Speaker 1: Hello, and welcome to the Australian's Money Puzzled podcast. I'm
Speaker 1: James Kirby, the welth editor at The Australian. Welcome aboard everybody.
Speaker 1: I don't know about you, but it strikes me that
Speaker 1: if I can get money out of my superfund to
Speaker 1: do a Tommy Tuck or some cosmetic surgery, and the
Speaker 1: cosmetic operators will help me fill out the form to
Speaker 1: get my super out early, then I think you should
Speaker 1: be able to use your super for your own property plans.
Speaker 1: Now there's a debate about this. I'm quite aware of
Speaker 1: that debate and I've come down clearly on one side,
Speaker 1: which is unfortunately, I think there's no escape here. The
Speaker 1: tax system is totally loaded in favor of the homeowner
Speaker 1: and then everything has flows from that. And on that
Speaker 1: basis alone, I think if it comes neck and neck
Speaker 1: between super and owning a home, you need to own
Speaker 1: a home in our tax system. And separately, as somebody
Speaker 1: who has had a self managed super fund, I've already
Speaker 1: used my super to buy an investment property, and not
Speaker 1: only that, but I've used it in a fashion that
Speaker 1: is really worth checking out. Not many people do it,
Speaker 1: but you use your you use the super fund in
Speaker 1: a non leverage way, so you're super fund, you the investor,
Speaker 1: the listener do a joint venture with your SMSF, and
Speaker 1: that joint venture buys an investment property the superfund, your
Speaker 1: SMSF simply puts in equity and nothing else, no leverage,
Speaker 1: no loans, pay no cost whatsoever. They just put in
Speaker 1: a piece of equity fifty grand, one hundred grand. And
Speaker 1: then in the future of say ten years time, and
Speaker 1: when you go to sell that property, you simply whatever
Speaker 1: you've made, whatever the superfund has made, you contribute that
Speaker 1: back into your superfund, and you go your own way.
Speaker 1: It's a very interesting principle, and there are bigger plans
Speaker 1: afoot around that, which I'm going to introduce you to
Speaker 1: in a moment. My guest is a person who's actually
Speaker 1: devoted several years to this whole area and has a
Speaker 1: plan I think you to capture our imagination. We're going
Speaker 1: to talk about possibilities between super and property. We're going
Speaker 1: to talk about what he has in mind and also
Speaker 1: answer some questions. It's Simon Jones from Home Super How
Speaker 1: are you, Simon good? Thanks James, Thanks for having me
Speaker 1: on and for.
Speaker 2: Your listeners for cheening it.
Speaker 1: Oh nice to have you on. Nice to have someone
Speaker 1: who's really across this, this whole concept. And before we
Speaker 1: talk about your ideas, let's just talk about what is
Speaker 1: and is impossible. Just now. With SUPER, I want to
Speaker 1: sort of distinguish between what you can do and what
Speaker 1: you might be able to do in the future. And
Speaker 1: I brought up the cousin metic surgery thing there. It's provocative,
Speaker 1: but it's true, it is, and I've done quite a
Speaker 1: bit of work on that, but a journalism work, I mean,
Speaker 1: I haven't done some cosmetic work, not as yet.
Speaker 2: It's an interesting leading because, as you're right, there is
Speaker 2: some different ways you can withdraw your SUPER and one
Speaker 2: of those SUPER and housing has been interlinked for quite
Speaker 2: some time. And one of those early release mechanisms is
Speaker 2: in the event of financial hardship, and that's if the
Speaker 2: bank is looking to foreclose on your home or a
Speaker 2: local council for non payment of rates, and as a
Speaker 2: last resort, you can essentially break the glass and withdraw
Speaker 2: those funds. That part I've had some experience with, unfortunately,
Speaker 2: helping some mums and dads and those in trouble with
Speaker 2: financial hardships. Unfortunately, in that circumstance, you would think someone's
Speaker 2: punished enough with the threat of losing their home, But
Speaker 2: government imposes a twenty two percent withdrawal tax on that.
Speaker 2: And we could argue whether tummy tucks are a necessity
Speaker 2: in life, but for me, living in your own home
Speaker 2: certainly is. So I've been advocating for the removal of
Speaker 2: that twenty two percent tax. And we also found a
Speaker 2: bit of a void and we built an online calculator
Speaker 2: linked to our website to help people understand some of
Speaker 2: the pros and cons of using a super last resort.
Speaker 1: Just about that twenty two percent that you pay if
Speaker 1: you take super out, Does that apply right if you
Speaker 1: were a one week from retirement?
Speaker 2: What it still apply does unfortunately? Yes?
Speaker 1: Yeah, right, okay, very interesting just to kind of fill
Speaker 1: in the landscape. First of all, for people just now,
Speaker 1: there's very few things you can do. Assignment says it's
Speaker 1: financial hardship, which oddly this some of the cosmetic treatments
Speaker 1: fall under, and that's where money is coming out the
Speaker 1: back door of supers. Very hard to take money out
Speaker 1: to buy property, especially if you are in the convention
Speaker 1: of the Big super Fund. There is plans afoot. That is,
Speaker 1: at least the Coalition has a plan which would allow
Speaker 1: people to take fifty thousand up to fifty thousand dollars
Speaker 1: out of SUPER of any fond to put into their home.
Speaker 1: That's a plan that's there at the moment. And in
Speaker 1: terms of what you can do, there's very little, but
Speaker 1: there is there is a plan. There is at least
Speaker 1: a scheme existing. It exists, it runs since the days
Speaker 1: of the Morrison government. It's called the First Home super
Speaker 1: Server Scheme FHSS. It's terribly elaborate and complex scheme. Some
Speaker 1: listeners have used it so where you can kind of
Speaker 1: quarantine your contributions to SUPER into a bucket basically, which
Speaker 1: you can then use to put towards your first home.
Speaker 1: It's quite elaborate, it's quite niche. But that's all. Is
Speaker 1: that all that's out there so far? Assigmon, Have I
Speaker 1: missed anything.
Speaker 2: That is any incentive? Yes, to help people save and
Speaker 2: a tax effective mechanism really, but you know, it really
Speaker 2: does depend. You mentioned the self managed circumstance there, and
Speaker 2: whilst this does not apply to everyone, a self managed fund,
Speaker 2: as you know, can buy an investment property. It can
Speaker 2: also buy business real property. So for someone who's self
Speaker 2: employed and they might be say a mechanic, and they
Speaker 2: wish to buy the commercial property in which they operate,
Speaker 2: that it allowable. But there's also there also is some
Speaker 2: quirky ones where they may need to live on site
Speaker 2: to actually operate the business. So there is actually some
Speaker 2: circumstances where someone can essentially buy a property that's obviously
Speaker 2: commercial there is a residence allowed. So there is all
Speaker 2: sorts of quirky and wonderful ways.
Speaker 1: And oh that'll be like an olive farm or something.
Speaker 2: Well depends again, I'm not going to say any specific
Speaker 2: can get myself in strife, but it.
Speaker 1: Will be an obvious one. If you bought a farm
Speaker 1: and house on it, would that be the sort of
Speaker 1: thing where it might be possible.
Speaker 2: That's pretty Sometimes the house is quarantine depending it could
Speaker 2: be a security measure where you need to be on site,
Speaker 2: or various other circumstances. But look, bits they are few
Speaker 2: and far between. But previously you mentioned about doing a
Speaker 2: joint venture with your fund and liking it to what
Speaker 2: the proposed fifty thousand as you mentioned by the LNP,
Speaker 2: and in that where you suggested you put the funds
Speaker 2: back into super We argue that it should never leave
Speaker 2: you should you should be able to do those joint ventures.
Speaker 1: But just to clarify for the listener, before we talk
Speaker 1: about what you're planning, just tell us about that how
Speaker 1: that works. So someone with an SMSF, how they can
Speaker 1: actually use equity funds from the SMSF to buy a
Speaker 1: property and the individual through a joint venture with the
Speaker 1: SMSF can actually do everything else, pet stamp duty, have
Speaker 1: the loan, et cetera.
Speaker 2: Yeah, correct, depending on again lenders and circumstances, because the
Speaker 2: fund's assets should not be charged and held under a mortgage.
Speaker 2: But there is circumstances where correct, there can be a
Speaker 2: joint venture with the fund and that's not extraordinary. There's
Speaker 2: the circumstances out there. It just gets a little bit
Speaker 2: complicated though when it is a residence in the current form.
Speaker 2: So just ensuring there's no financial benefits to the member
Speaker 2: he is not or he or shea are paying the
Speaker 2: market rent.
Speaker 1: Yes, you cannot stay a single night in that place
Speaker 1: if you own it in that arrangement because it's strictly
Speaker 1: for super return, isn't it?
Speaker 2: No, there is some carve outs with respect to repairs,
Speaker 2: or if it is a holiday home that's say independently
Speaker 2: managed and you are only staying for a for a week,
Speaker 2: and if it's peak peering, you might still have to
Speaker 2: pay full freight. So there is some circumstances, and it's
Speaker 2: highly dependent on circumstances and ensuring that the fund obtains
Speaker 2: commercial returns no matter who is in the property. So
Speaker 2: there is some quirks, and that's where often trustees can
Speaker 2: get themselves into strife if they just overstep that mark
Speaker 2: or not do everything to satisfy the regulations.
Speaker 1: Okay, but the reason listeners that I'm trawling through this,
Speaker 1: I'm basically showing and trying to demonstrate to you that
Speaker 1: under law, if you like are under the arrangements we
Speaker 1: have in super there is the possibility already to use
Speaker 1: cer superfund not just my property, but that you, an
Speaker 1: individual investor in country with your SMSF, can buy property
Speaker 1: together and the SMSF can put in the equity and
Speaker 1: you do everything else, and then at the end of
Speaker 1: the arrangement, you sell and the super fund gets what
Speaker 1: it's entitled to. Something not dissimilar to the home equity
Speaker 1: shared scheme, which is just basically looks like it's going
Speaker 1: to get proved through Parliament this week, and that would
Speaker 1: be where the government, for instance, shares with you and
Speaker 1: they can take up to forty percent of a property
Speaker 1: and you can take the rest and then in five
Speaker 1: or ten years time when you sell, you split the proceeds.
Speaker 1: I'm just basically lanning these things out, Simon, so that
Speaker 1: we can give people will have some context to what
Speaker 1: we're going to talk about next. And I should have
Speaker 1: said also Simon's background is in advice at all, at
Speaker 1: various levels over the years, at fairly high levels in
Speaker 1: the financial advice sector. Okay, we'll be back in a
Speaker 1: moment and we're going to talk about the possibility about
Speaker 1: how you and your superfund, any superfund, a big superfund,
Speaker 1: buy a home together. Back in the morning. Hello, welcome
Speaker 1: back to the Australians Money Puzzle. I'm James Kirby and
Speaker 1: I'm talking to Simon Jones from Home Super Okay, Simon, elevator, pitch,
Speaker 1: tell me what you've tell me, what you've planned in
Speaker 1: the simplest terms that at its very best, if it
Speaker 1: came to pass, how would it work?
Speaker 2: You can buy your home with less debt? As and
Speaker 2: more security. Utilizing your super fund as a co investment partner,
Speaker 2: so a shared equity arrangement whereby your fund takes an
Speaker 2: equity stake, you don't need as much money to buy
Speaker 2: the property and there's less obviously less opportunity going back
Speaker 2: to the bank and more to your fund.
Speaker 1: That's the elevator pitch. Okay, very good. And the fund
Speaker 1: can be any fund. It could be any of the
Speaker 1: big funds if they sign up to the idea. Okay, Now,
Speaker 1: I would have thought I know a fair bit about
Speaker 1: super but it's like a language, isn't it. It's endlessly
Speaker 1: full of surprises and contradictions. I would have thought that
Speaker 1: it was impossible to do that. But you've had some
Speaker 1: legal among other things, you've had some legal direction, if
Speaker 1: you like, from on your board. You have an advisor
Speaker 1: who's also a partner at Minternesson and she has established
Speaker 1: that there is no legal there's no current legal blockade
Speaker 1: to what you're planning.
Speaker 2: Is that how it sits correct? And once again it's
Speaker 2: all about it depends. It depends on the circumstance of
Speaker 2: the deal. And with respect to ours, the individual must
Speaker 2: be approved to buy the home on their own outright
Speaker 2: with a bank before we even get involved, because otherwise
Speaker 2: we would be providing financial assistance and giving a member
Speaker 2: an opportunity that they wouldn't normally have. So that's a
Speaker 2: crucial that's a crucial hurdle number one that we address
Speaker 2: at the outset. So again just ensuring that if they're
Speaker 2: eligible to borrow six hundred thousand, we know now the
Speaker 2: average mortgage is about six forty and the average first
Speaker 2: time buyers thirty five years of age. So if they're
Speaker 2: borrowing six hundred thousand, they've been approved for that amount,
Speaker 2: and they've got their deposit and twenty percent deposit, we
Speaker 2: can then look at utilizing some of their super to
Speaker 2: bring that six hundred thousand dollars down to an amount
Speaker 2: depending on their balance, and invest that prudently in the property.
Speaker 2: So we're not providing as a said, we're not providing
Speaker 2: that leg up. It's just another avenue of finance utilizing
Speaker 2: equity instead of just all debt and deposit.
Speaker 1: And then for the customer here, what it means is
Speaker 1: that their mortgage is smaller.
Speaker 2: Correct correct, and their serviceability buffer is essentially also increased.
Speaker 2: Not only that, mostly when they're buying their first property
Speaker 2: will lend. Two thirds of these are bought jointly, and
Speaker 2: you might be considering there with your mortgage broker, the bank,
Speaker 2: or relying in bed do we fix or do we
Speaker 2: leave it variable? And this also offers a little bit
Speaker 2: of a hedge against that because, as I said, to
Speaker 2: be to utilize this product, you must have your finance
Speaker 2: approved at six hundred thousand, and the banks have obviously
Speaker 2: used their buffer on top of that. So we've pulled
Speaker 2: that back even further and provided an additional buffer. And
Speaker 2: the equity from the fund going in obviously does not
Speaker 2: affect interest rate variations for the debt component.
Speaker 1: Okay, now, folks, part of the logic here and the
Speaker 1: imperatives behind this idea is there so many people of
Speaker 1: course now are retiring with the mortgage. If you think
Speaker 1: about it back not that long ago, say ten years ago,
Speaker 1: so a what a quarter of lumpsom withdraws were used
Speaker 1: to pay off a mortgage. By two seventeen that had
Speaker 1: gone to thirty percent, and now it's climbing higher and higher,
Speaker 1: where something like slim majority of do you know the
Speaker 1: number assignment is it something like half of all retirees
Speaker 1: now as they approach retirement, they still have a mortgage
Speaker 1: you need to pay off something.
Speaker 2: Correct. I think it's between fifty five and sixty four.
Speaker 2: The average balance is about two hundred and thirty odd
Speaker 2: thousand and what the funds speaking with some funds that
Speaker 2: the apro figures are around thirty percent of all lump
Speaker 2: Some withdrawals are going to repay mortgages. So that's not
Speaker 2: the intent of super And some funds we've been speaking
Speaker 2: with they said the numbers actually closer to forty percent
Speaker 2: for them.
Speaker 1: So your yeah, I love your point. Your point is
Speaker 1: that for all this talk that you can't touch your
Speaker 1: house with super, if one in three people when they
Speaker 1: get finally get there some super and retire, they get
Speaker 1: a lump sum, and one in three people turn around
Speaker 1: and spend it on their home having accumulated debt all
Speaker 1: their life. Yeah. Correct, This is the macro picture you're
Speaker 1: putting in now, just to try and see how this
Speaker 1: might really work. Has any super fund signed up with
Speaker 1: you yet to do this.
Speaker 2: No, now, a couple of signed NDAs, and they're very interested.
Speaker 2: But like with most super funds, they're very, very slow
Speaker 2: and prudent. And this obviously is on their radar now
Speaker 2: and the Treasury's paper in I believe it was twenty twenty,
Speaker 2: Federal Treasury did a report on retirement and retirement income
Speaker 2: and found the vast majority of retirees who are owned
Speaker 2: their home. We're in a much stronger financial position and
Speaker 2: we've known that for some time, but it's been great
Speaker 2: to have Federal Treasury confirm that in their studies. So yeah, exactly,
Speaker 2: we're looking to do a front end essentially arrangement rather
Speaker 2: than leaving it to the back end and where it's
Speaker 2: not the intent of Super whatsoever. And it's interesting now
Speaker 2: that banks are using SUPER for that serviceability test and
Speaker 2: for elder Australians to borrow money, utilizing SUPER essentially as
Speaker 2: part of the credit assessment and not even really as
Speaker 2: a backstop anymore. For those that are sixty years of
Speaker 2: age who are looking to borrow funds, some of the
Speaker 2: banks are very happy to use as the repayment plan.
Speaker 2: And that's an interest one because as we know, the
Speaker 2: Big four have essentially exited the funds management space. I
Speaker 2: think the last one left is Beta in their platform
Speaker 2: with Westpac, but they're still essentially getting their hands on
Speaker 2: Super in lump sums to repay that debt.
Speaker 1: To repay the debt. That's right, and they know it's there.
Speaker 1: Of course, it's on their books. One of the things
Speaker 1: I think reading, and I have to freely admit, folks,
Speaker 1: I don't regularly read the Australian Superannuation Law bulletin, but
Speaker 1: if I could speed read, maybe i'd read it. But
Speaker 1: I have been pointed to a piece in this by Simon,
Speaker 1: and it's by Ruth Stranger, who is, as I say,
Speaker 1: a partner at Minter Ellison, a specialist in this area,
Speaker 1: an advisor also to his operation Home super. Tell me
Speaker 1: if I'm wrong here, Simon, but it seems to me
Speaker 1: when you get through the whole thing and she comes
Speaker 1: to a conclusive what she says is there appears to
Speaker 1: be no blockage in law to what you are planning,
Speaker 1: but unfortunately the nature of the arrangements at the moment
Speaker 1: means that you can't get a sort of a binding
Speaker 1: ruling before you start, so it has to be sort
Speaker 1: of tested in real life. And that might be what's
Speaker 1: making the super funds slow. Would that be? I may
Speaker 1: under a tracker.
Speaker 2: Yeah, that's a fair point. But with most innovation in
Speaker 2: super with large funds, it is essentially that chicken and
Speaker 2: egg sort of scenario. Unfortunately, because OPRA do not have
Speaker 2: and this is no fault of the regulator, it's policy,
Speaker 2: and I actually really do feel for the opera staff
Speaker 2: in some of these circumstances. So there's no real window
Speaker 2: or avenue for the funds to say, hey, look, we're
Speaker 2: testing this product, what do you think. And speaking to
Speaker 2: another gentleman recently that built a retirement income product where
Speaker 2: he had a battle with for the regulator for quite
Speaker 2: some time a number of years before they essentially stopped
Speaker 2: any action towards him because they then said, okay, this
Speaker 2: is a fair product. We understand it now. So you can,
Speaker 2: on one hand, you can get frustrated, but on the
Speaker 2: other the whole point really is to innovate. It's not
Speaker 2: up to regulator's or the government to innovate. That's an
Speaker 2: interesting one. So yes, it would be helpful. And our
Speaker 2: discussions with OPRA, yes, they pressed us on all manner
Speaker 2: of issues from liquidity diversification and how it will all work,
Speaker 2: and couldn't find anything wrong with it, and their last
Speaker 2: space of advice was, look, we'll just keep an eye
Speaker 2: on you. So for some of the funds. They understand
Speaker 2: how that works. Were approached by a quite a large
Speaker 2: fund just recently after Ruth string Is Peace in that
Speaker 2: law bullsm so it provided them with some confidence and
Speaker 2: they understand that process with apro. But it is, as
Speaker 2: I said, it's an interesting space in that regard where
Speaker 2: there's no avenue.
Speaker 1: So there you are, folks. How about that that you
Speaker 1: could use your own super fund to put in equity
Speaker 1: in your own home, and that your super fund basically
Speaker 1: gets to diversify, It gets into a pretty conservative, reliable
Speaker 1: stream of investment compared to some of the stuff they're
Speaker 1: doing overseas and private equity at the moment, and you
Speaker 1: get to have less of a mortgage. I like the idea.
Speaker 1: I'd love to see it come into play. I will
Speaker 1: say to you, Simon, if you try to create something new,
Speaker 1: it can take a long time, but it can really
Speaker 1: pay off. I'm thinking of someone like green Talk well
Speaker 1: back in all I don't know the nineteen nineties who
Speaker 1: spent years and years trying to get the first exchange
Speaker 1: treaded fund off the ground in Australia, which was the
Speaker 1: Gold Exchange Treated Fund, and of course years now on
Speaker 1: the rich list and it's the FSA are a household
Speaker 1: of things, so best of luck with it and I
Speaker 1: hope that you get to breakthrough soon. What would be
Speaker 1: the best thing that could happen to you next?
Speaker 2: The best thing would be for a fund to take
Speaker 2: it up and help us do some initial full investments
Speaker 2: and break the ice. Essentially, I don't see that being
Speaker 2: too far off. But yeah, look, we're not essentially inventing
Speaker 2: something here that people don't want to use it. The
Speaker 2: idea really has come from Australians and we've just listened
Speaker 2: and worked out a prudent way to do it. It's
Speaker 2: interesting how do you get paid as a super fund
Speaker 2: or as a manager or as home super and being
Speaker 2: in the industry for a long time, there's plenty of
Speaker 2: meat on the bone. So actual return to us was
Speaker 2: the last thing I worked out and how we actually
Speaker 2: get paid. I do appreciate some comparisons to others in
Speaker 2: the market that have done really well, but no, the
Speaker 2: real driver here really is, as I said, just building
Speaker 2: something that Australians really want and deserve. In my opinion
Speaker 2: and interesting discussion, they're about other avenues and around the world.
Speaker 2: In the US, you can take up to fifty thousand
Speaker 2: from your four oh one K plan, but it must
Speaker 2: be in the form of a loan, and roughly just
Speaker 2: over thirty percent of the US home buyers do that,
Speaker 2: and it's actually even more convoluted. It's more restrictive. They
Speaker 2: do get to pay a slightly lower rate than they
Speaker 2: would with the bank, so they can essentially plot pay
Speaker 2: the Fed reserves rate rather than the bank's rates, but
Speaker 2: it is very convoluted. If they misrepayments, they're in all
Speaker 2: sorts of strife with the irs and the like. So
Speaker 2: we did research around the world, and yes, there's other
Speaker 2: avenues and some other countries that are a little bit
Speaker 2: more liberal on this we've taken up. We've still taken
Speaker 2: a really prudent approach to make sure that the fund
Speaker 2: gets a commercial return and that the member does not
Speaker 2: essentially have that. And people might think of when I
Speaker 2: say have that sort of financial assist and some people
Speaker 2: might say, well, they're paying back less of the line,
Speaker 2: So there's a there's financial assystems there. But I must
Speaker 2: put the caveat on that you no longer own one
Speaker 2: hundred percent of your home. You may only earn eighty
Speaker 2: percent and your fun owns twenty percent, so that's essentially
Speaker 2: the trade off as well.
Speaker 1: Okay, very good, Well I wish you look stick around
Speaker 1: and we'll do some questions here. Hello, welcome back to
Speaker 1: the Australians Money Puzzle. I'm talking to Simon Jones of
Speaker 1: Home Super. You probably don't know Simon Jones. You probably
Speaker 1: don't know Home Super, but you may soon because he's
Speaker 1: got a very ambitious plan. But it's actually quite practical, rational,
Speaker 1: and I would think that it may well get off
Speaker 1: the ground because the super funds, the big super funds might,
Speaker 1: rather than trying to squash it because it's in some
Speaker 1: way arrival to them, could actually incorporate this idea. We'll see. Okay.
Speaker 1: Question from Tim, I love the show. Have you heard
Speaker 1: of this piece of bureaucracy? I just receive this from
Speaker 1: the read Estate administoration. Are they for real? Please note,
Speaker 1: as you may be aware, for Australian residents selling property,
Speaker 1: when the contract price is over seven fifty thousand, that is,
Speaker 1: the seller must provide an ATO clear and certificate prior
Speaker 1: to settlement, or the buyer must withhold twelve five percent
Speaker 1: of the purchase price to provide to the ATO for
Speaker 1: more information and to work certificate please click here. Thank you, Tim.
Speaker 1: The paperwork and certification in relation to property settlement and
Speaker 1: buying and selling property remains. For all the talk of
Speaker 1: digital progress and simplification, it's still to kenzie, And as
Speaker 1: far as I'm concerned, I can't believe it. I'm talking
Speaker 1: with a friend who's buying a home at the moment
Speaker 1: and has is late to the party, has never bought
Speaker 1: a home before, and they just cannot believe how much
Speaker 1: they have to sign et cetera. Any comments on that one, Simon.
Speaker 2: No, it's it is. It is a process, so it
Speaker 2: can be a convoluted process and very detailed. But fortunately
Speaker 2: it's such a serious commitment and there is lots of
Speaker 2: hoops to jump and contracts to song.
Speaker 1: Imagine you're you're you're in an advanced, an elite level
Speaker 1: of paperwork, and you're what you're trying to do when
Speaker 1: you're actually trying to do something that is new to
Speaker 1: the system, as opposed to inside the system, which at
Speaker 1: least you are at least inside the system. Tin Okay, Cynthia,
Speaker 1: is it true that Sydney prices are falling? I see
Speaker 1: no evidence whatever of this in my neighborhood. Yeah, but
Speaker 1: you probably wouldn't notice and no point two percent monthly
Speaker 1: drop in your neighborhood, Cynthia, unless you had some sort
Speaker 1: of extraordinary calculator calculator and you were counting it all up.
Speaker 1: But it is happening. That is what the big researchers
Speaker 1: are telling us. I think the interesting thing is that
Speaker 1: on a monthly basis, prices are falling ever so slightly
Speaker 1: Insidia Melbourne zero point two percent percent, something like that.
Speaker 1: But it will accumulate, of course. And the very interesting
Speaker 1: aspect of it is that some as the rates, particularly
Speaker 1: as the rate cut forecast get pushed out into next year,
Speaker 1: they've been pushed off from February to March, from March
Speaker 1: up to me. Now you see that there is forecast
Speaker 1: now that the big cities, city and movement will actually
Speaker 1: see price detains next year somewhere between one and five percent.
Speaker 1: And I imagine that's entirely possible. At the same time,
Speaker 1: I forget that they're getting ten percent plus just about
Speaker 1: everywhere else in the other cities, so very divided market
Speaker 1: at the moment property ways, was it always this divided
Speaker 1: simon in your experience that they're getting such different returns
Speaker 1: in different cities.
Speaker 2: Look, I believe so it's a chemic really geographically specific
Speaker 2: certain areas, and really the main drivers are population and
Speaker 2: the capacity of that population to purchase the property. So
Speaker 2: population number one, twenty five people turning up at an
Speaker 2: oction instead of five, and those that have the capacity
Speaker 2: thanks to the lower regiest rates or borrowing capacity really
Speaker 2: are the main drivers. But we had such sensational growth
Speaker 2: throughout the COVID period and we often don't see those pullbacks,
Speaker 2: but it happens more often than people realize. It's just
Speaker 2: that we see share market updates every evening, we don't
Speaker 2: see your specific home price update. And you can these days, yes,
Speaker 2: you can even lot onto your own bank. Some of
Speaker 2: those will give you those estimates and they don't change
Speaker 2: as quickly as as markets, and they can be quite
Speaker 2: opaque and have some ranges that seem hard to work out.
Speaker 2: But the reality is you only really know the true
Speaker 2: value the day you buy the property and the day
Speaker 2: you sell it, and everything else is a little bit
Speaker 2: of a guestimation and that but it certainly does vary
Speaker 2: a lot more than most people realize.
Speaker 1: Yes, I mean, look at Melbourne, it's down. It now
Speaker 1: is down this year three percent. They're talking about next
Speaker 1: year five percent. This is why Brisbane, Adelaide and Perth
Speaker 1: absolutely or seen double figure increases in the scent period
Speaker 1: that is this calendar year. Okay, finally one from Shawn.
Speaker 1: I saw that Rental Affordability Index was released. Too much
Speaker 1: gnashing of teeth in the media because rents are going up.
Speaker 1: But isn't this wonderful news for investors? Why is there
Speaker 1: so much negativity about rents going up? Shouldn't we celebrate
Speaker 1: this win for hard working investors? Well, it depends on
Speaker 1: who you are, as full shown, If your rent's going up,
Speaker 1: you don't like it if you're paying, But if you
Speaker 1: are a property owner, then of course you like it
Speaker 1: and rentally yields. The big issue is whether you're yield
Speaker 1: is going up. That is the percentage income you get
Speaker 1: as a percentage of the AMOUNTI paid for the property.
Speaker 1: And it has inched up a little, but only ever
Speaker 1: so slightly actually in recent times. And we will now
Speaker 1: see what happens next. If we have falling we could
Speaker 1: actually have falling prices and rents still rising. That's not impossible,
Speaker 1: but would be very unusual. Wouldn't it, Simon, It's technically possible.
Speaker 2: And I think we often know have a look, yes,
Speaker 2: we know that landlords and investors may be affected by
Speaker 2: interest rate rises, but the actual cost of maintenance and
Speaker 2: the inflation essentially affecting some of the other things around
Speaker 2: being an investor really does have an impact on rents,
Speaker 2: And look, it is an interesting space, and I often
Speaker 2: think that the average mom and dad landlord gets a
Speaker 2: little bit of a bit of a hard time, particularly
Speaker 2: when affordability is so tight right now. And for my mind,
Speaker 2: having an investment property, it really does favor actually a
Speaker 2: new build anyway, because there's a lot of non cash
Speaker 2: deductions and what might mean by that is depreciation on
Speaker 2: your property fixtures and fittings that investors can really assist
Speaker 2: them for, incentivizing them to go into property. So for
Speaker 2: my mind, with respect to rents and the market in general,
Speaker 2: I really can't understand for the life of me why
Speaker 2: the government does not purely put a pause on tax
Speaker 2: benefits for negative gearing or just tax benefits generally for
Speaker 2: existing properties and just leave that door open for new builds,
Speaker 2: your grandfather, the existing investors. But what that would do
Speaker 2: overnight would encourage a lot more local investors to invest
Speaker 2: in brand new builds and assist The number one priority
Speaker 2: in my mind is Mohans.
Speaker 1: Okay, very interesting. Well look, thank you very much for that, Simon,
Speaker 1: and thanks very much for coming on the show. And
Speaker 1: great to hear your plans and best of luck with them.
Speaker 2: Thank you, James, and thanks again you listeners.
Speaker 1: Thank you, and thanks to Leah samuelglu who produced today's show.
Speaker 1: Let's have some correspondence, folks. Let's have some more questions
Speaker 1: that the property investors take over the inbox. The email
Speaker 1: is the Money Puzzle at the Australian dot com dot au.
Speaker 1: Talk to you soon.