildings, they really need to 0:18:56.840 --> 0:19:00.800 be punished. But the carrot also being that, Okay, if 0:19:00.800 --> 0:19:03.720 I can build quality, let's get that bride given point 0:19:03.800 --> 0:19:07.440 down and that should increase the supply side for the country. 0:19:08.320 --> 0:19:11.320 Okay, Well, yes, no sign of any of that coming through. 0:19:11.359 --> 0:19:13.840 There is a big tax, big tax get together later 0:19:14.000 --> 0:19:17.040 in the year, which everyone has high hopes for. I 0:19:17.960 --> 0:19:21.159 don't know certainly from what the attempts so far in 0:19:21.200 --> 0:19:24.320 the top property area for both federal labor and in 0:19:24.359 --> 0:19:26.600 the States, I wouldn't be holding my bread. 0:19:26.840 --> 0:19:29.520 I would to day the jains. I'm merely studying what 0:19:29.560 --> 0:19:31.960 should happen, But what will happen will either not a factor? 0:19:33.240 --> 0:19:36.760 Yes, all right, Bruce and Paul say on realized gains, 0:19:37.119 --> 0:19:39.440 Bruce says, I strongly disagree with both the taxing of 0:19:39.560 --> 0:19:43.399 unrealized gains and not indexing this new supertax. However, some 0:19:43.440 --> 0:19:45.679 people have raised the issue of council rates as an 0:19:45.760 --> 0:19:49.920 example of present day taxing of unrealized gains. You were 0:19:49.920 --> 0:19:53.320 not impressed with this in comparison. Could you please elaborate 0:19:53.400 --> 0:19:57.680 what was your main objection? Okay, So the predominant narrative 0:19:57.760 --> 0:19:59.840 right on the supertax is that it's never been done 0:19:59.880 --> 0:20:03.439 with for unrealized gains in such a fashion core to 0:20:03.640 --> 0:20:06.119 the taxing. Putting it into the tax system is not 0:20:06.160 --> 0:20:08.720 a good thing, and if it unworsted, it might expand 0:20:08.760 --> 0:20:11.159 if you like. And then people say, well, you know, 0:20:11.200 --> 0:20:14.639 on property, you've got unrealized gain taxes, you've got counseled rich, 0:20:14.720 --> 0:20:18.000 you've got land tax I would just say, yes, you do. 0:20:19.080 --> 0:20:23.320 But they are very much based on intrinsic value of property, 0:20:23.400 --> 0:20:26.240 which is where the valuation has lifted from A to B. 0:20:26.440 --> 0:20:29.600 The property is standing there, it's bricks and mortar. It's 0:20:29.640 --> 0:20:35.760 pretty reliable. In the new supertax, a person could buy bitcoin, 0:20:35.880 --> 0:20:38.040 they could buy a gold miner, they could buy a 0:20:38.080 --> 0:20:42.080 startup that the price of that could quadruple. They would 0:20:42.080 --> 0:20:44.960 be hit with a tax bill for that quadrupling in 0:20:45.240 --> 0:20:49.200 entirely theoretical paper gains. The following year the thing falls 0:20:49.240 --> 0:20:55.960 by fifty percent, and you see the problems. It's very illogical, 0:20:56.720 --> 0:21:00.000 inefficient to put mildly tax. It's going on unrealized gains, 0:21:00.080 --> 0:21:03.440 and all sorts of unexpected and unintended consequences will occur. 0:21:03.520 --> 0:21:06.760 We're already seeing them in this super tax. It's hitting 0:21:08.160 --> 0:21:10.240 people are starting to realize. It'll hit frank dividends, it'll 0:21:10.280 --> 0:21:14.160 hit narratives and super it'll hit private pension payments. Because 0:21:14.200 --> 0:21:20.800 it's unrealized gains, it's a very broad, crude measure of 0:21:20.920 --> 0:21:25.080 how people's finances are changing. Do you think Louis. 0:21:25.480 --> 0:21:28.440 James couldn't have said it better myself? Look, I think 0:21:28.480 --> 0:21:31.680 when it comes to the new super tax proposal, I've 0:21:31.720 --> 0:21:35.199 generally taken a view that look, it's understandable why the 0:21:35.280 --> 0:21:37.560 rate would be increased to thirty percent for those who 0:21:37.600 --> 0:21:40.280 are sitting on over three million dollars. I've had three 0:21:40.359 --> 0:21:43.600 issues with it. The issue, as you've rightly pointed out, 0:21:43.600 --> 0:21:47.240 the paper games, which I think will be very inefficient. 0:21:47.320 --> 0:21:49.119 And then the other issue I have, which has been 0:21:49.200 --> 0:21:51.480 raised more and more in the media, is the fact 0:21:51.520 --> 0:21:54.240 that the three million dollars is not going to be indexed, 0:21:54.480 --> 0:21:58.520 not initially anyway, And so that means that over the 0:21:58.560 --> 0:22:01.439 long term, assuming that three mens dolls is not adjusted, 0:22:01.960 --> 0:22:05.000 you will see the average income earn or the average 0:22:05.000 --> 0:22:09.879 supervaluation balance being impacted by this additional tax. 0:22:10.200 --> 0:22:12.560 Will it keep the serf managed super funds away from 0:22:12.640 --> 0:22:13.440 property investment? 0:22:14.080 --> 0:22:16.880 Yeah, it could, It could absolutely. 0:22:16.680 --> 0:22:18.720 Because it's so liquid. It's kind of a sitting dock 0:22:18.800 --> 0:22:22.679 for on realized gains tax, isn't it. 0:22:22.119 --> 0:22:25.280 It is it is now that said though, look, it's 0:22:25.280 --> 0:22:29.159 pretty easy to get evaluation these days on a residential 0:22:29.200 --> 0:22:33.960 property in particular, so and those valuations are reasonably reliable 0:22:34.600 --> 0:22:38.119 and they generally tend to be fairly stable, So you know, 0:22:38.160 --> 0:22:39.919 that's probably one thing in a positive and you know, 0:22:39.960 --> 0:22:42.320 I take your take on board what you said that 0:22:42.400 --> 0:22:44.680 your comment surrounding, for example, be coin and things which 0:22:44.720 --> 0:22:47.560 are more volatile, and I agree with you one hundred percent. 0:22:47.760 --> 0:22:51.679 It's interesting that property people are being relatively quiet in 0:22:51.720 --> 0:22:53.160 relation to this super tax. 0:22:54.040 --> 0:22:54.520 So far. 0:22:55.000 --> 0:22:58.320 Most of the complaints and protests are from for fairly 0:22:58.320 --> 0:23:01.400 obvious corners, if one managers Jeff Wilson, a self managed 0:23:01.440 --> 0:23:04.439 super funds association peter Burg as people like that very 0:23:04.520 --> 0:23:09.080 much out on front. But the property. The property sector 0:23:09.119 --> 0:23:11.040 has been fairly quiet about it. But I would have 0:23:11.080 --> 0:23:13.360 thought that if this gets in and as you say, 0:23:13.400 --> 0:23:16.920 it's not indexed, and everyone's calling for it to be indexed, 0:23:16.960 --> 0:23:19.600 I mean, the ACTU is calling for it to be indexed, 0:23:20.200 --> 0:23:21.960 but the government seem to be set in their ways 0:23:21.960 --> 0:23:25.360 that they won't index it, then mathematically more people will 0:23:25.400 --> 0:23:28.480 be caught very quickly. And in property terms, three million 0:23:28.600 --> 0:23:29.960 is not a gigantic number anymore. 0:23:30.119 --> 0:23:33.399 No, that's exactly. Three million dollars is not a gigantic number. 0:23:33.640 --> 0:23:38.040 But the proportion of self managed super fund investors who 0:23:38.119 --> 0:23:41.040 are invested in properly compared to all buys and all 0:23:41.080 --> 0:23:44.960 line owners is actually quite small relative to say your 0:23:45.040 --> 0:23:49.639