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Speaker 1: Hello, Welcome to the Australians Money Puzzle podcast. I'm James Kirkby.

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Speaker 1: Welcome aboard everybody. What a difference a week makes. We

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Speaker 1: finally get a raid cut and suddenly there are stories

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Speaker 1: ever heard really about improved signals across the property market.

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Speaker 1: I've been wondering where exactly these improved signals are, Like,

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Speaker 1: where are the hotspots in this national property market post

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Speaker 1: rad cut? Where we are it would seem heading into

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Speaker 1: a raid cycle. Well who better to tell us about

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Speaker 1: where the hotspots are than Terry Rider, regular guest on

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Speaker 1: the show, and who runs the hot spotting service? How

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Speaker 1: are you, Terry?

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Speaker 2: Are you well joined yourself? Good?

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Speaker 1: Thank you, thanks for coming on the show. Do you

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Speaker 1: get that sense that there's an uptick in tempo in

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Speaker 1: the markets following this raid cut? First in four years?

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Speaker 3: Look, I really don't think that the very small and

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Speaker 3: apparently isolated rope.

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Speaker 2: Cup is terribly influential.

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Speaker 3: I think things were fairly upbeat already. It certainly doesn't

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Speaker 3: hurt and as may have a psychological impact. It does

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Speaker 3: improve borrowing capacity a little bit. But we ended twenty

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Speaker 3: twenty four with markets generally pretty strong, and we started

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Speaker 3: twenty twenty five very strongly as well. We often find

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Speaker 3: in our business, and I think a lot of properly

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Speaker 3: related businesses that January is often half a month because

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Speaker 3: a lot of people are on leave and not really

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Speaker 3: doing things. But this year January started right from the

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Speaker 3: get go. A lot of investors obviously started the year

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Speaker 3: with intent, intending to do things, and that's what was

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Speaker 3: happening last month and through into February. And a rope

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Speaker 3: cut is perhaps a minor contribution to something some momentum

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Speaker 3: that was already building.

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Speaker 1: Think okay, but Sydney and Melbourne places on the month

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Speaker 1: were actually negative.

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Speaker 2: Well, that's right.

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Speaker 3: We never have a situation in asurround property markets where

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Speaker 3: the same thing that's happening everywhere. Sometimes media talk talks

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Speaker 3: about a two speed market. We tend to think of

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Speaker 3: a more like a four speed market where we at

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Speaker 3: any point in time in twenty twenty four was a

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Speaker 3: case in point. We had some markets, some capitalist cities

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Speaker 3: and some regional markets that were booming, some that had

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Speaker 3: moderate growth, some that were stagnating, and a few like Melbourne,

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Speaker 3: with prices actually fell in the last twelve months. And

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Speaker 3: that's pretty much normal. We do believe very strongly that

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Speaker 3: real estate is local, very local. We don't have an

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Speaker 3: Australian property market with literally thousands of individual markets and

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Speaker 3: they all arise out. What's happening with local economies and

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Speaker 3: Melbourne I think we'll talk about it a little bit later,

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Speaker 3: but it's a market that's struggling for its own local

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Speaker 3: Victorian state reasons.

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Speaker 1: That's right, Yes, it is.

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Speaker 2: Well.

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Speaker 1: I imagine when people meet you and they find out

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Speaker 1: what you do on the nicture of the enterprise hot spotting,

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Speaker 1: the obvious question for you, Terry is what are the

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Speaker 1: hotspots from a geographic perspective around Australia to the morment,

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Speaker 1: where are the hot spots?

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Speaker 3: Well, taking a broad brush view, we have done a

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Speaker 3: major analysis to give us some indicators of where we

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Speaker 3: expect the growth to be in twenty twenty five and beyond,

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Speaker 3: because we always take a long term view, as you

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Speaker 3: should with real estate, but all the metrics tell us

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Speaker 3: that is going to be very much the year of Queensland.

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Speaker 3: Queensland not only investor but also home buyers because Queensland

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Speaker 3: gets more uplift from internal migrants than any other state

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Speaker 3: or territory in the country, and that continues. So we

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Speaker 3: have a strong demand from people moving to Queensland as

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Speaker 3: home buyers, but we also have investors. There seems to

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Speaker 3: be a pivoting away from Perth and worstern Australia towards Queensland.

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Speaker 3: Regional Queensland is very strong. We ended twenty twenty four

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Speaker 3: with some of those Queensland regional cities as hot and

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Speaker 3: his frenzied and as competitive as the Perth market has

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Speaker 3: been in the last year or so. So if you're

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Speaker 3: trying to buy a regional city like Rockhampton or Townsville,

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Speaker 3: you'd find yourself competing for the same property with fifteen

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Speaker 3: or twenty others and it would sell very quickly and

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Speaker 3: probably for more than the asking price. So we're going

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Speaker 3: to see more of that this year right throughout regional

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Speaker 3: Queensland because it has probably more than any other state

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Speaker 3: or territory.

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Speaker 2: It has a.

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Speaker 3: Large number of regional centers that are affordable, they have

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Speaker 3: high rental yields and they've.

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Speaker 2: Got great prospects for growth. There's a big.

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Speaker 3: Infrastructure spend happening in many of those cities, and Queensland

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Speaker 3: offers that more than any other place in Australia. Adelaide

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Speaker 3: in South Australia continue to be strong. Adelaide's remarkably consistent.

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Speaker 3: It's been rising for four or five years and it's

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Speaker 3: not showing any signs of slowing down, whereas the Perth

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Speaker 3: and Western Australian markets definitely are weren't seeing no signs

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Speaker 3: yet that Adelaide has slowed down. There's still a significant

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Speaker 3: shortage of listenings and Adelaide's still a significant shortage of rent.

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Speaker 3: Rental vacancy is an incredibly low in Adelaide, as they

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Speaker 3: have been for the past several years. Probably the big

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Speaker 3: surprise that I think we'll see in twenty twenty five

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Speaker 3: is Darwin. I think Darwin's going to do much better.

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Speaker 3: It's been a poor performer in the last couple of years.

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Speaker 3: More and more investors asking questions about Darlin because it

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Speaker 3: has by far the highest rental yields in the country

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Speaker 3: amongst the capital cities. It's very affordable, and it also

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Speaker 3: has some major investment developments, infrastructure projects and the works,

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Speaker 3: some very big resources related things happening in the Northern Territory.

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Speaker 3: If one or two of those come off, it's really

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Speaker 3: going to supercharge the Darwin market.

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Speaker 2: The ones that expect to be weak.

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Speaker 3: Camera continues to be one of the weakest markets in

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Speaker 3: the country, and Perth and Wa after two or three

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Speaker 3: years of leading the nation on price growth, there's a

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Speaker 3: lot of indicators now that those markets moderating and the

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Speaker 3: peak has been passed in those markets unrapidly.

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Speaker 1: It's told it there and we'll do with Sydney and

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Speaker 1: Murdurn in the Mormons. Two things cut cut my eye

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Speaker 1: there on on Perth topping ours, you were seeing, there's

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Speaker 1: a number of indicators would suggest that this extremely good

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Speaker 1: spell they've had in Perth where it was the strongest

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Speaker 1: city in Donetian, what do you see that tells you

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Speaker 1: it might be slowing down?

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Speaker 2: Now?

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Speaker 3: There are a number of indicators. Firstly sales volumes, which

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Speaker 3: is something that we monitor quarter by quarter, and it's

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Speaker 3: about the middle of twenty twenty four we started to

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Speaker 3: see those taper off because prior to that, for the

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Speaker 3: previous a two years, pretty much every suburban Perth if

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Speaker 3: you looked at the quarterly the pattern of quarterly sales activity,

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Speaker 3: it was just rising and rising, and then it started

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Speaker 3: to taper off in the second half of calendar twenty

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Speaker 3: twenty four, so it's indicator, but more particularly perhaps we've

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Speaker 3: also seen the rate of price growth dropping month by month.

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Speaker 3: The latest figures from Project for example, the annual rate

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Speaker 3: for Perth has dropped to about twelve or thirteen percent,

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Speaker 3: whereas just you know, four or six months ago it

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Speaker 3: was not twenty five percent. And we've noticed that every

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Speaker 3: month the rate of growth has dropped. Perhaps the most

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Speaker 3: connect significant thing with the price data was with core

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Speaker 3: Logic where they show the figures for the latest month

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Speaker 3: and the latest quarter, and Perth has been overtaken. Has

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Speaker 3: previously been leading the nation by quite a considerable margin

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Speaker 3: on those metrics, but in the latest figures for January,

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Speaker 3: in the latest months several cities have overtaken Perth on

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Speaker 3: leading for the monthly price grape but also for the

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Speaker 3: latest quarter.

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Speaker 2: So we saw.

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Speaker 3: Cities like Brisbane, Adelaide and Darwin and some of the

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Speaker 3: regional markets actually having high growth in the latest month

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Speaker 3: and the last latest quarter.

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Speaker 1: I see, okay right with that. Yeah, so that would

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Speaker 1: suggest it has been on the show a few times.

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Speaker 1: Interesting to hear you actually drill down and chill us

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Speaker 1: why that is the case that the Perth market stopping

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Speaker 1: from a great height. It has to be said by that,

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Speaker 1: I mean that the price growth was extraordinary for a

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Speaker 1: year or two, but now slowing down. And then on

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Speaker 1: the other hand, Terry, you were saying that you were

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Speaker 1: saying that Queensland actually gets a great left from immigration.

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Speaker 1: It's interesting. I would have thought it was Melbourne being

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Speaker 1: sort of jobs city that had that, but you find

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Speaker 1: that the immigration is a pump if you like, behind

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Speaker 1: the Queensland market. Yeah.

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Speaker 3: Well I was talking when I referred to queens I

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Speaker 3: was talking about internal migration, which is people moving from

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Speaker 3: part of the Australia to another.

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Speaker 2: And we've had this.

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Speaker 3: Trend for some time awfter a well in course of

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Speaker 3: Sydney for ten years, where people are moving from the

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Speaker 3: two biggest cities to regional areas of smaller cities. We

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Speaker 3: call it the exodus to affordable lifestyle. And it was

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Speaker 3: believed by some that it was kind of came out

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Speaker 3: of the cop lockdowns, but really it was underway for

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Speaker 3: much longer, and it hasn't slowed down now that all

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Speaker 3: the sort of the lockdown and restrictions of COVID have passed,

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Speaker 3: as some expect that it would. Now there was a

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Speaker 3: prediction that people would move back, but that's not happening,

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Speaker 3: nor would I expect it to so Queensland. Whereas Melbourne

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Speaker 3: gets the most from overseas migration, Queensland, Brisbane and Queensland

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Speaker 3: get the most from internal migration and really big numbers.

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Speaker 3: You know, it's about climate and or perception of climate

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Speaker 3: because it hasn't been so great up here in Queensland,

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Speaker 3: but lifestyle climate affordability too. As I said earlier, there's

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Speaker 3: so many regional parts of Queensland that are just so

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Speaker 3: affordable relative to the lifestyle that they offer, both along

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Speaker 3: the coast and some of the wonderful inland cities like

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Speaker 3: twimber Is a wonderful place, was great lifestyle aspects, very

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Speaker 3: strong economy and it's one of one of the strongest

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Speaker 3: regional markets in the nation.

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Speaker 1: So these regional spots hot spots in Queensland. You mentioned

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Speaker 1: some towns Rockhampton, Townsville to Woomba, so it seems to

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Speaker 1: me that they have a lot of what investors want

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Speaker 1: in that it's not just that the yields are better

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Speaker 1: than inner Sydney or inner Melbourne, but they have the

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Speaker 1: price growth for atension as well, so you're getting the

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Speaker 1: two sides that you would always want as an investor. Yes,

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Speaker 1: very interesting and I wonder how they match up against

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Speaker 1: the big cities. We'll take a break, folks and we'll

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Speaker 1: have a look at Melbourne and Sydney in a minute. Hello,

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Speaker 1: Welcome back to The Australian's Money Puzzle podcast. James Kerby

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Speaker 1: here with Terry Ryder of the Hot Spoting Group. So

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Speaker 1: Sydney and Melbourne, then, Terry, Melbourne obviously the weakest market

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Speaker 1: in the country, the weakest figures on just about every criteria.

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Speaker 1: Falling prices in the last month the two and Sydney

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Speaker 1: also had a soft on in January. As you said,

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Speaker 1: that's it's not a regular a month, but they would

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Speaker 1: have very low yields and would those years would stay.

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Speaker 1: I mean roughly, what would there be like half of

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Speaker 1: regional towns something like two and a half percent against

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Speaker 1: five something like that.

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Speaker 3: Well, yeah, perhaps an even greater differential. There's there's plenty

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Speaker 3: of places in regional markets across trade we can get

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Speaker 3: six seven percent rental yields. And we should never forget

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Speaker 3: when we're talking about yields, we must never forget to

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Speaker 3: include units and the discussion because increasingly investors and home

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Speaker 3: buyers are opting for attached dwellings as a purchase of choice,

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Speaker 3: and of course the units tend to.

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Speaker 2: Have higher rental yields.

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Speaker 3: But yeah, I mean, you can't very readily find well

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Speaker 3: above six percent rental yields on houses in regional queens

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Speaker 3: somewhereas in Sydney and Melbourne.

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Speaker 2: It's more like two or three percent.

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Speaker 1: Yes, it is, And our listeners will tell you this

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Speaker 1: is the fact. There's a correspondence coming up, folks. In

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Speaker 1: one of our one of our correspondents, John actually spens

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Speaker 1: out just what is when he's finished paying all the

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Speaker 1: taxes and bits of Victoria, and it's really spectacular. Well,

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Speaker 1: it's one point two percent a year, he says. We've

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Speaker 1: come to that in the moment. So looking at Melbourne

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Speaker 1: and Sydney, then what's the view on them? The leading

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Speaker 1: research houses are seeing two or three percent growth this

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Speaker 1: year from Melbourne or Sydney. That's barely keeping up with

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Speaker 1: in fleetion and that's sort of like basically going nowhere,

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Speaker 1: what's your view on the big cities?

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Speaker 3: Look a little bit more abortion that when we when

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Speaker 3: analyzed all the markets around the country, and as I said,

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Speaker 3: earlier we found Brisbane and Queensland leading Adelaide in South Australia,

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Speaker 3: and well Sydney and Melbourne was sort of the middle

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Speaker 3: of the pack. Expected to have moderate growth this year, certainly,

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Speaker 3: but perhaps a little bit better than two or three percent.

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Speaker 3: The thing I think people need to keep in mind

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Speaker 3: is that those figures that are published about Sydney house

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Speaker 3: prices rose two percent last year, but they're very big generalizations.

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Speaker 3: People again come back to the point that markets are

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Speaker 3: very local and nature, and that includes within big city.

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Speaker 3: So Sydney is a massive city with something like over

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Speaker 3: seven hundred suburbs and it's not just one market all

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Speaker 3: performing in the same way. So whereas the generalized figures

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Speaker 3: would say that Melbourne house prices only rows two or

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Speaker 3: three percent last year, within Greater Sydney, there were pockets

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Speaker 3: that did double digit growth, particularly for example, the local

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Speaker 3: governor of Canterbury Bankstown, which has become a very popular

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Speaker 3: market because it's quite low, well located, got good amenities

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Speaker 3: and infrastructure, but by Sydney standards, quite affordable. Particularly it's

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Speaker 3: unit markets. You can sort of buy small units in

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Speaker 3: many of the suburbs of Canoby Bankstown. You know, in

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Speaker 3: the four hundred thousands, which is a very rare thing

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Speaker 3: to be able to do anywhere in Greater Sydney.

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Speaker 1: Did you say that what did you say the price

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Speaker 1: growth was in the Canterbury Bankstown Well.

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Speaker 3: In many of the suburbs of Canterbury Bankstown Municipality it's

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Speaker 3: ten or fifty percent in the last twelve months.

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Speaker 1: That right, but the city was just two or three Say,

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Speaker 1: sorry to interrupt you, and you were going to tell

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Speaker 1: me about the houses, you said, the units and what

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Speaker 1: was the story with the houses there.

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Speaker 3: Well, you're typically paying a little bit over a million

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Speaker 3: dollars for houses, but again, you know, the medium price

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Speaker 3: for Sydney, depending on who you figures, you believes one

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Speaker 3: point two one point three million as a median house price,

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Speaker 3: and Canery Banks Down houses tend to be lower than that.

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Speaker 3: So it has that appeal of affordability, but also you know,

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Speaker 3: pretty good location, bustling market. It's one that we've been

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Speaker 3: recommending for the last couple of years and it certainly

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Speaker 3: performed well above the average for Greater Sydney. So I

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Speaker 3: think the trick for investors and buyers have all sorts

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Speaker 3: really is to find those outlies and they do exist

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Speaker 3: within Sydney. They also exists within Melbourne because there are

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Speaker 3: some parts of Melbourne where her prices have actually grown

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Speaker 3: in the last twelve months, contrary to that generalized figure

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Speaker 3: it says overall Melbourne was down a few percent.

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Speaker 2: In Melbourne, then there's no direct equivalent.

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Speaker 3: We'll find that the more affordable outering areas that are

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Speaker 3: once where it's most likely to have been price grape,

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Speaker 3: but also in the inner city markets, it's the unit markets.

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Speaker 3: And this I think we've talked about this before, James,

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Speaker 3: this big trend where more and more people are opting

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Speaker 3: for attached dwellings, not just for affordability reasons, but for lifestyle,

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Speaker 3: for location, for security and safety, because a lot of

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Speaker 3: people are concerned about crime on the streets now Melbourne.

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Speaker 3: I know a lot of people in Melbourne. I'm constantly

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Speaker 3: hearing stories about breakings, who attempted breakings, and people feel

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Speaker 3: some people anyway want to be in an apartment on

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Speaker 3: the tenth floor and a building.

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Speaker 2: That's got security features.

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Speaker 3: So there's lots of reasons why people are opting for

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Speaker 3: units these days, and we're now seeing ten around that

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Speaker 3: dominant paradigm that used to be which said that houses

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Speaker 3: on their noise show better capital growth than units, but

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Speaker 3: we're seeing that completely challenged now right across Australia in

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Speaker 3: different markets where I think figures from I think core

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Speaker 3: Logic recently said that across Australia, sixty percent of suburbs

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Speaker 3: have higher growth for units than they did for houses

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Speaker 3: last year, and in Brisbane it was eighty seven percent

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Speaker 3: of suburbs units outperformed houses.

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Speaker 1: Do you think there's an element of catch up there

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Speaker 1: because the units were way behind.

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Speaker 3: There is an element of catch up, but I think, James,

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Speaker 3: it's mostly that we're just seeing this real uplift and demand.

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Speaker 3: We've been watching the market share of units in the

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Speaker 3: major cities and it's rising quarter by quarter and Sydney

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Speaker 3: is now fifty five percent of all sales across Greater

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Speaker 3: Sydney attached dwellings rather than houses on land, and so

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Speaker 3: that's having a big impact on the price data. And

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Speaker 3: just getting back to Melbourne, some of those inner city Melbourne,

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Speaker 3: including the Melbourne CB itself which has a lot of apartments,

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Speaker 3: there was price growth in some of those locations with

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Speaker 3: units in the last twelve months, contrary to the overall

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Speaker 3: trend for Melbourne.

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Speaker 1: Is that interesting? Yeah, very interesting because when we look

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Speaker 1: at units, often you will see that they have been

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Speaker 1: sold for something like the price that there were four

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Speaker 1: or five years ago. I'm talking about it at Melbourne

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Speaker 1: for instance, But then that doesn't tell me that they

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Speaker 1: look more closely, maybe the case that the last twelve

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Speaker 1: months was where the action was and actually that it

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Speaker 1: has recovered in the last felve months. And when you

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Speaker 1: say units cherry, you basically mean anything other than a

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Speaker 1: stand alone house. But the sounds of it, it covers

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Speaker 1: both apartments and the townhouses.

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Speaker 3: Anything attached townhouses, units, apartments, whatever you like to call them,

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Speaker 3: things that they're on some sort of strata plan. And

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Speaker 3: it's I think it's probably the most significant trend in

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Speaker 3: Australia safe for the last ten years. We're quite interested

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Speaker 3: in it and we're tracking it and we're starting to

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Speaker 3: you know, we're producing new and different reports now because

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Speaker 3: this has become a big factor in the market. You know,

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Speaker 3: more affordable, lots of features that apartments can offer that

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Speaker 3: houses can't. Typically a house doesn't have a view, not

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Speaker 3: always of course, whereas much units do. Is that safety

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Speaker 3: and security feature that's that low maintenance, lock up and

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Speaker 3: leave facility that is better with units. And it's also location.

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Speaker 3: Quite often units are much better located. There was actually

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Speaker 3: an interesting study by Infrastructure.

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Speaker 2: Victoria a year or two ago.

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Speaker 3: Which found that the average apartment was much better located

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Speaker 3: relative to where schools and shops and public transport was

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Speaker 3: than the average house and that has an impact on

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Speaker 3: price grast, so that all those factors are feeding into

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Speaker 3: this trend and it's become Yeah, we think the most

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Speaker 3: significant big change in property markets in Australia in a decade.

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Speaker 1: See that's really interesting because I suppose the challenge what

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Speaker 1: a challenge is the bias probably that many investors would

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Speaker 1: have in two dan I probably have from watching units

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Speaker 1: perform poorly against standard doornhouses, probably for a decade at least. Yeah, right, okay,

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Speaker 1: but do you think the swing is happening?

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Speaker 2: Well, I think it was.

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Speaker 3: Already well underway. And if you look at many locations

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Speaker 3: in Australia compare the price growth not just in the

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Speaker 3: last year, but in say that the last five years

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Speaker 3: the four year average, we're finally increasing examples where apartments

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Speaker 3: are up performing the houses in the same Like Christian

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Speaker 3: as I mentioned, earlier. Therese recent figures that across the

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Speaker 3: Strike sixty percent of suburbs now units are upperforming, and

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Speaker 3: in Brisbane it's a much harder percentage.

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Speaker 1: Very interesting, Okay, listeners, I think that we would take

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Speaker 1: that on board in terms of mega trends, which we

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Speaker 1: don't really see very often, and it's one of the

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Speaker 1: reasons I asked Harry to come on the show was

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Speaker 1: to try and eak out of your life what's really

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Speaker 1: happening on momentum and trends across the country, not just

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Speaker 1: in terms of this town or that town against another suburb,

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Speaker 1: but very interesting that notion that in fact, the units

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Speaker 1: are going through a very strong phase at the moment,

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Speaker 1: and it's something that's worth keeping in mind. Just when

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Speaker 1: you think you figured out the property market, it surprises you.

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Speaker 1: And there was a sense always, of course that units

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Speaker 1: would need to catch up with standalone homes because standalone

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Speaker 1: homes greatly outperformed during COVID, So the two things are

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Speaker 1: probably coming together now. But take short break. I have

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Speaker 1: some really good questions, including this first one from John

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Speaker 1: back in the moment. Hello, welcome back to The Australian's

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Speaker 1: Money Puzzlive podcast. Terry Ryder of the Hot Spotting Group

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Speaker 1: is my guest today and we are talking about, interestingly,

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Speaker 1: I think the power of unit investing, which has been

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Speaker 1: much derided, if you like, in recent times. But Terry's

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Speaker 1: got some pretty convincing information that the units are hot

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Speaker 1: at the moment. Is also you know, I think very

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Speaker 1: perspeactively argue that Queensland from original basis, Queensland is where

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Speaker 1: it's happening, where it's going to happen, and I certainly

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Speaker 1: would have no argument with that. I think all the

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Speaker 1: scigens do suggest that. Okay, a couple of questions. John says,

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Speaker 1: I thought you tined this interesting. I recently re reviewed

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Speaker 1: my property in Victoria, which was the worst by a

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Speaker 1: long way of the properties he has. He says, we're

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Speaker 1: charged three towns two hundred and forty nine per month

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Speaker 1: in rent for a free standing house and Point Cook. Okay,

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Speaker 1: so that's the income, and it's a house free standing

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Speaker 1: in Point Cook, which is an outer suburb of Melbourne,

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Speaker 1: relatively new suburbs. And then he lists it's really something else.

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Speaker 1: He lists the set costs, the land tax, the council tax,

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Speaker 1: the body corporate at the water rates, and the management fees,

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Speaker 1: the insurance fees, the Victorian government mandates that smoke detective fee,

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Speaker 1: and it all comes to thirteen thousand a year, one

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Speaker 1: thousand and thirty per month. And he says, I earn,

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Speaker 1: after fees and taxes, one thousand a month, or a

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Speaker 1: return of one point two percent per annum on a

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Speaker 1: house that's supposed to be worth over a million dollars.

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Speaker 1: I raised this with the agents and they laughed and

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Speaker 1: said they hear it all the time from many property owners.

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Speaker 1: There you are one point two percent. Maybe that's the

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Speaker 1: more we know. The yields are really low in the

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Speaker 1: big cities Melbourne and Sydney because the are so high

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Speaker 1: and you pay so much for the property, and your

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Speaker 1: rent is such a tiny fraction after the amount you've

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Speaker 1: paid that the years. I am not surprised that there

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Speaker 1: are between more than three percent in effect. And when

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Speaker 1: you talked about years, Terry, were you talking next years

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Speaker 1: or grossians?

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Speaker 3: I definitely gross yields.

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Speaker 1: Yeah, yeah.

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Speaker 3: And of course the reality is that with not only

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Speaker 3: interest rates so high, and this recent small cut doesn't

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Speaker 3: really help a great deal. After a dozen upward movements

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Speaker 3: and interest rates over the last couple of years, but

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Speaker 3: not just interest rates. There's been a massive increase in

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Speaker 3: all the costs of owning property as investors, council rates, insurances,

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Speaker 3: maintenance costs have increased a lot. I almost fell off

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Speaker 3: my chair when the Federal Treasurer suggested in the past

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Speaker 3: week that investor owners were be in a position to

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Speaker 3: pass on the latest interest rate cut and to tenants

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Speaker 3: in the form of a rental reduction. I thought, well,

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Speaker 3: I'll obviously there's an election in the wind. He's trying

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Speaker 3: to carry favor with a certain section of the market.

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Speaker 3: But seriously, after all those rises and interest rates, after

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Speaker 3: the massive increases and all the costs, to suggest that

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Speaker 3: the average mom and dad investor is just an ordinary

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Speaker 3: family on an average income, can afford to hand out

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Speaker 3: a rental cut because there's been that one tiny, isolated

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Speaker 3: reduction in interest rights.

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Speaker 2: It's just fascical.

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Speaker 3: He might have had his tongue very firmly in his

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Speaker 3: cheek when he said it.

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Speaker 1: Well, a political imperative there rather than an economic one,

441
00:23:32,920 --> 00:23:35,600
Speaker 1: I imagine. Okay, Kate says, it's funny you've just asked this.

442
00:23:36,200 --> 00:23:38,160
Speaker 1: Kate says, the redcot is only no point two five

443
00:23:38,160 --> 00:23:40,760
Speaker 1: percent and compensations are saying that might be the end

444
00:23:40,840 --> 00:23:43,480
Speaker 1: of the cycle. Pardon me for being very skeptical about this,

445
00:23:43,560 --> 00:23:45,560
Speaker 1: but I can't see how it'll change the numbers that

446
00:23:45,600 --> 00:23:48,800
Speaker 1: really mattered the most. Well, Kate, that's exactly what Terry

447
00:23:48,920 --> 00:23:51,040
Speaker 1: was saying there that look, it's not so much. I

448
00:23:51,119 --> 00:23:53,000
Speaker 1: think Terry that it was a cut and that it

449
00:23:53,080 --> 00:23:55,760
Speaker 1: was no point twenty five. It was the change of direction.

450
00:23:55,880 --> 00:23:57,960
Speaker 1: I think that's what people. I hope it's the really

451
00:23:58,000 --> 00:24:00,280
Speaker 1: good news that the reds field start coming down. We

452
00:24:00,320 --> 00:24:03,720
Speaker 1: will believe that when we see it. Okay, Bill says,

453
00:24:03,840 --> 00:24:06,040
Speaker 1: I like the podcast. He says, I love the podcast,

454
00:24:06,160 --> 00:24:09,080
Speaker 1: but as a grumpy lawyer, I have to remind James

455
00:24:09,080 --> 00:24:13,120
Speaker 1: that the mortgagee is the lender, not the borrower. Keep

456
00:24:13,200 --> 00:24:17,200
Speaker 1: up the good work. Aside from those minor clittures. Yes, sorry, billknew,

457
00:24:17,320 --> 00:24:17,600
Speaker 1: I know.

458
00:24:17,960 --> 00:24:18,320
Speaker 2: I knew.

459
00:24:18,320 --> 00:24:20,240
Speaker 1: In a minute I said that I knew I'd got

460
00:24:20,240 --> 00:24:21,119
Speaker 1: them the wrong way around.

461
00:24:21,280 --> 00:24:22,280
Speaker 2: We won't do that again.

462
00:24:22,600 --> 00:24:26,360
Speaker 1: Okay, Billy says, I want to share about your discussion

463
00:24:26,440 --> 00:24:28,600
Speaker 1: on the fourth of February with Kitty Parker about the

464
00:24:28,640 --> 00:24:30,920
Speaker 1: extent to which Mom and Dad bank of Mom and

465
00:24:31,040 --> 00:24:36,480
Speaker 1: Dad formalized loan agree documents would actually every bother pursuing

466
00:24:36,520 --> 00:24:40,239
Speaker 1: their children for loan arreers. So everybody might remember that

467
00:24:40,320 --> 00:24:42,480
Speaker 1: we had a very interesting session about the Bank of

468
00:24:42,520 --> 00:24:45,119
Speaker 1: Mom and Dad. It was really interesting as Richard Shellback

469
00:24:45,200 --> 00:24:47,760
Speaker 1: actually came in first of all with some really hard

470
00:24:47,840 --> 00:24:51,600
Speaker 1: numbers survey that they had done at ubs, and then

471
00:24:52,000 --> 00:24:55,560
Speaker 1: Kitty Parker, buyer's advocate in Sydney, came in and talked

472
00:24:55,560 --> 00:24:59,640
Speaker 1: about coming upon this issue of the bank of Mom

473
00:24:59,640 --> 00:25:03,080
Speaker 1: and Dad. Specifically in property. It's always going to be

474
00:25:03,600 --> 00:25:08,760
Speaker 1: where parents come to an arrangement that they actually loan

475
00:25:08,880 --> 00:25:13,920
Speaker 1: money to their adult children and they adult children then

476
00:25:13,960 --> 00:25:19,520
Speaker 1: go and buy a home. And I was skeptical about

477
00:25:19,640 --> 00:25:21,639
Speaker 1: not so much about the agreements about the way they

478
00:25:21,720 --> 00:25:27,879
Speaker 1: might ever be enforced. So Billy says, he explained that

479
00:25:27,920 --> 00:25:31,720
Speaker 1: they did all this, that they drew up alone and

480
00:25:32,600 --> 00:25:35,199
Speaker 1: they had all parties sign it for the loan that

481
00:25:35,400 --> 00:25:39,160
Speaker 1: was given to one of his adult children. He says,

482
00:25:39,200 --> 00:25:40,879
Speaker 1: the reason we did it was from the point of

483
00:25:40,960 --> 00:25:44,800
Speaker 1: view of acid protection against the remote possibility that the

484
00:25:44,880 --> 00:25:47,640
Speaker 1: marriage can to end up in the divorce courts. Fair enough,

485
00:25:47,680 --> 00:25:49,760
Speaker 1: that's putting it on the table, That's what it's all

486
00:25:49,800 --> 00:25:51,960
Speaker 1: about really, isn't it Most of the time when people

487
00:25:52,000 --> 00:25:56,000
Speaker 1: do these effectively what you can call pre nups on

488
00:25:56,280 --> 00:26:01,119
Speaker 1: property acquisition, where the parents bankroll one of their adult children.

489
00:26:01,240 --> 00:26:04,119
Speaker 1: That adult child is probably in a couple, they have

490
00:26:04,200 --> 00:26:08,159
Speaker 1: a loan agreement, and really, behind the scenes, the logic

491
00:26:08,200 --> 00:26:12,720
Speaker 1: of the loan agreement is that half the property or equal,

492
00:26:12,760 --> 00:26:15,560
Speaker 1: they won't walk away should their adult child be divorced

493
00:26:15,560 --> 00:26:19,960
Speaker 1: from their partner. Now, Billy concludes, I don't know if

494
00:26:20,000 --> 00:26:22,639
Speaker 1: our loan agreement would have held up in court. We

495
00:26:22,760 --> 00:26:26,320
Speaker 1: never needed it. Our daughter's marriage remains solid, free of

496
00:26:26,359 --> 00:26:28,880
Speaker 1: the burden of morgad stress. Our money was paid back

497
00:26:28,920 --> 00:26:31,000
Speaker 1: to us over the course of a few years, and we.

498
00:26:30,840 --> 00:26:31,880
Speaker 2: Were happy to play our part.

499
00:26:32,080 --> 00:26:38,080
Speaker 1: Okay, terrific, Billy, thank you for that. Interesting. What do

500
00:26:38,119 --> 00:26:40,600
Speaker 1: you think, Terry about this bank of mom and dad

501
00:26:40,640 --> 00:26:43,199
Speaker 1: loan agreements. I'm sure we know what happens all the time.

502
00:26:43,560 --> 00:26:46,040
Speaker 1: I mean, we know the figures now, and we know

503
00:26:46,160 --> 00:26:48,680
Speaker 1: that they can their parents put up to two hundred

504
00:26:48,760 --> 00:26:55,040
Speaker 1: thousand pert time where they help adult children buy whether

505
00:26:55,119 --> 00:26:58,960
Speaker 1: if there's a loan agreement formalized between the parent and

506
00:26:59,400 --> 00:27:02,359
Speaker 1: the adult child blame property. Do you think it would

507
00:27:02,359 --> 00:27:07,359
Speaker 1: ever really work legally or is it just a terrent

508
00:27:07,600 --> 00:27:09,040
Speaker 1: like I think Billy had it there.

509
00:27:10,280 --> 00:27:13,280
Speaker 3: Honestly, James, I've never actually thought about it in those terms.

510
00:27:13,320 --> 00:27:15,280
Speaker 3: I guess I always made the assumption that you know,

511
00:27:15,400 --> 00:27:19,040
Speaker 3: it's all within the family, and you know, this kind

512
00:27:19,040 --> 00:27:21,440
Speaker 3: of thing in ninety nine percent of cases would never

513
00:27:21,520 --> 00:27:25,280
Speaker 3: be needed because it's a family situation. It's kind I

514
00:27:25,359 --> 00:27:27,239
Speaker 3: kind of like it because it's like I think, it's

515
00:27:27,240 --> 00:27:30,000
Speaker 3: always a shame that your parents have to die before

516
00:27:30,000 --> 00:27:31,600
Speaker 3: you get to your inheritance, and this is a way

517
00:27:31,600 --> 00:27:35,680
Speaker 3: where an inheritance can happen while your parents are alive

518
00:27:35,720 --> 00:27:38,720
Speaker 3: and kicking and you can all enjoy the situation together.

519
00:27:39,240 --> 00:27:42,200
Speaker 3: It's just one of the realities of the modern world

520
00:27:42,600 --> 00:27:46,040
Speaker 3: and the modern real estate situation in Australia that real

521
00:27:46,119 --> 00:27:49,280
Speaker 3: estate is so expensive, and there are lots of reasons

522
00:27:49,280 --> 00:27:51,639
Speaker 3: for that. I certainly lay the blame for most of

523
00:27:51,640 --> 00:27:55,440
Speaker 3: the problems at the feet of politicians who have exacerbated

524
00:27:55,600 --> 00:27:59,680
Speaker 3: the poor affordability in Australia, in particular the incredibly high

525
00:27:59,680 --> 00:28:03,280
Speaker 3: cost of building new dwellings. I just want to throw

526
00:28:03,280 --> 00:28:06,159
Speaker 3: some figures. There's a little bit of the off topic,

527
00:28:06,240 --> 00:28:09,560
Speaker 3: but it's relevant to the overall discussion. And the last

528
00:28:09,560 --> 00:28:12,200
Speaker 3: week we've had two figures out, one from the Bureau Statistics,

529
00:28:12,200 --> 00:28:14,439
Speaker 3: so we said that the average cost of building a

530
00:28:14,480 --> 00:28:16,520
Speaker 3: new house in austral is now five hundred and thirty

531
00:28:16,520 --> 00:28:19,960
Speaker 3: seven thousand dollars. And then we had from the HIA

532
00:28:20,160 --> 00:28:23,280
Speaker 3: core Logic Residential Land Report the medium lot price in

533
00:28:23,280 --> 00:28:25,600
Speaker 3: our cities is now four hundred and eight thousand. So

534
00:28:25,600 --> 00:28:28,680
Speaker 3: you had those two figures together, we're getting scarily close

535
00:28:28,720 --> 00:28:30,720
Speaker 3: to the point where it costs a million dollars for

536
00:28:30,760 --> 00:28:33,159
Speaker 3: the standard house and land package. This is a very

537
00:28:33,160 --> 00:28:34,320
Speaker 3: boring brick and tile.

538
00:28:34,119 --> 00:28:36,800
Speaker 1: House on it to build anything anywhere, just to build

539
00:28:36,800 --> 00:28:40,320
Speaker 1: a box thirty cares out from the city, Yeah, coming

540
00:28:40,320 --> 00:28:42,120
Speaker 1: off two a million dollars very interesting.

541
00:28:42,240 --> 00:28:45,880
Speaker 3: Yeah, And so I mean, and those figures are really alarming.

542
00:28:46,000 --> 00:28:49,560
Speaker 3: And the Productivity Commission has just published a report which

543
00:28:49,960 --> 00:28:52,880
Speaker 3: spreads the blame across a number of features, but by

544
00:28:52,920 --> 00:28:55,720
Speaker 3: far the biggest one, according to the Commission's report, is

545
00:28:55,800 --> 00:28:59,360
Speaker 3: regulation and red tape. State comment's tinkering with the design

546
00:28:59,360 --> 00:29:01,360
Speaker 3: of houses and ways it adds to the cost of

547
00:29:01,440 --> 00:29:06,080
Speaker 3: construction delays. You know, the building industry is now half

548
00:29:06,120 --> 00:29:08,640
Speaker 3: as productive as it was in the nineteen nineties, is

549
00:29:08,680 --> 00:29:11,760
Speaker 3: taking twice as long to build houses because of regulation

550
00:29:11,880 --> 00:29:14,240
Speaker 3: and red tape. So all of that feeds into the

551
00:29:14,240 --> 00:29:16,000
Speaker 3: fact that it's very hard for young people to get

552
00:29:16,040 --> 00:29:19,120
Speaker 3: into housing without the help of the bank of mum

553
00:29:19,160 --> 00:29:22,320
Speaker 3: and dad. And not every family is do we have

554
00:29:22,360 --> 00:29:25,560
Speaker 3: the situation where the parents can actually afford to loan

555
00:29:25,720 --> 00:29:28,560
Speaker 3: or give money to their adult children to buy a house,

556
00:29:28,600 --> 00:29:32,240
Speaker 3: but some do. Obviously it's become increasingly a large factor.

557
00:29:32,280 --> 00:29:35,760
Speaker 3: But the reality is that for many young people, without

558
00:29:35,840 --> 00:29:39,479
Speaker 3: their assistance from family members, they can't get into the market.

559
00:29:39,680 --> 00:29:42,920
Speaker 1: Yeah, yeah, very true. And I suppose that just to

560
00:29:42,960 --> 00:29:46,320
Speaker 1: cover off on Billy and the whole scene. As you see,

561
00:29:46,520 --> 00:29:49,200
Speaker 1: not everyone can afford it, but maybe some people can.

562
00:29:50,000 --> 00:29:52,400
Speaker 1: And perhaps the most upbeat way of looking at it is,

563
00:29:52,440 --> 00:29:56,400
Speaker 1: as you said, Terry, you know, people are getting their

564
00:29:56,440 --> 00:29:59,080
Speaker 1: inheritance should they ever get an inheritance, but those who

565
00:29:59,120 --> 00:30:03,760
Speaker 1: do are getting them in their sixties. That's you need

566
00:30:03,760 --> 00:30:05,960
Speaker 1: the money in your thirties and forties, when you're buying

567
00:30:06,280 --> 00:30:09,000
Speaker 1: a house, that's when you really need it. And I

568
00:30:09,040 --> 00:30:12,000
Speaker 1: think if it can be done, it's certainly worth exploring,

569
00:30:12,000 --> 00:30:14,400
Speaker 1: and if it needs to be done in a formalized manner,

570
00:30:15,120 --> 00:30:18,400
Speaker 1: as Billy outlined there, Well, then if it works that

571
00:30:18,480 --> 00:30:21,360
Speaker 1: way for everybody, or the better if everybody comes to

572
00:30:21,400 --> 00:30:24,880
Speaker 1: the table in the right spirit. Okay, very interesting, Thank

573
00:30:24,920 --> 00:30:27,000
Speaker 1: you very much, Terry Ryder from Hotspoting. Great to have

574
00:30:27,040 --> 00:30:27,719
Speaker 1: you on the JAMS.

575
00:30:27,800 --> 00:30:29,680
Speaker 3: I always love coming on talking to you, and I

576
00:30:29,760 --> 00:30:32,000
Speaker 3: love talking about real estate, as you may have noticed,

577
00:30:32,200 --> 00:30:35,440
Speaker 3: such an important topic and so very much top of

578
00:30:35,520 --> 00:30:39,400
Speaker 3: mind for so many Australian individuals and families right at

579
00:30:39,400 --> 00:30:39,920
Speaker 3: this time.

580
00:30:40,280 --> 00:30:43,320
Speaker 1: It is always is and investors too. Okay, folks, keep

581
00:30:43,320 --> 00:30:47,400
Speaker 1: those emails coming the Money Puzzle at the Australian dot

582
00:30:47,440 --> 00:30:50,720
Speaker 1: com dot Au. Today's show was produced by Leah Samulu

583
00:31:00,720 --> 00:31:01,160
Speaker 2: Four