1 00:00:09,680 --> 00:00:12,920 Speaker 1: Hello and welcome to The Australian's Money Positive podcast. I'm 2 00:00:13,000 --> 00:00:16,520 Speaker 1: James Kirby. Welcome aboard everybody. Well, as they say in 3 00:00:16,560 --> 00:00:20,560 Speaker 1: the cricket, it's all happening across property market. Just now 4 00:00:20,680 --> 00:00:24,520 Speaker 1: we've had a raid cut, we've had a surprise acceleration 5 00:00:24,800 --> 00:00:28,160 Speaker 1: of the universal home deposit scheme from the government, and 6 00:00:28,280 --> 00:00:30,880 Speaker 1: off the back of the economic we've got all sorts 7 00:00:30,920 --> 00:00:36,559 Speaker 1: of things happening on the environmental regulations around housing, some 8 00:00:36,680 --> 00:00:40,800 Speaker 1: which will make houses get built faster, believe it or not, 9 00:00:41,200 --> 00:00:44,680 Speaker 1: some that will change the whole nature perhaps of housing. 10 00:00:45,000 --> 00:00:48,320 Speaker 1: I'm joined today by regular guest Nearada Connor Species, the 11 00:00:48,360 --> 00:00:52,320 Speaker 1: chief economist at Ray White. How are you, Nerida, I'm well, 12 00:00:52,440 --> 00:00:54,640 Speaker 1: thanks for having me. I think the last time you 13 00:00:54,680 --> 00:00:57,240 Speaker 1: were on were probably we were just discussing this that 14 00:00:57,320 --> 00:01:01,440 Speaker 1: this was a big step, this universal five percent home 15 00:01:01,440 --> 00:01:04,959 Speaker 1: deposit for first home buyers. Anyone in the country can 16 00:01:05,120 --> 00:01:09,160 Speaker 1: now buy a house at a five percent deposit if 17 00:01:09,200 --> 00:01:12,240 Speaker 1: they are a first home buyer. And it's staggered how 18 00:01:12,319 --> 00:01:14,119 Speaker 1: much you can spend. I think like nine to fifty 19 00:01:14,120 --> 00:01:17,080 Speaker 1: in Melbourne, a million plus in Sydney. But it's really 20 00:01:17,120 --> 00:01:20,400 Speaker 1: going to add that segment of the market is pretty hot. 21 00:01:20,400 --> 00:01:22,640 Speaker 1: Already good thing or a bad thing. 22 00:01:23,400 --> 00:01:27,280 Speaker 2: Well, there's two sides to it. On an individual level, 23 00:01:27,400 --> 00:01:30,840 Speaker 2: it's obviously a good thing because it does allow a 24 00:01:30,840 --> 00:01:33,240 Speaker 2: first time buyer to get in quicker than they otherwise 25 00:01:33,280 --> 00:01:35,959 Speaker 2: would and it is one of the key reasons why 26 00:01:36,600 --> 00:01:39,640 Speaker 2: Later's housing policy going into the election was so popular. 27 00:01:40,280 --> 00:01:42,320 Speaker 1: We should mention they've actually accelerated. It happened. It was 28 00:01:42,319 --> 00:01:45,360 Speaker 1: supposed to start January next year, and Prime Minister Abenez 29 00:01:45,440 --> 00:01:47,320 Speaker 1: has just announced it's going to start in September. 30 00:01:47,520 --> 00:01:52,120 Speaker 2: Yeah, okay, yes, So an individual level, very popular. On 31 00:01:52,160 --> 00:01:56,200 Speaker 2: an affordability level, not so great, because we know that 32 00:01:56,240 --> 00:01:59,920 Speaker 2: when you give people the ability to borrow more money, 33 00:02:00,320 --> 00:02:03,960 Speaker 2: we'll give them more money. It does lead to much 34 00:02:04,000 --> 00:02:07,240 Speaker 2: higher acceleration of pricing in a constrained supply environment, and 35 00:02:07,240 --> 00:02:09,920 Speaker 2: we do have a housing supply issue, and there's not 36 00:02:10,040 --> 00:02:13,760 Speaker 2: enough homes particulate those cheaper price points, and this will 37 00:02:13,840 --> 00:02:16,840 Speaker 2: lead to an acceleration of those cheaper homes in terms 38 00:02:16,840 --> 00:02:17,400 Speaker 2: of pricing. 39 00:02:17,800 --> 00:02:20,000 Speaker 1: So the estibus were up to five percent higher. 40 00:02:21,360 --> 00:02:23,880 Speaker 2: Yeah, it's already happening. I mean, we have a look 41 00:02:23,919 --> 00:02:26,880 Speaker 2: over the last couple of years in markets like Sydney. 42 00:02:26,960 --> 00:02:30,040 Speaker 2: Sydney pricing has been fairly flat, but it has been 43 00:02:30,080 --> 00:02:33,000 Speaker 2: flat mainly at the top end, or even declining at 44 00:02:33,000 --> 00:02:34,959 Speaker 2: the top end. If we have a look at sub 45 00:02:35,000 --> 00:02:37,640 Speaker 2: a million, we have seen quite strong growth at for 46 00:02:37,720 --> 00:02:39,000 Speaker 2: homes priced at that level. 47 00:02:39,560 --> 00:02:42,720 Speaker 1: Yeah, I mean, the argument in favor of it is 48 00:02:42,720 --> 00:02:48,800 Speaker 1: that it increases home ownership. And the same report that 49 00:02:48,960 --> 00:02:51,240 Speaker 1: said if we push up prices also said it would 50 00:02:51,240 --> 00:02:56,400 Speaker 1: increase participation or whole ownership rates from six five percent 51 00:02:56,560 --> 00:02:59,720 Speaker 1: sixty six to sixty seven, So more people get to 52 00:02:59,760 --> 00:03:03,200 Speaker 1: own a home than would have previously. Is the trede 53 00:03:03,200 --> 00:03:05,040 Speaker 1: off worth it? 54 00:03:05,600 --> 00:03:10,480 Speaker 2: The issue is that it will push more homes outside 55 00:03:10,520 --> 00:03:14,160 Speaker 2: of that affordable price point. So it is worth it 56 00:03:14,200 --> 00:03:16,320 Speaker 2: for those that can get in, and it's worth it 57 00:03:16,360 --> 00:03:18,560 Speaker 2: for those that can afford to pay off a loan. 58 00:03:19,160 --> 00:03:24,200 Speaker 2: But to put this policy in isolation without looking seriously 59 00:03:24,240 --> 00:03:26,520 Speaker 2: at housing supply is a challenge. So I know the 60 00:03:26,520 --> 00:03:30,000 Speaker 2: federal government is looking seriously at housing supply, but we 61 00:03:30,080 --> 00:03:34,280 Speaker 2: can't just keep giving people access to more funds assuming 62 00:03:34,639 --> 00:03:37,840 Speaker 2: that it won't lead to continued strong price growth. 63 00:03:37,840 --> 00:03:40,680 Speaker 1: And that's a challenge we have. So from an investor, 64 00:03:40,960 --> 00:03:45,800 Speaker 1: the investors' investors listening and looking at this market. It's 65 00:03:45,880 --> 00:03:49,680 Speaker 1: what it means is that a segment of the market, 66 00:03:49,720 --> 00:03:55,160 Speaker 1: the first home buyer strata, the million dollar market in 67 00:03:55,640 --> 00:03:57,320 Speaker 1: a little bit higher in Melbourne, but a little bit 68 00:03:57,320 --> 00:03:59,800 Speaker 1: lower than a million in Melbourne, and then lower again 69 00:03:59,880 --> 00:04:02,320 Speaker 1: in the other cities. But something in that region eight 70 00:04:02,440 --> 00:04:07,080 Speaker 1: hundred thousand plus across the country, seven to fifty plus 71 00:04:07,120 --> 00:04:09,480 Speaker 1: across the country. That's the hottest segment of the market. 72 00:04:09,520 --> 00:04:12,000 Speaker 1: Is that fair to see? Is that the investment messages 73 00:04:12,040 --> 00:04:14,440 Speaker 1: such to investors, that is the hottest part of the market. 74 00:04:15,360 --> 00:04:18,320 Speaker 2: Yeah, absolutely, it is the hottest part of the market. 75 00:04:18,400 --> 00:04:20,840 Speaker 2: So it is really been driven by first home buyers, 76 00:04:20,880 --> 00:04:23,560 Speaker 2: but we also know that part of the market is 77 00:04:23,800 --> 00:04:27,880 Speaker 2: popular with renters and investors are also in that market 78 00:04:27,920 --> 00:04:31,200 Speaker 2: as a result, so it will continue to get strong. 79 00:04:31,240 --> 00:04:33,719 Speaker 2: I mean, we've seen it very clearly in markets like Brisbane. 80 00:04:33,800 --> 00:04:35,680 Speaker 2: So do you have a look at a market like 81 00:04:35,800 --> 00:04:38,920 Speaker 2: It's witch house prices have more than doubled over the 82 00:04:39,000 --> 00:04:42,600 Speaker 2: past five years, and it is because It's witch medium 83 00:04:42,640 --> 00:04:45,480 Speaker 2: was about four hundred thousand at the start of twenty twenty, 84 00:04:45,560 --> 00:04:49,120 Speaker 2: it's now at about eight hundred thousand and really being 85 00:04:49,240 --> 00:04:54,520 Speaker 2: driven by affordability, So people buying there as first home buyers, 86 00:04:54,560 --> 00:04:57,640 Speaker 2: but also investors too because it was at a price 87 00:04:57,680 --> 00:05:01,000 Speaker 2: that investors are pretty happy putting their money into. 88 00:05:01,800 --> 00:05:03,680 Speaker 1: Yes, right, but it's an entry level, isn't it, and 89 00:05:03,680 --> 00:05:05,760 Speaker 1: people have doubled their money. It's not interested in the 90 00:05:05,760 --> 00:05:08,560 Speaker 1: market that's moving it five percent a year or whatever. 91 00:05:08,839 --> 00:05:11,960 Speaker 1: Tell me more broadly, you did something very interesting this week, 92 00:05:12,400 --> 00:05:14,520 Speaker 1: a deep dive as you do on these research notes 93 00:05:14,560 --> 00:05:19,440 Speaker 1: on what's happening around energy ratings in homes. That's to 94 00:05:19,440 --> 00:05:23,080 Speaker 1: put it simply, more broadly, what the government is doing 95 00:05:23,160 --> 00:05:31,120 Speaker 1: right is they are suspending temporarily the environmental layer, if 96 00:05:31,120 --> 00:05:35,359 Speaker 1: you like, in the new home approval process. But you 97 00:05:35,440 --> 00:05:38,240 Speaker 1: were worried about this. I'm not surprised that you were worried. 98 00:05:38,520 --> 00:05:42,240 Speaker 1: I just thought that you would be pro supply of 99 00:05:42,360 --> 00:05:45,040 Speaker 1: homes as the primary driver over anything else. 100 00:05:46,080 --> 00:05:49,960 Speaker 2: I mean, one of the challenges with housing supply, or 101 00:05:50,000 --> 00:05:54,880 Speaker 2: pushing through housing supply quickly is that to do so 102 00:05:55,080 --> 00:05:58,240 Speaker 2: the government the main labor that they can is planning. 103 00:05:58,360 --> 00:06:01,240 Speaker 2: So we have certainly seen that they have relaxed a 104 00:06:01,240 --> 00:06:05,040 Speaker 2: lot of planning around Australia to allow for more development 105 00:06:05,040 --> 00:06:08,480 Speaker 2: to take place. The next state. What they're looking at, 106 00:06:08,760 --> 00:06:11,840 Speaker 2: which was an outcome from the Federal government's Economic Roundtable, 107 00:06:12,160 --> 00:06:16,239 Speaker 2: was a relaxation of National Construction Code, where they've said 108 00:06:16,600 --> 00:06:21,719 Speaker 2: no more changes on environmental aspects of the code, so 109 00:06:22,240 --> 00:06:26,080 Speaker 2: you know for things such as energy efficiency or you know, 110 00:06:26,360 --> 00:06:28,839 Speaker 2: shading or whatever that we know changes for four years. 111 00:06:28,839 --> 00:06:33,640 Speaker 2: They will adjust the code for their safety obviously, so 112 00:06:33,760 --> 00:06:37,040 Speaker 2: that will continue be adjusted. But their idea being that 113 00:06:37,080 --> 00:06:40,599 Speaker 2: they do want to push through more homes. They're doing 114 00:06:40,600 --> 00:06:44,080 Speaker 2: it through planning, they're doing it through relaxing the construction code. 115 00:06:44,160 --> 00:06:46,680 Speaker 1: So the trade off is that they will build more 116 00:06:46,680 --> 00:06:49,920 Speaker 1: homes and they will not be as environmentally sophisticated as 117 00:06:49,960 --> 00:06:50,599 Speaker 1: they might have been. 118 00:06:51,400 --> 00:06:54,360 Speaker 2: Yes, and also the neighborhood might not be as livable. 119 00:06:54,440 --> 00:06:56,359 Speaker 2: And so I think that's the other aspect too with 120 00:06:56,400 --> 00:06:58,360 Speaker 2: the planning, the relaxation of planning. 121 00:07:00,160 --> 00:07:02,200 Speaker 1: So from an investment point of view, again this is 122 00:07:02,240 --> 00:07:05,240 Speaker 1: all in the new home area, isn't it? Broadly from 123 00:07:05,279 --> 00:07:10,120 Speaker 1: the summit, Productivity Summit, Wealth Tax Summit as we like 124 00:07:10,120 --> 00:07:13,400 Speaker 1: to call it in the Australian tell me looking at 125 00:07:13,720 --> 00:07:16,080 Speaker 1: what was said around the table and what the treasure 126 00:07:16,160 --> 00:07:20,360 Speaker 1: is set afterwards for property investors what do you think 127 00:07:20,480 --> 00:07:23,400 Speaker 1: is coming down the line that property investors should be 128 00:07:23,440 --> 00:07:24,280 Speaker 1: aware of. 129 00:07:26,080 --> 00:07:29,360 Speaker 2: Well, I think particularly buying new So it does apply 130 00:07:29,440 --> 00:07:31,400 Speaker 2: to new house and land, but it also applies to 131 00:07:31,520 --> 00:07:34,880 Speaker 2: new apartments. You do need to be careful as an investor. 132 00:07:35,080 --> 00:07:36,960 Speaker 2: You always need to be careful buying off the plan 133 00:07:37,000 --> 00:07:39,679 Speaker 2: obviously that even buying a new home in a new area, 134 00:07:39,760 --> 00:07:43,600 Speaker 2: that the area does have a high level of amenity, 135 00:07:43,920 --> 00:07:47,960 Speaker 2: and also that it does have a certain level of 136 00:07:48,320 --> 00:07:51,800 Speaker 2: environmental sustainability, so you know, you don't want to be 137 00:07:51,840 --> 00:07:54,360 Speaker 2: caught in a situation. I mean, a really good example 138 00:07:54,440 --> 00:07:58,520 Speaker 2: is a flammable cladding issue that came up last decade 139 00:07:58,640 --> 00:08:01,840 Speaker 2: that you know leads projects get pushed ahead very quickly. 140 00:08:01,920 --> 00:08:04,520 Speaker 2: They may be trying to cut costs and maybe trying 141 00:08:04,520 --> 00:08:06,800 Speaker 2: to get them up quickly, and you are left with 142 00:08:06,840 --> 00:08:09,160 Speaker 2: a very hefty bill down the track because they do 143 00:08:09,240 --> 00:08:12,680 Speaker 2: have to make adjustments. So you know, that's always something 144 00:08:12,680 --> 00:08:14,960 Speaker 2: to be wary of. But I think particularly now because 145 00:08:15,000 --> 00:08:18,880 Speaker 2: we are seeing an enormous level of development proposed and 146 00:08:19,000 --> 00:08:20,920 Speaker 2: as a result, there may be some issues with the 147 00:08:20,960 --> 00:08:22,160 Speaker 2: developments that take place. 148 00:08:22,680 --> 00:08:25,800 Speaker 1: Okay, so that is from an investment point of view, 149 00:08:25,880 --> 00:08:29,400 Speaker 1: there is the concern that the standards, if they are 150 00:08:29,440 --> 00:08:33,719 Speaker 1: suspended or rushed or diluted in any fashion during an 151 00:08:33,760 --> 00:08:39,040 Speaker 1: acceleration of the housing target, could cause economic risks that 152 00:08:39,240 --> 00:08:40,760 Speaker 1: aren't immediately obvious. 153 00:08:41,800 --> 00:08:44,520 Speaker 2: Yeah, and also I mean even the ability to leave 154 00:08:44,600 --> 00:08:47,120 Speaker 2: the property and also the capital growth of that property. 155 00:08:47,200 --> 00:08:51,040 Speaker 2: So you know, there's definitely risks associated with investing in 156 00:08:51,080 --> 00:08:54,200 Speaker 2: an environment where we are going, you know, ideally, because 157 00:08:54,200 --> 00:08:56,400 Speaker 2: that's what the government is trying to do is ideally 158 00:08:56,400 --> 00:08:58,440 Speaker 2: get high levels of development taking place. 159 00:09:00,880 --> 00:09:02,640 Speaker 1: We'll take a break because I wanted to talk to 160 00:09:02,679 --> 00:09:05,720 Speaker 1: you about this idea again at the summit was that 161 00:09:05,760 --> 00:09:11,280 Speaker 1: the big super funds would could should provide housing. Now, 162 00:09:11,320 --> 00:09:13,120 Speaker 1: what we've never really discussed on the show is what 163 00:09:13,160 --> 00:09:16,600 Speaker 1: would that reality be at the moment this show exists. 164 00:09:16,600 --> 00:09:19,600 Speaker 1: And particularly the property dimension of this show is aimed 165 00:09:19,640 --> 00:09:21,880 Speaker 1: at people who are investors in property. Most people have 166 00:09:21,960 --> 00:09:26,080 Speaker 1: one property, maybe too. It's a backbone of every day 167 00:09:26,080 --> 00:09:30,760 Speaker 1: investing in Australia. What if that was replaced by institutional investments? 168 00:09:30,760 --> 00:09:43,760 Speaker 1: What would it mean. We'll be back in a moment. Hello, 169 00:09:43,840 --> 00:09:47,000 Speaker 1: Welcome back to The Australian's Money Puzzle podcast. James Kirby 170 00:09:47,080 --> 00:09:50,839 Speaker 1: talking to narrative Conspy regular guests on the show talks 171 00:09:50,880 --> 00:09:54,480 Speaker 1: to us about the big picture in for property investors, 172 00:09:54,720 --> 00:09:57,679 Speaker 1: and the big picture having remained relatively stable for a 173 00:09:57,679 --> 00:10:00,560 Speaker 1: long time, there is a lot happening policy wise which 174 00:10:00,600 --> 00:10:04,360 Speaker 1: is directly relevant to investors just now. I mean, here's 175 00:10:04,360 --> 00:10:07,160 Speaker 1: the thing, for instance, narrative, if the big super funds 176 00:10:07,160 --> 00:10:11,840 Speaker 1: did get the green light to go into housing, and 177 00:10:11,880 --> 00:10:14,240 Speaker 1: by that I mean a green light would be that 178 00:10:14,280 --> 00:10:17,480 Speaker 1: they are allowed, they are encouraged, and the deals are 179 00:10:17,480 --> 00:10:19,640 Speaker 1: put on the table that they would be keen to 180 00:10:19,760 --> 00:10:25,439 Speaker 1: participate in. Tell me what has happened around the world 181 00:10:25,440 --> 00:10:29,360 Speaker 1: when big funds have gone into property, private equity funds, etc. 182 00:10:29,880 --> 00:10:33,000 Speaker 1: Say in the UK, in the US. What's the experience there? 183 00:10:33,080 --> 00:10:36,559 Speaker 1: Is it better? Is it different than market that's controlled 184 00:10:36,559 --> 00:10:39,280 Speaker 1: by private investors as we have our market just now. 185 00:10:40,840 --> 00:10:44,760 Speaker 2: So Australia has it had much institutional investment at all. 186 00:10:44,960 --> 00:10:47,240 Speaker 2: Is quite different to what we're seeing in the US 187 00:10:47,280 --> 00:10:49,560 Speaker 2: and the UK and most of Europe, where we have 188 00:10:49,679 --> 00:10:52,280 Speaker 2: seeing tension funds, super innovation funds. We've seen a lot 189 00:10:52,280 --> 00:10:56,120 Speaker 2: of private equity getting into housing renting them out. I 190 00:10:56,160 --> 00:10:58,680 Speaker 2: think for Australia we do need a bit of a 191 00:10:58,720 --> 00:11:02,440 Speaker 2: diversification of who I own rental properties, because at the 192 00:11:02,480 --> 00:11:05,679 Speaker 2: moment it's very heavily geared to mum and dad investors, 193 00:11:05,760 --> 00:11:09,520 Speaker 2: and we know it's certainly in recent years that if 194 00:11:09,520 --> 00:11:12,640 Speaker 2: there's not enough investment in housing from that group, then 195 00:11:12,640 --> 00:11:16,960 Speaker 2: we do have rental problems. So this would ideally help 196 00:11:17,040 --> 00:11:19,600 Speaker 2: if we see more investment from these other groups and 197 00:11:19,640 --> 00:11:23,480 Speaker 2: would ideally help with keeping rental growth calm the problem. 198 00:11:23,600 --> 00:11:26,920 Speaker 2: So what are emerging in the US is around very 199 00:11:26,960 --> 00:11:31,600 Speaker 2: similar issues to hear that people feel well, So if 200 00:11:31,600 --> 00:11:32,559 Speaker 2: you have a look at it, if you have a 201 00:11:32,679 --> 00:11:35,680 Speaker 2: good mum and dad investor in Australia, often they're quite 202 00:11:35,760 --> 00:11:38,640 Speaker 2: okay with very low rental yields because they're relying on 203 00:11:38,679 --> 00:11:42,319 Speaker 2: capital growth. If you have a look at institutional investors, 204 00:11:42,480 --> 00:11:46,160 Speaker 2: they need that rental yield to make the development, to 205 00:11:46,160 --> 00:11:47,360 Speaker 2: make the projects that come. 206 00:11:47,640 --> 00:11:49,880 Speaker 1: Oh yes, so the year is okay, This is very 207 00:11:49,880 --> 00:11:51,120 Speaker 1: important point. Yeah, okay. 208 00:11:51,240 --> 00:11:55,400 Speaker 2: So if you look at an institutional investor, if they 209 00:11:55,400 --> 00:11:58,920 Speaker 2: build an apartment building or they buy a whole suburb, 210 00:11:58,960 --> 00:12:02,480 Speaker 2: which has happened in the US, they may be they 211 00:12:02,480 --> 00:12:05,880 Speaker 2: may quite substantially push up rents to be able to 212 00:12:06,000 --> 00:12:08,600 Speaker 2: generate that decent return. So I think there is a 213 00:12:08,600 --> 00:12:12,920 Speaker 2: perception in Australia that if we get this institutional investment in, 214 00:12:13,240 --> 00:12:16,440 Speaker 2: it will calm rents and it will make it you know, 215 00:12:16,480 --> 00:12:19,559 Speaker 2: it will make it cheaper or better for renters. So 216 00:12:19,679 --> 00:12:21,520 Speaker 2: I don't think that's necessarily the case. 217 00:12:21,960 --> 00:12:25,520 Speaker 1: You think super funds are institutionalization, but big funds own 218 00:12:25,720 --> 00:12:29,560 Speaker 1: literally tracks of the suburbs that actually would push rents. 219 00:12:29,400 --> 00:12:33,840 Speaker 2: Up potentially, yes. And also, you know, we all have 220 00:12:34,000 --> 00:12:37,080 Speaker 2: super that if they don't push rents up and they 221 00:12:37,120 --> 00:12:40,240 Speaker 2: don't get a decent yield, how do you feel about 222 00:12:40,280 --> 00:12:45,880 Speaker 2: that being part of your superannuation balance? Because I think 223 00:12:45,920 --> 00:12:49,080 Speaker 2: on one hand, most of us, I mean, most people 224 00:12:49,160 --> 00:12:52,240 Speaker 2: feel that housing is too expensive and it would be 225 00:12:52,280 --> 00:12:55,199 Speaker 2: great if we could calm rents and calm house prices. 226 00:12:55,600 --> 00:12:57,720 Speaker 2: But at the same time, are you willing to take 227 00:12:57,760 --> 00:13:00,280 Speaker 2: a hint on your superbalance for that to take place? 228 00:13:00,320 --> 00:13:03,359 Speaker 2: And I think that's the that's kind of the uncomfortable 229 00:13:03,440 --> 00:13:07,479 Speaker 2: question we have around super funds getting into. 230 00:13:07,720 --> 00:13:10,480 Speaker 1: And it's that the experience overseas that rents did do 231 00:13:10,600 --> 00:13:14,679 Speaker 1: go higher when institution investors because the yield is more 232 00:13:14,720 --> 00:13:16,520 Speaker 1: the running yield is more important to them. Than it 233 00:13:16,559 --> 00:13:17,880 Speaker 1: would be for a moment, Dad. 234 00:13:18,440 --> 00:13:21,400 Speaker 2: Yeah, it has. If you look at the anger around 235 00:13:21,400 --> 00:13:25,000 Speaker 2: rental housing the US in particular, it's not anger directed 236 00:13:25,080 --> 00:13:29,960 Speaker 2: towards individual investors. It's now anger directed towards the big 237 00:13:30,480 --> 00:13:33,760 Speaker 2: funds or the big groups or the big companies that 238 00:13:33,840 --> 00:13:37,400 Speaker 2: I that I need properties and the same problems. They're 239 00:13:37,400 --> 00:13:40,120 Speaker 2: the same problems around upkeep. They're the same, you know, 240 00:13:40,160 --> 00:13:43,040 Speaker 2: they're very similar problems that the anchor now is directed 241 00:13:43,080 --> 00:13:46,400 Speaker 2: more to individual investors. Here, it's directed towards large companies. 242 00:13:46,440 --> 00:13:48,800 Speaker 2: So it's necessarily solve those problems. 243 00:13:48,960 --> 00:13:51,480 Speaker 1: So the retor, the rector here complains to mister and 244 00:13:51,480 --> 00:13:55,880 Speaker 1: missus Smith, but the rent in Chicago complains to Gigantic 245 00:13:55,880 --> 00:14:00,880 Speaker 1: Corporation Limited, And it's completely different. Dynamic about bidding at 246 00:14:00,920 --> 00:14:02,920 Speaker 1: auction or if you were bidding for the house around 247 00:14:02,960 --> 00:14:04,880 Speaker 1: the corner and you were up against amp. 248 00:14:06,120 --> 00:14:09,439 Speaker 2: Yeah, well this is the much statement pockets and then 249 00:14:09,480 --> 00:14:11,760 Speaker 2: an individual investor absolutely. 250 00:14:11,440 --> 00:14:13,959 Speaker 1: Yeah, I mean, I digress, but it's true, as you say, 251 00:14:14,040 --> 00:14:16,600 Speaker 1: deeper pockets are Remember going I was a property reporter 252 00:14:16,679 --> 00:14:18,880 Speaker 1: once upon a time, commercial property, and you would go 253 00:14:18,920 --> 00:14:21,760 Speaker 1: downtown there would be an auction city building, you know, 254 00:14:22,600 --> 00:14:25,440 Speaker 1: and everyone would stand on the street and the bidding 255 00:14:25,440 --> 00:14:27,720 Speaker 1: would start, and if the person from AMP put their 256 00:14:27,760 --> 00:14:30,840 Speaker 1: hand up, everyone would just go, oh, hell, ampre here, 257 00:14:31,200 --> 00:14:33,560 Speaker 1: you know, because they wanted, if they wanted. It's a 258 00:14:33,600 --> 00:14:37,640 Speaker 1: completely different dynamic than the individual investor who's looking at it. 259 00:14:37,680 --> 00:14:39,800 Speaker 1: And we've never had that in housing. That's a really 260 00:14:39,800 --> 00:14:42,520 Speaker 1: interesting point you make and that you bring up. I mean, 261 00:14:42,520 --> 00:14:45,280 Speaker 1: at its worst, I think is the vulture funds, which 262 00:14:45,320 --> 00:14:48,720 Speaker 1: of course swoop on housing when there's a crash. This 263 00:14:48,800 --> 00:14:53,520 Speaker 1: is a different dynamic. This is we're assuming under normal circumstances, 264 00:14:53,520 --> 00:14:56,320 Speaker 1: with a normal, gently growing economy. What would happen if 265 00:14:56,360 --> 00:14:59,360 Speaker 1: big funds came into the market just to develop that 266 00:14:59,400 --> 00:15:01,760 Speaker 1: a little bit more. Or there's also and it hasn't 267 00:15:01,760 --> 00:15:03,680 Speaker 1: been here at all, but we must allow for it. 268 00:15:03,720 --> 00:15:06,800 Speaker 1: I think now the sooner or later companies themselves buying 269 00:15:07,160 --> 00:15:09,800 Speaker 1: housing in Ireland. At the moment I noticed where there's 270 00:15:09,800 --> 00:15:13,440 Speaker 1: a lot of dependence, of course on multinationals companies like 271 00:15:13,520 --> 00:15:17,800 Speaker 1: I think it's certainly Ryanair and I think Intel have 272 00:15:18,040 --> 00:15:21,920 Speaker 1: been buying housing for their staff and they come out 273 00:15:21,960 --> 00:15:24,280 Speaker 1: and they say we cannot get the staff. The staff 274 00:15:24,280 --> 00:15:26,280 Speaker 1: can't afford to live in Dublin. So our answer is 275 00:15:26,360 --> 00:15:29,560 Speaker 1: we will buy houses for them. We haven't had that here. 276 00:15:30,280 --> 00:15:34,520 Speaker 1: It's got to be a potential outcome. Hasn't it our 277 00:15:34,560 --> 00:15:35,560 Speaker 1: market sooner or later? 278 00:15:36,320 --> 00:15:37,960 Speaker 2: Yeah, I mean we have had it here. I guess 279 00:15:38,240 --> 00:15:42,640 Speaker 2: places like man Easa we're probably originally, yes, traditionally mining 280 00:15:43,440 --> 00:15:44,160 Speaker 2: mining towns. 281 00:15:44,520 --> 00:15:47,520 Speaker 1: Yes, there was specific Dunlop houses actually where I lived 282 00:15:47,520 --> 00:15:49,760 Speaker 1: at one stage. Once upon a time, Pacific Dunlop had 283 00:15:49,760 --> 00:15:53,160 Speaker 1: owned a whole pile of houses. This was, once upon 284 00:15:53,200 --> 00:15:56,520 Speaker 1: a time, big conglomerate. But I'm talking about a different 285 00:15:56,600 --> 00:15:58,960 Speaker 1: dynamic where the company was not in housing. It's not 286 00:15:59,440 --> 00:16:03,000 Speaker 1: patron such. It's an urgency where they say we can't 287 00:16:03,000 --> 00:16:05,280 Speaker 1: get the workers, they can't live in the middle of 288 00:16:05,320 --> 00:16:08,000 Speaker 1: Melbourne or Sydney, so we've bought houses for them. Do 289 00:16:08,080 --> 00:16:09,920 Speaker 1: you think that's going to happen here ever? 290 00:16:11,240 --> 00:16:13,920 Speaker 2: Yeah, well, I think it's happening in a very mile 291 00:16:14,040 --> 00:16:15,800 Speaker 2: way in places like Bayer and Bay. You know, you 292 00:16:15,840 --> 00:16:20,600 Speaker 2: hear of hospitality companies providing some sort of accommodation, not 293 00:16:20,640 --> 00:16:23,840 Speaker 2: on mass you know, it hasn't happened here. But you know, 294 00:16:24,400 --> 00:16:27,560 Speaker 2: besides big infrastructure projects or big mining projects where they've 295 00:16:27,560 --> 00:16:31,080 Speaker 2: had to provide housing in quite isolated areas. But it's 296 00:16:31,120 --> 00:16:34,520 Speaker 2: one option. I mean, if you do need young staff 297 00:16:34,560 --> 00:16:38,280 Speaker 2: in Sydney, and young staff in Sydney really find it 298 00:16:38,320 --> 00:16:41,080 Speaker 2: difficult to live in such an expensive place, it is 299 00:16:41,120 --> 00:16:43,239 Speaker 2: an option to be providing that absolutely. 300 00:16:43,720 --> 00:16:48,120 Speaker 1: Okay, now we've covered favorite ground here. As I said, 301 00:16:48,160 --> 00:16:50,240 Speaker 1: there is a It's one of those times for a 302 00:16:50,400 --> 00:16:53,920 Speaker 1: policy sometimes doesn't matter an awful lot if you're an investor. 303 00:16:53,920 --> 00:16:56,200 Speaker 1: There are ties where it really matters. We have a 304 00:16:56,200 --> 00:16:58,920 Speaker 1: fairly active government outlining a policy in front of us 305 00:16:59,440 --> 00:17:02,440 Speaker 1: just now. A lot of it is pertinent property and 306 00:17:02,480 --> 00:17:04,560 Speaker 1: you can see how they can pull the lever so quickly, 307 00:17:04,600 --> 00:17:08,960 Speaker 1: like for instance, accelerating that first home deposit scheme and 308 00:17:09,040 --> 00:17:12,040 Speaker 1: opening it up from September on, which will instantly, I think, 309 00:17:12,080 --> 00:17:14,640 Speaker 1: feed into the home buyer market. And if you think 310 00:17:14,640 --> 00:17:17,560 Speaker 1: the prices are lifting quickly in that strata now where 311 00:17:17,600 --> 00:17:20,359 Speaker 1: they can only accelerate it, I would think. Okay. I've 312 00:17:20,440 --> 00:17:24,520 Speaker 1: kept some very interesting questions for Narrada right smack in 313 00:17:24,560 --> 00:17:33,480 Speaker 1: her area. We'll talk about them in a moment. Hello 314 00:17:33,560 --> 00:17:36,639 Speaker 1: and welcome back to the Australians Money Puzzled podcast. James 315 00:17:36,720 --> 00:17:40,639 Speaker 1: Kirby here with neared economspy chief economist at the Rape 316 00:17:40,640 --> 00:17:43,520 Speaker 1: White Group, someone who's willing to take questions of all 317 00:17:43,560 --> 00:17:46,439 Speaker 1: types from all types, which is good because we have 318 00:17:46,480 --> 00:17:49,679 Speaker 1: some pretty curly questions for her. First once from Sean. 319 00:17:50,320 --> 00:17:53,760 Speaker 1: I often hear of people using renovations as a strategy 320 00:17:54,040 --> 00:17:56,840 Speaker 1: to increase equity or the sale price of their home. 321 00:17:57,359 --> 00:18:00,720 Speaker 1: This polarized opinion on the merit of this, particularly with 322 00:18:00,800 --> 00:18:05,000 Speaker 1: construction labor costs increasing. I know many success stories failed 323 00:18:05,000 --> 00:18:07,800 Speaker 1: to account for all the costs in this area. So 324 00:18:07,920 --> 00:18:11,240 Speaker 1: are the days of renovating for profit behind this? Hey, 325 00:18:11,800 --> 00:18:14,520 Speaker 1: this is really interesting. We had talked through last year 326 00:18:14,520 --> 00:18:17,360 Speaker 1: how people were afraid to renovate, but I noticed you've 327 00:18:17,359 --> 00:18:21,159 Speaker 1: been doing some work on replacement cost, and that replacement 328 00:18:21,280 --> 00:18:24,440 Speaker 1: cost is Could you explain to people what happened and 329 00:18:24,480 --> 00:18:26,040 Speaker 1: how that's improving again? 330 00:18:27,040 --> 00:18:30,679 Speaker 2: Yeah, So what happened through the pandemic is that it 331 00:18:30,720 --> 00:18:34,000 Speaker 2: became apparent that it was cheaper to buy an established 332 00:18:34,000 --> 00:18:37,679 Speaker 2: home then buy a brand new home. So hard to measure, 333 00:18:37,680 --> 00:18:40,640 Speaker 2: but we saw it in the outskirts of many capital 334 00:18:40,680 --> 00:18:42,720 Speaker 2: cities that when we had to look at house and 335 00:18:42,800 --> 00:18:46,240 Speaker 2: land developments, anything that was built in twenty twenty could 336 00:18:46,280 --> 00:18:49,000 Speaker 2: be sort of thirty forty percent cheaper then something that 337 00:18:49,080 --> 00:18:54,400 Speaker 2: was being built in twenty twenty four and not dramatically 338 00:18:54,440 --> 00:18:57,040 Speaker 2: different in terms of quality. And so what happened is 339 00:18:57,040 --> 00:18:58,960 Speaker 2: that we've started to see a lot of people moving 340 00:18:59,000 --> 00:19:02,320 Speaker 2: into buy homes built in twenty twenty and. 341 00:19:02,400 --> 00:19:03,760 Speaker 1: You don't buy the new one, You're buy the one 342 00:19:03,800 --> 00:19:06,720 Speaker 1: that's one year old, because you know, I. 343 00:19:06,760 --> 00:19:10,120 Speaker 2: Think, yeah, like you said, buying a used part. It's 344 00:19:10,200 --> 00:19:12,600 Speaker 2: basically it's around replacement costs that if you have a 345 00:19:12,600 --> 00:19:16,240 Speaker 2: look at trying to bridge that gap, it was too 346 00:19:16,520 --> 00:19:19,719 Speaker 2: why that construction costs have really blown out even their 347 00:19:19,760 --> 00:19:23,200 Speaker 2: house parts seen strong growth, we've seen it narrow and 348 00:19:23,320 --> 00:19:28,000 Speaker 2: it's not because house construction costs have dropped, they have stabilized. 349 00:19:28,240 --> 00:19:30,320 Speaker 2: But what we have seen is that house prices have 350 00:19:30,440 --> 00:19:33,359 Speaker 2: now caught up in many areas and as a result 351 00:19:33,480 --> 00:19:37,040 Speaker 2: that that gap has substantially narrowed. So I think ideally 352 00:19:37,080 --> 00:19:39,760 Speaker 2: a lot of people would have hoped construction costs come down, 353 00:19:39,840 --> 00:19:42,440 Speaker 2: but they haven't. That we have seen it increased in 354 00:19:43,520 --> 00:19:45,240 Speaker 2: the cost of buying it home. 355 00:19:45,600 --> 00:19:50,880 Speaker 1: Okay, back to Sean, Then in that scenario, are renovations 356 00:19:51,600 --> 00:19:54,640 Speaker 1: financially more promising than there would be. 357 00:19:56,480 --> 00:19:59,320 Speaker 2: It depends on what you're doing. And you know, this 358 00:19:59,440 --> 00:20:02,040 Speaker 2: is a thing. If you're doing like a really super 359 00:20:02,119 --> 00:20:07,119 Speaker 2: unusual backyard sculpture or something, you know, maybe not. But 360 00:20:07,400 --> 00:20:10,720 Speaker 2: if you're doing something like painting and it saves someone time, 361 00:20:11,119 --> 00:20:13,320 Speaker 2: then you know that would definitely work out. I mean, 362 00:20:13,560 --> 00:20:16,959 Speaker 2: at a base level. You know, we generally say the 363 00:20:16,960 --> 00:20:19,440 Speaker 2: cost of your home now plus the renovation would equal 364 00:20:19,480 --> 00:20:21,840 Speaker 2: the cost you could sell at. But you know that's 365 00:20:21,960 --> 00:20:25,240 Speaker 2: not necessarily the case. We know that some renovations do 366 00:20:25,320 --> 00:20:26,879 Speaker 2: add a lot more value than others. 367 00:20:26,920 --> 00:20:30,720 Speaker 1: And okay, yeah, but I suppose usefully people that variability 368 00:20:30,800 --> 00:20:34,280 Speaker 1: has improved, that sense of oh, having no idea how 369 00:20:34,359 --> 00:20:37,760 Speaker 1: much costs would blow out, that period has calmed. 370 00:20:38,359 --> 00:20:40,040 Speaker 2: It has come. And I think the other thing too, 371 00:20:40,080 --> 00:20:41,719 Speaker 2: is that when we have a look at properties that 372 00:20:41,920 --> 00:20:46,200 Speaker 2: go up for option, a fully renovated family home will 373 00:20:46,240 --> 00:20:49,280 Speaker 2: absolutely do a lot better than something that's unrenovated. So 374 00:20:49,680 --> 00:20:51,960 Speaker 2: people are taking into account the fact that it is 375 00:20:52,040 --> 00:20:54,520 Speaker 2: hard to build at the moment, or still pretty hard 376 00:20:54,520 --> 00:20:56,080 Speaker 2: to build and still pretty expensive. 377 00:20:56,520 --> 00:20:59,719 Speaker 1: Yes, okay, so that's still highly valued. That you have 378 00:21:00,160 --> 00:21:03,120 Speaker 1: put yourself through the torture of dealing with the spectrum 379 00:21:03,160 --> 00:21:06,440 Speaker 1: of treaties as it should be. Okay, final question from Carl. 380 00:21:06,720 --> 00:21:09,879 Speaker 1: I was reading the Productivity Commission found that productivity in housing, 381 00:21:09,960 --> 00:21:14,280 Speaker 1: measured by dwellings completed per hour, has dropped by fifty 382 00:21:14,320 --> 00:21:17,359 Speaker 1: three percent. It made me wonder whether the decline is 383 00:21:17,440 --> 00:21:20,080 Speaker 1: due to the increasing size of homes we're building today. 384 00:21:20,280 --> 00:21:22,640 Speaker 1: Is that true? The productivity in housing has dropped and why? 385 00:21:23,280 --> 00:21:26,120 Speaker 2: Yeah, so it takes on average six it's gone out 386 00:21:26,160 --> 00:21:28,760 Speaker 2: from six months to build a home to over almost 387 00:21:28,800 --> 00:21:29,560 Speaker 2: eleven months. 388 00:21:29,600 --> 00:21:30,920 Speaker 1: So there's you know. 389 00:21:30,960 --> 00:21:33,760 Speaker 2: It is taking a lot longer. It's kind of it's 390 00:21:33,840 --> 00:21:36,320 Speaker 2: quite it's not complicated at all. I mean, basically what 391 00:21:36,359 --> 00:21:39,639 Speaker 2: happened through the pandemic is we had supply chain blockages. 392 00:21:40,000 --> 00:21:42,560 Speaker 2: Things like if you're building a house and then a 393 00:21:42,560 --> 00:21:44,960 Speaker 2: bas doesn't turn up, then you can't finish the house. 394 00:21:45,520 --> 00:21:48,840 Speaker 2: It then slows through to labor challenges, so again, if 395 00:21:48,880 --> 00:21:51,160 Speaker 2: you can't find a tiler, you can't finish your house. 396 00:21:51,200 --> 00:21:54,120 Speaker 2: And so that increased time. We then start to see 397 00:21:54,119 --> 00:21:57,639 Speaker 2: a lot of builders going to receivership. So the availability 398 00:21:57,680 --> 00:22:00,879 Speaker 2: of trades continue to be problematic, and even things like 399 00:22:00,960 --> 00:22:03,960 Speaker 2: the green energy transition is quite challenging in places like 400 00:22:04,160 --> 00:22:08,119 Speaker 2: Wa because very brick dependent and bricks need gas and 401 00:22:08,160 --> 00:22:11,360 Speaker 2: gas is expensive and then trying to find brick layers 402 00:22:11,480 --> 00:22:14,840 Speaker 2: is really difficult. So we do have an aging trade 403 00:22:15,240 --> 00:22:22,000 Speaker 2: trades profile in Australia, so very complicated, but definitely productivity 404 00:22:22,080 --> 00:22:26,560 Speaker 2: is low and there's quite amazing numbers of trades that 405 00:22:26,600 --> 00:22:30,560 Speaker 2: are required to increase productivity that the hi I have mentioned. 406 00:22:30,640 --> 00:22:31,919 Speaker 2: I can't remember off the top of my head, but 407 00:22:32,000 --> 00:22:34,400 Speaker 2: it was, you know, tens of thousands of trades are 408 00:22:34,440 --> 00:22:37,160 Speaker 2: required to try and fix the productivity. 409 00:22:37,359 --> 00:22:40,560 Speaker 1: So it's I see. So it's a flash flash point 410 00:22:40,600 --> 00:22:41,920 Speaker 1: basically in this area. 411 00:22:42,040 --> 00:22:44,280 Speaker 2: Yeah, absolutely, very. 412 00:22:44,119 --> 00:22:46,160 Speaker 1: I did not know that, all right, Thank you, Carl. 413 00:22:46,320 --> 00:22:48,560 Speaker 1: Very interesting question. They were. None of this, of course 414 00:22:48,640 --> 00:22:51,960 Speaker 1: is advice. It's information only. Terrific Keith, thank you very much. 415 00:22:52,080 --> 00:22:56,560 Speaker 1: Narrative Cando spy, very interesting. As always, this government is 416 00:22:57,240 --> 00:23:00,119 Speaker 1: an interventionist government. If you're an investor, you're really on 417 00:23:00,280 --> 00:23:02,720 Speaker 1: to keep your eyes open as to what is happening 418 00:23:02,840 --> 00:23:05,080 Speaker 1: around you. I think is the message from today's show. 419 00:23:05,320 --> 00:23:08,640 Speaker 1: We'll talk again fans, great, Thank you Narrador and thank 420 00:23:08,640 --> 00:23:11,760 Speaker 1: you folks. The email the money puzzle at the Australian 421 00:23:11,840 --> 00:23:13,960 Speaker 1: dot Com dot Au talk to you soon.