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Speaker 1: Hi. I'm Julianne Sprague, Wealth editor at The Australian. I'm

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Speaker 1: filling in for James Kirby today, who is on a

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Speaker 1: very well deserved break and today we want to get

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Speaker 1: stuck into how you can pick the right spot for

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Speaker 1: an investment property. You might want to buy an investment

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Speaker 1: property or add to your existing portfolio, but how do

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Speaker 1: you get the spot that will deliver you the maximum return.

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Speaker 1: You might think that there's a city that you want

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Speaker 1: to invest in, maybe it's a city that you live in,

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Speaker 1: but how do you get the right suburb the best suburb.

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Speaker 1: My guest today is Ben Kingsley. So Ben is the

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Speaker 1: chair of the Property Investors Council of Australia and he

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Speaker 1: has more than twenty five years of investing experience advising

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Speaker 1: people in property markets. He's also the co author of

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Speaker 1: two books with his fellow empower Wealth business partner Bryce Holdaway,

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Speaker 1: and together they host the Property Couch podcast. But today

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Speaker 1: Ben Kingsley is joining us right here on the Money

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Speaker 1: Puzzle to share his top property investing tips. Ben, thank

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Speaker 1: you so much for joining us on the Money Puzzle.

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Speaker 2: Delighted to be here, Julianne.

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Speaker 1: We wanted to have a chat to you because you've

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Speaker 1: got a lot of experience in this area. All of

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Speaker 1: the stories we are putting together at the moment appointing

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Speaker 1: to property growth over the next twelve months. It just

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Speaker 1: seems that things have aligned, the property prices will go up,

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Speaker 1: but not all property markets are created equal, and within

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Speaker 1: those there are little subsections. So I want to ask you, Ben,

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Speaker 1: how do you determine where is the best place to

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Speaker 1: buy an investment property? What are the fundamentals you look to?

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Speaker 2: Yeah, so how long have we got? But we'll start

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Speaker 2: with the big ones. So absolutely there are markets within markets.

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Speaker 3: That is proven to be true that different property cycles

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Speaker 3: can occur in different markets, and there are different reasons

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Speaker 3: behind why those particular activities happen. So we break it

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Speaker 3: down into if you think about short term usually what

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Speaker 3: you're talking about there is the sentiment, and you're also

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Speaker 3: looking at demand and supply, so you're looking at certain

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Speaker 3: variables that will determine, you know, whether a market is

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Speaker 3: in balance, in equilibrium, or whether it's out of balance.

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Speaker 3: And of course you know in terms of a shortage

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Speaker 3: of supply does put pressure on capital growth over time.

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Speaker 3: So supply is the enemy of capital growth is often

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Speaker 3: what you would say, and so when you're thinking about

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Speaker 3: it in the short term, you're looking for those variables,

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Speaker 3: so things like auction clearance rates, days.

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Speaker 2: On market, stock on market, and if your.

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Speaker 3: Days on market is coming down, that means that there's

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Speaker 3: obviously a.

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Speaker 2: Body of demand that's there.

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Speaker 3: And so and then on the supply side, you're looking

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Speaker 3: at things like what is the you know, the future

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Speaker 3: building approvals and what commencement have started, and so then

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Speaker 3: you start to think about, you know, those markets in

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Speaker 3: terms of well, if I've got a lot of vacant

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Speaker 3: land around me, then potentially there is risk that there

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Speaker 3: will be future over supply and that might taper my

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Speaker 3: future capital growth. So short term, it's very much a

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Speaker 3: story of supply and demand and looking for those markets

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Speaker 3: where you know there might be an inbalance between.

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Speaker 2: Supply and demand.

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Speaker 3: And then over the medium to longer term, it's absolutely

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Speaker 3: got everything to do with economic activity. And so what

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Speaker 3: I mean by that is the economic activity is going

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Speaker 3: to drive that population story.

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Speaker 2: So if you think about a thriving city that needs.

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Speaker 3: Workers, those workers will arrive that would put pressure on

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Speaker 3: housing both from a rental point of view, but also

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Speaker 3: potentially from a future purchasing point of view. And so

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Speaker 3: that's why we see the capital growth in our major

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Speaker 3: capital centers usually performing quite strongly during times of economic

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Speaker 3: growth and strong population growth into those centers, and of

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Speaker 3: course we see the reverse when you know, if you're

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Speaker 3: as old as I am, you will know that during

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Speaker 3: the sort of John Kurrent era, and we had some

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Speaker 3: failures in Melbourne in terms of the economic situation, we

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Speaker 3: had a lot of debt and the economy wasn't performing

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Speaker 3: very well and we see a lot of migration up

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Speaker 3: into Queensland, and the property markets suffered quite considerably during

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Speaker 3: that time because you know, we also had pyramid building

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Speaker 3: society and some banks failing, so it wasn't a good time.

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Speaker 3: So we do know that if there's no jobs here,

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Speaker 3: we're not going to necessarily move that population here, and

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Speaker 3: that's not necessarily going to then bode well for that

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Speaker 3: population story and that demand story.

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Speaker 1: If we look at the information at the moment, though,

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Speaker 1: it does seem we have a supply issue. There's just

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Speaker 1: not enough supply of housing across the country that's fed

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Speaker 1: into things. You know, we had thirteen interest rate rises

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Speaker 1: and property prices didn't fall as a result, it didn't

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Speaker 1: do what typically property markets have done. And now we're

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Speaker 1: in an easy cycle again, given how much property markets

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Speaker 1: have risen and how much they are anticipated to keep going.

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Speaker 1: What are the risks though for investors? How do you

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Speaker 1: make sure you're not sort of getting caught out here

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Speaker 1: and you're buying right at the top.

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Speaker 3: That is a great question, and let's unpack. You know,

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Speaker 3: traditionally you are right, higher interest rate thirteen rate rises,

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Speaker 3: you would normally see a correction in the market. But

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Speaker 3: what we also saw during that time was the immigration program,

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Speaker 3: which delivered over sort of six hundred and seven hundred

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Speaker 3: thousand people, and over the sort of last two or

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Speaker 3: three years, we've got a minion extra people in this country.

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Speaker 3: So that along with record low unemployment or record high employment,

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Speaker 3: also meant that people could continue on with making their

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Speaker 3: plans for their lives, so buying their homes and so forth.

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Speaker 3: So that's why we can sort of say, okay, we

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Speaker 3: can make a case as to why property didn't normally

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Speaker 3: do what it normally does.

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Speaker 2: If those arrivals.

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Speaker 3: Didn't come, and if unemployment had risen higher, then we

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Speaker 3: wouldn't have seen any sort of price growth during that

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Speaker 3: higher cost of doing business when it comes to the.

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Speaker 2: Mortgages we have on our properties.

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Speaker 3: So let's talk about today and what's going to be

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Speaker 3: the catalyst for that growth. So there's a couple of

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Speaker 3: things that are going to go on, and I want

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Speaker 3: to talk on the investor side.

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Speaker 2: We are seeing a lot of.

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Speaker 3: Animal spirits in the investment space at the moment, and

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Speaker 3: those animal spirits are potentially getting ahead of themselves in terms.

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Speaker 2: Of buying in the affordable quartile.

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Speaker 3: So the bottom twenty five percent of properties are very

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Speaker 3: attractive to obviously first home buyers, but they're also very

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Speaker 3: attractive at the moment to investors, and investors are certainly

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Speaker 3: looking for that sort of classic recantile home that might

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Speaker 3: be an existing property.

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Speaker 2: Because back to your.

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Speaker 3: Point earlier, Julianne, in terms of this shortage of accommodation,

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Speaker 3: since twenty nineteen, the cost of build a home has

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Speaker 3: basically gone up almost fifty percent being able to provide

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Speaker 3: new stock. So there's been a lot of pressure on

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Speaker 3: the existing stock market, and that's why we're seeing the

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Speaker 3: best performing market at the moment is that bottom twenty

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Speaker 3: five percent. The percentage price growth that we're seeing in

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Speaker 3: those areas are outstripping what we would call the middle

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Speaker 3: tier suburbs and certainly what we might judge as the

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Speaker 3: prime or the blue chip suburbs in our inner city

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Speaker 3: areas in most capital cities with the exemption of the Act,

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Speaker 3: which is performing in a more natural way because unfortunately

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Speaker 3: that they policy settings are very anti investment at the moment,

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Speaker 3: so they're not getting that investment activity. All the other

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Speaker 3: states and territories are enjoying that, but they're certainly not.

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Speaker 1: We'll get to that lower end of the market soon.

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Speaker 1: I do want to get your thoughts on what might

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Speaker 1: happen in that area given the expanded first home buyers

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Speaker 1: scheme from the federal government. But can we talk about

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Speaker 1: how you identify different areas of a market you've chosen

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Speaker 1: So say, we published a story recently in The Australian

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Speaker 1: where there are a couple of experts that tipped Perth

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Speaker 1: or Southeast Queensland as a sure bet for investors over

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Speaker 1: the next twelve months. They are still bullish on Melbourne,

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Speaker 1: but there are all the taxes and all the other

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Speaker 1: things going there. So to say, if you want a

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Speaker 1: sure thing pers or Southeast Queensland. Now say if you

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Speaker 1: take that proposition, go, Okay, I'm feeling good about either

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Speaker 1: of those markets. How do you then zone in and

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Speaker 1: go which area of that particular market should I be

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Speaker 1: buying in? Because not all suburbs are created equal.

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Speaker 3: Yeah, great question. So what we would then start to

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Speaker 3: do is as we go through the macro down into

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Speaker 3: the micro, we're starting to then analyze the data that

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Speaker 3: we're collecting, and we usually collect that at the suburb level,

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Speaker 3: so we're able to get quite a lot of rich

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Speaker 3: data at the suburb level around those some of those

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Speaker 3: variables that we were talking before about. So we think

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Speaker 3: along the lines of auction clearance rates. If it's a

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Speaker 3: heavily concentrated auction market, they're not so good if it's

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Speaker 3: not a high concentration of auctions happening in that area.

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Speaker 1: So just to drop in on that bit, but say,

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Speaker 1: if you're going for auction clearance rates, what am I

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Speaker 1: looking for? What exactly should I zone in on?

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Speaker 3: Yes, So if it is a high area where you

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Speaker 3: do get lots of auctions and the clearance rate is

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Speaker 3: above seventy percent and moving into five eighty percent, that's

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Speaker 3: giving you an immediate market signal in that area. That

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Speaker 3: there's more buyers than there are sellers, and so that

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Speaker 3: is becoming a selling market and so that's going to put.

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Speaker 2: Pressure on prices. So if there is you know, four.

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Speaker 3: Or five people or even six, seven, eight people competing

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Speaker 3: at auction, you're really clear in terms of you've got

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Speaker 3: a really strong signal that that's a market that's under

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Speaker 3: pressure in terms of demand, and so that's going to

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Speaker 3: potentially force prices higher as more of those people decide

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Speaker 3: that they want to get into that location.

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Speaker 1: And then a market like Perth that doesn't really have auctions,

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Speaker 1: is it a matter of do you sort of sort

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Speaker 1: of rock up to some home opens and to see

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Speaker 1: how many people are trying to get in?

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Speaker 3: That's right, I mean, certainly that's another indicator in terms

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Speaker 3: of as you so you know, we don't know that

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Speaker 3: if we're if we're doing our research, you know, the

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Speaker 3: in our offices as opposed to being in the field.

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Speaker 3: The first things we start to look at is things

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Speaker 3: like stock on market and then days on market, So

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Speaker 3: how long is it taking for those properties to sell

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Speaker 3: over time? And if we're seeing the trend coming down,

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Speaker 3: and then we then go out and do our field research,

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Speaker 3: and yes, to your point. We attend some of those opens,

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Speaker 3: we will start to see the number of people going

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Speaker 3: through those particular properties. Then we're also tracking things like

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Speaker 3: number of offers, number of contracts that are being issued

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Speaker 3: on that particular property. So we're starting to get that

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Speaker 3: those signals, and those signals are stronger than the general

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Speaker 3: noise that we might see in other areas. And then

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Speaker 3: what you then do is you munge all of that

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Speaker 3: data together and you give certain wetings.

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Speaker 2: To some of those variables. So this is the demand

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Speaker 2: supply score or demand supply ratio. So you know, you might.

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Speaker 3: Measure eight, ten, twelve, fifteen variables and you're putting all

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Speaker 3: those together and you've got you've got a belief around.

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Speaker 3: You know, if it is a high auction market and

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Speaker 3: you know where most properties are sold by auction, and

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Speaker 3: you're seeing those high things, you'll give a.

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Speaker 2: Higher weighting to that score.

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Speaker 3: We score every property in Australia out of one hundred

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Speaker 3: and so if we basically then see high scores.

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Speaker 2: Then we know that there is an imbalance in that market.

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Speaker 3: And then we go and validate that out in the

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Speaker 3: field to the research that we were just talking about,

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Speaker 3: which is how many people turned up to the open

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Speaker 3: for inspections, what number of contracts were issued, And we

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Speaker 3: know we're going to be in a competitive market, but

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Speaker 3: we're also then confident in that competitive market that the

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Speaker 3: level of demand, you know, in terms of the depth

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Speaker 3: of that demand is strong enough. And so that's that

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Speaker 3: supply demand story. Then we've got to lift our eyes

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Speaker 3: back to the question you asked earlier around say Southeast

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Speaker 3: Queensland and Western Australia, namely Perth, but even some of

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Speaker 3: the commutable areas of inter Perth they're also under good review.

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Speaker 3: Because that's when I come back to the whole story

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Speaker 3: about economic activity. You know, if you've got a strong

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Speaker 3: economy and that strong economy is driving the migration of

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Speaker 3: people into that market, then that's when you're going to

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Speaker 3: have longevity in regards.

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Speaker 2: To your investment returns.

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Speaker 3: And you mentioned really earlier when we started recording around

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Speaker 3: this idea is how do you know that's going to

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Speaker 3: be sustainable? Well, that's the whole you know, that's one

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Speaker 3: of the great messages I want the community to take

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Speaker 3: away today. If that's all been driven by investors and

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Speaker 3: investors only and there's no fundamentals underneath that then you're

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Speaker 3: going to be exposed and there's going to be risk

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Speaker 3: that you will be potentially buying at the top of

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Speaker 3: market and you may experience a downturn in property prices.

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Speaker 3: So you need to understand the short term drivers, which

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Speaker 3: is the supply demand and that economic stuff, and then

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Speaker 3: make sure that the economy is still strong, because if

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Speaker 3: it is going to be artificially inflated by investors who

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Speaker 3: are ill experienced, or they're being coached by enthusiastic buyers

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Speaker 3: agents who really don't know what they're doing, and they're

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Speaker 3: taking you into these regional markets or some of these

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Speaker 3: types of markets, you do run the risk of basically

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Speaker 3: buying into a dud market that will show its face

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Speaker 3: as the tide goes out over the next five years.

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Speaker 1: I'll ask you about buyers agents in the Sex But

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Speaker 1: just further on that, are you talking about the economy

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Speaker 1: for the state or the city in question. Say you've

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Speaker 1: decided it's Southeast Queensland or state it's Perth, and you're

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Speaker 1: happy about the profile for the next whatever it might

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Speaker 1: be five to ten years. I can imagine I wouldn't

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Speaker 1: be the only person to think this, that you go

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Speaker 1: into a suburb and it's running hot, and I would

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Speaker 1: look left and right that there's some suburbs sort of

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Speaker 1: around the fringe and they look better value to me.

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Speaker 1: But what do I need to be careful about.

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Speaker 2: Well, let's also introduce another concept which I think is

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Speaker 2: a really important concept, and that is investors in residential

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Speaker 2: property shouldn't be the price maker, they should be the

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Speaker 2: price taker. So ultimately, what you're looking for there is

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Speaker 2: that the fundamentals are grounded in owner occupiers wanting to

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Speaker 2: live there. If you don't have that, again.

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Speaker 3: You're giving yourself the risk of well, this has all

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Speaker 3: just been in speculative returns because someone picked a hot

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Speaker 3: spot and half a dozen buyers agents all agreed and

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Speaker 3: they all went in there and artificially inflated the price.

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Speaker 3: So it does come back to what you were saying before.

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Speaker 3: I'm looking at the economic activity that's happening in that center.

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Speaker 3: So if I'm buying in Perth, well, the economy, it's

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Speaker 3: the best economy in the country. The government's got very

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Speaker 3: low debt in comparison to other states and territories.

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Speaker 2: The incomes enjoyed there are the second highest across the country.

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Speaker 3: Per capita, and the livability of living in a city

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Speaker 3: like Perth is very high. So you've got and you're

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Speaker 3: starting to see a stronger diversified economy, and the icing

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Speaker 3: on the cake, their cost of electricity through their gas

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Speaker 3: and their cost of gas and all of those inputs

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Speaker 3: is also at record low levels.

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Speaker 1: But it has been boom bust Perth. People were listening

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Speaker 1: to this sound. That's all very well and good that

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Speaker 1: it sounds good now, but you know.

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Speaker 3: Perth's already had a double digit run and it's probably

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Speaker 3: moved about thirty or forty percent as is already, and

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Speaker 3: then everyone's sort of saying Perth done well. It's still

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Speaker 3: performing in the top two. Darwin is the number one

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Speaker 3: capital city at the moment, but Perth's a strong second.

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Speaker 3: And that's because again they didn't look and lift their eyes.

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Speaker 3: These runs can go seventy eighty percent in some cases,

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Speaker 3: and that's because the fundamentals are good.

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Speaker 2: Whereas if I.

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Speaker 3: Take an example of maybe Townsill, Okay, which is a

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Speaker 3: regional town, there's no easy to commute down into Brisbane

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Speaker 3: for a job. You can't commute there for the day,

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Speaker 3: so you've got to then start to say, well, what's

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Speaker 3: happening in towns will from an economic perspective, because if

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Speaker 3: I've only gone in there because I've been told that

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Speaker 3: rents are really high, and so I'll go in there

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Speaker 3: and compete against all the other investors who are.

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Speaker 2: Going in there, what's the fundamentals.

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Speaker 3: Like if you don't have that economic activity, well, where

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Speaker 3: are your renters going to come from? And what if

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Speaker 3: they don't have the jobs, why are they going to

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Speaker 3: stay there? They'll just relocate to another town. So that's

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Speaker 3: why it really is critical that you need to understand

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Speaker 3: what are those medium to long term drivers to get

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Speaker 3: into those markets.

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Speaker 2: Now back to Perth, you.

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Speaker 3: Were saying, Yep, it's a you know, it's basically a

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Speaker 3: one trick pony town being a mining town. All the

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Speaker 3: reality is is, you know, that's not necessarily the case.

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Speaker 2: We've got the Orchest deal coming in there.

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Speaker 3: We've got shipbuilding, we've got industry that's running at a

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Speaker 3: competitive advantage compared to the East Coast, and so if

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Speaker 3: I'm the multinational and I want to potentially set up there,

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Speaker 3: the conditions are better in Perth than they certainly are

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Speaker 3: in Melbourne. An ex example in terms of attracting me

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Speaker 3: to want to set and make that investment up and

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Speaker 3: then to basically bring the jobs into that particular market.

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Speaker 3: So now the fundamentals economically for Perth are really sound,

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Speaker 3: at least for the next five or ten years.

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Speaker 1: For anyone listening, I promise I haven't paid ben to Perth.

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Speaker 1: It is my favorite city. It is the city I'm based.

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Speaker 2: And I love it and world champion and I live

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Speaker 2: in Melbourne.

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Speaker 1: We've got to head to a break soon. But I

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Speaker 1: do want to get that sense of whether you should

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Speaker 1: be looking at the suburbs across that are cheaper or

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Speaker 1: if you run the risk. It's our idea of if

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Speaker 1: you're buying an investment property you want to maximize your dollar.

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Speaker 1: Is there any risk to that or is it actually

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Speaker 1: a smart strategy to say this suburb is on fire

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Speaker 1: but you just sort of look, you know, I don't

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Speaker 1: know as five case circumference or something. What's the metrics

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Speaker 1: that you would use.

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Speaker 2: At the end of the day.

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Speaker 3: The land is what we're trying to hold long term.

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Speaker 3: That's where the appreciation happened. It's not in the buildings,

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Speaker 3: it's in the land. And so let me introduce you

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Speaker 3: to other concepts, which is human interest in human behavior.

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Speaker 2: So in some respects, a lot of the land carry status.

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Speaker 2: You know.

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Speaker 3: One of the interesting things about property in the way

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Speaker 3: always say it's why it's owner occupier appeal because they

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Speaker 3: buy where their heart's not their heads.

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Speaker 2: So the reality is.

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Speaker 3: When you find those blue chip locations, that is all

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Speaker 3: about my success and showcasing my success. So how do

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Speaker 3: we show off, you know, aspiration, We show it off

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Speaker 3: in the houses that we own, the cars that we drive,

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Speaker 3: the jewelry, et cetera. And so you do have this

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Speaker 3: aspirational element of living in the best suburbs around that

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Speaker 3: and so ultimately those suburbs come at a premium because

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Speaker 3: there's exclusivity, and that's where that land value appreciates over time.

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Speaker 3: So if you're in a fortunate position where you can

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Speaker 3: potentially buy and hold and investment property in those higher markets,

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Speaker 3: you are going to pretendctually see strong the land appreciation

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Speaker 3: because ultimately that is all about how humans activate in

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Speaker 3: the ecology of their lives and the biology of who

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Speaker 3: we are as living in villages. So that is true

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Speaker 3: if your budget doesn't allow for that, and the income

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Speaker 3: off the rental needs to be an important part of

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Speaker 3: sustaining the holding of that property, then you're going to

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Speaker 3: move out to the mid tier suburbs or into the

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Speaker 3: sort of outer fringes of the market. And that's how

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Speaker 3: the land is priced. It's ultimately priced from a ripple

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Speaker 3: effect where the most expensive land is located closer in,

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Speaker 3: and so it's looking at that land and looking at

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Speaker 3: its future productive use in terms of what it can do.

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Speaker 3: A single home can potentially be a duplex in the future,

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Speaker 3: or it could even be a block of flat or

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Speaker 3: some townhousers. So that future productive use of that land

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Speaker 3: in that more exclusive area is potentially going to generate

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Speaker 3: you a longer term return over the decades. But of course,

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Speaker 3: if you want to invest, it's around your budget. So

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Speaker 3: if your budget allows you to take you into the

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Speaker 3: outer suburbs, then we still want to make sure that

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Speaker 3: there's low scarcity in terms of not a lot of

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Speaker 3: vacant land around you.

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Speaker 1: Okay, good tips, all right, Ben. When we come back

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Speaker 1: from the break, we'll have a chat about what you

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Speaker 1: think will happen to the market now that the government

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Speaker 1: is expanding the first Home Buyer scheme. I'll get your

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Speaker 1: top tips where you think the best property investments will

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Speaker 1: be over the next year. And also I wouldn't mind

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Speaker 1: your thoughts on some of the common mistakes people make

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Speaker 1: with property investing. We'll have that chat when we come back.

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Speaker 1: Thanks for joining me on the money Puzzle. I'm your

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Speaker 1: host Julianne Sprague, a wealth editor at The Australian, filling

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Speaker 1: in for James Kirby, who's on a well deserved break.

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Speaker 1: I'm chatting with Benett Kingsley, a property expert. You can

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Speaker 1: find him at Empower Wealth and at the Property Couch podcast.

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Speaker 1: Ben is joining me. We're having a chat about how

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Speaker 1: you can pick a great place to buy investment property.

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Speaker 1: And then we spoke earlier about that lower end of

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Speaker 1: the market and how it is quite hot at the moment.

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Speaker 1: The federal government's expanding the First Home Buyers Scheme. Today,

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Speaker 1: all sorts of measures have been sort of dropped, if

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Speaker 1: you like, or widened. More people will have access to

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Speaker 1: this scheme. What is it going to do for property markets?

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Speaker 3: Look, I'm pleased with the initiative because it will allow

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Speaker 3: people to get into the market, but of course it

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Speaker 3: falls on the demand side, so that's doing to potentially

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Speaker 3: create an additional set of demand for first time buyers

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Speaker 3: to get into the market. So the question for us,

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Speaker 3: and this is one is really hard to analyze, is

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Speaker 3: where is that concentration is. If it's going to be concentrated,

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Speaker 3: then that's going to sharpen the data really quickly and

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Speaker 3: we're going to see price spikes, you know, as that

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Speaker 3: then sort of then becomes the norm in the market.

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Speaker 3: My interesting observation here is that because it's lifted the

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Speaker 3: entry level price is allowing for people to get into

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Speaker 3: the sort of middle tier markets. Hopefully that spread will

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Speaker 3: not necessarily see it being such a high concentrated into

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Speaker 3: the absolute entry level of the market. So I'm hoping

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Speaker 3: it's not going to continue to inflate that price area

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Speaker 3: because there's already enough you know, sort of government policy

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Speaker 3: that's pushing a lot of people into that potential entry

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Speaker 3: level market.

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Speaker 2: And I'll give you a couple of examples. We're seeing a.

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Speaker 3: Lot of spooking property spooking around setting up trusts and

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Speaker 3: buying residential property and trusts, and I'm concerned about that

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Speaker 3: heavily because that's also pushing a lot of people into

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Speaker 3: those entry level markets. And there's more and more social

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Speaker 3: media marketing around that and also setting up self managed

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Speaker 3: super funds.

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Speaker 1: And why do you think that's flourishing. What's the pitch

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Speaker 1: there that's hooking people?

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Speaker 3: Well, I'm in You know if you go on to

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Speaker 3: social media and you look at the property spookers talking

439
00:21:54,840 --> 00:21:58,960
Speaker 3: about making sixty percent gains in twelve months, and you know,

440
00:21:59,240 --> 00:22:02,560
Speaker 3: there's that human nature that basically drives people in that

441
00:22:02,600 --> 00:22:05,159
Speaker 3: they want to They want to know your investor, you

442
00:22:05,200 --> 00:22:06,879
Speaker 3: want to get that quick win, you know, like I

443
00:22:06,920 --> 00:22:10,160
Speaker 3: want to be bragging about that, almost like a stock pick.

444
00:22:10,440 --> 00:22:11,480
Speaker 2: That's sort of what's happening.

445
00:22:11,520 --> 00:22:13,960
Speaker 3: So I am worried about that, and I've spoken publicly

446
00:22:14,359 --> 00:22:18,640
Speaker 3: about that recently, and so that's already driving people into

447
00:22:18,640 --> 00:22:20,960
Speaker 3: that entry level area. The other thing that's also of

448
00:22:21,000 --> 00:22:23,800
Speaker 3: the interest is appras three percent buffer rate. So that

449
00:22:23,880 --> 00:22:27,399
Speaker 3: puts a throttle on what both investors and owner occupiers

450
00:22:27,440 --> 00:22:30,520
Speaker 3: can borrow. And so that means putting that throttling on

451
00:22:30,840 --> 00:22:33,879
Speaker 3: means that you've got to gain concentration of demand in

452
00:22:33,960 --> 00:22:34,560
Speaker 3: that sort.

453
00:22:34,400 --> 00:22:36,520
Speaker 2: Of bottom quarto of the market.

454
00:22:36,600 --> 00:22:40,000
Speaker 3: And so that in itself is seeing We said it

455
00:22:40,040 --> 00:22:42,760
Speaker 3: earlier in the podcast that that's why that end of

456
00:22:42,800 --> 00:22:46,800
Speaker 3: the market is performing better because unfortunately all the demands

457
00:22:46,840 --> 00:22:48,560
Speaker 3: being pushed into that particular area.

458
00:22:48,720 --> 00:22:52,200
Speaker 1: But do you then think it's overheated that market because

459
00:22:52,200 --> 00:22:54,879
Speaker 1: you're funneling, You're pushing everyone into there. So there's the

460
00:22:54,880 --> 00:22:57,200
Speaker 1: appra measure shore. Now we've got the expanded first home

461
00:22:57,240 --> 00:22:59,840
Speaker 1: bias scheme. If so much demand is funbling, there is

462
00:23:00,400 --> 00:23:01,760
Speaker 1: at risk of a bit of a bubble.

463
00:23:01,840 --> 00:23:04,560
Speaker 3: The short answer that is potentially, and I would say

464
00:23:04,560 --> 00:23:08,040
Speaker 3: in some of the regional towns, I can't support the

465
00:23:08,080 --> 00:23:11,359
Speaker 3: fundamental valuations in terms of what those property prices are

466
00:23:11,359 --> 00:23:14,119
Speaker 3: selling for right now, because you know, the data is

467
00:23:14,119 --> 00:23:17,359
Speaker 3: suggesting that the vast majority of those buyers are investors,

468
00:23:17,680 --> 00:23:20,320
Speaker 3: so they are artificially pushing the market up.

469
00:23:20,359 --> 00:23:21,200
Speaker 2: And I've seen.

470
00:23:21,280 --> 00:23:24,000
Speaker 3: Those markets are a lot more volatile after the end

471
00:23:24,040 --> 00:23:26,480
Speaker 3: of these sort of get rich quick type promotions that

472
00:23:26,560 --> 00:23:28,120
Speaker 3: happen into these particular areas.

473
00:23:28,400 --> 00:23:31,040
Speaker 1: This could be devastating for first home buyers though, couldn't it.

474
00:23:31,080 --> 00:23:33,120
Speaker 1: I mean investors that sort of buyer beware. But we're

475
00:23:33,160 --> 00:23:35,359
Speaker 1: also pulling in first home buyers into this market, and

476
00:23:35,400 --> 00:23:37,879
Speaker 1: they could be in negative equity territory pretty quickly.

477
00:23:37,880 --> 00:23:39,760
Speaker 2: They could, And that's why I'm worried about it.

478
00:23:39,840 --> 00:23:42,040
Speaker 3: That's why I've written to all of the trade associations

479
00:23:42,040 --> 00:23:45,000
Speaker 3: to say, hey, it's all being led by this social

480
00:23:45,080 --> 00:23:48,399
Speaker 3: media marketing push and they're talking about, you know, if

481
00:23:48,440 --> 00:23:50,159
Speaker 3: you can't buy it in your personal name, go on,

482
00:23:50,200 --> 00:23:52,479
Speaker 3: buy two or three in trusts and then buy them

483
00:23:52,520 --> 00:23:55,720
Speaker 3: in yourself many superfund So I've got real problems with that,

484
00:23:55,800 --> 00:23:57,440
Speaker 3: and I've got real problems and the fact that it's

485
00:23:57,440 --> 00:24:01,080
Speaker 3: being generated by mortgage brokers and buy as agents and

486
00:24:01,160 --> 00:24:05,919
Speaker 3: property investment advisors who aren't licensed to give financial product advice,

487
00:24:05,960 --> 00:24:08,760
Speaker 3: which is self managed super funds or trust lending.

488
00:24:08,880 --> 00:24:10,280
Speaker 2: That's a real problem for me.

489
00:24:10,960 --> 00:24:13,800
Speaker 3: And yes, it does have consequences, and the same sort

490
00:24:13,800 --> 00:24:14,760
Speaker 3: of consequences too.

491
00:24:14,760 --> 00:24:15,639
Speaker 2: You know, they're getting on there.

492
00:24:15,640 --> 00:24:17,840
Speaker 3: I've bought my fifth I bought my eighth, I bought

493
00:24:17,840 --> 00:24:20,640
Speaker 3: my tenth property in three years using all of these

494
00:24:20,680 --> 00:24:25,760
Speaker 3: trust structures. That's that's unsustainable to your point around getting

495
00:24:25,760 --> 00:24:29,000
Speaker 3: first home buyers into the market if they're if you know,

496
00:24:29,119 --> 00:24:31,800
Speaker 3: for every ten offers on a property, if nine of

497
00:24:31,800 --> 00:24:35,680
Speaker 3: them are from investors and only one owner occupier, that's

498
00:24:35,680 --> 00:24:37,679
Speaker 3: that's not where we want to be. That's not not

499
00:24:38,000 --> 00:24:41,119
Speaker 3: you know, there's no social contract for investors to have

500
00:24:41,240 --> 00:24:42,240
Speaker 3: that right to be able to do.

501
00:24:42,200 --> 00:24:43,399
Speaker 2: That, and it's going to end badly.

502
00:24:43,840 --> 00:24:46,239
Speaker 3: So I'm trying to get in front of, you know,

503
00:24:46,280 --> 00:24:48,399
Speaker 3: the potential risk here because I'm seeing it as an

504
00:24:48,400 --> 00:24:51,960
Speaker 3: emergent risk. Also for the financial stability of the market

505
00:24:52,000 --> 00:24:54,159
Speaker 3: as well, because at the end of the day, if

506
00:24:54,200 --> 00:24:57,960
Speaker 3: you think about property, property underpins the wealth in this country,

507
00:24:58,119 --> 00:25:01,480
Speaker 3: you know, and so you do then have obviously financial risk.

508
00:25:01,520 --> 00:25:04,480
Speaker 3: And I don't want to be scaring people, but the

509
00:25:04,560 --> 00:25:07,240
Speaker 3: reality here is that we've got some settings that are

510
00:25:07,280 --> 00:25:09,840
Speaker 3: wrong and we need to We need to tighten them

511
00:25:09,880 --> 00:25:13,119
Speaker 3: up in terms of getting easy access to credit for

512
00:25:13,200 --> 00:25:15,720
Speaker 3: trust lending or for self managed super fund lending.

513
00:25:15,760 --> 00:25:16,920
Speaker 2: So we need to tighten that up.

514
00:25:17,160 --> 00:25:19,199
Speaker 3: And we need to get the balance back to the

515
00:25:19,240 --> 00:25:23,560
Speaker 3: seventy thirty seventy percent owner occupy thirty percent investor. If

516
00:25:23,600 --> 00:25:26,720
Speaker 3: we're seeing that move outer kilter, we're going to have

517
00:25:26,760 --> 00:25:29,600
Speaker 3: some problems. And to your point, those first home buyers

518
00:25:29,640 --> 00:25:32,600
Speaker 3: who got in might think great, property price has gone

519
00:25:32,640 --> 00:25:35,520
Speaker 3: up twenty percent, but if they then correct by thirty percent,

520
00:25:36,240 --> 00:25:38,680
Speaker 3: then ultimately they could be in some negative equity area.

521
00:25:38,760 --> 00:25:39,000
Speaker 2: Now.

522
00:25:39,760 --> 00:25:43,520
Speaker 3: First for home buyers, look, they're playing in the decades game.

523
00:25:43,560 --> 00:25:47,119
Speaker 3: They're not necessarily playing in, you know, buyer property and

524
00:25:47,200 --> 00:25:49,919
Speaker 3: turn it into a commodity and trade it, because we

525
00:25:49,960 --> 00:25:53,119
Speaker 3: don't want trading in property either. You know, it's unsustainable

526
00:25:53,119 --> 00:25:56,520
Speaker 3: if we have speculation in residential property. So what I'm

527
00:25:56,600 --> 00:25:59,600
Speaker 3: hoping is that you know, those first home buyers can

528
00:25:59,640 --> 00:26:02,040
Speaker 3: get in the market, can hold onto their property for

529
00:26:02,040 --> 00:26:04,720
Speaker 3: a long period of time, and enjoy some capital growth,

530
00:26:04,760 --> 00:26:07,879
Speaker 3: which will obviously help them in the future as well.

531
00:26:07,960 --> 00:26:10,520
Speaker 1: You think, you think governments need to have a bit

532
00:26:10,520 --> 00:26:12,240
Speaker 1: of a crackdown on those other areas of the market.

533
00:26:12,280 --> 00:26:14,080
Speaker 1: So it's all very well and good to offer these

534
00:26:14,080 --> 00:26:16,720
Speaker 1: incentives and these schemes and do what they can to

535
00:26:16,760 --> 00:26:19,280
Speaker 1: help first home buyers. But if there are these other

536
00:26:19,359 --> 00:26:22,280
Speaker 1: schemes flourishing that it is just sucking in more investors

537
00:26:22,280 --> 00:26:23,920
Speaker 1: that's pushing out first home buyers. That they've got to

538
00:26:23,960 --> 00:26:25,080
Speaker 1: act on that and do that soon.

539
00:26:25,560 --> 00:26:29,000
Speaker 3: One hundred percent, Julian, it is. I mean, it's just logical, right,

540
00:26:29,040 --> 00:26:31,119
Speaker 3: Like it might feel great that you're an investor and

541
00:26:31,160 --> 00:26:33,919
Speaker 3: you've just made a quick thirty percent return, but at

542
00:26:33,960 --> 00:26:36,879
Speaker 3: the end of the day, investing in property, you're running

543
00:26:36,880 --> 00:26:37,720
Speaker 3: a private.

544
00:26:37,400 --> 00:26:38,639
Speaker 2: Rental accommodation business.

545
00:26:38,680 --> 00:26:41,280
Speaker 3: And that should be something that you think about that

546
00:26:41,359 --> 00:26:44,320
Speaker 3: you're going to be doing for ten, fifteen, twenty years, right,

547
00:26:44,720 --> 00:26:47,679
Speaker 3: and enjoy the spoils of that long term. If we

548
00:26:47,800 --> 00:26:51,240
Speaker 3: turn property into a speculative asset and it becomes a

549
00:26:51,280 --> 00:26:55,359
Speaker 3: tradable commodity, no politician, no government is going to on

550
00:26:55,400 --> 00:26:59,760
Speaker 3: either side of politics, is going to want to be responsible.

551
00:26:59,440 --> 00:27:02,200
Speaker 2: For robbing the Great Australian dream from people.

552
00:27:02,280 --> 00:27:05,399
Speaker 3: So it's clear to me that the animal spirits that

553
00:27:05,440 --> 00:27:08,080
Speaker 3: we're currently seeing which is driving a lot of this

554
00:27:08,160 --> 00:27:10,480
Speaker 3: price growth at the moment, because if you just look

555
00:27:10,480 --> 00:27:14,119
Speaker 3: at the last quarter of data around investment lending versus

556
00:27:14,119 --> 00:27:17,679
Speaker 3: owner occupied lending, it's clear investment lending is growing at

557
00:27:17,680 --> 00:27:20,840
Speaker 3: three to four times greater than owner occupied lending at

558
00:27:20,840 --> 00:27:23,879
Speaker 3: the moment. What does that tell you about the market mechanisms?

559
00:27:23,880 --> 00:27:26,800
Speaker 3: And APRA is sort of aware of this, they're flagged

560
00:27:26,840 --> 00:27:29,399
Speaker 3: something to say, you know, they may potentially put some

561
00:27:29,480 --> 00:27:33,520
Speaker 3: other macro credential throttles in place, and I'm sort of saying, well,

562
00:27:33,840 --> 00:27:38,000
Speaker 3: here's something that the regulators can do. Just ban trust

563
00:27:38,080 --> 00:27:41,080
Speaker 3: lending and have a look at self managed super funds

564
00:27:41,119 --> 00:27:44,240
Speaker 3: in terms of who's giving the advice. Because the advice

565
00:27:44,320 --> 00:27:48,160
Speaker 3: is being started by the property sprewkers and then ultimately

566
00:27:48,200 --> 00:27:50,080
Speaker 3: then you go off and see your financial planner and

567
00:27:50,119 --> 00:27:52,160
Speaker 3: then they set you up, you know, in your account

568
00:27:52,160 --> 00:27:54,560
Speaker 3: and sets you up. But it's not the traditional way

569
00:27:54,600 --> 00:27:56,720
Speaker 3: in which that should work. It should be if I've

570
00:27:56,720 --> 00:27:59,399
Speaker 3: done my own personal research and I've gone to speak

571
00:27:59,400 --> 00:28:01,879
Speaker 3: to a financial planner or I've gone to speak to

572
00:28:02,400 --> 00:28:05,439
Speaker 3: my accountant to learn about No, it doesn't feel like that.

573
00:28:05,640 --> 00:28:07,960
Speaker 2: What it feels like is, yes, that these.

574
00:28:07,800 --> 00:28:11,600
Speaker 3: Buyers agents, mortgage brokers and property investment advisors who are

575
00:28:11,600 --> 00:28:13,760
Speaker 3: self interest. There's all self interest here, and make no

576
00:28:13,880 --> 00:28:16,440
Speaker 3: mistake about that. And I'm also putting my hand up.

577
00:28:16,760 --> 00:28:18,679
Speaker 3: I run a business in this space, and I've been

578
00:28:18,760 --> 00:28:22,879
Speaker 3: running that business for almost twenty years, so you know,

579
00:28:22,880 --> 00:28:26,720
Speaker 3: I'm talking down you know, a marketplace that obviously I

580
00:28:26,760 --> 00:28:29,359
Speaker 3: get to benefit from. So that's how concerned I am

581
00:28:29,400 --> 00:28:33,200
Speaker 3: about the sustainability of the market. It's just not where

582
00:28:33,240 --> 00:28:36,119
Speaker 3: it needs to be in terms of that particular story.

583
00:28:36,200 --> 00:28:39,080
Speaker 3: So there is an emerging story here and I'm trying

584
00:28:39,120 --> 00:28:40,840
Speaker 3: to get that message out there.

585
00:28:41,040 --> 00:28:43,239
Speaker 1: Then you mentioned a few times about buyers agents, and

586
00:28:43,280 --> 00:28:45,400
Speaker 1: it's coming across our desks quite often to a lot

587
00:28:45,440 --> 00:28:47,600
Speaker 1: of people are using buyers agents. It used to be

588
00:28:47,680 --> 00:28:50,600
Speaker 1: sort of, I don't know, an for very wealthy people,

589
00:28:50,600 --> 00:28:52,880
Speaker 1: and now it seems to be trickling down to all

590
00:28:52,920 --> 00:28:55,760
Speaker 1: facets of the market. Do people need a buyers agent?

591
00:28:56,000 --> 00:28:58,880
Speaker 2: All disclosure. I run a buyers agency business, so.

592
00:28:58,840 --> 00:29:01,680
Speaker 3: As part of our empower wealth business, we have a

593
00:29:01,720 --> 00:29:04,680
Speaker 3: full suite of services including mortgage broken, buyers aid, and

594
00:29:04,680 --> 00:29:06,520
Speaker 3: property advice, et cetera. So I want to make sure

595
00:29:06,560 --> 00:29:10,360
Speaker 3: the public understands that. So what does a buyer's agent do.

596
00:29:10,720 --> 00:29:13,360
Speaker 3: The buyer's agent works on behalf of the buyer to

597
00:29:13,760 --> 00:29:19,000
Speaker 3: effectively find, assess, negotiate and secure the property on behalf

598
00:29:19,120 --> 00:29:20,000
Speaker 3: of their client.

599
00:29:20,400 --> 00:29:23,600
Speaker 2: So they work for the buyer obviously, and they are

600
00:29:23,640 --> 00:29:25,440
Speaker 2: a licensed real estate agent.

601
00:29:25,920 --> 00:29:28,840
Speaker 3: As opposed to the current way in which we potentially

602
00:29:28,880 --> 00:29:31,320
Speaker 3: see the mainstream of real estate agents. They work on

603
00:29:31,360 --> 00:29:33,600
Speaker 3: behalf of the vendor and their job is to obviously

604
00:29:33,640 --> 00:29:35,320
Speaker 3: get the best result for their client.

605
00:29:35,440 --> 00:29:38,120
Speaker 2: So each of the parties are working on behalf of

606
00:29:38,160 --> 00:29:41,320
Speaker 2: their clients to try and get an outcome for those times.

607
00:29:41,360 --> 00:29:44,480
Speaker 3: So that's what they do. There absolutely has been an

608
00:29:44,560 --> 00:29:48,080
Speaker 3: explosion of buyers agents wanting it into the market. I

609
00:29:48,080 --> 00:29:52,080
Speaker 3: mean property, property is our favorite barbecue topic. What and

610
00:29:52,120 --> 00:29:55,040
Speaker 3: if I can go and earn a commission on helping

611
00:29:55,080 --> 00:29:57,040
Speaker 3: someone else buy a property, how.

612
00:29:58,960 --> 00:30:01,959
Speaker 1: I almost might do that in my spare time quite frankly.

613
00:30:02,000 --> 00:30:04,560
Speaker 1: Then it's like it's so I really love watching the

614
00:30:04,800 --> 00:30:06,800
Speaker 1: property watch this stite go to home opens. I'm not

615
00:30:06,800 --> 00:30:07,920
Speaker 1: even in the market to buy home.

616
00:30:08,160 --> 00:30:10,560
Speaker 3: There you go, so and it's being promoted is that

617
00:30:10,560 --> 00:30:12,520
Speaker 3: that it's like a side hustle that you can be

618
00:30:12,560 --> 00:30:16,520
Speaker 3: a buyers agent part time, and so we're worried about

619
00:30:17,040 --> 00:30:20,320
Speaker 3: the quality of buyers agents. You know, they want to

620
00:30:20,360 --> 00:30:22,720
Speaker 3: do the right thing, and so I might refer to

621
00:30:22,760 --> 00:30:26,560
Speaker 3: them as enthusiastic amateurs. They don't really understand that if

622
00:30:26,600 --> 00:30:29,240
Speaker 3: they're doing it for investment, they really probably don't understand

623
00:30:29,240 --> 00:30:32,800
Speaker 3: how financial services work. They certainly aren't a clued up

624
00:30:32,800 --> 00:30:36,240
Speaker 3: in terms of the Regulatory Corporations Act around what you

625
00:30:36,280 --> 00:30:38,160
Speaker 3: can talk about what you can't talk about from.

626
00:30:38,000 --> 00:30:39,000
Speaker 2: An advice point of view.

627
00:30:39,320 --> 00:30:42,080
Speaker 3: So there is definitely a knowledge gap that a lot

628
00:30:42,120 --> 00:30:45,760
Speaker 3: of them have, and that's also leading to potentially bad

629
00:30:45,840 --> 00:30:48,800
Speaker 3: outcomes for their clients if they're buying the wrong investment

630
00:30:48,840 --> 00:30:51,200
Speaker 3: property in the wrong location, if they're not doing their

631
00:30:51,280 --> 00:30:53,880
Speaker 3: due diligence properly, and give you here's a good example.

632
00:30:54,200 --> 00:30:57,240
Speaker 3: We've got interstate buyers agents who will buy a property

633
00:30:57,280 --> 00:31:01,040
Speaker 3: based on what they see on the on the search

634
00:31:01,080 --> 00:31:03,920
Speaker 3: portals and then the video walk.

635
00:31:03,800 --> 00:31:07,680
Speaker 2: Through from the selling agent. So do you think the selling.

636
00:31:07,400 --> 00:31:11,280
Speaker 3: Agent is agent is going to show the structural problems

637
00:31:11,360 --> 00:31:13,560
Speaker 3: or the cracks in the brick work, or the missing

638
00:31:13,640 --> 00:31:16,280
Speaker 3: thing here or the broken thing there. No, they're doing

639
00:31:16,360 --> 00:31:19,360
Speaker 3: a quick walkthrough, and then that buyers agent in a

640
00:31:19,400 --> 00:31:22,720
Speaker 3: state is not sending their own independent well they're not

641
00:31:22,800 --> 00:31:25,920
Speaker 3: turning up That has problems everywhere in terms of conflicts

642
00:31:25,920 --> 00:31:29,600
Speaker 3: of interest and basically outcomes for those customers. So I'm

643
00:31:29,640 --> 00:31:34,040
Speaker 3: worried about again these animal spirits and these enthusiastic amateurs

644
00:31:34,280 --> 00:31:35,920
Speaker 3: who are currently operating in our space.

645
00:31:35,920 --> 00:31:38,920
Speaker 1: It's just on that. So we talked about Person earlier,

646
00:31:39,120 --> 00:31:43,160
Speaker 1: and it is a fantastic place to live. But if

647
00:31:43,200 --> 00:31:45,440
Speaker 1: you're not living in Person, you think that's the market

648
00:31:45,440 --> 00:31:47,240
Speaker 1: I want to go and buy in. It is a

649
00:31:47,240 --> 00:31:49,080
Speaker 1: bit of a distance. It is an airfare. I mean,

650
00:31:49,080 --> 00:31:50,960
Speaker 1: do you recommend people actually going physically look at the

651
00:31:50,960 --> 00:31:53,520
Speaker 1: property themselves or is it about finding a really good

652
00:31:53,600 --> 00:31:56,600
Speaker 1: buyers agent in that area, and then maybe you can

653
00:31:56,800 --> 00:31:59,120
Speaker 1: document what are the red flags want to look out

654
00:31:59,160 --> 00:31:59,920
Speaker 1: for and how to.

655
00:32:00,560 --> 00:32:03,000
Speaker 3: So let's talk about the three types of buyers agents.

656
00:32:03,040 --> 00:32:05,680
Speaker 3: There is the local buyers agent who might be you

657
00:32:05,680 --> 00:32:07,920
Speaker 3: know what they might refer to as their local expert

658
00:32:08,080 --> 00:32:09,960
Speaker 3: in terms of their pocket of the market, similar to

659
00:32:10,000 --> 00:32:12,480
Speaker 3: the way in which is selling agent might operate that way.

660
00:32:12,840 --> 00:32:14,800
Speaker 3: Then you've got what we call the boardless property and

661
00:32:15,280 --> 00:32:18,760
Speaker 3: buyers agent, and so they're helping clients potentially in other states,

662
00:32:18,800 --> 00:32:22,680
Speaker 3: and then they often fly into those locations or they

663
00:32:22,720 --> 00:32:25,800
Speaker 3: have what we refer to as inspectors or spotters on

664
00:32:25,840 --> 00:32:26,240
Speaker 3: the ground.

665
00:32:26,240 --> 00:32:28,400
Speaker 1: Maybe I can do that. Can I be someone's spotter who.

666
00:32:29,840 --> 00:32:32,360
Speaker 2: You can go and walk through properties and inspect them? So, yes,

667
00:32:32,360 --> 00:32:32,600
Speaker 2: that can.

668
00:32:32,920 --> 00:32:36,080
Speaker 3: And usually they might be say retired or part time

669
00:32:36,160 --> 00:32:39,120
Speaker 3: real estate agents or whatever, you know, former property managers,

670
00:32:39,160 --> 00:32:40,880
Speaker 3: or they could be the property manager that's working on

671
00:32:40,920 --> 00:32:43,040
Speaker 3: behalf of that group. All of those things can be

672
00:32:43,080 --> 00:32:45,120
Speaker 3: true in terms of how they do that. But and

673
00:32:45,160 --> 00:32:48,400
Speaker 3: then of course no property should ever be bought without

674
00:32:48,440 --> 00:32:51,400
Speaker 3: a building and pest inspection, so and now they are

675
00:32:51,400 --> 00:32:54,280
Speaker 3: obviously independent. They will come in and do that building

676
00:32:54,280 --> 00:32:56,960
Speaker 3: and pest inspection. So yes, you will see more and

677
00:32:57,040 --> 00:33:01,320
Speaker 3: more investors who are buying in their mind sight unseen

678
00:33:01,400 --> 00:33:04,400
Speaker 3: in terms of their eyes. But they are absolutely relying

679
00:33:04,480 --> 00:33:07,040
Speaker 3: on quality of the buyers agents to do that due

680
00:33:07,040 --> 00:33:10,720
Speaker 3: diligence work. And so we're concerned about the corners that

681
00:33:10,760 --> 00:33:14,000
Speaker 3: are being cut by certain buyers agents in the market

682
00:33:14,040 --> 00:33:14,520
Speaker 3: at the moment.

683
00:33:14,840 --> 00:33:17,240
Speaker 1: Okay, we are fast running out of time then, and

684
00:33:17,280 --> 00:33:18,840
Speaker 1: I do want to make sure we cover off what

685
00:33:18,880 --> 00:33:21,280
Speaker 1: you think are the top markets for property investing. So

686
00:33:21,320 --> 00:33:23,320
Speaker 1: if you're going to buy an investment property in the

687
00:33:23,320 --> 00:33:26,120
Speaker 1: next let's just say six months, shall we say you're

688
00:33:26,160 --> 00:33:27,400
Speaker 1: in the market, you're on the hunt, you want to

689
00:33:27,400 --> 00:33:28,440
Speaker 1: buy one, where are you buying?

690
00:33:29,160 --> 00:33:30,880
Speaker 3: So at the start of the year I said Darwin

691
00:33:31,240 --> 00:33:33,080
Speaker 3: would be the number one performing market.

692
00:33:33,200 --> 00:33:34,640
Speaker 1: And have you got the stats to hand? Ben, Now

693
00:33:34,640 --> 00:33:36,880
Speaker 1: you got what's darting up about? Is it seventeen percent

694
00:33:36,920 --> 00:33:41,160
Speaker 1: or something? It's definitely I think seventeen percent was the

695
00:33:41,200 --> 00:33:43,480
Speaker 1: stat I heard, which includes rental yield, But anyway, maybe

696
00:33:43,480 --> 00:33:43,840
Speaker 1: it's true.

697
00:33:44,000 --> 00:33:46,160
Speaker 3: No, there's every chance that it's over twenty by the time,

698
00:33:46,200 --> 00:33:48,680
Speaker 3: because what the data you're looking at is lag data.

699
00:33:48,760 --> 00:33:50,760
Speaker 2: So if you actually look at what the rolling three

700
00:33:50,840 --> 00:33:53,400
Speaker 2: month trend is. It's definitely in the twenties plus. Now.

701
00:33:53,440 --> 00:33:56,080
Speaker 3: It's moving very quickly and it's a pretty logical thing.

702
00:33:56,120 --> 00:33:57,760
Speaker 3: There's only about one hundred and twenty to one hundred

703
00:33:57,760 --> 00:34:01,120
Speaker 3: and thirty listed properties in Darwin, the entire market. So

704
00:34:01,160 --> 00:34:03,200
Speaker 3: you talk about that supply demand imbalance.

705
00:34:03,600 --> 00:34:05,080
Speaker 1: Is that why you tipped it at the beginning of

706
00:34:05,120 --> 00:34:07,720
Speaker 1: the year you saw the imbalance or was there some

707
00:34:07,760 --> 00:34:08,800
Speaker 1: other economic activity?

708
00:34:09,040 --> 00:34:11,200
Speaker 2: Yeah, well it's definitely not economic activity.

709
00:34:11,239 --> 00:34:13,360
Speaker 3: Look, you've got a new government in power there, the

710
00:34:13,400 --> 00:34:16,319
Speaker 3: Liberal National Party, and they are very pro business and

711
00:34:16,360 --> 00:34:19,000
Speaker 3: so they're very pro economy. So that was the first

712
00:34:19,160 --> 00:34:21,000
Speaker 3: That was the first cod that needed to go into

713
00:34:21,000 --> 00:34:22,920
Speaker 3: that wheel. Then you start to have a look at

714
00:34:22,920 --> 00:34:26,520
Speaker 3: the yield story. And also there's no land tacks in Darwin,

715
00:34:26,600 --> 00:34:29,439
Speaker 3: so you've got really strong yields. And then the third

716
00:34:29,480 --> 00:34:32,839
Speaker 3: one was it's been dormant for almost fifteen years, right,

717
00:34:33,120 --> 00:34:35,440
Speaker 3: it is again in a boombust. And so off the

718
00:34:35,440 --> 00:34:37,719
Speaker 3: back of that, I've said to people, look, if you're

719
00:34:37,719 --> 00:34:39,880
Speaker 3: going to go into Darwin, you're only going to be

720
00:34:39,920 --> 00:34:42,040
Speaker 3: in that market for maybe five to seven years and

721
00:34:42,040 --> 00:34:44,920
Speaker 3: then you'll probably get out. And then with all of

722
00:34:44,920 --> 00:34:47,680
Speaker 3: this trust lending and self manitude fund lending where they

723
00:34:47,719 --> 00:34:50,279
Speaker 3: really do rely on really high rents. That was the

724
00:34:50,320 --> 00:34:53,080
Speaker 3: final straw, so that one was always going to take off,

725
00:34:53,320 --> 00:34:54,040
Speaker 3: and it's done that.

726
00:34:54,120 --> 00:34:56,680
Speaker 2: So the next one was Perth and Melbourne. I had

727
00:34:56,680 --> 00:34:57,720
Speaker 2: them side by side.

728
00:34:57,760 --> 00:35:00,319
Speaker 3: I really love Perth in the sense that fundamental are

729
00:35:00,320 --> 00:35:04,320
Speaker 3: so good economic activity, so good liveability scores off the charts,

730
00:35:04,600 --> 00:35:06,920
Speaker 3: so you know, job opportunities and all that, so I

731
00:35:06,920 --> 00:35:09,160
Speaker 3: think the economy will run strong, so that one will

732
00:35:09,160 --> 00:35:12,120
Speaker 3: continue to perform well. I had Melbourne in that sort

733
00:35:12,160 --> 00:35:15,920
Speaker 3: of mix through probably more so around sentiment everyone you know,

734
00:35:16,040 --> 00:35:16,879
Speaker 3: Unfortunately a lot.

735
00:35:16,760 --> 00:35:19,440
Speaker 2: Of investors aren't. They aren't doing a lot of research

736
00:35:19,440 --> 00:35:19,640
Speaker 2: on this.

737
00:35:19,760 --> 00:35:22,399
Speaker 3: So if there's a view that it's affordable and that's

738
00:35:22,400 --> 00:35:24,439
Speaker 3: where I need to buy, I'll go down and buy

739
00:35:24,440 --> 00:35:26,680
Speaker 3: in Melbourne. So we're seeing a lot of that borderless

740
00:35:26,680 --> 00:35:28,000
Speaker 3: investing coming into Melbourne.

741
00:35:28,000 --> 00:35:29,120
Speaker 2: So I think it's probably.

742
00:35:28,920 --> 00:35:32,480
Speaker 1: People like myself. Obviously I'm no expert, but when you

743
00:35:32,480 --> 00:35:36,200
Speaker 1: have a look at the charts, Melbourne has deviated from

744
00:35:36,239 --> 00:35:40,320
Speaker 1: Sydney prices in a way that just doesn't seem normal,

745
00:35:40,400 --> 00:35:43,360
Speaker 1: that just can't sustain itself forever. We know that the

746
00:35:43,480 --> 00:35:45,560
Speaker 1: Victorian government has left all the taxes on, so we

747
00:35:45,600 --> 00:35:47,520
Speaker 1: know sort of the background story. But it does seem

748
00:35:47,560 --> 00:35:51,279
Speaker 1: remarkable that Sydney's me in house price can be so

749
00:35:51,440 --> 00:35:53,560
Speaker 1: much moigher than Melbourne.

750
00:35:53,040 --> 00:35:56,319
Speaker 3: Correct especially given obviously now Victoria has just moved over

751
00:35:56,400 --> 00:36:00,000
Speaker 3: seven million people in the state and Melbourne is continued

752
00:36:00,280 --> 00:36:03,920
Speaker 3: to attract its high share of immigration. It's losing a

753
00:36:03,960 --> 00:36:07,440
Speaker 3: small portion of interstate migrants who are probably moving up

754
00:36:07,440 --> 00:36:12,360
Speaker 3: to Southeast Queensland, but that's its superpower. Melbourne's multicultural attraction

755
00:36:12,520 --> 00:36:17,040
Speaker 3: tool is its superpower. But it's underperformed purely off the

756
00:36:17,080 --> 00:36:20,040
Speaker 3: back of the economic performance of the state. It's got

757
00:36:20,080 --> 00:36:23,520
Speaker 3: the highest level of unemployment across the capital cities. It's

758
00:36:23,520 --> 00:36:25,600
Speaker 3: got a debt story that's going to be a massive

759
00:36:25,600 --> 00:36:28,919
Speaker 3: problem for future state government, so that's holding it back.

760
00:36:28,960 --> 00:36:31,000
Speaker 3: But if you think that will be rectified over the

761
00:36:31,000 --> 00:36:33,359
Speaker 3: period of time, the regression to the means should kick

762
00:36:33,400 --> 00:36:35,880
Speaker 3: back in and you'll start to see probably prices move

763
00:36:35,960 --> 00:36:38,600
Speaker 3: high there. The one that surprised me the most has

764
00:36:38,640 --> 00:36:41,520
Speaker 3: probably been Southeast Queensland, namely Brisbane, is that it's had

765
00:36:41,560 --> 00:36:43,600
Speaker 3: a terrific run and that run has been going for

766
00:36:43,760 --> 00:36:46,880
Speaker 3: a good period of time, but the fundamentals and the

767
00:36:47,000 --> 00:36:49,719
Speaker 3: affordability story is now starting to taper that out, but

768
00:36:49,760 --> 00:36:51,920
Speaker 3: it's performing still quite strongly.

769
00:36:52,280 --> 00:36:53,440
Speaker 2: Then I had Adelaide.

770
00:36:53,560 --> 00:36:55,319
Speaker 3: It's had a sort of strong run for five to

771
00:36:55,360 --> 00:36:57,920
Speaker 3: seven years, so I suspect that will settle down and

772
00:36:57,960 --> 00:37:00,000
Speaker 3: there's a good amount of supply that's about to write

773
00:37:00,160 --> 00:37:03,160
Speaker 3: into Adelaide over the next sort of twelve to eighteen months.

774
00:37:03,320 --> 00:37:06,759
Speaker 3: Looking at the forwards, then I had Canberra, more so

775
00:37:06,840 --> 00:37:08,920
Speaker 3: because the labor governor in power and so all of

776
00:37:08,960 --> 00:37:11,680
Speaker 3: the public servants an't going to lose their job, so

777
00:37:11,719 --> 00:37:14,200
Speaker 3: that will keep that sort of population and growth going.

778
00:37:14,560 --> 00:37:17,120
Speaker 3: Then I had Sydney In terms of in that mix,

779
00:37:17,320 --> 00:37:19,839
Speaker 3: Sydney is an interesting one. It's dynamic city, it's our

780
00:37:19,880 --> 00:37:24,360
Speaker 3: financial capital market, it's our international city. There's prestige associated

781
00:37:24,400 --> 00:37:27,440
Speaker 3: with living in but it's still very much unaffordable, so

782
00:37:27,719 --> 00:37:29,719
Speaker 3: from an investment point of view, it's a challenging market

783
00:37:29,760 --> 00:37:31,960
Speaker 3: to get into it. And then finally I had Hobart

784
00:37:31,960 --> 00:37:34,160
Speaker 3: at the bottom of the market. Purely on the back

785
00:37:34,200 --> 00:37:37,880
Speaker 3: of Hobart. In the last results of population growth, it

786
00:37:38,000 --> 00:37:42,120
Speaker 3: had about one hundred and sixty two people increased population growth,

787
00:37:42,160 --> 00:37:45,080
Speaker 3: so it's really stagnating. It needs to get its economy

788
00:37:45,120 --> 00:37:48,720
Speaker 3: working otherwise it'll lose its knowledge base and its youth.

789
00:37:48,880 --> 00:37:52,440
Speaker 2: And if that youth moves out into Victoria or other markets,

790
00:37:52,680 --> 00:37:53,880
Speaker 2: that market's going to be challenged.

791
00:37:53,920 --> 00:37:56,680
Speaker 3: If it's only going to be reliant on retirees moving

792
00:37:56,680 --> 00:37:59,120
Speaker 3: down into that market who don't have the incomes or

793
00:37:59,120 --> 00:38:00,920
Speaker 3: the borrowing powers, price is higher.

794
00:38:01,000 --> 00:38:03,080
Speaker 1: So if you're buying today or sometime over the next

795
00:38:03,080 --> 00:38:05,520
Speaker 1: six months based on that list, is it So Darwin

796
00:38:05,520 --> 00:38:06,560
Speaker 1: is where you're buying.

797
00:38:07,040 --> 00:38:10,000
Speaker 3: Darwin want to be I need to sort of precursor Darwin.

798
00:38:10,480 --> 00:38:14,200
Speaker 3: It's a speculative buy. It's not something that I would

799
00:38:14,200 --> 00:38:17,239
Speaker 3: sit back. So fundamentally, I'm a long term investor, so

800
00:38:17,280 --> 00:38:18,600
Speaker 3: I want to invest for the decades.

801
00:38:18,600 --> 00:38:19,960
Speaker 2: I don't want to trade property.

802
00:38:20,360 --> 00:38:23,000
Speaker 3: So if I'm buying in my individual name to run

803
00:38:23,040 --> 00:38:26,680
Speaker 3: my private rental accommodation business, I wouldn't necessarily be jumping

804
00:38:26,719 --> 00:38:28,840
Speaker 3: into Darwin, you know. But if I was buying in

805
00:38:28,880 --> 00:38:33,120
Speaker 3: a self managed super fund where I have better tax arrangements,

806
00:38:33,160 --> 00:38:34,759
Speaker 3: I don't want to give advice to anyone in it.

807
00:38:34,760 --> 00:38:38,600
Speaker 3: Please don't take this as advice. It's not advice. But ultimately,

808
00:38:38,920 --> 00:38:42,480
Speaker 3: you know, Darwin does provide that sort of ability to

809
00:38:42,520 --> 00:38:45,440
Speaker 3: get into the market and then potentially trade out of

810
00:38:45,480 --> 00:38:46,480
Speaker 3: that market at its peak.

811
00:38:46,640 --> 00:38:48,800
Speaker 1: So does that mean if you're doing a long term

812
00:38:48,840 --> 00:38:51,880
Speaker 1: traditional investing its perse second on the list, Perth.

813
00:38:51,680 --> 00:38:54,080
Speaker 3: Melbourne would probably be the markets that I would be

814
00:38:54,520 --> 00:38:56,600
Speaker 3: playing in at the moment, and I'd be looking at

815
00:38:56,960 --> 00:39:01,560
Speaker 3: freestanding houses that have a really good proportion of land

816
00:39:01,560 --> 00:39:04,480
Speaker 3: to asset ratio. So the land needs to be the

817
00:39:04,520 --> 00:39:07,840
Speaker 3: minimum of sixty percent of the value of the overall

818
00:39:07,880 --> 00:39:08,840
Speaker 3: asset that you're buying.

819
00:39:09,080 --> 00:39:12,080
Speaker 1: Okay, good tip to know, Ben. When we come back,

820
00:39:12,080 --> 00:39:14,560
Speaker 1: we've got some readers, readers, We've got some listeners. You

821
00:39:14,560 --> 00:39:16,520
Speaker 1: can tell I'm a newspaper, Janelis, can't you. We've got

822
00:39:16,520 --> 00:39:20,319
Speaker 1: some listeners who have sent through some questions. I'll put

823
00:39:20,320 --> 00:39:22,400
Speaker 1: them to you. And also we just might get that

824
00:39:22,920 --> 00:39:27,520
Speaker 1: one one mistake, one common mistake people make when investing

825
00:39:27,560 --> 00:39:29,439
Speaker 1: in property. We'll have a chat when we come back.

826
00:39:40,000 --> 00:39:42,399
Speaker 1: Thanks for joining me on the money Puzzle. I'm your host.

827
00:39:42,560 --> 00:39:46,120
Speaker 1: Julianne Sprague, Wealth editor at The Australian, filling in for

828
00:39:46,320 --> 00:39:49,960
Speaker 1: James Kirby. Ben Kingsley from Empower Wealth is joining me

829
00:39:50,000 --> 00:39:52,359
Speaker 1: to talk all things at property. We've got some top

830
00:39:52,360 --> 00:39:55,160
Speaker 1: tips so far, We've got some listener questions to get to.

831
00:39:55,280 --> 00:39:57,719
Speaker 1: But first Ben, I just want to get to your

832
00:39:57,719 --> 00:40:00,120
Speaker 1: insights on Is there one thing that you see ze

833
00:40:01,280 --> 00:40:04,040
Speaker 1: happens quite frequently when it comes to property investing. The

834
00:40:04,080 --> 00:40:07,200
Speaker 1: one thing that people get wrong or overlook.

835
00:40:07,880 --> 00:40:11,360
Speaker 3: The tip I'm going to give here is over extending themselves.

836
00:40:11,920 --> 00:40:14,399
Speaker 3: Property investments should be a long term investment, and you're

837
00:40:14,440 --> 00:40:19,000
Speaker 3: taking on debt. What I often see is potentially people

838
00:40:19,040 --> 00:40:23,080
Speaker 3: aren't thinking about their cash flows in the short.

839
00:40:22,840 --> 00:40:24,760
Speaker 2: To medium term. So let me give you an example.

840
00:40:24,880 --> 00:40:27,880
Speaker 3: I buy an investment property and then we decide to

841
00:40:27,880 --> 00:40:30,040
Speaker 3: have a second child or whatever that may look like,

842
00:40:30,680 --> 00:40:33,799
Speaker 3: and all of a sudden, now we're really tight in

843
00:40:33,840 --> 00:40:37,399
Speaker 3: regards to our cash flows, and so I haven't let

844
00:40:37,400 --> 00:40:40,799
Speaker 3: that property breathe enough in terms of mature enough. So

845
00:40:41,160 --> 00:40:44,040
Speaker 3: with my high cost of getting into that particular market

846
00:40:44,040 --> 00:40:48,120
Speaker 3: through stem duty and also the selling costs associated with

847
00:40:48,120 --> 00:40:50,000
Speaker 3: that in the interest that I had over that time,

848
00:40:50,400 --> 00:40:53,839
Speaker 3: a lot of people don't necessarily break even if they're

849
00:40:53,920 --> 00:40:55,680
Speaker 3: held that property for a short period of time. So

850
00:40:56,160 --> 00:40:59,239
Speaker 3: I'm always about make sure you have a plan. Make

851
00:40:59,280 --> 00:41:02,080
Speaker 3: sure you understand what your future cash flow impacts are

852
00:41:02,080 --> 00:41:05,560
Speaker 3: going to be around that plane. Because it's a high

853
00:41:05,760 --> 00:41:08,400
Speaker 3: cost investment property. We're not buying five thousand dollars worth

854
00:41:08,440 --> 00:41:11,400
Speaker 3: of shees heer. We're potentially buying half a million dollar

855
00:41:11,560 --> 00:41:14,600
Speaker 3: towards a million dollar asset. So if we get it wrong,

856
00:41:14,960 --> 00:41:18,160
Speaker 3: it will put us back for years and so it

857
00:41:18,280 --> 00:41:20,879
Speaker 3: really is important to know that we can buy and

858
00:41:20,960 --> 00:41:24,120
Speaker 3: hold and sustain that property for the medium to longer term.

859
00:41:24,200 --> 00:41:27,280
Speaker 1: Okay, we've got some people who are looking at investment

860
00:41:27,360 --> 00:41:30,239
Speaker 1: properties as we speak, Ben and I kid you not.

861
00:41:30,440 --> 00:41:34,080
Speaker 1: We have two questions from two listeners. They're both called Ben.

862
00:41:34,120 --> 00:41:36,440
Speaker 1: I'm chatting to Ben Kingsley, so this should make it

863
00:41:36,480 --> 00:41:39,440
Speaker 1: easy for me not to stuff up people's names. So

864
00:41:39,480 --> 00:41:42,240
Speaker 1: Ben has emailed the show and if you'd like to email,

865
00:41:42,280 --> 00:41:44,399
Speaker 1: you can email the Money Puzzle at the Australian dot

866
00:41:44,440 --> 00:41:46,880
Speaker 1: com dot au. But Ben says, my wife and I

867
00:41:46,920 --> 00:41:49,399
Speaker 1: are thinking of selling our first home, which is now

868
00:41:49,400 --> 00:41:52,319
Speaker 1: an investment property. They purchased it in twenty sixteen and

869
00:41:52,400 --> 00:41:56,000
Speaker 1: has been rented out since twenty twenty one. We want

870
00:41:56,040 --> 00:41:59,360
Speaker 1: to cash out to help knock down their existing mortgage

871
00:41:59,360 --> 00:42:02,600
Speaker 1: and reallo our investments, and we're hoping to use my

872
00:42:02,640 --> 00:42:06,640
Speaker 1: wife's lower income during maternity leave to our advantage for

873
00:42:06,719 --> 00:42:09,800
Speaker 1: capital gains tax. And so Ben says, if we apply

874
00:42:09,920 --> 00:42:13,239
Speaker 1: the six year rule to avoid capital gains tax on

875
00:42:13,280 --> 00:42:16,280
Speaker 1: the sale of our investment property, are we just pushing

876
00:42:16,280 --> 00:42:19,000
Speaker 1: the tax liability down the road to our current home.

877
00:42:19,800 --> 00:42:23,360
Speaker 1: Both have had similar capital gains, saying about two hundred

878
00:42:23,360 --> 00:42:25,279
Speaker 1: and forty thousand in game for the investment property versus

879
00:42:25,320 --> 00:42:27,920
Speaker 1: about two hundred and eighty thousand for the current home.

880
00:42:28,239 --> 00:42:32,360
Speaker 3: Ben Kingsley, these are tax questions, and there's some tax impacts.

881
00:42:32,400 --> 00:42:33,799
Speaker 3: I need to put my hand up and say I'm

882
00:42:33,840 --> 00:42:37,040
Speaker 3: not a tax agent. I'm not a qualified tax agent.

883
00:42:37,280 --> 00:42:39,880
Speaker 3: So I'll talk in statements of fact to sort of

884
00:42:39,880 --> 00:42:43,000
Speaker 3: help being on this particular story. So, yes, it's true

885
00:42:43,320 --> 00:42:46,440
Speaker 3: that if you have owned a property that was your

886
00:42:46,440 --> 00:42:48,919
Speaker 3: principal place of residence from twenty twenty one, I think

887
00:42:49,239 --> 00:42:52,160
Speaker 3: was said you have up to six years in which

888
00:42:52,200 --> 00:42:55,560
Speaker 3: you can declare that your principal place of residence. Now,

889
00:42:55,600 --> 00:42:58,360
Speaker 3: if you're owning two properties and you're in another property,

890
00:42:58,400 --> 00:43:02,320
Speaker 3: that obviously means that capital gain in that second property

891
00:43:02,800 --> 00:43:05,239
Speaker 3: will actually be taxable because you can only ever have

892
00:43:05,360 --> 00:43:08,120
Speaker 3: one principal place of residence at one time, so you

893
00:43:08,160 --> 00:43:11,160
Speaker 3: can only have one exemption at one time. So what

894
00:43:11,239 --> 00:43:13,360
Speaker 3: Ben would need to do is go and speak to

895
00:43:13,400 --> 00:43:16,640
Speaker 3: his trusted accountant and they would need to do the

896
00:43:16,680 --> 00:43:19,960
Speaker 3: math in terms of what has been the gain over

897
00:43:20,000 --> 00:43:23,200
Speaker 3: that period of time versus if they've moved into a

898
00:43:23,239 --> 00:43:26,600
Speaker 3: new owner occupied property, what has been the gain on

899
00:43:26,680 --> 00:43:29,120
Speaker 3: that property over that same period of time, and then

900
00:43:29,200 --> 00:43:31,480
Speaker 3: do the calculation in terms of which is better for

901
00:43:31,520 --> 00:43:35,560
Speaker 3: them in regards to the sale of that asset. Benning

902
00:43:35,600 --> 00:43:39,439
Speaker 3: is also right technically again statement of fact that the

903
00:43:39,480 --> 00:43:43,200
Speaker 3: income that you will learn as a capital income is

904
00:43:43,400 --> 00:43:46,960
Speaker 3: assessed as income for that tax year. So income for

905
00:43:47,040 --> 00:43:50,520
Speaker 3: that tax year then is a calculation. So if your

906
00:43:50,600 --> 00:43:53,920
Speaker 3: wife is on maternity leave, then you have lower income.

907
00:43:53,960 --> 00:43:57,240
Speaker 3: That means that potentially, now it's all based on ownership,

908
00:43:57,280 --> 00:43:59,479
Speaker 3: So if it's a fifty to fifty ownership, that still

909
00:43:59,520 --> 00:44:02,759
Speaker 3: means that Ben can't allocate a higher portion of that

910
00:44:02,840 --> 00:44:05,200
Speaker 3: income again to his wife.

911
00:44:05,400 --> 00:44:06,280
Speaker 2: That's not possible.

912
00:44:06,440 --> 00:44:07,920
Speaker 1: Half of it can go across, that's right.

913
00:44:07,960 --> 00:44:10,400
Speaker 3: And if that means that you know Ben's wife is

914
00:44:10,520 --> 00:44:14,160
Speaker 3: on a lower marginal tax rate at that time, then

915
00:44:14,239 --> 00:44:17,600
Speaker 3: ultimately that could there could be some tax savings there.

916
00:44:17,920 --> 00:44:22,360
Speaker 3: But again, if the intention is all about minimizing your tax,

917
00:44:23,239 --> 00:44:25,759
Speaker 3: be very careful. That's why it's always important to go

918
00:44:25,800 --> 00:44:29,680
Speaker 3: and seek proper tax advice before you take any decisions.

919
00:44:29,680 --> 00:44:32,319
Speaker 1: Ben, it sounds like Ben has he says he has

920
00:44:32,560 --> 00:44:35,480
Speaker 1: got some advice, but he's always keen for more opinions

921
00:44:35,520 --> 00:44:37,800
Speaker 1: than just is there any real benefit to the strategy

922
00:44:37,800 --> 00:44:39,320
Speaker 1: besides getting more cash?

923
00:44:39,400 --> 00:44:41,839
Speaker 3: Now, Yeah, I would always try And you know, if

924
00:44:41,880 --> 00:44:45,959
Speaker 3: I'm in conversations with clients, I'm always looking at what's

925
00:44:46,320 --> 00:44:49,000
Speaker 3: what is our end goal and what's.

926
00:44:48,800 --> 00:44:50,360
Speaker 2: Our lifestyle by design look like?

927
00:44:50,400 --> 00:44:52,080
Speaker 3: And am I putting the big rocks in the jar

928
00:44:52,600 --> 00:44:54,520
Speaker 3: making sure that you know, like, at the end of

929
00:44:54,560 --> 00:44:56,799
Speaker 3: the day, money is important, it is, you know, but

930
00:44:56,920 --> 00:44:59,560
Speaker 3: it doesn't by happiness. And so what are the goals

931
00:44:59,560 --> 00:45:02,880
Speaker 3: that you're trying to achieve and how does the decisions

932
00:45:02,880 --> 00:45:05,600
Speaker 3: that you may compliment those goals? And if you can

933
00:45:05,640 --> 00:45:07,799
Speaker 3: align it that way, you're going to live a more

934
00:45:07,840 --> 00:45:10,839
Speaker 3: meaningful and purposeful life number one. But two, you're then

935
00:45:10,920 --> 00:45:13,719
Speaker 3: going to not necessarily get hung up just on how

936
00:45:13,760 --> 00:45:16,560
Speaker 3: much tax I'm paying or what you know, how much

937
00:45:16,640 --> 00:45:18,000
Speaker 3: money I've got in my bank account.

938
00:45:18,040 --> 00:45:18,920
Speaker 2: The bragging rights.

939
00:45:19,239 --> 00:45:21,680
Speaker 3: No one sees those bragging rights in the cemetery like,

940
00:45:21,760 --> 00:45:23,520
Speaker 3: so ultimately live now.

941
00:45:23,520 --> 00:45:25,160
Speaker 2: And make sure you're doing those decisions.

942
00:45:25,200 --> 00:45:27,319
Speaker 3: So it sounds like they're going to build their dream home,

943
00:45:27,320 --> 00:45:30,040
Speaker 3: and if this decision is around selling that property so

944
00:45:30,120 --> 00:45:33,880
Speaker 3: they'll have a better dream home and lower non deductible

945
00:45:33,880 --> 00:45:36,239
Speaker 3: debt on their family home, that's not a bad that's

946
00:45:36,239 --> 00:45:37,000
Speaker 3: not a bad idea.

947
00:45:37,440 --> 00:45:38,359
Speaker 1: Thanks for getting in touch.

948
00:45:38,360 --> 00:45:38,520
Speaker 2: Ben.

949
00:45:38,560 --> 00:45:42,040
Speaker 1: Now to another Ben who has emailed the program and says,

950
00:45:42,280 --> 00:45:44,920
Speaker 1: I have a mate who is starting a side hustle

951
00:45:45,080 --> 00:45:48,440
Speaker 1: of buying a rundown house, fixing it up and flipping

952
00:45:48,520 --> 00:45:51,400
Speaker 1: it in six uch. You would have heard about this

953
00:45:51,480 --> 00:45:53,560
Speaker 1: a lot of Thankingsley with lots of people will go

954
00:45:53,680 --> 00:45:56,160
Speaker 1: get that door upper. I will not lie to you.

955
00:45:56,239 --> 00:45:58,640
Speaker 1: I once tried to convince my husband we should buy

956
00:45:58,640 --> 00:46:01,160
Speaker 1: a house across the road. It a dump, and I

957
00:46:01,200 --> 00:46:03,759
Speaker 1: had all sorts of visions we would become amazing block

958
00:46:03,760 --> 00:46:04,760
Speaker 1: contestants or something.

959
00:46:04,920 --> 00:46:05,760
Speaker 2: You're not alone.

960
00:46:05,920 --> 00:46:08,279
Speaker 1: Thankfully he was the smarter of us too and said

961
00:46:08,400 --> 00:46:11,759
Speaker 1: we're not doing that. Yeah. Anyway, So Ben says, it

962
00:46:11,840 --> 00:46:14,799
Speaker 1: made me wonder if this is actually put into the

963
00:46:14,800 --> 00:46:16,880
Speaker 1: house price statistics. So he's having to think about this.

964
00:46:16,920 --> 00:46:19,279
Speaker 1: Major takes a rundown house, does it up, flips it,

965
00:46:19,320 --> 00:46:21,880
Speaker 1: and obviously the property value has gone up quite a bit.

966
00:46:21,920 --> 00:46:26,000
Speaker 1: So he says, does this then impact property markets? He

967
00:46:26,040 --> 00:46:27,759
Speaker 1: hasn't got much work to do with Mayde reckons this

968
00:46:27,840 --> 00:46:30,240
Speaker 1: is going to fix up the floorboards, fix the garden, repaint,

969
00:46:30,320 --> 00:46:33,360
Speaker 1: clean it anyway, they flip it. I guess Benn's wondering,

970
00:46:33,680 --> 00:46:35,239
Speaker 1: is it a big issue or is it just a

971
00:46:35,280 --> 00:46:38,120
Speaker 1: tiny problem if people are coming into these suburbs doing

972
00:46:38,200 --> 00:46:40,200
Speaker 1: up the market and then you might see property prices

973
00:46:40,200 --> 00:46:40,720
Speaker 1: have jumped.

974
00:46:40,880 --> 00:46:45,480
Speaker 3: Yeah, So he raises a really poignant point around measuring

975
00:46:45,560 --> 00:46:46,439
Speaker 3: median house price.

976
00:46:46,480 --> 00:46:48,000
Speaker 2: Now, a meetian is the midpoint.

977
00:46:48,280 --> 00:46:50,560
Speaker 3: So if you've got five property sales, then you know

978
00:46:50,600 --> 00:46:53,200
Speaker 3: the midpoint is the third sale of those five, right,

979
00:46:53,520 --> 00:46:55,959
Speaker 3: And so that's how the market is reported on through

980
00:46:55,960 --> 00:47:00,000
Speaker 3: totality and through other research area. So if you've got

981
00:47:00,080 --> 00:47:03,000
Speaker 3: a suburb where there's a new development going in a

982
00:47:03,040 --> 00:47:06,959
Speaker 3: thirty year old subdivision that's already there, you will see

983
00:47:07,000 --> 00:47:11,280
Speaker 3: that suburb reporting really strong price growth. But the reality

984
00:47:11,320 --> 00:47:13,520
Speaker 3: is there hasn't really been any price growth at all

985
00:47:13,719 --> 00:47:16,360
Speaker 3: all that's basically happened is the more expensive properties have

986
00:47:16,440 --> 00:47:21,120
Speaker 3: been sold, and so that's artificially manipulating the median price

987
00:47:21,320 --> 00:47:22,640
Speaker 3: in that particular area.

988
00:47:22,760 --> 00:47:24,680
Speaker 1: The older properties would still be worth less. The're not

989
00:47:24,719 --> 00:47:26,840
Speaker 1: going to trade up to those higher prices.

990
00:47:26,520 --> 00:47:29,319
Speaker 3: Right, yes, but over time the land value of those

991
00:47:29,360 --> 00:47:32,440
Speaker 3: older properties would have potentially enjoyed the fact that all

992
00:47:32,480 --> 00:47:35,120
Speaker 3: this extra investment has been put into this new area.

993
00:47:35,200 --> 00:47:38,080
Speaker 3: But it just goes to show you that the susceptibility

994
00:47:38,120 --> 00:47:41,160
Speaker 3: of the data that we work with more generally when

995
00:47:41,160 --> 00:47:44,799
Speaker 3: we're educating people around property is that data is it's

996
00:47:44,840 --> 00:47:47,800
Speaker 3: a good indicator, but it's certainly not a great indicator.

997
00:47:48,239 --> 00:47:50,239
Speaker 3: So that's just one thing we need to understand about

998
00:47:50,280 --> 00:47:53,560
Speaker 3: how we report property data. It's not ideal, but it's

999
00:47:53,600 --> 00:47:56,720
Speaker 3: the mechanisms that we use onto the question of buying

1000
00:47:56,800 --> 00:47:58,920
Speaker 3: worshouse in the bestreet and doing it up. I love

1001
00:47:58,920 --> 00:48:00,560
Speaker 3: that idea for the first time by I love that

1002
00:48:00,600 --> 00:48:03,000
Speaker 3: idea for anyone who's trying to get on the property ladder.

1003
00:48:03,160 --> 00:48:05,840
Speaker 3: More broadly, I think it's an excellent way if you

1004
00:48:05,920 --> 00:48:10,279
Speaker 3: do your numbers correctly, that you can potentially harvest equity and.

1005
00:48:10,280 --> 00:48:12,880
Speaker 2: Bring that property back up to its original quality.

1006
00:48:12,920 --> 00:48:15,520
Speaker 3: So I like that in terms of flipping property and

1007
00:48:15,560 --> 00:48:18,480
Speaker 3: trading property, there are some costs and challenges around that,

1008
00:48:18,680 --> 00:48:21,880
Speaker 3: and in a lot of cases, I think flippers don't

1009
00:48:21,920 --> 00:48:25,000
Speaker 3: necessarily do their numbers correctly in their due diligence well,

1010
00:48:25,360 --> 00:48:27,279
Speaker 3: and so a lot of them can potentially spend six

1011
00:48:27,320 --> 00:48:30,560
Speaker 3: to twelve months and break even and jot it down

1012
00:48:30,600 --> 00:48:31,799
Speaker 3: as a learning experience.

1013
00:48:32,160 --> 00:48:34,160
Speaker 2: But I would say that the other thing that they

1014
00:48:34,200 --> 00:48:34,840
Speaker 2: also need.

1015
00:48:34,719 --> 00:48:37,040
Speaker 3: To be aware of, and this is the whole political

1016
00:48:37,080 --> 00:48:39,840
Speaker 3: thing that we're getting into here now, is that the

1017
00:48:39,880 --> 00:48:43,240
Speaker 3: governments are definitely looking at negative gearing and capital gains

1018
00:48:43,280 --> 00:48:48,520
Speaker 3: tax exemptions. Those conversations aren't going away, so that the

1019
00:48:48,560 --> 00:48:51,320
Speaker 3: moment you get a fifty percent exemption based on holding

1020
00:48:51,320 --> 00:48:54,000
Speaker 3: theirsset for twelve months a longer. So if you're going

1021
00:48:54,080 --> 00:48:57,360
Speaker 3: to flipping and you're going to flip that property inside

1022
00:48:57,880 --> 00:49:01,279
Speaker 3: six months, then you're paying one hundred percent of your

1023
00:49:01,440 --> 00:49:05,000
Speaker 3: marginal tax rate in tax on that particular property in

1024
00:49:05,080 --> 00:49:07,319
Speaker 3: terms of the profits that it makes. So you've got

1025
00:49:07,320 --> 00:49:09,560
Speaker 3: to then decide whether it's worth going into the business

1026
00:49:09,560 --> 00:49:11,960
Speaker 3: of doing this or whether it's you know, this is

1027
00:49:12,040 --> 00:49:13,480
Speaker 3: just a one off thing that I'm going to do.

1028
00:49:13,880 --> 00:49:14,880
Speaker 2: And that's a game.

1029
00:49:14,719 --> 00:49:16,880
Speaker 3: Where I would say, go and speak to your accountant

1030
00:49:17,239 --> 00:49:20,520
Speaker 3: about your ideas in this particular space and try and

1031
00:49:20,800 --> 00:49:22,799
Speaker 3: get an account And Neo's had some experience in this

1032
00:49:22,840 --> 00:49:26,520
Speaker 3: area might also be helpful for you because it sounds sexy.

1033
00:49:26,960 --> 00:49:29,680
Speaker 3: You know, when I watched the block and that's all

1034
00:49:29,680 --> 00:49:33,120
Speaker 3: summarized into a thirty minute or a sixty minute episode,

1035
00:49:33,440 --> 00:49:35,200
Speaker 3: you don't know what's going on in the background.

1036
00:49:35,360 --> 00:49:37,080
Speaker 2: You don't know how much work's gone into.

1037
00:49:37,040 --> 00:49:40,160
Speaker 3: It, or what cost blowouts they've had and all of

1038
00:49:40,160 --> 00:49:42,440
Speaker 3: those profits. I mean, at the end of the day,

1039
00:49:42,440 --> 00:49:45,319
Speaker 3: they're selling it to a national audience, so that you know,

1040
00:49:45,360 --> 00:49:47,799
Speaker 3: and we've seen you know, there's plenty of articles on

1041
00:49:47,840 --> 00:49:50,440
Speaker 3: the research in terms of how all those properties performed

1042
00:49:50,480 --> 00:49:53,520
Speaker 3: after that first sale. The reality is that those properties

1043
00:49:53,560 --> 00:49:58,160
Speaker 3: were bought at extended prices, and it does they weren't

1044
00:49:58,200 --> 00:50:00,000
Speaker 3: really you know, fair market value at that time.

1045
00:50:00,520 --> 00:50:02,719
Speaker 1: Well, this will test my husband if he's listening to

1046
00:50:02,719 --> 00:50:06,080
Speaker 1: the podcast. Honey, you're right about that one.

1047
00:50:06,360 --> 00:50:08,360
Speaker 4: But if it's across the road to your point, Julian,

1048
00:50:08,560 --> 00:50:10,520
Speaker 4: I'll just finish off that, like, if you can get

1049
00:50:10,560 --> 00:50:12,759
Speaker 4: easy and quick access to it, and you're prepared to

1050
00:50:12,760 --> 00:50:14,840
Speaker 4: do elbow grease and that type thing, but take a

1051
00:50:14,920 --> 00:50:17,080
Speaker 4: longer term view and then rent that out.

1052
00:50:17,239 --> 00:50:19,000
Speaker 2: That could be a sensible thing, right, do you know

1053
00:50:19,040 --> 00:50:22,759
Speaker 2: what I mean? Like, like, here's the tips. Paint, do your.

1054
00:50:22,680 --> 00:50:26,080
Speaker 3: Flooring, don't do anything structural, and make sure you work

1055
00:50:26,120 --> 00:50:28,239
Speaker 3: on a dollar in for two dollars back. And if

1056
00:50:28,239 --> 00:50:30,880
Speaker 3: the numbers don't stack up, just off that. Some people

1057
00:50:30,880 --> 00:50:32,759
Speaker 3: do a one for three, but I think if it's

1058
00:50:32,760 --> 00:50:36,160
Speaker 3: one for two. But be prepared that this is not investing.

1059
00:50:36,360 --> 00:50:39,839
Speaker 3: This is active investing. Like it's not passive investing. You're

1060
00:50:39,840 --> 00:50:41,399
Speaker 3: going to have to put the elbow grease in because

1061
00:50:41,400 --> 00:50:43,520
Speaker 3: if you get too many trades in, there's going to

1062
00:50:43,600 --> 00:50:45,480
Speaker 3: be no profit at the end of the end of

1063
00:50:45,480 --> 00:50:45,960
Speaker 3: the outcome.

1064
00:50:46,040 --> 00:50:48,160
Speaker 1: One dollar in two dollars back. Okay, I'll use That's

1065
00:50:48,200 --> 00:50:49,960
Speaker 1: a nice mat truck to use. Ben Kingsley, thank you

1066
00:50:50,000 --> 00:50:52,080
Speaker 1: so much for joining us on the Money Puzzle. It's

1067
00:50:52,080 --> 00:50:52,600
Speaker 1: been a pleasure.

1068
00:50:52,960 --> 00:50:54,520
Speaker 2: Yeah, thank you very much for the opportunity.

1069
00:50:55,239 --> 00:50:57,480
Speaker 1: Ben Kingsley from in Power. Well, then you can also

1070
00:50:57,520 --> 00:51:00,839
Speaker 1: catch him at the Property Couch podcast. We'll be back

1071
00:51:00,840 --> 00:51:03,200
Speaker 1: Friday for another episode of the Money Puzzle.