Speaker 1: Nine podcasts.
Speaker 2: Well two studies have now confirmed that housing in Australia's
Speaker 2: major cities have become quote impossibly unaffordable unquote impossibly unaffordable.
Speaker 2: Sydney has been judged the least affordable city in the world.
Speaker 2: The median house price requires almost fourteen times the median
Speaker 2: wage to actually get into it and buy it, and
Speaker 2: that's been increasing over the years. Now this is fueling
Speaker 2: a lot of things in Australia. In particular, a generational
Speaker 2: war is beginning. Boomers are the target. Baby boomers already,
Speaker 2: Federal Treasurer Jim Chalmers has talked about intergenerational justice. To
Speaker 2: my mind, that means screw the boomers, look after the
Speaker 2: next generation. There is a social media trend to attack
Speaker 2: anybody over fifty to fifty five who's got a few dollars.
Speaker 2: There is class and age warfare resentment building in Australia
Speaker 2: over time. On this podcast, I want to look at
Speaker 2: the various frontline issues in generational wars, and this is
Speaker 2: the first one. Housing. One commentator described the cost of
Speaker 2: housing as a national emergency. It's freezing younger buyers out
Speaker 2: of the market. What I want to do here is
Speaker 2: explore real estate, explore housing affordability. What can we do
Speaker 2: for supply, What can we do for demand? What can
Speaker 2: we do for availability? There are other issues too, downsizing investment,
Speaker 2: taxes on property, land tax, stamp judy. You can't walk
Speaker 2: in the front door of your house without being taxed.
Speaker 2: Millennials and gen ygen X tend to say older homeowners
Speaker 2: are the problem, milking the system with tax benefits, forcing
Speaker 2: up prices. Boomers gen Z even say, come on, toughen up.
Speaker 2: We did it, You've got to do it as well.
Speaker 2: With me. Two people expert in the area, the Housing
Speaker 2: Expert Panel, Doctor Nicola Powell is head of research for Domain.
Speaker 2: She has fifteen years experience as an academic and private
Speaker 2: analyst and economist. One of the country's leading experts and
Speaker 2: with me as well Scott O'Neill. He's a property investment expert,
Speaker 2: founder of the company Rethink Investing, who has done very
Speaker 2: well with his own investing. He's a licensed real estate
Speaker 2: agent who has veered into professional property investment. I'm going
Speaker 2: to break this down into several areas. In particular, first
Speaker 2: home buyers. Generational wars are starting. I reckon, there's this
Speaker 2: real resentment towards people, older people with houses from those
Speaker 2: who haven't. Houses in Australia are amongst the most expensive
Speaker 2: in the world, impossibly unaffordable. Recent reports have said impossibly unaffordable.
Speaker 2: So who's cleaning up, who's making the money? Who's making
Speaker 2: the money, Scott O'Neil, you're an agent, an investor, you're
Speaker 2: making a fortune out of this.
Speaker 3: Well, as you said, I'm an investor.
Speaker 4: We're finding more people are defaulting to investing rather than
Speaker 4: purchasing a family home because of the reasons you mentioned it.
Speaker 4: If you're living in a capital city in Australia, it's
Speaker 4: just out of reach for most families, and even in
Speaker 4: the regional areas it's really getting up there. So people
Speaker 4: are just renvesting and they just rent where they live
Speaker 4: and then invest somewhere else.
Speaker 3: That's what's happening more and more.
Speaker 2: And what they're buying properties they wouldn't necessarily live in.
Speaker 2: They're not buying flats or units or something like that.
Speaker 3: Also, just more affordable houses.
Speaker 4: There's obviously people investing in units, but those that can,
Speaker 4: they'll go to the cheaper capital cities potentially or regional
Speaker 4: markets and instead of spending two or three mil on
Speaker 4: a house in Sydney. You'll see them buying a seven
Speaker 4: hundred and fifty grand smaller property somewhere else around the country.
Speaker 3: Quite location agnostic is what they're doing.
Speaker 4: It's more budget dependent and yeah, that's what's happening more
Speaker 4: and more in the search.
Speaker 3: Of a bit more yield.
Speaker 2: You've done a subturb job avoiding the question. Who's making money?
Speaker 4: Well, the baby boomers are, obviously because they held the properties.
Speaker 4: But look, anyone that's sort of in the market is
Speaker 4: doing very well at the moment. There's been incredibly strong
Speaker 4: capital growth for you know, especially in the last fifteen
Speaker 4: twenty years. It's been a remarkable growth phase and there's
Speaker 4: been very little blips on that rado as well.
Speaker 2: But Nicola, I'll ask you a mum too, But I
Speaker 2: don't take that seriously. I've owned a house for a
Speaker 2: long time. I see the value of the house go up.
Speaker 2: I want to sell it in a good market. I've
Speaker 2: got to buy in a good market. Where's my gain
Speaker 2: I mean on my downsize and therefore take a bit
Speaker 2: of equity out of it. Where's the game, Nicola, who
Speaker 2: do you think is making money?
Speaker 1: I think those that have been established in the housing
Speaker 1: market for many years are the ones that are benefiting
Speaker 1: from price growth. I think that we have to consider
Speaker 1: that the property market is really at the heart of
Speaker 1: the Australian economy. About seventy percent of Australia's household wealth
Speaker 1: is tied to the value of our homes. And you know,
Speaker 1: when you look at the valuation of property across Australia,
Speaker 1: it's over eleven trillion dollars. This is a significant amount
Speaker 1: of money. I think what you've got, and this is
Speaker 1: probably what you're alluding to, is you've got this growing
Speaker 1: gap between the haves and the haves nots, and if
Speaker 1: you are a young person in today trying to get
Speaker 1: a foot onto the property ladder, it is extremely challenging.
Speaker 1: And I think it's particularly a growing gap between those
Speaker 1: that don't have family members to be able to lean
Speaker 1: on for financial support.
Speaker 2: Bank of mummy, durn yeah.
Speaker 1: Bank of mom or nanam pop. I think that what
Speaker 1: we've got to be real here is that generational wealth
Speaker 1: could likely skip a generation. I think boomers passing on
Speaker 1: their financial wealth might not necessarily be to their children,
Speaker 1: it might be to their grandchildren. I think Australia it
Speaker 1: is so embedded in our culture to buy a property.
Speaker 1: I think that that Australian dream still runs very strong
Speaker 1: in Australia. But if he's seen as a measure of
Speaker 1: success and wealth creation, and that has been established in
Speaker 1: Australia for many, many, many years.
Speaker 2: But is it gone? Is it over? Is it dead
Speaker 2: the Australian the house with the backyard? Is it unattainable?
Speaker 1: So I'm going to answer that in a slightly different way,
Speaker 1: but I will answer your question. I don't think it's dead.
Speaker 1: I think that the dream to own your own home
Speaker 1: is still very much, deeply a bit embedded in our culture.
Speaker 1: I think what we have seen change, it's more the
Speaker 1: quarter acre block with a hills voice in the backyard.
Speaker 1: It is actually what we're purchasing is changing. We live
Speaker 1: in some of the least dens cities in the world.
Speaker 1: We have global cities, we have beautiful cities. You know,
Speaker 1: Sydney is the best city I have probably ever been
Speaker 1: lucky enough to live in. But it is very unaffordable.
Speaker 1: And I think today's first time buyer, they are purchasing
Speaker 1: a unit that is what's realistic for a first time today.
Speaker 1: All their rent vesting has Scott alluded to I think
Speaker 1: the whole concept of re investing was born in Sydney
Speaker 1: because it is such an expensive market.
Speaker 2: Okay, renvesting is one thing, but you talk about the
Speaker 2: dream exists, it's just been adapted a little. We're going
Speaker 2: to live in a townhouse, we live in a flat,
Speaker 2: we're going to live on the outer suburbs or anything.
Speaker 2: I don't know that that's actually got through yet that
Speaker 2: people might need to do that. Who wants to live
Speaker 2: in the outer suburbs where there's no services and that
Speaker 2: the traffic takes twice as long to get in and
Speaker 2: you're living in a mansion that you put holes in
Speaker 2: the wall if you lean against them. Scott, what do
Speaker 2: you think is the dream dead or shaky?
Speaker 3: Look?
Speaker 4: It is definitely shaken and you can tell like I
Speaker 4: actually think there's going to be This trend's going to
Speaker 4: go a lot further as well.
Speaker 3: You know, you look at parts of Europe in you know.
Speaker 4: I'd call it a more mature market that's been around,
Speaker 4: more established than our sort of young country is. And
Speaker 4: lifelong renting is a big thing over that. It's going
Speaker 4: to happen here due to cost of construction, the fact
Speaker 4: that people are we're not keeping up with the demand,
Speaker 4: and with high immigration and just the way this country
Speaker 4: is just never catching up with a supply of the market.
Speaker 3: It's just inevitable.
Speaker 4: Things are going to get more expensive and it's just
Speaker 4: going to be kind of part of life. So unless
Speaker 4: you get helped from mum and dad or grandpa and grandma,
Speaker 4: it's going to be pretty difficult to buy a nice
Speaker 4: house in a sablage market when you're up against people
Speaker 4: that are a generation ahead of.
Speaker 2: You with more savings life long rinting.
Speaker 4: Yeah, and then the recussion of that long term is
Speaker 4: you could imagine more than half the population becomes lifelong renters.
Speaker 4: That I think will create a bit of a political
Speaker 4: risk because if more than fifty percent of people believe
Speaker 4: they'll never own a home, they're going to vote more
Speaker 4: towards tenant friendly policies. We're seeing this happen more and more.
Speaker 4: You're obviously seen the likes of Victoria with the land
Speaker 4: tax increases that we're trying to bring in some laws
Speaker 4: into Queensland that would have had a similar impact, and
Speaker 4: you know, it's just going to be no grounds evictions.
Speaker 3: Things like this are going.
Speaker 4: To become more and more common, which could put the
Speaker 4: investing at a bit more of a risk.
Speaker 2: I'd like to get into government involvement soon, do you
Speaker 2: do you agree with that assessment Nikola that the future
Speaker 2: is lifelong renting for the majority, or at least few percent.
Speaker 1: So the rental market plays a really important role in
Speaker 1: providing a home to many Australians. About one third of
Speaker 1: US rent I think the concept of longer term leases
Speaker 1: is something that we should be really adopting. I think
Speaker 1: that we've always had a portion of our population that
Speaker 1: are going to be lifelong renters, whether that's through choice
Speaker 1: or whether that's through the fact that they just don't
Speaker 1: have the financial means. I think ultimately, probably what Scott
Speaker 1: is alluding to is that more and more people are
Speaker 1: just going to face the inability to actually purchase their
Speaker 1: first time, which means more of them are actually going
Speaker 1: to be locked in the rental market. And I think,
Speaker 1: you know, we have seen huge amounts of rental reform
Speaker 1: in across different states and territory governments in recent years,
Speaker 1: and I think the rental market is a huge point
Speaker 1: of our property market overall. I don't think that we'll
Speaker 1: ever get to the point where fifty percent of our
Speaker 1: population will be lifelong renters though that is a significant,
Speaker 1: large chunk of our nation, and I think, you know,
Speaker 1: we've got to think longer term, you know, when you
Speaker 1: think about baby boomers, and the biggest increase in demographics
Speaker 1: over the next five years is going to be those
Speaker 1: in their golden years. And particularly when we get to
Speaker 1: when baby boomers are passing and they are passing on
Speaker 1: their generational wealth, what you're going to actually see is
Speaker 1: a wave of rejuvenation from about in a middle suburbs
Speaker 1: and you will see governments moving and they will increase
Speaker 1: density in some of these prime inner city locations. And
Speaker 1: one you mentioned, Neil that you wanted to talk about
Speaker 1: government policy. We really need to see increased density. We
Speaker 1: need to make sure that we are utilizing not only
Speaker 1: our housing stock that we have already built effectively. We
Speaker 1: need to make sure that we're utilizing the land that
Speaker 1: we have on offer around infrastructure that is already there
Speaker 1: that can take that high level of density.
Speaker 2: There's a lot of resentment building towards baby boomers in
Speaker 2: social media and the rest of it, and the resentment
Speaker 2: goes along the lines of you've done it, You've occupying
Speaker 2: all the houses you've got all these tax breaks to
Speaker 2: get there. What and I get to Scott point about
Speaker 2: fifty percent rental. Eventually, as you say, Nicola, the baby
Speaker 2: boomers move on, die and the kids get the money.
Speaker 2: Don't they then go and buy houses or inherit the houses?
Speaker 2: I mean, in the end, these generations that are complaining
Speaker 2: very loudly at the moment are going to end up
Speaker 2: with the boomers' money unless they drink it all on
Speaker 2: a golf course.
Speaker 1: Sounds great, that, doesn't it that?
Speaker 2: But isn't that the reality? It's got the money that
Speaker 2: the generational well held by baby boomers will filter down.
Speaker 4: Yeah, look it's and it's already starting to happen. People
Speaker 4: are obviously either personally guaranteed or doing early early handovers
Speaker 4: that gifts for deposits. So, like Nikola mentioned, there's a
Speaker 4: massive transfer of wealth. I don't know the exact statistic,
Speaker 4: but like I've heard, fifty percent of the total world
Speaker 4: wealth is going to get transitioned over the next twenty
Speaker 4: odd years. So it might be able to correct me
Speaker 4: on that exact figure, but it's a significant number, and
Speaker 4: a lot.
Speaker 3: Of it's held in property stops as well, and it might.
Speaker 4: Skip poor old genets and go straight to Gen y
Speaker 4: or millennials potentially depending on the age.
Speaker 3: But yeah, it's already started.
Speaker 4: It's basically from now onwards, and yeah, there's going to
Speaker 4: be huge transitions.
Speaker 2: Ask you both, is that social media surge? Correct? Have
Speaker 2: the boomers done too well? Have they been closeted by
Speaker 2: government policies? Have they have they had too much of
Speaker 2: an advantage in establishing this housing wealth.
Speaker 1: I think we need to go back to what the
Speaker 1: core is here, and that is that we have not
Speaker 1: been building enough homes over the past two decades and
Speaker 1: that's what has created one of the drivers to continuous
Speaker 1: price growth over the last two decades. We have spent
Speaker 1: most of that time in a period of undersupply. When
Speaker 1: you look at what population growth has been sitting at
Speaker 1: versus the homes that we have built that are new,
Speaker 1: we haven't been meeting that. So not only do we
Speaker 1: have an undersupply of housing, there is a whole portion
Speaker 1: of Australians that are actually under housed, which means that
Speaker 1: they are not actually living in a home that suits
Speaker 1: their current needs. So I kind of flip it back
Speaker 1: to what we were talking about slightly earlier, which was
Speaker 1: around policy. You know, it goes back to the argument
Speaker 1: is should population growth actually be tied to the number
Speaker 1: of homes that we can actually supply, because if we
Speaker 1: had built enough homes, we would not be in the
Speaker 1: scenario today where you know, Sydney's house price is sitting
Speaker 1: at one point seven mill.
Speaker 2: Two points that why haven't we built more homes scott policy.
Speaker 4: Like you mentioned those sort of inner ring suburbs, they
Speaker 4: have not had the density increases needed. There's a lot
Speaker 4: of protectionism in many suburbs, and rightly so in some areas,
Speaker 4: but the infrastructure hasn't caught up.
Speaker 3: In many areas.
Speaker 4: There's a default for people to move into certain capital
Speaker 4: cities instead of going into other markets, and that's due
Speaker 4: to jobs, that's due to just lifestyle choices. You've seen
Speaker 4: some markets become more affordable, like the lights of Melbourne,
Speaker 4: but then you've got others that have gone.
Speaker 3: The other way.
Speaker 4: So it's, yeah, it's a bit of a mixed bag.
Speaker 4: But look, we are under supplied massively, and that's there's
Speaker 4: a bit of a people still prefer going for the
Speaker 4: house and there's going to be a lot more units
Speaker 4: built in the near future, so that will solve some
Speaker 4: of it, but then some people don't want to buy
Speaker 4: and live in a unit forever as well, So maybe
Speaker 4: the culture needs to do well.
Speaker 2: Yeah, we get back to undermining that dream and changing
Speaker 2: the culture, and the culture is still no. I want
Speaker 2: a house. I want a house, and it might be entrendy,
Speaker 2: little inner city suburb with a tiny backyard. I don't
Speaker 2: particularly want to live out of town. I want a house.
Speaker 2: You got to change that attitude. The other thing you
Speaker 2: talk about population, Australia's population in two thousand and was
Speaker 2: nineteen point two minion. It's now twenty seven and a
Speaker 2: half minion. That is a forty percent increase, near enough
Speaker 2: for forty percent increase in twenty five years. Is that
Speaker 2: too much for the housing market, Nicola.
Speaker 1: We haven't been able to construct enough homes to meet
Speaker 1: that population growth. You know, when you look at a
Speaker 1: really simple line chart and you do the change in
Speaker 1: both of those are homes built versus the number of
Speaker 1: new residents to Australia. We haven't been able to match that.
Speaker 1: And that's due to various reasons, due to red tape,
Speaker 1: due to the high costs, due to even you know,
Speaker 1: rise in cost of construction, project feasibility, even productivity has
Speaker 1: been diminished in the construction in the construction industry is
Speaker 1: extremely strained. And what you've got is this dynamic currently
Speaker 1: in our housing market where you've got a really wide
Speaker 1: price gap between the price it costs to buy a
Speaker 1: new home versus the price it costs to purchase an
Speaker 1: established home. And so what you have is Australians quite
Speaker 1: rightly are going to establish homes because they're technically cheaper
Speaker 1: to build, but we're never going to actually stimulate the
Speaker 1: new supply of housing until we see a leveling out
Speaker 1: between that difference. We need to really focus on policy
Speaker 1: that drives demand to new homes if we want to. Ultimately,
Speaker 1: for me, the core policy is how do we deliver
Speaker 1: more homes to Australia because we don't have enough field.
Speaker 2: But you seem to be suggesting we should be linking
Speaker 2: our population growth, which essentially means immigration. That's the only
Speaker 2: thing we can control. We're not going to control the
Speaker 2: birth rate, and that's not all staggering anyway. But are
Speaker 2: you suggesting we should link immigration or population growth to
Speaker 2: housing supply and there's no houses available, therefore no immigration
Speaker 2: this year?
Speaker 1: I think it should be something that is highly considered.
Speaker 2: Get it, It'll never happen because immigration covers up recession.
Speaker 1: Exactly, so it would never happen. So then it goes
Speaker 1: to how we actually can stimulate the supply of new homes,
Speaker 1: and that's where you need those policies. So it might be,
Speaker 1: for example, we've got a wave of new first home
Speaker 1: buyer policies coming into place. It should be things like
Speaker 1: stimulating first home buyers and steering them towards new to
Speaker 1: help stimulate the construction of new home.
Speaker 2: Well, I'm still looking for the emerging generations. Get somebody
Speaker 2: to blame that can blame the boomers? Can they blame
Speaker 2: immigration as well? And immigration is a very positive thing
Speaker 2: for the country in many, many, many ways. But can
Speaker 2: they blame immigration for the fact that housing is what's
Speaker 2: the term term possibly unaffordable?
Speaker 4: Yeah, I think that can because there's a million extra
Speaker 4: people in the last twelve months as well in Australia,
Speaker 4: so that's a very strong increase, you know, roughly three
Speaker 4: and a half percent. So we haven't we haven't introduced
Speaker 4: the same level of supplier nic Clobe mentioned, and there's
Speaker 4: no chance that we're going to be keeping up with
Speaker 4: the next wave as well, so you know, you keep
Speaker 4: falling forward further and further behind. If there's one hundred
Speaker 4: people trying to buy fifty houses, prices are going to
Speaker 4: go up. And that's that's what we're up against.
Speaker 2: Government seems to ignore this. Does anybody seriously put to government, look, yes,
Speaker 2: houses are IMPOSSI kept coming up the phrase impossibly unaffordable.
Speaker 2: One of the reasons is your immigration poblicy. So anybody
Speaker 2: ever raised that with government and got a reaction.
Speaker 1: I think it has been discussed. Fore, I'm not sure
Speaker 1: what the outcome of that, probably very negative given that
Speaker 1: there has been no change. I think one of the
Speaker 1: other kind of elephants in the room, though, is also
Speaker 1: stamp duty. Stamp duty is a massive disincentive to move
Speaker 1: and one of the key issues across our current housing
Speaker 1: stock is that we are not right sizing our homes.
Speaker 1: So what that means is we have a large portion
Speaker 1: of Australians living in homes that far exceed seed them needs.
Speaker 1: And I'm not saying that, you know, an Australian can't
Speaker 1: have a spare bedroom. You know, it's functional. We all
Speaker 1: love that additional room. If we're able to afford it.
Speaker 1: But when you look at census data, sixty five percent
Speaker 1: of owner occupiers who own their home outright have two
Speaker 1: or more spare bedrooms. And we have a disincentive to move,
Speaker 1: We have a disincentive to relocate for work opportunities because
Speaker 1: of that high cost barrier. And also what you see
Speaker 1: is people don't buy a home that they think they're
Speaker 1: going to live in for the next three years. They
Speaker 1: buy a home that they think they're going to live
Speaker 1: in for the next ten years. And that is because
Speaker 1: they want to reduce the amount of stamp duty that
Speaker 1: they pay on their life of buying and selling property,
Speaker 1: so they leap a property type to factor in the
Speaker 1: growing family over that ten year period. Whereas if we
Speaker 1: didn't have stamp duty, what that would mean is that
Speaker 1: we would be more inclined to actually right size their
Speaker 1: heart at our homes. And we don't have this right
Speaker 1: sizing issue in the rental market, which we know is
Speaker 1: much more free form, is much more easier to jump
Speaker 1: between different rentals.
Speaker 2: Yeah, just a personal story about stamp duty, and you're
Speaker 2: quite right, living in a large house, comfortable house, probably
Speaker 2: bigger than needed, good suburb worth a fair bit of money,
Speaker 2: and when my kids were small, I thought I should, really,
Speaker 2: because I was earning good money, I should go and
Speaker 2: get a bigger mortgage and buy a bigger house, buy
Speaker 2: a bigger, better house and a bigger bit of suburb
Speaker 2: as an investment. Capital gains tax free and the rest
Speaker 2: of it. It made financial success, except I worked in
Speaker 2: radio and you're never sure you'd have a job next week,
Speaker 2: so I wasn't willing to risk that mortgage. Then when
Speaker 2: I came to sell the house and downsize, I thought,
Speaker 2: if i'd done that, i'd have a property worth probably
Speaker 2: twice what that one was worth. And the reason I
Speaker 2: didn't do it is we use the money that would
Speaker 2: have gone on stamp duty to renovate the other one.
Speaker 2: And I guess that's typical.
Speaker 4: Scott is yeah, And I do a lot of work
Speaker 4: in the commercial field and we're seeing a lot of
Speaker 4: new policies come through on that front to help with
Speaker 4: the transactions. So for example, South Australia has no commercial
Speaker 4: stamp duty fifty percent discount in Victoria Regional Act up
Speaker 4: to about one point nine million do stamp duty. So
Speaker 4: these are good policies and it helps with transacting, so
Speaker 4: they help in the business community, so I'd like the
Speaker 4: idea that that could be passed on into the residential market.
Speaker 2: Once again, this goes on the list of Herd of
Speaker 2: Blind Boom's immigration and stamp duty. But the average stamp
Speaker 2: duty median price is around on a medium press house,
Speaker 2: around about thirty thousand dollars around the country. Thirty grand
Speaker 2: for nothing. There's just tax I'm one and you get
Speaker 2: this stamp.
Speaker 1: You get stamp duty bracket creep as well. So stamp
Speaker 1: duty thresholds are not moved in line with say the
Speaker 1: property market movements. So what that means is more of us.
Speaker 1: So more homes in Sydney, for example, are falling into
Speaker 1: the higher stamp duty brackets than otherwise would and that
Speaker 1: has been something that's been going on for years. And look, Neil,
Speaker 1: I did some little figures because I knew that you
Speaker 1: were interested in looking at what the wage versus the
Speaker 1: house price.
Speaker 2: Oh yes, yes, how many how many years salary buys
Speaker 2: a house?
Speaker 1: Yeah, yeah, absolutely so back in thirty years ago, back
Speaker 1: in nineteen ninety five, when you do that comparison of
Speaker 1: the median house price, which was just over one hundred
Speaker 1: and fifty thousand, dollars at the time versus what the
Speaker 1: average wage was four and a half times the wage.
Speaker 1: Guess what that.
Speaker 5: Figure is today, fourteen times eleven.
Speaker 2: It's the same figure as I come up with fourteen.
Speaker 2: It's huge, huge, it's huge whatever it is. Yeah, okay,
Speaker 2: so but stamp duty Victoria takes eight and a half
Speaker 2: a billion a year in stamp duty. New South Wales
Speaker 2: is more nine to nine billion. Once again, it's like immigration,
Speaker 2: that's they're never going to stop that. They're never going
Speaker 2: to say, oh, yeah, we're ripping you off. Sorry, all
Speaker 2: a big mistake. They're not going to give up nine
Speaker 2: ten billion dollars revenue in a year, any of them,
Speaker 2: are they. So we're stuck with it.
Speaker 3: So look, I think that sort of answers your question.
Speaker 3: Who's to blame.
Speaker 4: It's it's probably a lot of the government, Like they
Speaker 4: could help them the supply, they could help with tax solutions.
Speaker 4: Those two things alone, if they were implemented correctly, that
Speaker 4: solves a lot of the problems. Like it's not the
Speaker 4: baby bitiness fault. They're just a product of the market
Speaker 4: they were born into. Anyone would have been in the
Speaker 4: same position. There's no deliberate acts there, so you know
Speaker 4: they've done well statistically as a group, but you know,
Speaker 4: that's it's.
Speaker 3: A different world we live in.
Speaker 4: It's a different country, and you know a lot of
Speaker 4: that tax goes into services and bigger governments and the
Speaker 4: out roads and all that kind of stuff.
Speaker 3: So you know, if it.
Speaker 4: Was spent really efficiently, it could technically benefit others that way.
Speaker 3: So we do need that as well, but well as
Speaker 3: better ways.
Speaker 2: What about land tax? I mean, if they remove the
Speaker 2: exemption on the principal place of residence and so we're
Speaker 2: going to tax that and it's going to be an
Speaker 2: annual fee and we'll dump stamp duty, is that going
Speaker 2: to help because I mean, that's that sort of idea
Speaker 2: has been floated. An annual annual land tax fee in Victoria.
Speaker 2: At least it's at the moment you're exempt on your
Speaker 2: principal place of residence, an annual land tax free and
Speaker 2: no stamp duty.
Speaker 4: What I think that'll do is especially remember more so
Speaker 4: in commercial but if you increase the cost of holding
Speaker 4: a property, that will keep the price down as a
Speaker 4: ratio of the cap rate of that market. So you know,
Speaker 4: if you let's say you've got a property and it's
Speaker 4: costing you five grand extra a year. That will either
Speaker 4: push rents up or keep prices down until you know
Speaker 4: the associated yield is corrected in time. So that could
Speaker 4: have a negative impact on tenants potentially long term. As
Speaker 4: that flows through, it'll soften prices but increase yields that way.
Speaker 4: But look, it's it is something to consider as well.
Speaker 4: Like you know, if there's not that many people with
Speaker 4: huge amounts of property in one state, like one thing
Speaker 4: I advocate as an investor is to spread the risk around,
Speaker 4: so you've got a bit in Wa and Queensland and
Speaker 4: New South Wales, because if you've got it all in
Speaker 4: one state, you're going to get punished very hard, and
Speaker 4: probably more so as time goes on.
Speaker 2: What do you think, Nikoler about the land tax option
Speaker 2: to stamp I look, it is one.
Speaker 1: Of the options and it was so the Act was
Speaker 1: one of the jurisdictions that over I think it was
Speaker 1: like two decades, a long period of time they were
Speaker 1: phasing out stamp duty and increasing the rates that you
Speaker 1: pay on your home and you saw New South Wales
Speaker 1: dip into it and pull back the policy for first
Speaker 1: time buyers quite quickly. But I don't know, like I
Speaker 1: think it's a hard one because you've got these scenarios
Speaker 1: where you've got people who are perhaps asset rich but
Speaker 1: cash poor. So actually then wouldn't have you know, the
Speaker 1: cash to be able to pay for a larger bill,
Speaker 1: but you probably helped to drive right sizing you know
Speaker 1: that conversation we were having earlier. But on the thread
Speaker 1: of kind of taxes, I think the other one, removing
Speaker 1: stamp duty, I just don't think is going to be
Speaker 1: ever something that we see occur because it is such
Speaker 1: cash cow for governments, and you know, if we're frank,
Speaker 1: I don't think any government is going to be willing
Speaker 1: to stop that revenue flow. I think all economists really
Speaker 1: do agree that it is an inefficient tax. But the
Speaker 1: other argument to it would be that if you do
Speaker 1: remove stamp duty, and many people factor into their mortgage
Speaker 1: the cost of stamp duty also to cover their cost base,
Speaker 1: it might actually just add to the cost of homes.
Speaker 1: So it actually might just drive homes even higher because
Speaker 1: all of the sudden borrowing capacity is going to be
Speaker 1: increased because you haven't got a covering stamp duty in there.
Speaker 1: But the other kind of tax point that I also
Speaker 1: wanted to touch on is the cost of new homes.
Speaker 1: And this looks back to something that we were saying
Speaker 1: earlier about forty up to forty percent of the cost
Speaker 1: of a new home is taxes. And if the government
Speaker 1: really wanted to do something about affordability, wouldn't you do
Speaker 1: something about the tax that is associated with the building
Speaker 1: of new homes, you know, restructuring GST, making new homes
Speaker 1: exempt from the gsd T component, anything that could help
Speaker 1: bring down the cost of a new home would help
Speaker 1: improve affordability.
Speaker 2: Government's emerging this is the real devil here. What about
Speaker 2: subsidies in in your view, it's got the subsidies that
Speaker 2: governments both and the opposition offered going into the federal election.
Speaker 2: I've always had the impression trivic there's a subsidy for
Speaker 2: first time buyer puts up the price of the property.
Speaker 2: Is that fair or is that actually constructive?
Speaker 3: Exactly right.
Speaker 4: I've never been a fan of these kind of subsidies
Speaker 4: or discount or waiving something type fee because it's exactly
Speaker 4: what we've just mentioned before.
Speaker 3: It goes straight onto the mortgage.
Speaker 2: You know.
Speaker 4: I remember I bought my first property in twenty ten.
Speaker 4: There was a stamp duty waiver, and you know, you
Speaker 4: could go in with smaller deposit back then, and all
Speaker 4: that did was allow you to spend more, and that
Speaker 4: pushes the price in those circum segments of the market
Speaker 4: straight up, because if everyone's got the first you know,
Speaker 4: they're all going at the same discounted rate. You just
Speaker 4: you can outbit each other just a little bit more.
Speaker 4: So the economics of it is it gets more expensive
Speaker 4: and then their mortgage ends up being a little bit
Speaker 4: bigger as well. So it's not great for those who
Speaker 4: are already on the knife edge of affordability with repayments
Speaker 4: do then have a slightly bigger mortgage just because you
Speaker 4: can do it because of the government's discount.
Speaker 2: Here or that.
Speaker 3: But yeah, it's a solution. It's anything to reduce the
Speaker 3: costs permanently.
Speaker 4: You know, supply needs to loosen up, and giving a
Speaker 4: discount here or there, that's not really helping anyone.
Speaker 2: Nikola, you were talking about annual sealery as a multiplier
Speaker 2: for the value of a house. But we talk about
Speaker 2: average journeys, don't we, rather than media earnings. Every journey
Speaker 2: is about one hundred grand media and earnings are about seventy,
Speaker 2: so it's in fact harder than we indicate. In fact,
Speaker 2: I read the household income, you know, the household income
Speaker 2: one hundred and seventy thousand to buy a house, which
Speaker 2: not many people would have in the single income. So
Speaker 2: does this discriminate against the single person buying a house?
Speaker 1: It absolutely does. And I think that one of the
Speaker 1: biggest increases in demographics and household configurations is single person households,
Speaker 1: so that actually reshapes what we need in terms of
Speaker 1: the demand and floor plans of homes. We're also seeing
Speaker 1: increases in multi generational living because of this core issue,
Speaker 1: the inability for adult children to be able to purchase
Speaker 1: the home. I mean, I think we have to consider
Speaker 1: that if you're comparing now to thirty years ago, life
Speaker 1: stages have also changed. We're living longer, we're going to university,
Speaker 1: we're having children later, we're settling down later in life.
Speaker 1: So it actually means that we're purchasing our first home,
Speaker 1: you know, I think they average ages like mid thirties now.
Speaker 1: But I do think that those core changes that we're
Speaker 1: seeing in demographics is rewriting floor plans and our needs
Speaker 1: for housings.
Speaker 2: Moving forward, talking about I think I bought my house
Speaker 2: in about mid seventies, I was in my mid twenties, and
Speaker 2: they wouldn't Commonwealth Bank, it was, wouldn't allow my fiance
Speaker 2: who was buying the house with me now wife on
Speaker 2: the to be part of the loan calculation because she
Speaker 2: was obviously going to get married and get pregnant. There
Speaker 2: was a very deliberate policy against women in that sense.
Speaker 2: In the end, I think we bought it before we
Speaker 2: got married, so we got away with it because you
Speaker 2: couldn't get pregnant if you weren't married. Of course, tooking
Speaker 2: to doctor Nicola Powell from Domain and Scott O'Neill, a
Speaker 2: property investment expert from Rethink Investing. We've analyzed some of
Speaker 2: the problems. We've got a few more to go. What's
Speaker 2: the future, what's the hope? What can actually be done
Speaker 2: to fix these problems? Negative gearing? Does that play an
Speaker 2: evil role in all? This is negative gearing and negative
Speaker 2: gearing I should explain and correct me if I'm wrong.
Speaker 2: Is where you can claim the loss on an investment
Speaker 2: property and rental property. For example, you rent it for
Speaker 2: one hundred dollars a week in your cost for one
Speaker 2: hundred and twenty so you can claim it as a
Speaker 2: tax deduction that is seen by some I know was
Speaker 2: subsidizing greedy people trying to build wealth.
Speaker 1: And this is one of the stats that I think
Speaker 1: is really misunderstood. Many people who negatively gear are your
Speaker 1: average Australian and there are more investors who negatively gear
Speaker 1: that have one property and are under the age of
Speaker 1: forty nine. So what that tells me is I think
Speaker 1: that we've got a whole cohor of people here trying
Speaker 1: to build up Welsh property wealth, perhaps being that re investor,
Speaker 1: and perhaps it means that they do need to negatively gear.
Speaker 1: And there are many studies around if we remove negative gearing,
Speaker 1: what would that actually do to the housing market?
Speaker 2: And the study what did they say? Because Paul Keating
Speaker 2: did it and then unlike Paul Keating, he changed his
Speaker 2: mind and reversed it. That was in the nineties. Paul
Speaker 2: Keatings hasn't changed his mind since. But an I've raisis
Speaker 2: with a number of labor people who are around at
Speaker 2: the time, and there's some disagreement about whether that they
Speaker 2: abandoned or aband a negative gearing then put it back again,
Speaker 2: whether that was done because the rental market was affected,
Speaker 2: or whether it was done for other reasons. Now, if
Speaker 2: negative gearing is that crucial to the rental market, we
Speaker 2: can't afford to touch it, can we.
Speaker 1: The studies show that it does increase rents, but importantly
Speaker 1: it also helps to increase home ownership. But I think
Speaker 1: what it does is it also increases reduces pricing, so
Speaker 1: overall pricing property too. But the coursing is that it
Speaker 1: does increase rents and that's going to obviously have a
Speaker 1: detrimental impact for anybody that's left within the rental market.
Speaker 1: And let's be realistic, if you are an investor in Sydney,
Speaker 1: a large chunk of them are going to be negatively
Speaker 1: geared because it is such a high priced market and
Speaker 1: it's not.
Speaker 2: A yielding So is it worth the public money? Though?
Speaker 2: Is it worth foregoing the amount of tax that we
Speaker 2: lose through negative gearing for the sake of what it
Speaker 2: does to the rental market and the housing market? Well,
Speaker 2: not the housing market so much.
Speaker 1: I think that if you did remove negative gearing, it
Speaker 1: would have a detrimental impact obviously on investment numbers, and
Speaker 1: I reckon I'd be interested in Scott's view in commercial space,
Speaker 1: because what would probably happen is you would get investors
Speaker 1: then looking chasing yields, and that that's when they go
Speaker 1: to the commercial market.
Speaker 4: Yeah, well, this was huge couple of elections ago, when
Speaker 4: the talk of negative gearing was on. My business went
Speaker 4: from i'd say fifty percent residential to commercial. We went
Speaker 4: up to almost eighty five percent commercial. People did not
Speaker 4: want to touch residential because the yield play was gone.
Speaker 4: Remember yields in residential they vary from three to five
Speaker 4: percent gross generally. So then you've got to take all
Speaker 4: your outgoings you mature, and to your property management, your maintenance.
Speaker 4: Once you take all that out, you're sitting between one
Speaker 4: and three percent net. So commercial you're looking at five
Speaker 4: to eight percent net depending on the parts of the
Speaker 4: country you go. So no one's going to get by
Speaker 4: on one to three percent net because that's like look
Speaker 4: at the current mortgage rates. At the moment, you're going
Speaker 4: to be significantly negatively geared. And remember most people are
Speaker 4: negatively geared only for a certain period of time as well,
Speaker 4: because as rents go up and you pay your mortgage down,
Speaker 4: you eventually turn positively geared. You have to otherwise, what
Speaker 4: are you holding these assets for you can't just negatively
Speaker 4: gear forever, even if the property is growing, because at
Speaker 4: some point you.
Speaker 3: Need to live off an income, and that's what happens.
Speaker 4: So I think it'd be terrible for the cohort that
Speaker 4: believe negative gearing would be better off it wasn't around,
Speaker 4: because there would be less rentals, the less supply again,
Speaker 4: and it would hurt the higher priced markets, the most
Speaker 4: negatively geared markets. And as an investor, I actually wouldn't
Speaker 4: really lose out too much in that space because people
Speaker 4: would chase the products or we're.
Speaker 3: Most active in as well.
Speaker 4: So it could actually cause more capital growth for warehouses, shoppings,
Speaker 4: medical centers, that type of stuff, because it gives you
Speaker 4: more reason to not go residential.
Speaker 2: I'd ask you both. Allen Cohler on the OBC recently
Speaker 2: described housing affordability as a genuine emergence when they couldn't
Speaker 2: go on a genuine emergency. Given that Sydney has the
Speaker 2: most expensive houses in the world on that formula we're
Speaker 2: talking about, do you see it as a genuine emergency.
Speaker 1: Nikola, I think we genuinely have a chronic undersupply of housing,
Speaker 1: so I would describe that as an emergency. I think
Speaker 1: also it goes back to partly what we were discussing
Speaker 1: earlier about changing how we talk about a first home.
Speaker 1: I think that we are seeing a transition of what
Speaker 1: that first home looks like. And you know, I'm from
Speaker 1: the UK originally, and Australian homes are large. They are
Speaker 1: large in comparison to UK standards, and I think that
Speaker 1: we don't have density to the extent that we do
Speaker 1: in other capital cities across the world. So, you know,
Speaker 1: I think in part it means that we do need
Speaker 1: to increase density. I think there's lots of arguments and
Speaker 1: lots of not in my backyard against that, but I
Speaker 1: think ultimately we need to be planning Australia for the
Speaker 1: tomorrow and not for yesterday. I think we do need
Speaker 1: to see a greater diversity of how across Australia, not
Speaker 1: just you know, single residential blocks. It is about townhouses,
Speaker 1: terrorist times units, apartments.
Speaker 2: It is a mix scott to people want to live
Speaker 2: in townhouses or apartments and are they a good investment,
Speaker 2: a good commercial investment. I'll build a half a dozen townhouses.
Speaker 4: Look, I'll use my story as an example. So I
Speaker 4: my first property. I was either going to go to
Speaker 4: a two better unit in South Sydney or by the
Speaker 4: worst house I could afford in Sydney, which I didn't
Speaker 4: want to live in, and I ended up going the
Speaker 4: housing route, and.
Speaker 3: The difference was significant.
Speaker 4: Over the last fifteen years, that unit would be worth
Speaker 4: two thirds of the cost essentially, plus.
Speaker 3: There was strata I would have had to pay and
Speaker 3: all that kind of stuff. So the house was the
Speaker 3: good option.
Speaker 4: But I then invested heavily all over the country commercial residential,
Speaker 4: and I was renting. I was living in the Eastern Suburbs,
Speaker 4: one of the most expensive markets, and we rented as
Speaker 4: the family group. We started in two better units, then
Speaker 4: went the townhouse, and then ended up renting a four
Speaker 4: atom house in a suburb called Bronzi, and it was
Speaker 4: one quarter of the costs to rent versus the mortgage
Speaker 4: and the outgoings on it. So I thought I was
Speaker 4: getting a great deal in this property because someone else
Speaker 4: was funding my lifestyle in a very nice house and
Speaker 4: they didn't mind copying that incredibly low yield for a
Speaker 4: premium property. Eventually, you know, when it all made sense,
Speaker 4: we bored. But even though we're even buying the property.
Speaker 3: I was.
Speaker 4: I had mixed emotions because I know the mathematics behind it.
Speaker 4: It makes no sense from a financial sense outside of
Speaker 4: you know, they see red money is dead money. It's
Speaker 4: only dead if you haven't invested somewhere else. Because, like
Speaker 4: you mentioned, Neil, you bought your house and did well,
Speaker 4: you probably would have done well if you spread that
Speaker 4: same amount of money somewhere else, because the capital growth
Speaker 4: rates are remarkably similar.
Speaker 3: They just feel larger if the house is larger with
Speaker 3: the percentages.
Speaker 2: I would be paying, I'll be paying if you.
Speaker 4: Sell, or you can refinance and keep going, and if
Speaker 4: the yield was high enough, you would probably offset and
Speaker 4: positively did income.
Speaker 2: Yeah, okay, Nicola, what's your view on that? Do people
Speaker 2: want to live in townhouses despite this cultural change we're
Speaker 2: talking about? Do they want to live in the townhouses?
Speaker 2: I don't know many you do?
Speaker 1: Yeah. Look, I think that we are seeing it change.
Speaker 1: I think that Australians do you want to have something
Speaker 1: that they own themselves. I think as well, we have
Speaker 1: to consider that a lot of new people arriving in
Speaker 1: Australia are also really you know, relocating from other countries
Speaker 1: where living in a high rise apartment or a unit
Speaker 1: is standard. You know, that is pretty typical.
Speaker 2: We've got a lo space, we've got all this land,
Speaker 2: and why can't we spread and have larger houses, but
Speaker 2: just service them properly.
Speaker 1: Absolutely, that would be wonderful, Neil. But we all seem
Speaker 1: to want the crowd into the three biggest cities, which
Speaker 1: are Sydney, Brisbane and Melbourne. And if one of the
Speaker 1: core things that could change the affordable AYR landscape is decentralization. Now,
Speaker 1: the pandemic in essence did create deta centralization from bottom up.
Speaker 1: It meant that people could work from home. It meant
Speaker 1: that you saw them flood into the regional areas to
Speaker 1: those more affordable locations. But ultimately, now that we are
Speaker 1: hybrid steel that many of us you know, are unable
Speaker 1: to do that hybrid natured work. We need better connectivity.
Speaker 1: That means improved rail, it means faster row, it means
Speaker 1: connecting some of those bigger regional towns better with our
Speaker 1: bigger capital cities. That is the unlock in my mind
Speaker 1: for a Ford.
Speaker 2: Billits well, it's not only the regional towns and it's
Speaker 2: the fringes of the cities. I mean, there are many
Speaker 2: suburbs popping up around the fringes of Melbourne that I
Speaker 2: know well, and they take it now and I have
Speaker 2: to get here to get to the city. They so
Speaker 2: you don't work in the city. What about little hubs
Speaker 2: around the suburbs or working from home? Is that changing it?
Speaker 2: What do you wat to your view, Scott.
Speaker 4: Oliguy I always liked the idea, you know, whenever they
Speaker 4: mentioned a high speed rail or something like that like that,
Speaker 4: that's music's my ears is, you know, a solution. But
Speaker 4: obviously that never happened. They was talking about stuff like
Speaker 4: that happened. But if you build a high speed rail
Speaker 4: up to Newcastle and all the way down to Woollongong,
Speaker 4: it opens up those markets very quickly and they'll become expensive,
Speaker 4: but they'll they'll just it's going to create big population
Speaker 4: centers that you know, you could bring them back to
Speaker 4: the areas because you're not going to see you know,
Speaker 4: many parts of Sydney you just turning to high rise units.
Speaker 4: There'll be so much fight against the inefficient government, local government,
Speaker 4: all of the above pushback on this.
Speaker 3: Type of stuff.
Speaker 4: But they are decentralizing Sydney at least to a degree.
Speaker 4: Thats the you know, the central part of Sydney keeps
Speaker 4: moving more west from a population average centric center and
Speaker 4: that's you know, that's making people move out there and
Speaker 4: work and live in the same areas.
Speaker 2: And we build do we build good enough houses and townhouses?
Speaker 2: I mean, I know there's a shortage and there's a few,
Speaker 2: but but are they built properly generally?
Speaker 4: There's been a lot of that type of stuff on
Speaker 4: the news, cracking in column and stuff like that Home
Speaker 4: Bush and Alexandria stuff like that. But yeah, look they're
Speaker 4: not built the same way. There's obviously huge cost pressures
Speaker 4: that need to be taken into accounts, so more lightweight
Speaker 4: material and you know, taking the engineer into the nth
Speaker 4: degree is important.
Speaker 3: But yeah, look there's.
Speaker 2: And making it more attractive. And then people said, I
Speaker 2: don't want to live in the dog box, and we've
Speaker 2: got suburbs full of dog boxes in Melbourne.
Speaker 3: I know.
Speaker 4: I went to a friend's house a while ago that
Speaker 4: lived out in Western Sydney and their garage so their
Speaker 4: backyard was about six square meters and you think, is
Speaker 4: this a house or is it really a townhouts? But
Speaker 4: like you know, they've packed them in which is exactly
Speaker 4: what we kind of need to for this conversation, I guess,
Speaker 4: but it wasn't super attractive for the price proposition.
Speaker 3: I must admit I had.
Speaker 1: A similar experience. It was a new suburb, went to
Speaker 1: a friend's place and these are single residential homes and
Speaker 1: the neighbor's roofline was hanging over their fence line and
Speaker 1: I was like, how did you house? And whoever had
Speaker 1: built it had cut their fence to enable this roofline
Speaker 1: to hang over into their garden, and I just it's
Speaker 1: on my LinkedIn if anyone wants to see that photo.
Speaker 1: I was so shocked.
Speaker 2: We saw this government interference and we needed the regulation.
Speaker 1: Yeah, and you can understand why Australian confidence, particularly in
Speaker 1: high rises Scott alluded to. You know, there's been lots
Speaker 1: of defects, there's been lots of challenges, particularly in high
Speaker 1: rise apartments. That doesn't build confidence, right, So that goes
Speaker 1: back to making sure that we have the codes and
Speaker 1: the contacts and the right standards in place to ensure
Speaker 1: that we are building homes of quality downsizing.
Speaker 2: Do we don't do enough to encourage downsizing? I know
Speaker 2: when I sold that house, I'm referring to and downsize
Speaker 2: to a townhouse. I should say because the kids had left,
Speaker 2: I was able to put some of the equity from
Speaker 2: the house into superannuation as a one off. Mind you,
Speaker 2: superinnuations now getting in the images of the evil of
Speaker 2: the older generation. But do we do enough to encourage
Speaker 2: downsizing the people to get out of that house. And
Speaker 2: we're talking about the stamp duty earlier and how it
Speaker 2: discourages you from moving and buying the townhouse or downsizing.
Speaker 2: Do we need to look at something else to encourage downsizing,
Speaker 2: which at least would open up some of the property that.
Speaker 3: Would be the stamp duty solution.
Speaker 4: Like you know, I know there's a lot of parts
Speaker 4: of the country where you might have an old four
Speaker 4: bedroom house that you don't longer need. You're not going
Speaker 4: to go straight into a one or two bedroom unit.
Speaker 4: You'd probably want the townhouse. And the price differential is
Speaker 4: not that great in some areas, especially if that townhouse
Speaker 4: is brand new or ten years new. And by the
Speaker 4: time you pay stamp duty again, you know, you're not
Speaker 4: walking away with a big wad of cash.
Speaker 3: You're telling that you just ended up. It's a similar
Speaker 3: kind of you know, equation everywhere.
Speaker 4: You know, it's if you've got a big, great house
Speaker 4: and you're on the water.
Speaker 3: You know, that's it's a different problem.
Speaker 4: But yeah, the differential art to taxes is not as
Speaker 4: good as it should be, so people to sit on
Speaker 4: the end.
Speaker 2: What do you think, Nikola?
Speaker 1: So I agree with Scott there's the tax side, But
Speaker 1: I think there's this emotional side to our housing market
Speaker 1: that we probably haven't touched on. And I think this
Speaker 1: comes caught really into play, particularly when it comes to downsizing.
Speaker 1: I have quote unquote heard you know, older friends say
Speaker 1: to me, I am not selling this house. You're going
Speaker 1: to take me out dead in a box. You know.
Speaker 1: They it's their family home, it's where their children were raised,
Speaker 1: and they have an emotional tie to that particular place.
Speaker 1: And I understand that, and I think it's hard for
Speaker 1: some downsizes where they've lived in a community for fifty years.
Speaker 1: They want to stay with their local doctor, where they
Speaker 1: know where the great coffee is, where they know that
Speaker 1: they go on the same walk every day, and often
Speaker 1: in those suburbs, there isn't a product so a different
Speaker 1: type of home on offer that suits their needs. So
Speaker 1: it goes back to that conversation about increasing density and
Speaker 1: increasing diver diversity across our suburbs to allow down sizes
Speaker 1: to have those options.
Speaker 2: Just a couple of things I sort of random things
Speaker 2: I want to go to to wrap up, Scott. If
Speaker 2: I came to you instead, I got lazy half a
Speaker 2: million to invest, would you tell me to get into
Speaker 2: the housing market.
Speaker 3: Well, there's two options you'd go.
Speaker 4: You'd either target a couple of smaller regional houses or
Speaker 4: cheaper capital cities.
Speaker 3: Just try to push the yield up.
Speaker 2: For regional community gross regionalism.
Speaker 4: All Satinic Nicola will back us up. You look at
Speaker 4: the statistics, some of the regional markets have done incredibly
Speaker 4: well better than many of the capital cities in the
Speaker 4: last twenty years.
Speaker 3: So it's a bit of a myth.
Speaker 4: And that's because if a million dollar property goes up
Speaker 4: five percent every year, it feels a lot bigger than
Speaker 4: half a million dollar property going up five percent every year.
Speaker 4: So just because the quantum's larger, it doesn't mean the
Speaker 4: percentage isn't similar. So you know, if you're buying in
Speaker 4: a strong regional city you can do quite well. Supplying
Speaker 4: those markets are still pretty tough, and you know that
Speaker 4: they have the same problems like due to the serve
Speaker 4: lack of services. But look, depending on where you're at
Speaker 4: in life, you might need more yields and half a
Speaker 4: million will serve you pretty well in the likes of commercial,
Speaker 4: but you've got to target the right ones. You wouldn't
Speaker 4: go buy a high rise office space right now because
Speaker 4: maybe they're part of the solution. Turn them into residential apartments,
Speaker 4: but the economics of those buildings sometimes don't allow for that.
Speaker 4: But as the use of office drops off, maybe residential
Speaker 4: become more of a play. But industrial medical, you might
Speaker 4: put your money into a fund just for some safe returns. Like,
Speaker 4: there are plenty of options out there to get exposure.
Speaker 2: As long as I can remember, there's been a comparison
Speaker 2: of growth in the stock market over over ten twenty
Speaker 2: thirty years compared to the real estate market, Nikola, do
Speaker 2: you know which performs better over so twenty years.
Speaker 1: Look, I don't know those stats at the top of
Speaker 1: my head, but I scoot to stop.
Speaker 4: Yeah, although I can tell you they're similar as a
Speaker 4: percentage as a whole, but the difference is the return
Speaker 4: on equity. So remember commercial residential, there's loans applied, so
Speaker 4: if you're controlling one hundred grand of the step share market. Sure,
Speaker 4: there's some people with margin loans up to you know,
Speaker 4: fifty percent, but most people are going into their first
Speaker 4: home with eighty ninety percent debt in the residential market,
Speaker 4: So that hundred grand will give you five hundred grand
Speaker 4: of exposure. So as that five hundred grand grows six
Speaker 4: seven percent per animal on average, that's.
Speaker 3: A really good return on equity.
Speaker 4: As long as you can meet the cash flow requirements,
Speaker 4: you're going to make more money in property in Australia,
Speaker 4: which is why seventy percent of our wealth is tied
Speaker 4: up in it.
Speaker 2: Look, I really appreciate the time both you've given a
Speaker 2: cent of the candor. I mean sometimes it's a bit
Speaker 2: hard to get what well I think public the people
Speaker 2: find it hard to believe information they get on the
Speaker 2: market because there's so many vested interest. I mean, domains
Speaker 2: owned by nine that owns this podcast, The Rear Group
Speaker 2: is owned by News Corp. We've got eight. I've never
Speaker 2: met an agent who took a market down. I mean,
Speaker 2: there's so I really appreciate that you've given us that
Speaker 2: time and a couple of other things just randomly, war
Speaker 2: the threat of war around the world Middle East, Ukraine, China,
Speaker 2: perhaps even what is what are those bad times those
Speaker 2: uncertain times due to the real estate market, Scott, it.
Speaker 4: Slows the volume of transactions down the worst. That gets
Speaker 4: people tend to sit on their hands. There's already less
Speaker 4: confidence inequities, so you tend to see a little bit
Speaker 4: more people default to the safest houses strategy.
Speaker 3: It's not great for the market.
Speaker 4: It's obviously going to cause economic uncertainty, and that means
Speaker 4: people just don't make decisions, whether it's businesses or property owners.
Speaker 4: Like you mentioned you the uncertainty of having a job
Speaker 4: in a year's time, that meant you didn't take a
Speaker 4: larger loan. So lending volumes will drop and yeah, the
Speaker 4: market will kind of go on pause for two or
Speaker 4: three years or whatever it takes to to sort out.
Speaker 2: So well that helped the first time buy.
Speaker 3: No, because they're the ones that get hurt the most.
Speaker 4: It's like it's you know, there's it slows everything down
Speaker 4: and lending like when it's not.
Speaker 3: Lending bad, everyone slows down at the same rate.
Speaker 4: And if anything of those with the least means they're
Speaker 4: not going to just all of a sudden jump ten
Speaker 4: places in the market and be the others.
Speaker 3: So you know everyone's in the same boat.
Speaker 4: And that's why, like if the market's drop, everyone thinks
Speaker 4: it's their chance to get into the market.
Speaker 3: It's dropped for a.
Speaker 4: Reason banking lending is more restrictive, or the uncertainty is
Speaker 4: they're like, there's going to be you know, it's going.
Speaker 3: To be engineered away from you sometimes.
Speaker 4: So it doesn't mean you can just jump the queue
Speaker 4: because everyone's going to go down a level.
Speaker 2: Do you agree Nicholer on the impact of international uncertainty?
Speaker 1: I agree with Scott flying as safe as housing is,
Speaker 1: you do tend to find that people steer towards the
Speaker 1: property market during economic instability. I think for me, coming
Speaker 1: from a kind of property expert lens, I think my
Speaker 1: the biggest risk that I see is obviously inflation holding
Speaker 1: higher for longer, meaning that the rate cuts that the
Speaker 1: market is pricing in for the rest of this year,
Speaker 1: which is another two or three might not actually be delivered.
Speaker 1: And what that means for the housing market is slower transactions,
Speaker 1: as Scott mentioned, slower rates of price growth, which actually
Speaker 1: might then transition okay for first time buyers if we're
Speaker 1: seeing actually more modest rates of price growth or even
Speaker 1: a dip. We only released our price forecasting last week
Speaker 1: and we've got forecast price growth across all capital cities
Speaker 1: and including record highs across the majority.
Speaker 2: Of them, and that won't change. We didn't have moombs
Speaker 2: dropped last week, though, that.
Speaker 1: Is very true. I think the risk for the forecast
Speaker 1: is if you inflict. So if we see petrol prices,
Speaker 1: supply chain issues impacting that level of inflation, and it
Speaker 1: means the RBA set where the cash rate is for longer,
Speaker 1: I think that's where we'll see probably a slower property market.
Speaker 2: Just a random one. Is airbn B affecting supply?
Speaker 1: I think so in certain pockets. I mean the has
Speaker 1: revolutionized the rental and short term space. I think that
Speaker 1: it definitely has an impact, particularly on kind of coastal locations,
Speaker 1: prime holiday tourism locations, and who comes at the detriment
Speaker 1: of that is longer term renters who are in that
Speaker 1: market in one or twelve months least. So it definitely
Speaker 1: does impact, but I think it's location specific.
Speaker 2: Well, Scott, what do you advise me of the five
Speaker 2: hundred thousand we've spread around Regional Victoria or Regional Australia.
Speaker 2: Do I use those properties for Airbnb or long term rental?
Speaker 3: Long term rental, I think it's too uncertain.
Speaker 4: Like I have Airbnb properties, but the time you take
Speaker 4: all the costs out and it's sometimes a six month restrictions,
Speaker 4: you can't rend it out all year. There's also changing
Speaker 4: policies that you're seeing all over the world where they're
Speaker 4: banning certain sections. It's not a great long term safe model.
Speaker 4: I think I think you're better not just running out
Speaker 4: to the long term because it's stable.
Speaker 2: The boomers get back to the generation wars or intergenerational justice,
Speaker 2: as the treasure of Federal Treasurer called it. Boehmer's liked
Speaker 2: to say, well, in my day, we went without food
Speaker 2: to save for the mortgage and to pay the pay
Speaker 2: for the mortgage, to pay the repayments, and we lived
Speaker 2: in a suburb we didn't want to live in, in
Speaker 2: a house we didn't want to live in tough en
Speaker 2: up you lot.
Speaker 5: Is that unfair, Nicola, It's quite brutal.
Speaker 1: I think it's brutal. I think every generation has had challenges.
Speaker 1: I think when you're getting to the point where the
Speaker 1: median income cannot purchase that median home. That is where
Speaker 1: you have a real problem, you know, And it goes
Speaker 1: back to that house price versus what the income is.
Speaker 1: And so the challenge for first time buyers has widened
Speaker 1: over time. But it goes back to also with the
Speaker 1: point you made earlier that there are going to be
Speaker 1: families and younger generations who haven't owned a property are
Speaker 1: going to inherit the wealth from their grandparents or their parents,
Speaker 1: and that generation wealth is going to be cast on.
Speaker 1: So yeah, I think it's brutal.
Speaker 2: But what's Scott, the way you told your story. You
Speaker 2: sort of didn't go and buy your first house in
Speaker 2: the top suburb and the best house. You sort of
Speaker 2: work your way up. Do you think there's some truth
Speaker 2: to that argument that you know you've got to go
Speaker 2: and live somewhere you don't want to live in a
Speaker 2: house that isn't the ideal because you're getting onto the
Speaker 2: property ladder that does. These generations have to view it
Speaker 2: that way.
Speaker 4: I think if they live in one of those expensive,
Speaker 4: high demand markets, renting must be part of your strategy
Speaker 4: right now unless you've got an inheritance, because you're not
Speaker 4: going to get into those top markets. And also I'd
Speaker 4: never liked the idea of transitioning up three times into
Speaker 4: a property, as in, buy two bedroom unit and then
Speaker 4: go all right, now I need a three bedroom house
Speaker 4: because I've got that. Now i want the family home
Speaker 4: at four bedrooms. That's three sets of stamp duty to
Speaker 4: pay sales agent on the way out. It's just not
Speaker 4: an efficient use of your money. And while you hold
Speaker 4: those large investment large properties, you've got effectively like a
Speaker 4: lending boat anchor on you. It's very hard to get
Speaker 4: an investment loan or playground with shares like.
Speaker 3: Because you need to invest to get ahead.
Speaker 4: Now that's you know, you can't buy a house on
Speaker 4: a policeman's wage anymore. Like that would have been done
Speaker 4: possibly in the nineteen seventies. You can't do that now.
Speaker 4: So but you can still invest and you can build
Speaker 4: your wealth through that method. And look, I rented for
Speaker 4: ten years and moved four times in that period and
Speaker 4: it wasn't bad. Like, you know, you can negotiate a
Speaker 4: longer lease if you want. There's some you know, there's
Speaker 4: some restrictions re lease. You don't have to pay for
Speaker 4: all your maintenance.
Speaker 2: And you were doing as understanding you were doing that
Speaker 2: as a strategy to build a portfolio that you own.
Speaker 4: Yeah, because if I took the home loan out, I
Speaker 4: wouldn't be able to get lending to you know, I'd
Speaker 4: be done. I'd be just strapped to that large mortgage
Speaker 4: because you would have had to go all in on
Speaker 4: the house. And yeah, I'd be in a very different
Speaker 4: position in life right now if.
Speaker 3: I did that.
Speaker 2: There's another culture. Well how many how many? How many? Well,
Speaker 2: I assume you own your property. Now you live in
Speaker 2: the house you own.
Speaker 4: Yeah, and we've got we've got sixty five other tenants
Speaker 4: and that includes a big commercial la audi and chemists, warehouse,
Speaker 4: all those types of things. They pay for the mortgage
Speaker 4: on our house. So you know, we building income through
Speaker 4: this investment method. And you know, it took us four
Speaker 4: years to buy our first two properties, so it didn't
Speaker 4: happen really quickly. But you know, as the capital growth
Speaker 4: kicks in and you know, time passes, you start being
Speaker 4: able to It's like a snowball effect. You know. If
Speaker 4: you've got a lot of houses, yeah, you know, and
Speaker 4: they're all growing at seven percent per anum, it's it's
Speaker 4: a significant number.
Speaker 2: Well, just to give hope to gen xy is it
Speaker 2: or whatever? How old are you now, thirty eight? Thirty
Speaker 2: eight doing okay, yeah, thirty.
Speaker 4: Eight and we've got about one hundred and thirty million
Speaker 4: in property as well.
Speaker 3: Yeah, and there was no handouts.
Speaker 4: It was just done through investing and doing everything we
Speaker 4: possibly could in.
Speaker 2: That field hobnously. While you gave up engineer in because
Speaker 2: you qualified engineer, aren't you?
Speaker 3: Yeah? Yeah, yeah. There was a moment where I was
Speaker 3: I was making more and property.
Speaker 4: We're doing four hours a week work for sixty so
Speaker 4: it was a a bit.
Speaker 3: Of a no brain.
Speaker 2: Okay. One of the joys of this job is I
Speaker 2: can I can appoint both of you individually as Dictator
Speaker 2: of Australia. Nicola, what would you do now, no political considerations,
Speaker 2: no Parliament to get it through. You're in charge. What
Speaker 2: do you do to address this.
Speaker 1: Problem, To address the undersupplyved housing.
Speaker 2: To indress the well and the I keep coming back
Speaker 2: to intergenerational justice, the emergency that Alan Kohler described.
Speaker 5: I would remove stamp duty, get rid of STAMPT.
Speaker 1: I do that nationally, and I'd actually get the states
Speaker 1: and territories to align on policies where it comes to
Speaker 1: housing policies.
Speaker 2: So put up the GS two to cover the stamp duty.
Speaker 1: Yeah, perhaps, and remove moves part of the tax nation
Speaker 1: of new homes too. So yeah, I would tax consumption,
Speaker 1: I would remove stamp duty, and I would remove the
Speaker 1: GSD component new homes.
Speaker 2: Scott, what would you do? Dictator Scott?
Speaker 4: Look, without sounding boring, I don't want to do the
Speaker 4: exact same thing there, Like the stand duty is the
Speaker 4: one that keeps coming up all the time. It's you know,
Speaker 4: there's there's options in Victoria to sort of choose between
Speaker 4: that coming up, and I just think it's going to
Speaker 4: remove the barrier to entry and fit homes better for
Speaker 4: the supplier people. I do think the immigration blunt tool
Speaker 4: to help the economy is hurting a lot of Australian
Speaker 4: So if you keep letting a million people in, you
Speaker 4: know you can like it's supply demand. So you just
Speaker 4: got to think how do we cut supply or sorry,
Speaker 4: increased supplying or cut demand. So you've got to do
Speaker 4: a bit of both, and that supplies removing tabs and
Speaker 4: demand does that then it's going.
Speaker 3: To hurt the economy. We're in a.
Speaker 4: Capita recession and doesn't look like a recession because of
Speaker 4: you know, all the money we're importing, so you've got
Speaker 4: to slow that down and increased densities. But I look
Speaker 4: at a lot of it go back onto the culture
Speaker 4: part two. I really think people have just got to
Speaker 4: get out of their head. You need a four bedroom house,
Speaker 4: you know, as a young person out like you either
Speaker 4: stage it up like I mentioned, and that's going to
Speaker 4: cost you a lot of time or money, or be
Speaker 4: prepared to rent for twenty years and then just work
Speaker 4: on the side and invest your way into it.
Speaker 2: Well, you've had extraordinary success in a period of under
Speaker 2: twenty years. Could you do it now? Starting now, same philosophy,
Speaker 2: same theories. Could you do it?
Speaker 4: You could slightly slower rate, but like interest rates were
Speaker 4: similar when I was starting.
Speaker 3: The house prices for achieved, but so were wages.
Speaker 4: But look, the big ticket is like eleven times the
Speaker 4: average in converse, it's probably about seven or eight when
Speaker 4: I started. So it has got more unaffordable. It doesn't
Speaker 4: mean it can't be done. You've just got to be
Speaker 4: a little bit more location agnostic.
Speaker 2: This intergenerational justice, are we going to solve it? Are
Speaker 2: we going to bring intergenerational justice without the sort of
Speaker 2: changes you talked about, because no government's going to do them,
Speaker 2: as we discussed earlier, they just won't do them. They'll
Speaker 2: convince us they're doing other things. They'll throw subsidies at
Speaker 2: your first home buyers. They won't do it.
Speaker 1: And the other political challenge is that most Australians own
Speaker 1: the home, so if they are going to do any
Speaker 1: policy that is going to rattle home prices, they're just
Speaker 1: not going to get the votes polling day. So that's
Speaker 1: the challenge really.
Speaker 2: By the way, Tom, in interest rates, my first house,
Speaker 2: I had no my second house, I'd an interest rate
Speaker 2: at thirteen and a half percent, and my friends were
Speaker 2: so jealous because the going rate was eighteen percent and
Speaker 2: I'd locked in at thirteen and a half. However, I
Speaker 2: must admit it cost me. The equivalent value of the
Speaker 2: house was two years salary, as my kids keep reminding me.
Speaker 2: So we've drawn up a list of who's to blame here.
Speaker 2: Government number one, stamp duty number two, immigration number three,
Speaker 2: and greedy boomers number four. So the boomers make the
Speaker 2: list or not.
Speaker 1: I think they do. I think they've just been a benefactor, Scott.
Speaker 4: Look, I get why younger people might be envious of,
Speaker 4: you know, for a university, cheaper homes, et cetera.
Speaker 3: But the reality is it's it's not.
Speaker 4: Their fault that they're just a product of the system.
Speaker 4: So you know, I don't hate the player, hate the game.
Speaker 2: I won't hate the boomers and one of them obviously.
Speaker 2: Thank you so much for your time. It's really good
Speaker 2: to talk to you. I hope that that's helped you.
Speaker 2: We get a bit glib in the reporting of this area,
Speaker 2: and you know, government does this, They're going to do that.
Speaker 2: Opposition says this, then they do the same thing. Interest
Speaker 2: right to coming down there for people will buy more houses.
Speaker 2: It's just oversimplified and I think we've I think you
Speaker 2: have dug into it beautifully. Thanks for your time, doctor
Speaker 2: Nicola Powell Domain ahead of research at Domain. Scott O'Neill
Speaker 2: rethink investing now. Just before I leave you to your life,
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