Latest / The Money Puzzle / Villa Units: What's not to like for the smart investor?

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Villa Units: What's not to like for the smart investor? · The Money Puzzle

0:06
Speaker 1: Hello and welcome to The Australian's Money Puzzle Podcast. I'm
0:09
Speaker 1: James Kirby, the wealth editor at The Australian.
0:12
Speaker 2: Welcome aboard, everybody. On the last time that I had
0:23
Speaker 2: Sarah Petty on the show, she's the property reporter on.
0:26
Speaker 1: The podcast, so a great response. She gave a particular
0:29
Speaker 1: perspective of Gen Z in the property market and she's
0:32
Speaker 1: back today And we are going to talk about some
0:35
Speaker 1: red hot issues in property for property investors, for anyone
0:39
Speaker 1: in the world of property just now. Rentals still rising,
0:43
Speaker 1: insurance going through the roof. We're going to look at
0:48
Speaker 1: a popular, but I have to tell you, debatable concept
0:52
Speaker 1: that you see reported all the time where they say
0:55
Speaker 1: you can buy cheaper than rent in certain suburbs. And
0:59
Speaker 1: I see that starting to happen again now. I see
1:01
Speaker 1: those stories coming through. And I just want to ask
1:04
Speaker 1: Sarah about the reality of that and a few other things,
1:07
Speaker 1: including the rather spectacular story she had recently where she
1:12
Speaker 1: found an apartment that was for sale in Melbourne, metropolitan Melbourne,
1:17
Speaker 1: for $ 99, 000. Story behind that one. Story behind all these stories,
1:22
Speaker 1: isn't there?
1:23
Speaker 2: How are you, Sarah? I'm good.
1:24
Speaker 3: How are you, James?
1:25
Speaker 2: Good, good. Thanks for coming on the show. Thank you.
1:28
Speaker 2: Great to have you on again. I saw where you
1:30
Speaker 2: had something recently.
1:31
Speaker 1: Rents, we know, are climbing all the time and the
1:35
Speaker 1: vacancy rate is still very, very tight and I don't
1:37
Speaker 1: see any great changes to that. But when we looked
1:41
Speaker 1: at the recent inflation figures and the inflation figures, if
1:44
Speaker 1: you recall, folks, were a surprise, a negative surprise. It's
1:46
Speaker 1: one of the reasons they're talking about rates staying up
1:49
Speaker 1: but not going higher, was that the 4% annualized inflation
1:53
Speaker 1: was driven by two things in particular. One was rentals,
1:57
Speaker 1: both related to property. One was rentals, rental costs. And
1:59
Speaker 1: the other was insurance. And house insurance has really taken
2:05
Speaker 1: off on a trajectory that is slightly disconcerting, I imagine,
2:10
Speaker 1: for anybody.
2:11
Speaker 3: Well, I can say that in Victoria, building insurance has
2:16
Speaker 3: been increased. So domestic building insurance is going to go
2:19
Speaker 3: up another 65%.
2:20
Speaker 1: Essentially....
2:24
Speaker 3: The building insurance already went up 11 months ago by
2:28
Speaker 3: about 43%. So you can imagine that this is going
2:31
Speaker 3: to have a pretty big effect on those that are
2:33
Speaker 3: wanting to build their own home.
2:35
Speaker 2: Can you repeat the numbers? What happened last year and
2:37
Speaker 2: what's going to happen this year?
2:38
Speaker 3: So in September last year, there was already an increase
2:41
Speaker 3: to domestic building insurance by 43%. And then this year,
2:44
Speaker 3: about a month ago, insurance has been increased by another 65%.
2:48
Speaker 2: So extraordinary exactly it's multiples of what inflation is i
2:55
Speaker 2: know this is an issue across the nation and i
2:57
Speaker 2: know that from the national inflation figures so what's the explanation.
3:01
Speaker 3: Essentially i think they're trying to crack down on builders
3:04
Speaker 3: i mean there is a lot of talk about there
3:07
Speaker 3: being some dodgy building practices out there so that's the
3:10
Speaker 3: victorian managed insurance authorities position but in terms of repercussions
3:15
Speaker 3: i think is that those that are looking to build
3:18
Speaker 3: their own home yeah builders are likely to pass on
3:20
Speaker 3: those extra costs to them.
3:22
Speaker 1: So they crack down on dodgy builders by charging all
3:25
Speaker 1: builders higher insurance.
3:27
Speaker 3: Yes.
3:28
Speaker 2: Oh, that's terrible.
3:29
Speaker 1: I didn't know about that. It hasn't come up before.
3:32
Speaker 1: I did notice that the insurance figures were just completely
3:35
Speaker 1: out of line. This is an ongoing problem across the
3:37
Speaker 1: investment system, really. In an entirely different world, in financial
3:41
Speaker 1: planning and financial advice, for instance, they have a new
3:45
Speaker 1: scheme of last resort, it's called, where if the company
3:49
Speaker 1: that you got advice from goes under, you can now
3:52
Speaker 1: get covered on that.
3:54
Speaker 2: Basically, it's a form of insurance. But it's the same problem.
3:57
Speaker 1: They're charging the existing advisors for the sins, if you like,
4:01
Speaker 1: of other advisors. Here they are charging the existing builders
4:04
Speaker 1: for sort of the doings of other bad builders.
4:07
Speaker 2: Okay, I see.
4:08
Speaker 3: I will also add that they're also trying to crack
4:10
Speaker 3: down on... There's obviously been insolvencies, Porter Davis... being one
4:15
Speaker 3: of them. So, yeah, insolvencies, inflation, and skilled worker shortages
4:19
Speaker 3: are also another reason why the premiums have increased. So
4:22
Speaker 3: basically to ensure home buyers are protected. That's what they've said.
4:26
Speaker 2: But they protect them. They make everything dearer for them.
4:30
Speaker 3: But they're going to be the ones that.
4:32
Speaker 2: Pay, probably.
4:33
Speaker 1: Gee, yeah, that's so difficult. And one of the things
4:37
Speaker 1: about that in terms of we also mentioned on the show,
4:40
Speaker 1: and a couple of people got very hot under the collar,
4:43
Speaker 1: in recent times, about lender's mortgage insurance, a similar thing
4:46
Speaker 1: that everybody must pay. But, you know, the figures suggest that,
4:50
Speaker 1: in fact, the defaults are tiny on this, even at
4:54
Speaker 1: the moment. But just to cover off on that, about
4:57
Speaker 1: the builders. So there is a number of builders going under.
4:59
Speaker 1: I know that insolvencies are at a record. I know
5:02
Speaker 1: that bankruptcies.
5:03
Speaker 2: Are at a record.
5:05
Speaker 1: They're at the highest since ASIC started collecting figures. And
5:10
Speaker 1: I was actually on radio this morning, we were talking
5:12
Speaker 1: about How also there's a debt hotline in Sydney and
5:16
Speaker 1: the managers of that debt hotline said that they have
5:19
Speaker 1: had more complaints and concern calls this year already than
5:23
Speaker 1: they had all of last year.
5:26
Speaker 2: So for first home buyers.
5:30
Speaker 1: Have you any sense of that segment of people who
5:31
Speaker 1: go to own, go to build their own house? Was
5:34
Speaker 1: it traditionally seen as some sort of a cheaper way.
5:36
Speaker 3: To do it? I mean, from my understanding, there has been,
5:39
Speaker 3: you know, enticing offers in order for people to, buy
5:43
Speaker 3: that sort of piece of land and then build their
5:46
Speaker 3: own home. But in terms of increased construction costs, increased
5:51
Speaker 3: labour shortages, that isn't at all an enticing option, especially
5:56
Speaker 3: for young buyers such as myself.
5:59
Speaker 2: Yes, yeah. Or it used to be. So people feel
6:02
Speaker 2: it's so sort of ridden with risk. Ridden with risk, yeah, absolutely.
6:06
Speaker 3: And even just ensuring that your home is built, you know,
6:09
Speaker 3: to the best standard as well.
6:11
Speaker 2: Yes, I can imagine. Yeah, I see.
6:14
Speaker 1: OK, so that was that one, folks. I wanted to
6:16
Speaker 1: just put that on the table because I noticed the
6:17
Speaker 1: insurance popping.
6:18
Speaker 2: Out, if you like, on the inflation numbers.
6:20
Speaker 1: And of course, it turns out, well, the property market
6:23
Speaker 1: is at the heart of it, both on rentals and insurance. Now,
6:27
Speaker 1: on another issue, the sort of story that we will regularly,
6:31
Speaker 1: and mea culpa, I've never actually told this story, but
6:36
Speaker 1: the Australian runs stories like this. The Halsan runs stories.
6:39
Speaker 1: Everyone runs stories like this. It's a great eye catcher.
6:42
Speaker 1: people say, or a reporter says, hey, look, you know,
6:45
Speaker 1: some researcher comes out and says, hey, if there's six
6:49
Speaker 1: suburbs in Brisbane, or there's 12 suburbs in Melbourne, where
6:54
Speaker 1: it's cheaper to.
6:55
Speaker 2: Buy than rent.
6:57
Speaker 1: And what really caught my eye recently was inner city suburbs. Carlton,
7:02
Speaker 1: in the middle of Melbourne, attractive suburb by anyone's estimation,
7:08
Speaker 1: is on this list. But I just want to ask you,
7:11
Speaker 1: have you ever looked at it and do you find those,
7:14
Speaker 1: is it fair actually to put that in front of
7:16
Speaker 1: people and get them all excited? I mean, did we
7:18
Speaker 1: tell this whole story when we do those stories?
7:21
Speaker 3: I recently did a story on this.
7:23
Speaker 2: I mean, look, yeah.
7:25
Speaker 3: I mean, it's always good to know your options. And
7:27
Speaker 3: I guess I think everybody, especially first-time buyers, are looking
7:30
Speaker 3: for any positivity that they can find in the market
7:33
Speaker 3: at the moment. But I recently wrote a story based
7:36
Speaker 3: on some data that we've received. And yeah, Carlton was
7:39
Speaker 3: one of them. Something important to note, and there are
7:41
Speaker 3: a couple of disclaimers with this, is when we look
7:44
Speaker 3: at data like this, you've got to think about the
7:46
Speaker 3: composition of these suburbs. So places like Carlton, another couple
7:50
Speaker 3: that I had on the list where it would be
7:52
Speaker 3: cheaper to buy them rent would be Travencore in Melbourne. So, yeah,
7:57
Speaker 3: obviously I'm speaking from a Victoria-centric position here. These are
8:01
Speaker 3: all places that are very close to the city and
8:03
Speaker 3: have a large amount of units. And when you have
8:06
Speaker 3: a large number of units, that drags the median dwelling
8:09
Speaker 3: value down. So some of the data I received, yes,
8:12
Speaker 3: if a buyer puts down a 20% deposit, these were
8:17
Speaker 3: some of the suburbs that would cost less to essentially
8:20
Speaker 3: service a mortgage rather than rent.
8:22
Speaker 1: Okay.
8:22
Speaker 2: Have you got a list of them there? Yeah, I've
8:24
Speaker 2: got a few here. Give us your four or five favourites.
8:26
Speaker 3: Okay. Again, this is all Victoria, but Abbotsford, Docklands, North Melbourne, Travencore,
8:32
Speaker 3: Notting Hill and Box Hill.
8:33
Speaker 1: Okay, and this would be mirrored in other cities around
8:36
Speaker 1: the country. But the point I'm going to drive at
8:38
Speaker 1: here is, so the thing is, when we see these reports,
8:41
Speaker 1: what they say is, the interest you would pay on
8:45
Speaker 1: your mortgage is less than the rent you would pay
8:48
Speaker 1: to the property owner.
8:50
Speaker 2: And that is true, as far as it goes. It
8:52
Speaker 2: is true. But the thing is, when you own a place,
8:55
Speaker 2: it's a lot more cost than interest. Do people fully
8:59
Speaker 2: understand that, do you think?
9:01
Speaker 3: I mean, it depends if you own a property or not.
9:04
Speaker 2: Yeah.
9:05
Speaker 3: There's a lot of costs and, yeah, there is quite
9:07
Speaker 3: a large priority to entry in terms of actually getting
9:09
Speaker 3: into the market.
9:10
Speaker 2: Yeah.
9:11
Speaker 3: And depending on what government schemes you're eligible for, but, yeah,
9:15
Speaker 3: there's SAMG, there's MI, or when there's mortgage insurance.
9:19
Speaker 2: Yeah, that's right.
9:21
Speaker 1: I would say to people listening, when you see those reports,
9:23
Speaker 1: take it on board, but just don't be under the
9:26
Speaker 1: impression you can match this very simply, the mortgage repayments
9:30
Speaker 1: against the rent payments. You can't, unfortunately, because there are
9:33
Speaker 1: running costs. I'm going to pick a number out here.
9:36
Speaker 1: The average apartment risk will be 10 to 20 grand
9:39
Speaker 1: a year of just costs. There's body corporate costs, there's
9:42
Speaker 1: insurance costs, LMI, lender's mortgage insurance, all these various things
9:47
Speaker 1: that will come up. I suppose the other thing about that,
9:52
Speaker 1: in a way, it's great to see that you can
9:54
Speaker 1: do that, And that there are places you can buy
9:57
Speaker 1: that cost less than they.
9:59
Speaker 2: Do to rent.
10:00
Speaker 1: But what the real situation here is that the rent
10:03
Speaker 1: is so high yes the rents are so crazy.
10:06
Speaker 3: Yes I think on average rents across the nation have
10:09
Speaker 3: gone up about 10% in the last 12 months so
10:12
Speaker 3: yes that's true and yeah like what you said in
10:14
Speaker 3: terms of if you do decide to buy a unit
10:17
Speaker 3: yeah you do have all those extra costs like things
10:20
Speaker 3: yeah and everything yes rents have skyrocketed so that's the
10:23
Speaker 3: main point you know some people are paying 50 extra
10:27
Speaker 3: a week that compared to months.
10:29
Speaker 1: Ago yes i asked you the last time you were
10:31
Speaker 1: on we were talking about the the unreported side of
10:35
Speaker 1: the property market where people bid so they go in
10:41
Speaker 1: and the person says hey this rental it's so much
10:43
Speaker 1: per week and the person catches them in the corridor
10:45
Speaker 1: and says what if i toss an extra $ 10, $ 20
10:47
Speaker 1: at it per week.
10:49
Speaker 2: Does that happen and does it work?
10:51
Speaker 3: Yes, it happens all the time. An agent can't say,
10:54
Speaker 3: you know, you should add an extra $ 10 onto your offer.
10:58
Speaker 3: They can't advise that, but renters are more than willing
11:02
Speaker 3: to or more than allowed to add an extra $ 10,
11:04
Speaker 3: $ 20 to your week to get ahead of the pack.
11:07
Speaker 3: But in Victoria, that in the first housing statement in
11:11
Speaker 3: September last year, they are trying to outlaw all types
11:14
Speaker 3: of biddings.
11:15
Speaker 2: At the moment, you can't solicit it. The agent can't say, hey,
11:17
Speaker 2: you want to pay more? What if you volunteer? You
11:19
Speaker 2: can volunteer.
11:21
Speaker 3: Fine.
11:21
Speaker 2: Yeah, I see. Okay, very good. It's really interesting. We'll
11:26
Speaker 2: take a short break. Back in a moment.
11:38
Speaker 1: Hello and welcome back to the Australian's Money Puzzle podcast.
11:41
Speaker 1: I'm James Kirby, the web editor.
11:43
Speaker 2: At The Australian. It's Tuesday, I'm talking property, property investment.
11:51
Speaker 1: And my guest today is Sarah Petty, property reporter from
11:54
Speaker 1: the Harris Sun, who is out there, folks, at the auctions,
11:58
Speaker 1: on the street, talking to the agents, the buyers, advocates,
12:01
Speaker 1: the buyers, which I find the most interesting aspect of
12:04
Speaker 1: a lot of the stories she does. She's talking to
12:06
Speaker 1: the people who are actually trying to invest or trying
12:08
Speaker 1: to buy at the moment.
12:10
Speaker 2: So she's a very good notion of what it's like.
12:11
Speaker 1: Sarah, if I said to you, I'm in a position
12:15
Speaker 1: to buy my first property anywhere in Australia, any type,
12:18
Speaker 1: And I said to you, would you like to advise
12:20
Speaker 1: me the nature of that property?
12:22
Speaker 2: What would you say? What would you say?
12:24
Speaker 3: Okay, well, if you're just buying your first property, what
12:28
Speaker 3: I would say is those granny flats, you know, those
12:31
Speaker 3: single level dwellings.
12:33
Speaker 2: They're.
12:35
Speaker 3: A really good buy.
12:36
Speaker 1: That's really interesting. You mentioned that Stuart Weems was on
12:39
Speaker 1: the show last, maybe last week, and he said the
12:42
Speaker 1: same thing.
12:43
Speaker 2: He had a villa units.
12:45
Speaker 3: Villa units.
12:46
Speaker 2: Unfashionable, but perhaps lucrative option.
12:50
Speaker 3: Oh, very much so. And actually fashionable, I would say
12:52
Speaker 3: at the moment, especially for first home buyers. I've Seen
12:56
Speaker 3: at auctions, them going for $ 100, 000 over a certain price.
13:00
Speaker 3: So they're just a smaller house, essentially. And some of
13:03
Speaker 3: them even have a backyard.
13:04
Speaker 1: And they're in every city. Every city in Australia is
13:07
Speaker 1: full of them. As you know, folks, they were built
13:08
Speaker 1: from the 60s to the 80s.
13:09
Speaker 2: We're talking about, you know.
13:10
Speaker 1: The suburban street. There are six fillet units, three on
13:13
Speaker 1: one side, three on the other. Road down the middle,
13:15
Speaker 1: six bins on the front. But Stuart was making the point,
13:18
Speaker 1: why don't you buy one?
13:19
Speaker 2: You literally get land value. You get a garden. You
13:22
Speaker 2: get a garage. You basically get a house. What's wrong
13:24
Speaker 2: with them? They're not cool.
13:27
Speaker 3: They're not cool, I guess, but I'm 27 and I
13:31
Speaker 3: think they're pretty cool as opposed to getting a unit.
13:34
Speaker 3: They're actually pretty cool to me.
13:37
Speaker 2: Yeah, well, it's funny.
13:38
Speaker 1: It might surprise you, but I lived in one for
13:41
Speaker 1: a year and a half, just a year and a
13:43
Speaker 1: half ago because we built a house on the street
13:47
Speaker 1: and we lived on, luckily enough, we rented on the
13:52
Speaker 1: street that we were building the house on. And it
13:54
Speaker 1: ended up being there for a year and a half
13:56
Speaker 1: during COVID, if you don't mind. But it was very
13:59
Speaker 1: interesting to me. I'd never been in a villa unit before.
14:02
Speaker 2: And they were so trouble-free, first of all.
14:06
Speaker 1: And the other people, there was only six in the
14:11
Speaker 1: block and it was all very, all terribly, everyone was well-behaved.
14:17
Speaker 2: Everyone was very interested in keeping it nice. It wasn't
14:20
Speaker 2: particularly good.
14:21
Speaker 1: It wasn't particularly bad, but it did strike me, gosh,
14:24
Speaker 1: A couple moved in next door, a couple with a.
14:27
Speaker 2: Baby, and it struck me like they had absolutely everything.
14:30
Speaker 2: A bit of back garden. Front garden tends to be common.
14:33
Speaker 2: Back garden tends to be your own. But you get
14:36
Speaker 2: a lot back for your buck. And they were keenly priced,
14:40
Speaker 2: I thought, compared to apartments and townhouses. Very interesting. Okay,
14:43
Speaker 2: I love your answer. Now, tell me, while.
14:46
Speaker 1: We have you in the studio, about your recent story
14:50
Speaker 1: where you found an apartment in Melbourne, metropolitan Melbourne, and
14:54
Speaker 1: it's sold, sold for $ 99, 000. And everyone says, what was
15:02
Speaker 1: the issue with that apartment?
15:03
Speaker 2: What was the issue and what was the story?
15:06
Speaker 3: Well, obviously there's a little asterisk next to this sale,
15:10
Speaker 3: but yes, essentially an apartment in Frankston sold for $ 99, 000
15:14
Speaker 3: and some in this building have actually sold for even less, $ 70, 000.
15:19
Speaker 3: So it's formerly called the Ambassador Hotel, which was a
15:22
Speaker 3: ritzy wedding venue back in the 80s and 90s, but
15:25
Speaker 3: then later became a bit of a hub for vandalism,
15:29
Speaker 3: antisocial behaviour, a couple of incidents, drug-punished incidents.
15:34
Speaker 2: That was notorious.
15:35
Speaker 3: Paramedics apparently wouldn't go unless they were assisted by police. Wow. However,
15:41
Speaker 3: the agent that I spoke to said that it has
15:45
Speaker 3: since cleaned up a lot. Another caveat is that there
15:48
Speaker 3: is an overlay. We can't technically make one of those
15:52
Speaker 3: properties your principal place of residence. However, the agent said
15:56
Speaker 3: that that was ridiculous.
15:57
Speaker 2: I never heard of such a thing.
15:58
Speaker 3: And lots of people were living there and having one
16:02
Speaker 3: after 10 years. So, yes, it does have a bit
16:04
Speaker 3: of a troubled past. However, the latest one that sold
16:08
Speaker 3: was actually to an older gentleman and he And he
16:12
Speaker 3: said that they're a great investment and apparently steps from
16:14
Speaker 3: the beach as well.
16:15
Speaker 2: I know it.
16:16
Speaker 1: I cycle past it sometimes. Yes, it's on the main road.
16:20
Speaker 1: But the point, folks, is not so much where it
16:24
Speaker 1: is because we don't think we'd all.
16:25
Speaker 2: Rush to it.
16:26
Speaker 1: But it's a market and people will overpay and underpay.
16:31
Speaker 1: And I think if there's a theme on the show
16:33
Speaker 1: today from Sarah, It's that if you find that property
16:37
Speaker 1: that in some way doesn't conventionally fit what everyone else wants,
16:40
Speaker 1: then you may actually get value.
16:42
Speaker 2: So for instance, on.
16:43
Speaker 1: The broad overall team, everyone's running around looking for the,
16:47
Speaker 1: they want the pretty house on the beauty street, or
16:49
Speaker 1: they want the apartment with the view or whatever. And
16:52
Speaker 1: there are these villa units in every suburb in Australia,
16:55
Speaker 1: and they have land value, which every investor should know about.
16:59
Speaker 2: And they are seen from several guests on our show.
17:03
Speaker 2: It's two in a row now. That's great value at
17:05
Speaker 2: the moment, so keep that in mind.
17:06
Speaker 1: And the other thing is, obviously, if you aren't prepared
17:08
Speaker 1: to take a risk, every property is different, and it's
17:11
Speaker 1: not like shares. All common bank shares are the same,
17:13
Speaker 1: but not all property investments are the same. I thought
17:16
Speaker 1: it was amazing that someone actually bought a property for.
17:20
Speaker 2: $ 99, 000.
17:21
Speaker 1: Lock, stock, and barrel for Metropolitan Melbourne. How wrong can
17:25
Speaker 1: you go? You can't go wrong.
17:26
Speaker 3: And he even said he doesn't even need to put
17:27
Speaker 3: them on the market. I mean, you can imagine why.
17:29
Speaker 3: There's a waiting list of people trying to get to
17:32
Speaker 3: this block now.
17:33
Speaker 2: There you go. In this market? It's fascinating. Absolutely fascinating.
17:41
Speaker 1: Okay, we'll be back in a moment with a couple
17:42
Speaker 1: of questions. Hello, welcome back to the Australian's Money Puzzle podcast.
17:57
Speaker 1: James Grabby with Sarah Petty. We are talking property and
18:05
Speaker 1: we are going to have some property questions now.
18:09
Speaker 2: Actually, this first one is property.
18:10
Speaker 1: It's from Luke and it's about super. The reason I've
18:15
Speaker 1: just dropped this in here is just to tell you
18:17
Speaker 1: folks that we really did have a big response, needless
18:21
Speaker 1: to say, from the show, How Much Should You Have
18:24
Speaker 1: in Super? And just like I mentioned on the newspaper,
18:27
Speaker 1: I reckon we could run a show called How Much
18:29
Speaker 1: Should You Have in Super? I reckon we could run
18:31
Speaker 1: one every month and we would probably have endless listeners,
18:34
Speaker 1: because it's a question that there is no answer to, unfortunately,
18:38
Speaker 1: no simple answer. It's different for every single person, but
18:42
Speaker 1: everybody really wants to know. And it was a really
18:44
Speaker 1: good show with Ashley Owen, and if you've missed it,
18:47
Speaker 1: it would be a good idea to listen back to it.
18:51
Speaker 2: Because, as I say, it's a key issue. It's particularly
18:55
Speaker 2: a key.
18:55
Speaker 1: Issue in our society, in our economy, because super is compulsory.
19:01
Speaker 1: and 11.5% of your salary is going into this every year.
19:05
Speaker 2: 11.5% of your salary.
19:06
Speaker 1: So you want to know as much as you can
19:09
Speaker 1: about it. Check out that show with Ashley Owen. One
19:11
Speaker 1: of the many questions, we'll deal with the questions on
19:13
Speaker 1: Thursday's show, but one of the many questions was from Luke,
19:17
Speaker 1: who says, as well as maximizing last financial year's concessional
19:20
Speaker 1: contributions to Super, I've accidentally put in about.
19:24
Speaker 2: $ 200 more than I was allowed. What will happen next?
19:29
Speaker 2: The ATO will come to your house and take you away, Luke. No,
19:32
Speaker 2: I'm only kidding.
19:33
Speaker 1: This is never advice. This is general information. And I
19:36
Speaker 1: don't have a second opinion here on the show. I
19:38
Speaker 1: would just say that occasionally over the years in my
19:41
Speaker 1: deep enthusiasm to contribute as much as possible to super,
19:45
Speaker 1: I have gone over once or twice a tiny bit
19:49
Speaker 1: and I'm happy to say I wasn't fined or anything.
19:52
Speaker 1: You can be fined, whether it's their benevolence that they
19:55
Speaker 1: let you off with small numbers or whether their systems
19:58
Speaker 1: are so accurate, I don't know.
20:00
Speaker 2: Obviously, you try to avoid it. And I suppose, indeed,
20:03
Speaker 2: just a fair play.
20:05
Speaker 1: What you could do, obviously, is if you're putting in
20:07
Speaker 1: 30,000 a year, And one year you put in 31,000,
20:10
Speaker 1: you didn't mean to, then put in 29,000 the next,
20:14
Speaker 1: and if it ever should come up with the ATO,
20:16
Speaker 1: you could say that I honestly tried to reconcile the
20:19
Speaker 1: issue there.
20:19
Speaker 2: Okay, now back to the property questions. Marnie, M-A-R-N-I-E.
20:26
Speaker 1: On the issue of lenders' mortgage insurance, it seems to
20:30
Speaker 1: me the most unfair slug on homebuyers as the default
20:35
Speaker 1: rates are tiny. Surely the insurance risks are tiny too. Yeah,
20:40
Speaker 1: I'd say they are.
20:41
Speaker 2: But because the banks made it compulsory, it's become a
20:44
Speaker 2: big business. Lenders' mortgage insurance, you mentioned it a couple
20:49
Speaker 2: of times.
20:49
Speaker 1: Could you tell readers and business owners what it is
20:52
Speaker 1: and why it's a thorn in the shoe of the
20:56
Speaker 1: average homebuyer?
20:57
Speaker 3: Yeah, so lenders' mortgage insurance is insurance a lender takes
21:01
Speaker 3: out to insure itself against the risk of a borrower
21:05
Speaker 3: being unable to meet their loan repayments.
21:08
Speaker 2: Okay, okay.
21:09
Speaker 3: Yes.
21:09
Speaker 1: It doesn't happen very often. The records show Australian homebuyers
21:13
Speaker 1: don't default very often.
21:14
Speaker 2: Very, very, very rarely.
21:16
Speaker 3: I think especially in an environment of high interest rates,
21:19
Speaker 3: most banks are willing to refinance. It's very much the last.
21:23
Speaker 2: Okay.
21:24
Speaker 1: Actually, I've been doing some very interesting work of late
21:31
Speaker 1: on what's going on with mortgage holders and how they're
21:33
Speaker 1: trying to survive through this particular period of what would
21:35
Speaker 1: seem to be high interest.
21:37
Speaker 2: Relatively high rates. Relatively high.
21:40
Speaker 1: They're not sky high, by the way, on a historical basis,
21:42
Speaker 1: but they're relatively high. But two things are happening. People
21:45
Speaker 1: are flicking to interest-only investors when they can. What I
21:49
Speaker 1: thought was really interesting was about mortgage extenders. Have you
21:52
Speaker 1: seen that, where an increasing amount of people are extending
21:57
Speaker 1: the life of their mortgage? So what you do is
22:00
Speaker 1: you say, I cannot find any savings. I've got this mortgage.
22:04
Speaker 1: How am I going to manage it? And what they
22:07
Speaker 1: do is they renegotiate with the bank and they add
22:09
Speaker 1: five years. And then suddenly your payments. So we made
22:13
Speaker 1: out that basically for the average person in that position,
22:16
Speaker 1: their payments come down about 200 bucks a month. But
22:20
Speaker 1: their loan goes up.
22:23
Speaker 2: On $ 150, 000 over the fullness of time. But people say, hey,
22:27
Speaker 2: you know, I've faced that problem.
22:29
Speaker 3: It's a future.
22:30
Speaker 2: It's a picking the can down the road exercise. But anyway.
22:34
Speaker 2: It is what's happening.
22:35
Speaker 1: And if you wonder how are people paying their mortgages
22:38
Speaker 1: when there's such rampant inflation, especially at the consumer side
22:42
Speaker 1: and the discretionary spending side, well, that's what's going on.
22:45
Speaker 1: There's a lot of that going on behind the scenes.
22:47
Speaker 3: Okay.
22:48
Speaker 1: That was the lender's mortgage insurance, which again, unfortunately, is
22:51
Speaker 1: unavoidable for most people unless you've got a fucking huge deposit.
22:55
Speaker 1: There's not much you can do about that, folks. But
22:56
Speaker 1: you can keep in mind that you can refinance. You
22:59
Speaker 1: can fit two interests only if you're an investor, say,
23:02
Speaker 1: and you're struggling with the investment you have. And you
23:04
Speaker 1: can extend the life of your mortgage if you were
23:06
Speaker 1: a home owner struggling with your insurance. I think they're
23:11
Speaker 1: useful for people to know, useful for techniques. Okay, final
23:15
Speaker 1: question was from Josh.
23:19
Speaker 2: Is the government's shared equity scheme up and running?
23:23
Speaker 1: Do you recommend it? Thank you, Josh. We don't give advice,
23:27
Speaker 1: but the government, to be precise, the Albanese government's shared
23:31
Speaker 1: equity scheme is really different than all the other.
23:33
Speaker 2: Grants, isn't it? Because the deal is you and the
23:36
Speaker 2: government buy the house together. Yes. Does it exist yet? No.
23:42
Speaker 3: So it's held up in Senate at the moment, but
23:45
Speaker 3: if everything goes to plan, it will pass and be
23:48
Speaker 3: up and running by the end of this year.
23:50
Speaker 2: Okay.
23:51
Speaker 3: All right. I see.
23:52
Speaker 2: So it's not actually, okay, not out yet. Not out yet.
23:55
Speaker 3: Can you apply? I wonder.
23:57
Speaker 2: I think so.
23:57
Speaker 3: Well, Queensland is set to be the first to roll
24:00
Speaker 3: out the shared equity scheme. So it's not up and
24:03
Speaker 3: running yet, but it will be.
24:05
Speaker 1: And so how it works is that you and the
24:08
Speaker 1: government together will buy the house. And how does the
24:11
Speaker 1: deal end?
24:11
Speaker 3: Basically, government contributes up to 40% towards your mortgage loan.
24:18
Speaker 3: You can put down as little as 2%. However, that
24:20
Speaker 3: also means on the other side, when you sell your home,
24:22
Speaker 3: they will be able to take the size of the pie.
24:26
Speaker 2: Or 20% or whatever.
24:28
Speaker 3: Or however much they contribute. Yes, they'll be able to
24:31
Speaker 3: take that in terms of your equity. But it also
24:34
Speaker 3: works the same way as if the property price goes down.
24:38
Speaker 3: So just the amount that they'll be able to take
24:39
Speaker 3: from that.
24:40
Speaker 2: Yeah.
24:41
Speaker 1: Right. I know a lot of the Australians, a lot
24:44
Speaker 1: of the readers and commenters did not like sharing anything
24:47
Speaker 1: with the government. But again, if you were, you know,
24:50
Speaker 1: if you really needed to get to buy that place
24:53
Speaker 1: and if you didn't have any other option.
24:55
Speaker 3: Yeah.
24:56
Speaker 1: I studied it closely because I wrote on it. Interestingly,
25:01
Speaker 1: in the UK, they had this game and it was
25:03
Speaker 1: actually created by the Conservatives, not the Labour government, because Conservatives,
25:10
Speaker 1: as you know, were in for 14 years in a
25:11
Speaker 1: row there. And so they introduced this scheme, and then
25:14
Speaker 1: they had a.
25:15
Speaker 2: House of Lords do a review of the scheme.
25:17
Speaker 1: And basically, they came out with a conclusion that it
25:21
Speaker 1: didn't do much for the provision of housing in the market.
25:25
Speaker 1: You often get that sort of conclusion on a macro level,
25:28
Speaker 1: but for an individual, they're just saying, it doesn't work
25:30
Speaker 1: for me. So I think for listeners, it's worth checking
25:33
Speaker 1: out that.
25:34
Speaker 3: Shared equity scheme. Yeah, you know, it depends on what
25:36
Speaker 3: you do. If you're just purely trying to find a
25:39
Speaker 3: home and get into the market, then it could be
25:42
Speaker 3: an option, not giving any advice, of course.
25:45
Speaker 2: It could be an option anywhere in the country, as
25:48
Speaker 2: long as it's their first home. Is that the deal? Yes, absolutely.
25:51
Speaker 3: So, yeah.
25:52
Speaker 1: Right.
25:53
Speaker 2: So you get perhaps shared equity on a villa unit.
25:56
Speaker 1: Yes.
25:57
Speaker 2: Somewhere. There you go.
26:00
Speaker 3: It's a property.
26:01
Speaker 2: The new hot property. So you heard it here first, folks.
26:03
Speaker 2: You heard it here, actually. You asked me, too. But
26:05
Speaker 2: you're hearing it here quite regularly.
26:07
Speaker 1: All right.
26:08
Speaker 2: Very good. Hey, thank you very much, Sarah. Very, very interesting,
26:11
Speaker 2: as always.
26:12
Speaker 1: It's a great round you have out there, and it's
26:17
Speaker 1: something that everyone, everybody's interested in. I watch what you do,
26:21
Speaker 1: and I find some of the stories really, really interesting.
26:23
Speaker 1: I told the one about the $ 99, 000 apartment, particularly so.
26:33
Speaker 2: Thanks a lot, Sarah. Great to have you on the show.
26:35
Speaker 2: We'll talk again. Thank you, folks.
26:38
Speaker 1: Do keep those emails coming. The address is themoneypuzzleattheaustralian.com.au.
26:43
Speaker 2: Talk to you soon.
27:00
Speaker 1: Thank you.