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New order: How Canberra and Brisbane now outpace Melbourne · The Money Puzzle

• 0:11
  Speaker 1: Hello and welcome to the Australian's Money Puzzle podcast. I'm
• 0:15
  Speaker 1: James Kirby, the wealth editor at The Australian. Welcome aboard, everybody.
• 0:18
  Speaker 1: If you're a property investor, you're probably watching some key
• 0:21
  Speaker 1: numbers this week out of the budget and it's promised
• 0:24
  Speaker 1: to drop in inflation. If inflation drops, rates should drop.
• 0:30
  Speaker 1: And if the government puts, you know, a cumulative 30
• 0:34
  Speaker 1: billion into a housing market in a spectrum of support initiatives,
• 0:41
  Speaker 1: Mostly at the lower income side of the market. Does
• 0:44
  Speaker 1: that free up the middle income side of the market?
• 0:46
  Speaker 1: Does it create some space? Does it loosen the vacancy rate? Really,
• 0:51
  Speaker 1: really interesting. And that's going to be revealed, I suppose,
• 0:54
  Speaker 1: in the days ahead. We do have a budget special, remember,
• 0:58
  Speaker 1: on Thursday coming up on 16th with Will Hamilton. But
• 1:03
  Speaker 1: inside property, folks, I think the biggest question of all
• 1:06
  Speaker 1: is that is this market, this post-COVID time, property investment
• 1:12
  Speaker 1: market that we're in, are we going to see a
• 1:14
  Speaker 1: reversion to the natural order of things? You know, will
• 1:16
  Speaker 1: standalone houses, for instance, lose the sort of extreme premium
• 1:20
  Speaker 1: they have over units and other key issues of the
• 1:24
  Speaker 1: day for property investors? Who could answer these questions? Tim Lawless,
• 1:28
  Speaker 1: doyen of the property market, doyen of the property market,
• 1:32
  Speaker 1: head of research at CoreLogic. How are you, Tim?
• 1:34
  Speaker 2: I'm really well, James. Thanks for the invitation to join
• 1:37
  Speaker 2: you today, Matt.
• 1:38
  Speaker 1: You're welcome. The doyen is female. The doyen is male.
• 1:40
  Speaker 1: I just remembered. Hence the correction there. Now, we've had
• 1:46
  Speaker 1: a we actually we spoke in recent times, didn't we?
• 1:48
  Speaker 1: And we did a piece as well. And I thought
• 1:50
  Speaker 1: it was really, really interesting about changing shape of the market.
• 1:53
  Speaker 1: But why we're why we're on budget week. Where are
• 1:56
  Speaker 1: you coming from in terms of are you of the
• 1:58
  Speaker 1: opinion that rates will drop? And if you are, when
• 2:02
  Speaker 1: might that happen?
• 2:04
  Speaker 2: Well, rates will obviously drop at some stage. I think
• 2:07
  Speaker 2: the timing is what's highly uncertain. I'm in the view
• 2:12
  Speaker 2: that we probably won't see interest rates coming down until
• 2:15
  Speaker 2: sometime next year. It's looking like clearly the Treasurer is
• 2:21
  Speaker 2: trying to bring down inflation in the budget, at least
• 2:24
  Speaker 2: based on the leaks that are coming through. mechanically, offering
• 2:28
  Speaker 2: up some incentives or rebates and so forth, which is
• 2:32
  Speaker 2: going to be good news for households, absolutely. But arguably,
• 2:35
  Speaker 2: that potentially does free up households to spend a little
• 2:39
  Speaker 2: bit more, which arguably could put some renewed upwards pressure
• 2:43
  Speaker 2: on consumption. But time will tell. And I think anybody
• 2:47
  Speaker 2: is going to be jumping at the chance to see
• 2:50
  Speaker 2: any sort of easing in cost of living pressures, that's
• 2:52
  Speaker 2: for sure.
• 2:53
  Speaker 1: Yes, yeah. Well, it's very much, it's the Labour government,
• 2:57
  Speaker 1: it's their third budget. It's going to be very supportive
• 3:00
  Speaker 1: from a social perspective. We know that. That's where most
• 3:03
  Speaker 1: of the money is going. It's going into education, it's
• 3:06
  Speaker 1: going into workers in various areas. It's going into cost
• 3:10
  Speaker 1: of living support and housing. Housing is the really interesting one.
• 3:15
  Speaker 1: So when we were talking recently, you told me an
• 3:19
  Speaker 1: amazing stat and it really, to me, it really reflected
• 3:24
  Speaker 1: What has happened in recent years? So we had this
• 3:26
  Speaker 1: extraordinary COVID period and everyone rushed for space, understandably, because
• 3:32
  Speaker 1: we were all trapped inside our houses. And at the time,
• 3:34
  Speaker 1: I suppose it was very real to us that we
• 3:36
  Speaker 1: might be trapped there for a long time or trapped
• 3:38
  Speaker 1: there again in the future for some other pandemic or
• 3:40
  Speaker 1: some other reason. And so the premium that people put
• 3:43
  Speaker 1: on standalone homes just went through the roof compared to traditionally.
• 3:49
  Speaker 1: Could you explain to people what's happened, first of all? Yeah, absolutely.
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  Speaker 2: It's a fascinating paradigm here where, as you say, James,
• 3:58
  Speaker 2: we've seen this real preference shift towards space that seems
• 4:02
  Speaker 2: to be lasting a lot longer than the pandemic itself.
• 4:06
  Speaker 2: Interestingly enough, we did see an update from the Reserve
• 4:09
  Speaker 2: Bank on the average household size, which is a key
• 4:11
  Speaker 2: part of this trend. And we haven't really seen too
• 4:15
  Speaker 2: much of a reversal in that earlier trend where the
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  Speaker 2: average household size dropped from around 2.6 to around 2.5
• 4:22
  Speaker 2: people per household. And a real reflection of this amplification
• 4:27
  Speaker 2: of housing demand we saw through the pandemic, even at
• 4:30
  Speaker 2: a time when international borders were closed. But part and
• 4:34
  Speaker 2: parcel of that was also the fact that people were
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  Speaker 2: looking for more space. There was this almost a shunning
• 4:40
  Speaker 2: of medium to high density styles of housing. As people
• 4:45
  Speaker 2: worked remotely, they wanted more living space. They wanted somewhere
• 4:49
  Speaker 2: to work from home. They wanted not to have to
• 4:53
  Speaker 2: share a manatee like elevators or stairwells and so forth.
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  Speaker 2: But we're not really seeing too much evidence of that
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  Speaker 2: changing up until recently. So what that meant, of course,
• 5:02
  Speaker 2: was house values as opposed to unit values just rocketed higher.
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  Speaker 2: In fact, if you look at the longer-term trend from
• 5:10
  Speaker 2: the onset of the pandemic through to the most recent
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  Speaker 2: end of month, end of April of this year, we've
• 5:16
  Speaker 2: seen house values across our capital cities have risen by
• 5:21
  Speaker 2: about 37%, pretty significant amounts. Unit values are up by
• 5:25
  Speaker 2: about a third of that amount, up by 13%.
• 5:28
  Speaker 1: Yeah, yeah, right. It really, really trailed behind standalone housing. Yeah,
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  Speaker 1: it's a phenomenal trend.
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  Speaker 2: That trend, though, is really narrowed, partly because house values
• 5:39
  Speaker 2: did show a larger correction through the early phase of
• 5:42
  Speaker 2: the rate hiking cycle following that surge of growth. But also,
• 5:47
  Speaker 2: more recently, we've started to see unit values rising at
• 5:50
  Speaker 2: a more similar pace to house values. Even some cities,
• 5:55
  Speaker 2: Sydney is a good example, so is Brisbane. Perth, Adelaide
• 5:58
  Speaker 2: are all showing unit values rising a little bit more
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  Speaker 2: rapidly than house values now.
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  Speaker 1: And of course, that means- The gap is closing a
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  Speaker 1: little bit.
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  Speaker 2: The gap is closing. It's still substantial.
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  Speaker 1: You don't seem to be particularly convinced that it's never
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  Speaker 1: going to go back, right? It's not going to go
• 6:15
  Speaker 1: back to pre-pandemic. It would have to go- Units would
• 6:18
  Speaker 1: have to go crazy and houses would have to do
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  Speaker 1: nothing for the gap to go back to where it was. Yeah.
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  Speaker 1: Am I exaggerating?
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  Speaker 2: Think about, I'll use a market like Sydney, which we
• 6:30
  Speaker 2: know is a really good example because it's already quite
• 6:32
  Speaker 2: a mature density market. The gap between house and unit
• 6:35
  Speaker 2: median values in Sydney at the moment is about 68%.
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  Speaker 2: Through the height of the pandemic, it was about 69%.
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  Speaker 2: So Sydney hasn't really narrowed all that much since those
• 6:47
  Speaker 2: pandemic highs. Pre-pandemic, like coming into March of 2020, the
• 6:52
  Speaker 2: gap was only about 30%. So, yeah, I agree.
• 6:56
  Speaker 1: We won't see.
• 6:57
  Speaker 2: That gap completely narrowing back to where it was in
• 6:59
  Speaker 2: March 2020. But I think the fact that affordability is
• 7:03
  Speaker 2: so challenging at the moment and we've got such a
• 7:06
  Speaker 2: tight rental market, a lot of first home buyers coming
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  Speaker 2: in because they don't want to be renters anymore. I
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  Speaker 2: think the logical alternative is looking towards the unit sector
• 7:14
  Speaker 2: where price points are a lot lower and a lot
• 7:16
  Speaker 2: more achievable.
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  Speaker 1: Okay. So if you were an economist with a view
• 7:20
  Speaker 1: of the reversion to the mean, you'd say, listen, units
• 7:23
  Speaker 1: from here on in, the wind is behind them, that
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  Speaker 1: they may actually dollar for dollar do better than single
• 7:29
  Speaker 1: standard loan homes.
• 7:32
  Speaker 2: Yeah, I would say that at least over the short
• 7:34
  Speaker 2: to medium term. I think there is this other argument
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  Speaker 2: over the long term, the scarcity value of land, which
• 7:41
  Speaker 2: is generally what drives house prices higher compared to units,
• 7:45
  Speaker 2: is still a thing, right?
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  Speaker 1: I think that's probably going.
• 7:47
  Speaker 2: To keep house values with assuming a premium. There's also
• 7:51
  Speaker 2: the other factor, which is we haven't really seen much
• 7:55
  Speaker 2: of a supply response at all in the medium to
• 7:57
  Speaker 2: high density sector. Houses at least had the benefit of
• 8:00
  Speaker 2: home builder and there's been a supply response there, although
• 8:04
  Speaker 2: it's fair to say there's still a lot of hurdles
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  Speaker 2: to getting that supply into the marketplace. We haven't seen
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  Speaker 2: that in the medium to high-density sector, and for developers,
• 8:13
  Speaker 2: getting medium to high-density styles of housing stock into the
• 8:16
  Speaker 2: marketplace has a lot higher barriers because getting a multi-storey
• 8:21
  Speaker 2: unit into the marketplace is very expensive at a time
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  Speaker 2: when construction costs are high and labor costs are high.
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  Speaker 2: is in scarce supply.
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  Speaker 1: Yes, I see. And when you say units, Tim, you
• 8:32
  Speaker 1: mean apartments. Do you also mean like units as we
• 8:35
  Speaker 1: know them, little garden units? And do you mean townhouses too?
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  Speaker 1: Is it everything except the standalone home in the traditional sense?
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  Speaker 2: Yeah, thanks for clarifying, James. It is a bit of
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  Speaker 2: a catch-all phrase, units. And you're right, it does include
• 8:46
  Speaker 2: everything from, say, townhomes through to high-rise units. I think
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  Speaker 2: there's a pretty good argument that what a lot of
• 8:55
  Speaker 2: developers or the industry would describe as the missing middle,
• 8:58
  Speaker 2: which is your more sort of low to medium density
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  Speaker 2: styles of multi-unit dwellings, townhouses would be the best example,
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  Speaker 2: are probably going to be in high demand. Again, there's
• 9:08
  Speaker 2: a real supply shortage and it's kind of like the
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  Speaker 2: next best option. If you can't afford a house, then
• 9:14
  Speaker 2: you'll probably be looking towards a townhouse or a terrace
• 9:17
  Speaker 2: or a villa.
• 9:18
  Speaker 1: Okay. That's really interesting. So, folks, I mean, there's the
• 9:21
  Speaker 1: head of research at CoreLogic. And, you know, basically, he's
• 9:25
  Speaker 1: saying dollar for dollar that the units, the immediate outlook
• 9:30
  Speaker 1: could go better per square meter, if you like, than
• 9:33
  Speaker 1: standalone homes, because the standalone homes just basically went out.
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  Speaker 1: The increase that they had. not just in COVID, but
• 9:42
  Speaker 1: in the immediate post-COVID year was so extraordinary. Okay. Very,
• 9:47
  Speaker 1: very interesting. I want to come back and we're going
• 9:50
  Speaker 1: to take a short break. And I want to ask
• 9:51
  Speaker 1: you in terms of this post-COVID market, Tim, I want
• 9:54
  Speaker 1: to talk to you about the order of the property
• 9:57
  Speaker 1: markets in Australia. We used to have a very simple
• 10:00
  Speaker 1: ladder sydney was at the top melbourne was second and
• 10:03
  Speaker 1: i sort of descended down cobart was at the bottom
• 10:06
  Speaker 1: that's all changed we'll be back in a moment hello
• 10:10
  Speaker 1: welcome back to the australians money puzzle podcast i'm james
• 10:14
  Speaker 1: kirby the world's editor at the australian and i'm talking
• 10:16
  Speaker 1: to tim lawless Head of Research at CoreLogic, a man
• 10:19
  Speaker 1: you will see regularly quoted on all things property and
• 10:23
  Speaker 1: property investment around Australia. So, Tim, once upon a time,
• 10:26
  Speaker 1: that was it for me. I mean, I had a
• 10:28
  Speaker 1: very simple view, which was established over the years. That
• 10:33
  Speaker 1: Sydney was the leading market. It set the trends. It
• 10:35
  Speaker 1: was the most expensive market. And then it cascaded down
• 10:38
  Speaker 1: from there. You had Melbourne next. Then you had Brisbane.
• 10:41
  Speaker 1: Then you had Perth, Adelaide. And Hobart was at the end.
• 10:44
  Speaker 1: I used to have a joke that at the Hobart prices,
• 10:46
  Speaker 1: when they moved up, that was it. That was the
• 10:49
  Speaker 1: last link in the chain. It was over, basically. It
• 10:54
  Speaker 1: happened very slowly. Sydney always started. Any movement upwards and
• 10:58
  Speaker 1: Hobart ended. That all kind of went out the window
• 11:01
  Speaker 1: in the COVID period. And there was an extraordinary time where,
• 11:04
  Speaker 1: for instance, Hobart was more expensive than Parth or Adelaide.
• 11:08
  Speaker 1: What's the situation now?
• 11:10
  Speaker 2: Yeah, there is this natural order, I suppose, in the
• 11:13
  Speaker 2: housing market. And it does tend to change over time
• 11:17
  Speaker 2: or evolve gradually.
• 11:18
  Speaker 1: And then reverse.
• 11:19
  Speaker 2: So at the moment, we still have Sydney, like heads
• 11:21
  Speaker 2: and shoulders, the most expensive market based on median values.
• 11:25
  Speaker 2: But the median house value in Sydney, it's about $ 1. 4
• 11:29
  Speaker 2: million at the end of April. And then you've got Canberra,
• 11:34
  Speaker 2: a lot of space between Sydney and Canberra. Canberra's got
• 11:37
  Speaker 2: a median house value about $ 972, 000.
• 11:38
  Speaker 1: And then Melbourne at $ 941, 000.
• 11:38
  Speaker 2: But there is a little bit of a changing of
• 11:40
  Speaker 2: the guards happening here. I don't think Sydney is at
• 11:47
  Speaker 2: any risk of being overtaken for its median value at
• 11:50
  Speaker 2: the moment. But it does look like Brisbane will probably
• 11:54
  Speaker 2: overtake Melbourne, for example. There's not much difference there. $ 920, 000
• 11:59
  Speaker 2: in Brisbane as a median, $ 940, 000 in Melbourne. Melbourne's a
• 12:03
  Speaker 2: flat market. Brisbane's seeing housing values rising at nearly 2%
• 12:07
  Speaker 2: month on month. So on those sort of trends, it
• 12:09
  Speaker 2: won't take long before Brisbane overtakes Melbourne. which will be
• 12:13
  Speaker 2: a little bit different.
• 12:14
  Speaker 1: That's interesting. You could have Canberra and Brisbane more expensive
• 12:17
  Speaker 1: than Melbourne, even though it's the second biggest city. Yeah, yeah.
• 12:21
  Speaker 2: There's not much difference between Perth and Melbourne either, okay,
• 12:27
  Speaker 2: when you look at percentage difference. And with Perth housing
• 12:30
  Speaker 2: values rising at about 2% month-on-month at the moment and
• 12:34
  Speaker 2: even accelerating into the quarter, and again, Melbourne flat, You know, arguably,
• 12:39
  Speaker 2: if we see these trends continue over the next six months,
• 12:42
  Speaker 2: then Perth's going to be pretty close to Melbourne's value
• 12:45
  Speaker 2: as well. A bit of a changing of the hierarchy here.
• 12:48
  Speaker 1: Yeah.
• 12:49
  Speaker 2: Go back to 2006, and for a little while there,
• 12:53
  Speaker 2: Perth was even more expensive than Sydney during the mining boom.
• 12:56
  Speaker 2: That didn't last very long. It went through a hangover
• 13:00
  Speaker 2: after that as well.
• 13:01
  Speaker 1: Right, right. So, actually... There is perhaps a natural order,
• 13:06
  Speaker 1: but the natural order bounces around considerably, depending on, obviously,
• 13:12
  Speaker 1: what Perth will ride up and down with the commodities market,
• 13:15
  Speaker 1: I suppose, to an extent.
• 13:17
  Speaker 2: Yeah, I mean, the mining commodity cycle, or more the
• 13:20
  Speaker 2: infrastructure cycle, where the company's resources prices was the real
• 13:24
  Speaker 2: driver of Perth. But now, what's really driving the Perth
• 13:28
  Speaker 2: market is a very healthy rate of affordability, at least,
• 13:32
  Speaker 2: In relativity to Sydney and Melbourne, really strong rate of
• 13:36
  Speaker 2: interstate migration and overseas migration and inherent lack of supply
• 13:40
  Speaker 2: and a very strong economy, of course, as well. It's
• 13:42
  Speaker 2: got one of the strongest jobs growth figures and one
• 13:45
  Speaker 2: of the lowest rates of unemployment. The resources sector is
• 13:48
  Speaker 2: very strong, but a lot of big infrastructure projects for
• 13:52
  Speaker 2: transport underway as well. So it's looking very different to
• 13:55
  Speaker 2: the mining boom in Perth. And despite such strong growth,
• 14:00
  Speaker 2: it's still fairly affordable.
• 14:02
  Speaker 1: It's still affordable. And on the other end of the scale,
• 14:05
  Speaker 1: as I understand, Hobart has started to drop back through
• 14:08
  Speaker 1: the rungs on the ladder because a lot of people
• 14:11
  Speaker 1: perhaps rushed there during COVID. It would have been such
• 14:14
  Speaker 1: a lovely place to be if you were lucky enough
• 14:16
  Speaker 1: to be there when everybody else is locked down. But
• 14:19
  Speaker 1: I think it's– has it dropped a few tiers?
• 14:23
  Speaker 2: It has, absolutely. Even before COVID. COVID, Hobart was a
• 14:27
  Speaker 2: very strong market. If you look at the longer-term growth rates,
• 14:31
  Speaker 2: say over the five or 10-year period, Hobart really stands
• 14:34
  Speaker 2: out as such a strong market. But now its median
• 14:37
  Speaker 2: house value is the second lowest of any capital city now,
• 14:41
  Speaker 2: above Darwin and just below Perth. We're still seeing Hobart
• 14:46
  Speaker 2: housing values down about 11% from their record highs, so 11.5%
• 14:48
  Speaker 2: from the record highs back in 2022. So, yeah, it's
• 14:54
  Speaker 2: a clear example of a market that was very strong,
• 14:56
  Speaker 2: but it doesn't have the same demographic tailwinds as most
• 15:00
  Speaker 2: other markets. And that affordability you mentioned is really been
• 15:03
  Speaker 2: quite a barrier to attracting more people into that market.
• 15:07
  Speaker 1: Gee, it's interesting, isn't it? It really is, especially if
• 15:09
  Speaker 1: you are an investor and you are prepared to invest interstate.
• 15:14
  Speaker 1: you can get it very right or very wrong. If
• 15:17
  Speaker 1: you'd gone into Perth two years ago, and then people
• 15:20
  Speaker 1: had been saying for years, of course, that Perth will
• 15:21
  Speaker 1: come up, but it didn't until very recently. And now
• 15:24
  Speaker 1: it's really starting to steam. But if you had gone
• 15:26
  Speaker 1: into Hobart, you would have actually been at the peak,
• 15:30
  Speaker 1: looks like. And you'd be losing money if you were selling. Interesting, interesting.
• 15:35
  Speaker 1: Fascinating to talk to you, Tim. And you have that
• 15:37
  Speaker 1: helicopter view of the market. Really, really interesting. I have
• 15:41
  Speaker 1: curated some questions just for you, Tim, So I think
• 15:44
  Speaker 1: we'll take a break and we'll try to get through
• 15:45
  Speaker 1: all those questions in a moment. Hello, welcome back to
• 15:51
  Speaker 1: the Money Puzzle podcast. James Kirby talking to Tim Lawless. Tim,
• 15:55
  Speaker 1: I've all sorts of questions here and hopefully you can
• 15:57
  Speaker 1: help me with some. Some you will not be able
• 15:58
  Speaker 1: to help me with because they are really comments and
• 16:02
  Speaker 1: complaints as much as questions. So I will start with Reid,
• 16:05
  Speaker 1: Orion ID. He says, thanks for your response on my
• 16:09
  Speaker 1: question on land banking. But I think your simple answer
• 16:14
  Speaker 1: seemed a little dismissive. I expect more from a journalist
• 16:17
  Speaker 1: who usually sounds pretty sceptical of the more self-promoting claims
• 16:21
  Speaker 1: of your guests. Thank you, Reid. Sorry, in no way
• 16:25
  Speaker 1: did I mean to be dismissive on your question about
• 16:29
  Speaker 1: land banking that time. I hope if you're a regular
• 16:32
  Speaker 1: listener to the show, I'm quite earnestly interested in the
• 16:35
  Speaker 1: broader area of housing provision across, not just from an
• 16:38
  Speaker 1: investment point of view, but apologies there. Okay, Zoe says,
• 16:43
  Speaker 1: now this is really interesting. Everyone's been knocking the first
• 16:46
  Speaker 1: home super scheme on the show. We've had lots of
• 16:50
  Speaker 1: correspondents saying it's extremely difficult to deal with. It's more
• 16:55
  Speaker 1: trouble than it's worth. Zoe says, I've been listening to
• 16:58
  Speaker 1: your podcast for the last 12 months as I saved
• 17:01
  Speaker 1: for and have now purchased my first home. As someone
• 17:05
  Speaker 1: starting out in the market, it's great to learn from
• 17:08
  Speaker 1: the experience of those who's been in it for longer. However,
• 17:10
  Speaker 1: it troubles me the way The first home super saver
• 17:15
  Speaker 1: scheme is depicted as raiding your super. I've heard that
• 17:18
  Speaker 1: phrase on your show. I'm disappointed to hear it again. Recently,
• 17:23
  Speaker 1: the first home super scheme was the only way I
• 17:24
  Speaker 1: could save towards my deposit when I was renting. And
• 17:27
  Speaker 1: I think it's one of the best policies out there
• 17:29
  Speaker 1: to help first home buyers, even if it is complicated.
• 17:33
  Speaker 1: And then Zoe points three things. She says, I found
• 17:37
  Speaker 1: it really useful. For three reasons. One, I couldn't touch
• 17:40
  Speaker 1: my house deposit, which is very, of course, would be
• 17:43
  Speaker 1: the case if you buy in any event, but fair enough. Two,
• 17:48
  Speaker 1: it lowered my taxable income. Three, it's keeping my deposit
• 17:51
  Speaker 1: savings in my super, increased the compounding interest on my
• 17:55
  Speaker 1: super because I had a larger amount invested. I hope
• 17:58
  Speaker 1: these arguments encourage you to rethink the FHSS. Well, what
• 18:03
  Speaker 1: about that? Here we are with a point where The
• 18:07
  Speaker 1: whole argument about super for housing is so hot. And
• 18:10
  Speaker 1: we have this curious scheme where you're allowed to use
• 18:12
  Speaker 1: your super contributions. So thank you very much for that, Zoe.
• 18:18
  Speaker 1: It's not a view we've heard many times, but it
• 18:21
  Speaker 1: was very persuasively put. Tim, on the housing for super,
• 18:26
  Speaker 1: you know that the opposition is really building on this.
• 18:29
  Speaker 1: And they're now saying, certainly Andrew Bagg is saying in
• 18:31
  Speaker 1: his Senate committee, that if they get in, not only
• 18:33
  Speaker 1: would they allow you to use your super for housing,
• 18:37
  Speaker 1: but they would allow you to use your entire super
• 18:39
  Speaker 1: for housing, basically with no limits. You could just, whatever
• 18:42
  Speaker 1: you got, you could take it out, put it in,
• 18:43
  Speaker 1: buy a house. I'm not going to ask you whether
• 18:45
  Speaker 1: you think that's good or bad. I'm going to ask
• 18:47
  Speaker 1: you what would be its impact, do you think, on
• 18:50
  Speaker 1: our housing market?
• 18:52
  Speaker 2: Yeah, I'm in two minds here, but I think broadly,
• 18:56
  Speaker 2: clearly this is a demand side opportunity or stimulus to
• 19:01
  Speaker 2: the market. It generally would tend to provide better access
• 19:04
  Speaker 2: to housing, would increase demand logically when you have higher
• 19:08
  Speaker 2: demand against this ongoing backdrop of very low supply, it
• 19:12
  Speaker 2: probably would push prices higher, arguably. But if you look
• 19:15
  Speaker 2: at some of the other research around the productivity commissions,
• 19:18
  Speaker 2: a good example, retirement wealth is very much underpinned by
• 19:23
  Speaker 2: home ownership. So getting into the market earlier and using
• 19:27
  Speaker 2: your super funds, logically, it was probably a good way
• 19:30
  Speaker 2: to build wealth and set yourself up for retirement growth.
• 19:34
  Speaker 2: much better so i think there's a bit of pro
• 19:36
  Speaker 2: and con here but um yeah it'll be interesting to
• 19:39
  Speaker 2: see how it pans out.
• 19:40
  Speaker 1: Yeah yeah i i look i have i think i've
• 19:43
  Speaker 1: said this on the show recently if i haven't i'll
• 19:45
  Speaker 1: make it clear now i did always think super should
• 19:49
  Speaker 1: solve super and housing should solve housing. And in principle,
• 19:53
  Speaker 1: that all works out very well. Thing is that in reality,
• 19:57
  Speaker 1: the tax system is totally and utterly biased towards the homeowner.
• 20:03
  Speaker 1: And access to the pension is biased towards the homeowner.
• 20:08
  Speaker 1: And capital gains tax is biased towards the homeowner. And
• 20:11
  Speaker 1: if you're not a homeowner, you don't get all those
• 20:14
  Speaker 1: tax breaks that the entire system is constructed around. So
• 20:19
  Speaker 1: I'm afraid that in some way reluctantly, I think that
• 20:25
  Speaker 1: super can be used for housing. And I can see
• 20:29
  Speaker 1: why people would want to do it. And not only that,
• 20:31
  Speaker 1: but I could see how it could work out for people.
• 20:34
  Speaker 1: Because having a little bit of super... And no home
• 20:37
  Speaker 1: is a much worse position than owning your own home
• 20:41
  Speaker 1: in reality, in the way the tax system works. They're
• 20:43
  Speaker 1: just putting that out there. Okay. Anil, in reforming negative gearing,
• 20:49
  Speaker 1: one of the options discussed is to limit it to
• 20:51
  Speaker 1: one property. This approach lacks equity. As someone with two
• 20:54
  Speaker 1: 500,000 properties would get far fewer reductions than someone with
• 20:59
  Speaker 1: one 1 million property. How's the idea of a total
• 21:02
  Speaker 1: cap being reduced? considered instead. Thank you, Anil. Actually, well,
• 21:07
  Speaker 1: we have no idea whether they're going to go near
• 21:10
  Speaker 1: negative gearing in the budget. I'm speaking to you on
• 21:12
  Speaker 1: budget morning. We go in at half past one for
• 21:16
  Speaker 1: six merry hours. We're locked up together and looking at
• 21:19
  Speaker 1: the budget. There's always rumours that they might go near
• 21:23
  Speaker 1: capital gains tax, might go near negative gearing. I think specifically,
• 21:27
  Speaker 1: perhaps a more immediate concern might be they could close
• 21:31
  Speaker 1: down the ability of self-managed super funds to borrow for
• 21:34
  Speaker 1: property because they could be backed up in that. There
• 21:37
  Speaker 1: has been previous inquiries which says that should happen, including
• 21:40
  Speaker 1: David Murray's inquiry once upon a time, which was commissioned
• 21:43
  Speaker 1: by the coalition. So I think that's actually a risk
• 21:46
  Speaker 1: as we go in there today. I'll just finish with
• 21:49
  Speaker 1: a final question from Andrew, which will trigger thoughts from
• 21:51
  Speaker 1: both of us, Tim. Andrew asks, what do you want
• 21:53
  Speaker 1: to see in the May budget, which would strike the
• 21:55
  Speaker 1: right balance of frugality and effectiveness? Thank you, Andrew. Big question.
• 22:00
  Speaker 1: I think we know a lot about what we're going
• 22:03
  Speaker 1: to see, the nature of what we're going to see
• 22:04
  Speaker 1: in the budget. So for someone like Tim, I would
• 22:06
  Speaker 1: think policy-wise, he's really looking at whether inflation will be
• 22:09
  Speaker 1: stoked and whether rates will move up and down. On
• 22:13
  Speaker 1: the other issues, Tim, on the big-ticket issues like housing,
• 22:16
  Speaker 1: I mean, cumulative, 3.0, as I said, 30 billion going
• 22:20
  Speaker 1: into housing, 9 billion alone, just a single item in
• 22:24
  Speaker 1: this budget on social housing. How will it affect the markets?
• 22:29
  Speaker 1: broadly for investors.
• 22:31
  Speaker 2: Yeah, it won't have an instant effect, that's for sure,
• 22:34
  Speaker 2: because even with more funding, which I think is very welcome,
• 22:37
  Speaker 2: by the way, social and community housing is pretty desperate
• 22:40
  Speaker 2: for more funding and we clearly need it. But it's
• 22:43
  Speaker 2: a pretty slow burn. We know there's a lot of
• 22:45
  Speaker 2: hurdles to getting more supply into the marketplace. But longer term, absolutely,
• 22:50
  Speaker 2: this is going to fund more housing for people who
• 22:53
  Speaker 2: need it and can't afford it. And we know the
• 22:56
  Speaker 2: government has really removed itself from owning public housing. And
• 23:00
  Speaker 2: the way they're offsetting that is through funding more social
• 23:02
  Speaker 2: and community housing, of course. So I think that's certainly key.
• 23:07
  Speaker 2: I wouldn't be surprised if we see some other– announcements
• 23:10
  Speaker 2: or maybe further incentives from build-to-rent styles of institutional ownership
• 23:15
  Speaker 2: to get more rental supply into the market. And of course,
• 23:17
  Speaker 2: the transport infrastructure side of things is also very important
• 23:21
  Speaker 2: for housing as well. And no doubt there is a
• 23:23
  Speaker 2: lot more being funded for key transport infrastructure.
• 23:27
  Speaker 1: We often get questions about build-to-rent, to which I have
• 23:29
  Speaker 1: to answer invariably each time is, sorry, it's not accessible.
• 23:33
  Speaker 1: To the everyday investor just yet, it's very much institutional.
• 23:38
  Speaker 1: Have you looked at that area in terms of what's
• 23:40
  Speaker 1: been going on and what might happen in the future?
• 23:44
  Speaker 2: Yeah, absolutely.
• 23:45
  Speaker 1: It's very topical.
• 23:46
  Speaker 2: And I think it's fair to say, even though there's
• 23:48
  Speaker 2: a lot of hype around built to rent and a
• 23:50
  Speaker 2: lot of interest, we aren't seeing a lot of activity
• 23:53
  Speaker 2: or a lot of actually, you know, beat on the
• 23:55
  Speaker 2: ground as such just yet. There are some good examples
• 23:58
  Speaker 2: in Melbourne, but they're few and far between nationally.
• 24:01
  Speaker 1: And I think.
• 24:02
  Speaker 2: we're still seeing institutional investment quite cautious in this space
• 24:05
  Speaker 2: given the very low yield environment across Australian housing and
• 24:10
  Speaker 2: probably also some challenges around just financing these styles of
• 24:15
  Speaker 2: developments as well amid a high interest rate environment.
• 24:18
  Speaker 1: So the big super funds, they said, yeah, yeah, housing,
• 24:22
  Speaker 1: it doesn't match our investment profile. The yields aren't there.
• 24:26
  Speaker 1: We don't get the returns that we're looking for. So what,
• 24:29
  Speaker 1: are 2 million Australians wrong to invest in property or
• 24:33
  Speaker 1: are they coming in a different doorway?
• 24:35
  Speaker 2: Yeah, it's very different. Taxation policies look to be, I suppose,
• 24:40
  Speaker 2: improving in a sense of lower withholding taxes, better depreciation
• 24:43
  Speaker 2: benefits for institutional investors. But you're right.
• 24:47
  Speaker 1: I think.
• 24:48
  Speaker 2: Just putting my finger in the air, around 85% to 90%
• 24:51
  Speaker 2: of all rental housing in the country is owned by
• 24:54
  Speaker 2: private sector investors. And of course, taxation policy being capital
• 24:59
  Speaker 2: gains concessions and negative gearing are a pretty big part
• 25:03
  Speaker 2: of that.
• 25:03
  Speaker 1: Yes. So that explains perhaps to a substantial degree the
• 25:08
  Speaker 1: enthusiasm of the investors, individual investors. And that's been sort
• 25:13
  Speaker 1: of baked in for so long. People work it into
• 25:16
  Speaker 1: their figures and they don't expect it to change. Well,
• 25:18
  Speaker 1: we'll see if it changes or anything changes around it
• 25:21
  Speaker 1: later this afternoon. OK, well, thank you very much, Tim.
• 25:25
  Speaker 1: Great to talk to you. Very interesting to look at
• 25:27
  Speaker 1: that market. I must say I am dumbfounded to hear
• 25:32
  Speaker 1: that Sydney, Canberra and Brisbane are already dearer than Melbourne
• 25:37
  Speaker 1: and Perth could be soon. Sitting as I am in
• 25:40
  Speaker 1: the middle of this city of 5 million, I do
• 25:42
  Speaker 1: wonder what on earth is happening. But as you say,
• 25:46
  Speaker 1: it changes all the time. There is a natural order,
• 25:48
  Speaker 1: but the pillars move all the time. And we see
• 25:54
  Speaker 1: Hobart sinking at the moment and Brisbane and Perth ascending.
• 25:58
  Speaker 1: So very interesting for the investor, especially the investor who's
• 26:02
  Speaker 1: open to moving cities with their money. Okay, thank you
• 26:05
  Speaker 1: very much, Tim Lawless, Head of Research at CoreLogic.
• 26:08
  Speaker 2: Many thanks, James.
• 26:09
  Speaker 1: Lovely to have you on the show. And folks, let's
• 26:11
  Speaker 1: have some questions. Email is themoneypuzzle at theaustralian.com.au. Talk to
• 26:17
  Speaker 1: you soon.