Latest / The Money Puzzle / Why Queensland units are the future

Transcript

Why Queensland units are the future · The Money Puzzle

0:07
Speaker 1: Hello, Welcome to the Australians Money Puzzle podcast. I'm James Kirkby.
0:11
Speaker 1: Welcome aboard everybody. What a difference a week makes. We
0:15
Speaker 1: finally get a raid cut and suddenly there are stories
0:18
Speaker 1: ever heard really about improved signals across the property market.
0:24
Speaker 1: I've been wondering where exactly these improved signals are, Like,
0:28
Speaker 1: where are the hotspots in this national property market post
0:34
Speaker 1: rad cut? Where we are it would seem heading into
0:39
Speaker 1: a raid cycle. Well who better to tell us about
0:41
Speaker 1: where the hotspots are than Terry Rider, regular guest on
0:44
Speaker 1: the show, and who runs the hot spotting service? How
0:47
Speaker 1: are you, Terry?
0:49
Speaker 2: Are you well joined yourself? Good?
0:51
Speaker 1: Thank you, thanks for coming on the show. Do you
0:54
Speaker 1: get that sense that there's an uptick in tempo in
0:57
Speaker 1: the markets following this raid cut? First in four years?
1:02
Speaker 3: Look, I really don't think that the very small and
1:06
Speaker 3: apparently isolated rope.
1:07
Speaker 2: Cup is terribly influential.
1:09
Speaker 3: I think things were fairly upbeat already. It certainly doesn't
1:13
Speaker 3: hurt and as may have a psychological impact. It does
1:18
Speaker 3: improve borrowing capacity a little bit. But we ended twenty
1:22
Speaker 3: twenty four with markets generally pretty strong, and we started
1:26
Speaker 3: twenty twenty five very strongly as well. We often find
1:31
Speaker 3: in our business, and I think a lot of properly
1:33
Speaker 3: related businesses that January is often half a month because
1:37
Speaker 3: a lot of people are on leave and not really
1:39
Speaker 3: doing things. But this year January started right from the
1:43
Speaker 3: get go. A lot of investors obviously started the year
1:46
Speaker 3: with intent, intending to do things, and that's what was
1:50
Speaker 3: happening last month and through into February. And a rope
1:54
Speaker 3: cut is perhaps a minor contribution to something some momentum
1:58
Speaker 3: that was already building.
1:59
Speaker 1: Think okay, but Sydney and Melbourne places on the month
2:04
Speaker 1: were actually negative.
2:06
Speaker 2: Well, that's right.
2:06
Speaker 3: We never have a situation in asurround property markets where
2:10
Speaker 3: the same thing that's happening everywhere. Sometimes media talk talks
2:13
Speaker 3: about a two speed market. We tend to think of
2:15
Speaker 3: a more like a four speed market where we at
2:18
Speaker 3: any point in time in twenty twenty four was a
2:20
Speaker 3: case in point. We had some markets, some capitalist cities
2:23
Speaker 3: and some regional markets that were booming, some that had
2:26
Speaker 3: moderate growth, some that were stagnating, and a few like Melbourne,
2:30
Speaker 3: with prices actually fell in the last twelve months. And
2:33
Speaker 3: that's pretty much normal. We do believe very strongly that
2:36
Speaker 3: real estate is local, very local. We don't have an
2:39
Speaker 3: Australian property market with literally thousands of individual markets and
2:43
Speaker 3: they all arise out. What's happening with local economies and
2:46
Speaker 3: Melbourne I think we'll talk about it a little bit later,
2:49
Speaker 3: but it's a market that's struggling for its own local
2:52
Speaker 3: Victorian state reasons.
2:54
Speaker 1: That's right, Yes, it is.
2:56
Speaker 2: Well.
2:56
Speaker 1: I imagine when people meet you and they find out
2:58
Speaker 1: what you do on the nicture of the enterprise hot spotting,
3:01
Speaker 1: the obvious question for you, Terry is what are the
3:04
Speaker 1: hotspots from a geographic perspective around Australia to the morment,
3:10
Speaker 1: where are the hot spots?
3:13
Speaker 3: Well, taking a broad brush view, we have done a
3:17
Speaker 3: major analysis to give us some indicators of where we
3:20
Speaker 3: expect the growth to be in twenty twenty five and beyond,
3:24
Speaker 3: because we always take a long term view, as you
3:26
Speaker 3: should with real estate, but all the metrics tell us
3:30
Speaker 3: that is going to be very much the year of Queensland.
3:33
Speaker 3: Queensland not only investor but also home buyers because Queensland
3:37
Speaker 3: gets more uplift from internal migrants than any other state
3:41
Speaker 3: or territory in the country, and that continues. So we
3:44
Speaker 3: have a strong demand from people moving to Queensland as
3:47
Speaker 3: home buyers, but we also have investors. There seems to
3:49
Speaker 3: be a pivoting away from Perth and worstern Australia towards Queensland.
3:54
Speaker 3: Regional Queensland is very strong. We ended twenty twenty four
3:59
Speaker 3: with some of those Queensland regional cities as hot and
4:03
Speaker 3: his frenzied and as competitive as the Perth market has
4:06
Speaker 3: been in the last year or so. So if you're
4:09
Speaker 3: trying to buy a regional city like Rockhampton or Townsville,
4:13
Speaker 3: you'd find yourself competing for the same property with fifteen
4:16
Speaker 3: or twenty others and it would sell very quickly and
4:19
Speaker 3: probably for more than the asking price. So we're going
4:23
Speaker 3: to see more of that this year right throughout regional
4:26
Speaker 3: Queensland because it has probably more than any other state
4:29
Speaker 3: or territory.
4:30
Speaker 2: It has a.
4:30
Speaker 3: Large number of regional centers that are affordable, they have
4:34
Speaker 3: high rental yields and they've.
4:35
Speaker 2: Got great prospects for growth. There's a big.
4:37
Speaker 3: Infrastructure spend happening in many of those cities, and Queensland
4:41
Speaker 3: offers that more than any other place in Australia. Adelaide
4:45
Speaker 3: in South Australia continue to be strong. Adelaide's remarkably consistent.
4:49
Speaker 3: It's been rising for four or five years and it's
4:53
Speaker 3: not showing any signs of slowing down, whereas the Perth
4:57
Speaker 3: and Western Australian markets definitely are weren't seeing no signs
5:01
Speaker 3: yet that Adelaide has slowed down. There's still a significant
5:05
Speaker 3: shortage of listenings and Adelaide's still a significant shortage of rent.
5:11
Speaker 3: Rental vacancy is an incredibly low in Adelaide, as they
5:13
Speaker 3: have been for the past several years. Probably the big
5:17
Speaker 3: surprise that I think we'll see in twenty twenty five
5:20
Speaker 3: is Darwin. I think Darwin's going to do much better.
5:23
Speaker 3: It's been a poor performer in the last couple of years.
5:25
Speaker 3: More and more investors asking questions about Darlin because it
5:28
Speaker 3: has by far the highest rental yields in the country
5:31
Speaker 3: amongst the capital cities. It's very affordable, and it also
5:35
Speaker 3: has some major investment developments, infrastructure projects and the works,
5:41
Speaker 3: some very big resources related things happening in the Northern Territory.
5:45
Speaker 3: If one or two of those come off, it's really
5:47
Speaker 3: going to supercharge the Darwin market.
5:50
Speaker 2: The ones that expect to be weak.
5:52
Speaker 3: Camera continues to be one of the weakest markets in
5:54
Speaker 3: the country, and Perth and Wa after two or three
5:58
Speaker 3: years of leading the nation on price growth, there's a
6:00
Speaker 3: lot of indicators now that those markets moderating and the
6:05
Speaker 3: peak has been passed in those markets unrapidly.
6:08
Speaker 1: It's told it there and we'll do with Sydney and
6:11
Speaker 1: Murdurn in the Mormons. Two things cut cut my eye
6:13
Speaker 1: there on on Perth topping ours, you were seeing, there's
6:19
Speaker 1: a number of indicators would suggest that this extremely good
6:22
Speaker 1: spell they've had in Perth where it was the strongest
6:26
Speaker 1: city in Donetian, what do you see that tells you
6:30
Speaker 1: it might be slowing down?
6:31
Speaker 2: Now?
6:33
Speaker 3: There are a number of indicators. Firstly sales volumes, which
6:35
Speaker 3: is something that we monitor quarter by quarter, and it's
6:39
Speaker 3: about the middle of twenty twenty four we started to
6:42
Speaker 3: see those taper off because prior to that, for the
6:45
Speaker 3: previous a two years, pretty much every suburban Perth if
6:49
Speaker 3: you looked at the quarterly the pattern of quarterly sales activity,
6:52
Speaker 3: it was just rising and rising, and then it started
6:56
Speaker 3: to taper off in the second half of calendar twenty
6:58
Speaker 3: twenty four, so it's indicator, but more particularly perhaps we've
7:03
Speaker 3: also seen the rate of price growth dropping month by month.
7:07
Speaker 3: The latest figures from Project for example, the annual rate
7:10
Speaker 3: for Perth has dropped to about twelve or thirteen percent,
7:13
Speaker 3: whereas just you know, four or six months ago it
7:16
Speaker 3: was not twenty five percent. And we've noticed that every
7:18
Speaker 3: month the rate of growth has dropped. Perhaps the most
7:21
Speaker 3: connect significant thing with the price data was with core
7:25
Speaker 3: Logic where they show the figures for the latest month
7:28
Speaker 3: and the latest quarter, and Perth has been overtaken. Has
7:31
Speaker 3: previously been leading the nation by quite a considerable margin
7:35
Speaker 3: on those metrics, but in the latest figures for January,
7:40
Speaker 3: in the latest months several cities have overtaken Perth on
7:44
Speaker 3: leading for the monthly price grape but also for the
7:46
Speaker 3: latest quarter.
7:47
Speaker 2: So we saw.
7:48
Speaker 3: Cities like Brisbane, Adelaide and Darwin and some of the
7:51
Speaker 3: regional markets actually having high growth in the latest month
7:54
Speaker 3: and the last latest quarter.
7:55
Speaker 1: I see, okay right with that. Yeah, so that would
7:58
Speaker 1: suggest it has been on the show a few times.
8:01
Speaker 1: Interesting to hear you actually drill down and chill us
8:04
Speaker 1: why that is the case that the Perth market stopping
8:08
Speaker 1: from a great height. It has to be said by that,
8:10
Speaker 1: I mean that the price growth was extraordinary for a
8:14
Speaker 1: year or two, but now slowing down. And then on
8:17
Speaker 1: the other hand, Terry, you were saying that you were
8:19
Speaker 1: saying that Queensland actually gets a great left from immigration.
8:23
Speaker 1: It's interesting. I would have thought it was Melbourne being
8:25
Speaker 1: sort of jobs city that had that, but you find
8:29
Speaker 1: that the immigration is a pump if you like, behind
8:33
Speaker 1: the Queensland market. Yeah.
8:36
Speaker 3: Well I was talking when I referred to queens I
8:38
Speaker 3: was talking about internal migration, which is people moving from
8:41
Speaker 3: part of the Australia to another.
8:43
Speaker 2: And we've had this.
8:44
Speaker 3: Trend for some time awfter a well in course of
8:46
Speaker 3: Sydney for ten years, where people are moving from the
8:49
Speaker 3: two biggest cities to regional areas of smaller cities. We
8:53
Speaker 3: call it the exodus to affordable lifestyle. And it was
8:57
Speaker 3: believed by some that it was kind of came out
8:59
Speaker 3: of the cop lockdowns, but really it was underway for
9:01
Speaker 3: much longer, and it hasn't slowed down now that all
9:04
Speaker 3: the sort of the lockdown and restrictions of COVID have passed,
9:08
Speaker 3: as some expect that it would. Now there was a
9:11
Speaker 3: prediction that people would move back, but that's not happening,
9:14
Speaker 3: nor would I expect it to so Queensland. Whereas Melbourne
9:17
Speaker 3: gets the most from overseas migration, Queensland, Brisbane and Queensland
9:22
Speaker 3: get the most from internal migration and really big numbers.
9:25
Speaker 3: You know, it's about climate and or perception of climate
9:28
Speaker 3: because it hasn't been so great up here in Queensland,
9:34
Speaker 3: but lifestyle climate affordability too. As I said earlier, there's
9:39
Speaker 3: so many regional parts of Queensland that are just so
9:41
Speaker 3: affordable relative to the lifestyle that they offer, both along
9:45
Speaker 3: the coast and some of the wonderful inland cities like
9:47
Speaker 3: twimber Is a wonderful place, was great lifestyle aspects, very
9:51
Speaker 3: strong economy and it's one of one of the strongest
9:54
Speaker 3: regional markets in the nation.
9:56
Speaker 1: So these regional spots hot spots in Queensland. You mentioned
10:00
Speaker 1: some towns Rockhampton, Townsville to Woomba, so it seems to
10:06
Speaker 1: me that they have a lot of what investors want
10:10
Speaker 1: in that it's not just that the yields are better
10:14
Speaker 1: than inner Sydney or inner Melbourne, but they have the
10:18
Speaker 1: price growth for atension as well, so you're getting the
10:21
Speaker 1: two sides that you would always want as an investor. Yes,
10:24
Speaker 1: very interesting and I wonder how they match up against
10:26
Speaker 1: the big cities. We'll take a break, folks and we'll
10:28
Speaker 1: have a look at Melbourne and Sydney in a minute. Hello,
10:40
Speaker 1: Welcome back to The Australian's Money Puzzle podcast. James Kerby
10:44
Speaker 1: here with Terry Ryder of the Hot Spoting Group. So
10:48
Speaker 1: Sydney and Melbourne, then, Terry, Melbourne obviously the weakest market
10:52
Speaker 1: in the country, the weakest figures on just about every criteria.
10:57
Speaker 1: Falling prices in the last month the two and Sydney
11:02
Speaker 1: also had a soft on in January. As you said,
11:04
Speaker 1: that's it's not a regular a month, but they would
11:06
Speaker 1: have very low yields and would those years would stay.
11:09
Speaker 1: I mean roughly, what would there be like half of
11:11
Speaker 1: regional towns something like two and a half percent against
11:14
Speaker 1: five something like that.
11:16
Speaker 3: Well, yeah, perhaps an even greater differential. There's there's plenty
11:20
Speaker 3: of places in regional markets across trade we can get
11:23
Speaker 3: six seven percent rental yields. And we should never forget
11:26
Speaker 3: when we're talking about yields, we must never forget to
11:29
Speaker 3: include units and the discussion because increasingly investors and home
11:34
Speaker 3: buyers are opting for attached dwellings as a purchase of choice,
11:38
Speaker 3: and of course the units tend to.
11:40
Speaker 2: Have higher rental yields.
11:41
Speaker 3: But yeah, I mean, you can't very readily find well
11:44
Speaker 3: above six percent rental yields on houses in regional queens
11:48
Speaker 3: somewhereas in Sydney and Melbourne.
11:49
Speaker 2: It's more like two or three percent.
11:51
Speaker 1: Yes, it is, And our listeners will tell you this
11:53
Speaker 1: is the fact. There's a correspondence coming up, folks. In
11:57
Speaker 1: one of our one of our correspondents, John actually spens
12:01
Speaker 1: out just what is when he's finished paying all the
12:05
Speaker 1: taxes and bits of Victoria, and it's really spectacular. Well,
12:08
Speaker 1: it's one point two percent a year, he says. We've
12:10
Speaker 1: come to that in the moment. So looking at Melbourne
12:12
Speaker 1: and Sydney, then what's the view on them? The leading
12:15
Speaker 1: research houses are seeing two or three percent growth this
12:19
Speaker 1: year from Melbourne or Sydney. That's barely keeping up with
12:23
Speaker 1: in fleetion and that's sort of like basically going nowhere,
12:25
Speaker 1: what's your view on the big cities?
12:27
Speaker 3: Look a little bit more abortion that when we when
12:31
Speaker 3: analyzed all the markets around the country, and as I said,
12:33
Speaker 3: earlier we found Brisbane and Queensland leading Adelaide in South Australia,
12:37
Speaker 3: and well Sydney and Melbourne was sort of the middle
12:39
Speaker 3: of the pack. Expected to have moderate growth this year, certainly,
12:43
Speaker 3: but perhaps a little bit better than two or three percent.
12:46
Speaker 3: The thing I think people need to keep in mind
12:48
Speaker 3: is that those figures that are published about Sydney house
12:52
Speaker 3: prices rose two percent last year, but they're very big generalizations.
12:56
Speaker 3: People again come back to the point that markets are
12:59
Speaker 3: very local and nature, and that includes within big city.
13:01
Speaker 3: So Sydney is a massive city with something like over
13:06
Speaker 3: seven hundred suburbs and it's not just one market all
13:10
Speaker 3: performing in the same way. So whereas the generalized figures
13:14
Speaker 3: would say that Melbourne house prices only rows two or
13:17
Speaker 3: three percent last year, within Greater Sydney, there were pockets
13:21
Speaker 3: that did double digit growth, particularly for example, the local
13:26
Speaker 3: governor of Canterbury Bankstown, which has become a very popular
13:28
Speaker 3: market because it's quite low, well located, got good amenities
13:32
Speaker 3: and infrastructure, but by Sydney standards, quite affordable. Particularly it's
13:37
Speaker 3: unit markets. You can sort of buy small units in
13:40
Speaker 3: many of the suburbs of Canoby Bankstown. You know, in
13:43
Speaker 3: the four hundred thousands, which is a very rare thing
13:45
Speaker 3: to be able to do anywhere in Greater Sydney.
13:47
Speaker 1: Did you say that what did you say the price
13:49
Speaker 1: growth was in the Canterbury Bankstown Well.
13:52
Speaker 3: In many of the suburbs of Canterbury Bankstown Municipality it's
13:56
Speaker 3: ten or fifty percent in the last twelve months.
13:58
Speaker 1: That right, but the city was just two or three Say,
14:00
Speaker 1: sorry to interrupt you, and you were going to tell
14:02
Speaker 1: me about the houses, you said, the units and what
14:04
Speaker 1: was the story with the houses there.
14:06
Speaker 3: Well, you're typically paying a little bit over a million
14:08
Speaker 3: dollars for houses, but again, you know, the medium price
14:11
Speaker 3: for Sydney, depending on who you figures, you believes one
14:13
Speaker 3: point two one point three million as a median house price,
14:16
Speaker 3: and Canery Banks Down houses tend to be lower than that.
14:19
Speaker 3: So it has that appeal of affordability, but also you know,
14:23
Speaker 3: pretty good location, bustling market. It's one that we've been
14:26
Speaker 3: recommending for the last couple of years and it certainly
14:29
Speaker 3: performed well above the average for Greater Sydney. So I
14:33
Speaker 3: think the trick for investors and buyers have all sorts
14:35
Speaker 3: really is to find those outlies and they do exist
14:38
Speaker 3: within Sydney. They also exists within Melbourne because there are
14:41
Speaker 3: some parts of Melbourne where her prices have actually grown
14:45
Speaker 3: in the last twelve months, contrary to that generalized figure
14:48
Speaker 3: it says overall Melbourne was down a few percent.
14:51
Speaker 2: In Melbourne, then there's no direct equivalent.
14:54
Speaker 3: We'll find that the more affordable outering areas that are
14:57
Speaker 3: once where it's most likely to have been price grape,
15:00
Speaker 3: but also in the inner city markets, it's the unit markets.
15:03
Speaker 3: And this I think we've talked about this before, James,
15:07
Speaker 3: this big trend where more and more people are opting
15:09
Speaker 3: for attached dwellings, not just for affordability reasons, but for lifestyle,
15:14
Speaker 3: for location, for security and safety, because a lot of
15:18
Speaker 3: people are concerned about crime on the streets now Melbourne.
15:21
Speaker 3: I know a lot of people in Melbourne. I'm constantly
15:23
Speaker 3: hearing stories about breakings, who attempted breakings, and people feel
15:28
Speaker 3: some people anyway want to be in an apartment on
15:30
Speaker 3: the tenth floor and a building.
15:32
Speaker 2: That's got security features.
15:33
Speaker 3: So there's lots of reasons why people are opting for
15:36
Speaker 3: units these days, and we're now seeing ten around that
15:40
Speaker 3: dominant paradigm that used to be which said that houses
15:43
Speaker 3: on their noise show better capital growth than units, but
15:45
Speaker 3: we're seeing that completely challenged now right across Australia in
15:49
Speaker 3: different markets where I think figures from I think core
15:52
Speaker 3: Logic recently said that across Australia, sixty percent of suburbs
15:57
Speaker 3: have higher growth for units than they did for houses
15:59
Speaker 3: last year, and in Brisbane it was eighty seven percent
16:02
Speaker 3: of suburbs units outperformed houses.
16:05
Speaker 1: Do you think there's an element of catch up there
16:07
Speaker 1: because the units were way behind.
16:09
Speaker 3: There is an element of catch up, but I think, James,
16:11
Speaker 3: it's mostly that we're just seeing this real uplift and demand.
16:14
Speaker 3: We've been watching the market share of units in the
16:18
Speaker 3: major cities and it's rising quarter by quarter and Sydney
16:21
Speaker 3: is now fifty five percent of all sales across Greater
16:24
Speaker 3: Sydney attached dwellings rather than houses on land, and so
16:28
Speaker 3: that's having a big impact on the price data. And
16:31
Speaker 3: just getting back to Melbourne, some of those inner city Melbourne,
16:34
Speaker 3: including the Melbourne CB itself which has a lot of apartments,
16:37
Speaker 3: there was price growth in some of those locations with
16:40
Speaker 3: units in the last twelve months, contrary to the overall
16:43
Speaker 3: trend for Melbourne.
16:45
Speaker 1: Is that interesting? Yeah, very interesting because when we look
16:49
Speaker 1: at units, often you will see that they have been
16:52
Speaker 1: sold for something like the price that there were four
16:54
Speaker 1: or five years ago. I'm talking about it at Melbourne
16:57
Speaker 1: for instance, But then that doesn't tell me that they
17:00
Speaker 1: look more closely, maybe the case that the last twelve
17:02
Speaker 1: months was where the action was and actually that it
17:05
Speaker 1: has recovered in the last felve months. And when you
17:08
Speaker 1: say units cherry, you basically mean anything other than a
17:10
Speaker 1: stand alone house. But the sounds of it, it covers
17:12
Speaker 1: both apartments and the townhouses.
17:15
Speaker 3: Anything attached townhouses, units, apartments, whatever you like to call them,
17:20
Speaker 3: things that they're on some sort of strata plan. And
17:23
Speaker 3: it's I think it's probably the most significant trend in
17:27
Speaker 3: Australia safe for the last ten years. We're quite interested
17:30
Speaker 3: in it and we're tracking it and we're starting to
17:32
Speaker 3: you know, we're producing new and different reports now because
17:36
Speaker 3: this has become a big factor in the market. You know,
17:39
Speaker 3: more affordable, lots of features that apartments can offer that
17:44
Speaker 3: houses can't. Typically a house doesn't have a view, not
17:48
Speaker 3: always of course, whereas much units do. Is that safety
17:51
Speaker 3: and security feature that's that low maintenance, lock up and
17:55
Speaker 3: leave facility that is better with units. And it's also location.
18:00
Speaker 3: Quite often units are much better located. There was actually
18:04
Speaker 3: an interesting study by Infrastructure.
18:06
Speaker 2: Victoria a year or two ago.
18:08
Speaker 3: Which found that the average apartment was much better located
18:12
Speaker 3: relative to where schools and shops and public transport was
18:16
Speaker 3: than the average house and that has an impact on
18:19
Speaker 3: price grast, so that all those factors are feeding into
18:21
Speaker 3: this trend and it's become Yeah, we think the most
18:25
Speaker 3: significant big change in property markets in Australia in a decade.
18:29
Speaker 1: See that's really interesting because I suppose the challenge what
18:32
Speaker 1: a challenge is the bias probably that many investors would
18:36
Speaker 1: have in two dan I probably have from watching units
18:41
Speaker 1: perform poorly against standard doornhouses, probably for a decade at least. Yeah, right, okay,
18:48
Speaker 1: but do you think the swing is happening?
18:51
Speaker 2: Well, I think it was.
18:51
Speaker 3: Already well underway. And if you look at many locations
18:54
Speaker 3: in Australia compare the price growth not just in the
18:57
Speaker 3: last year, but in say that the last five years
19:00
Speaker 3: the four year average, we're finally increasing examples where apartments
19:04
Speaker 3: are up performing the houses in the same Like Christian
19:06
Speaker 3: as I mentioned, earlier. Therese recent figures that across the
19:09
Speaker 3: Strike sixty percent of suburbs now units are upperforming, and
19:14
Speaker 3: in Brisbane it's a much harder percentage.
19:16
Speaker 1: Very interesting, Okay, listeners, I think that we would take
19:19
Speaker 1: that on board in terms of mega trends, which we
19:22
Speaker 1: don't really see very often, and it's one of the
19:24
Speaker 1: reasons I asked Harry to come on the show was
19:26
Speaker 1: to try and eak out of your life what's really
19:29
Speaker 1: happening on momentum and trends across the country, not just
19:33
Speaker 1: in terms of this town or that town against another suburb,
19:37
Speaker 1: but very interesting that notion that in fact, the units
19:40
Speaker 1: are going through a very strong phase at the moment,
19:43
Speaker 1: and it's something that's worth keeping in mind. Just when
19:45
Speaker 1: you think you figured out the property market, it surprises you.
19:49
Speaker 1: And there was a sense always, of course that units
19:51
Speaker 1: would need to catch up with standalone homes because standalone
19:54
Speaker 1: homes greatly outperformed during COVID, So the two things are
19:57
Speaker 1: probably coming together now. But take short break. I have
20:01
Speaker 1: some really good questions, including this first one from John
20:04
Speaker 1: back in the moment. Hello, welcome back to The Australian's
20:11
Speaker 1: Money Puzzlive podcast. Terry Ryder of the Hot Spotting Group
20:14
Speaker 1: is my guest today and we are talking about, interestingly,
20:19
Speaker 1: I think the power of unit investing, which has been
20:24
Speaker 1: much derided, if you like, in recent times. But Terry's
20:26
Speaker 1: got some pretty convincing information that the units are hot
20:30
Speaker 1: at the moment. Is also you know, I think very
20:32
Speaker 1: perspeactively argue that Queensland from original basis, Queensland is where
20:36
Speaker 1: it's happening, where it's going to happen, and I certainly
20:39
Speaker 1: would have no argument with that. I think all the
20:41
Speaker 1: scigens do suggest that. Okay, a couple of questions. John says,
20:45
Speaker 1: I thought you tined this interesting. I recently re reviewed
20:49
Speaker 1: my property in Victoria, which was the worst by a
20:54
Speaker 1: long way of the properties he has. He says, we're
20:59
Speaker 1: charged three towns two hundred and forty nine per month
21:02
Speaker 1: in rent for a free standing house and Point Cook. Okay,
21:05
Speaker 1: so that's the income, and it's a house free standing
21:07
Speaker 1: in Point Cook, which is an outer suburb of Melbourne,
21:11
Speaker 1: relatively new suburbs. And then he lists it's really something else.
21:15
Speaker 1: He lists the set costs, the land tax, the council tax,
21:19
Speaker 1: the body corporate at the water rates, and the management fees,
21:22
Speaker 1: the insurance fees, the Victorian government mandates that smoke detective fee,
21:27
Speaker 1: and it all comes to thirteen thousand a year, one
21:30
Speaker 1: thousand and thirty per month. And he says, I earn,
21:34
Speaker 1: after fees and taxes, one thousand a month, or a
21:38
Speaker 1: return of one point two percent per annum on a
21:42
Speaker 1: house that's supposed to be worth over a million dollars.
21:46
Speaker 1: I raised this with the agents and they laughed and
21:49
Speaker 1: said they hear it all the time from many property owners.
21:53
Speaker 1: There you are one point two percent. Maybe that's the
21:55
Speaker 1: more we know. The yields are really low in the
21:57
Speaker 1: big cities Melbourne and Sydney because the are so high
22:01
Speaker 1: and you pay so much for the property, and your
22:03
Speaker 1: rent is such a tiny fraction after the amount you've
22:07
Speaker 1: paid that the years. I am not surprised that there
22:12
Speaker 1: are between more than three percent in effect. And when
22:15
Speaker 1: you talked about years, Terry, were you talking next years
22:18
Speaker 1: or grossians?
22:20
Speaker 3: I definitely gross yields.
22:22
Speaker 1: Yeah, yeah.
22:23
Speaker 3: And of course the reality is that with not only
22:25
Speaker 3: interest rates so high, and this recent small cut doesn't
22:29
Speaker 3: really help a great deal. After a dozen upward movements
22:33
Speaker 3: and interest rates over the last couple of years, but
22:35
Speaker 3: not just interest rates. There's been a massive increase in
22:38
Speaker 3: all the costs of owning property as investors, council rates, insurances,
22:43
Speaker 3: maintenance costs have increased a lot. I almost fell off
22:46
Speaker 3: my chair when the Federal Treasurer suggested in the past
22:50
Speaker 3: week that investor owners were be in a position to
22:53
Speaker 3: pass on the latest interest rate cut and to tenants
22:56
Speaker 3: in the form of a rental reduction. I thought, well,
22:59
Speaker 3: I'll obviously there's an election in the wind. He's trying
23:01
Speaker 3: to carry favor with a certain section of the market.
23:04
Speaker 3: But seriously, after all those rises and interest rates, after
23:08
Speaker 3: the massive increases and all the costs, to suggest that
23:11
Speaker 3: the average mom and dad investor is just an ordinary
23:14
Speaker 3: family on an average income, can afford to hand out
23:19
Speaker 3: a rental cut because there's been that one tiny, isolated
23:23
Speaker 3: reduction in interest rights.
23:24
Speaker 2: It's just fascical.
23:25
Speaker 3: He might have had his tongue very firmly in his
23:27
Speaker 3: cheek when he said it.
23:29
Speaker 1: Well, a political imperative there rather than an economic one,
23:32
Speaker 1: I imagine. Okay, Kate says, it's funny you've just asked this.
23:36
Speaker 1: Kate says, the redcot is only no point two five
23:38
Speaker 1: percent and compensations are saying that might be the end
23:40
Speaker 1: of the cycle. Pardon me for being very skeptical about this,
23:43
Speaker 1: but I can't see how it'll change the numbers that
23:45
Speaker 1: really mattered the most. Well, Kate, that's exactly what Terry
23:48
Speaker 1: was saying there that look, it's not so much. I
23:51
Speaker 1: think Terry that it was a cut and that it
23:53
Speaker 1: was no point twenty five. It was the change of direction.
23:55
Speaker 1: I think that's what people. I hope it's the really
23:58
Speaker 1: good news that the reds field start coming down. We
24:00
Speaker 1: will believe that when we see it. Okay, Bill says,
24:03
Speaker 1: I like the podcast. He says, I love the podcast,
24:06
Speaker 1: but as a grumpy lawyer, I have to remind James
24:09
Speaker 1: that the mortgagee is the lender, not the borrower. Keep
24:13
Speaker 1: up the good work. Aside from those minor clittures. Yes, sorry, billknew,
24:17
Speaker 1: I know.
24:17
Speaker 2: I knew.
24:18
Speaker 1: In a minute I said that I knew I'd got
24:20
Speaker 1: them the wrong way around.
24:21
Speaker 2: We won't do that again.
24:22
Speaker 1: Okay, Billy says, I want to share about your discussion
24:26
Speaker 1: on the fourth of February with Kitty Parker about the
24:28
Speaker 1: extent to which Mom and Dad bank of Mom and
24:31
Speaker 1: Dad formalized loan agree documents would actually every bother pursuing
24:36
Speaker 1: their children for loan arreers. So everybody might remember that
24:40
Speaker 1: we had a very interesting session about the Bank of
24:42
Speaker 1: Mom and Dad. It was really interesting as Richard Shellback
24:45
Speaker 1: actually came in first of all with some really hard
24:47
Speaker 1: numbers survey that they had done at ubs, and then
24:52
Speaker 1: Kitty Parker, buyer's advocate in Sydney, came in and talked
24:55
Speaker 1: about coming upon this issue of the bank of Mom
24:59
Speaker 1: and Dad. Specifically in property. It's always going to be
25:03
Speaker 1: where parents come to an arrangement that they actually loan
25:08
Speaker 1: money to their adult children and they adult children then
25:13
Speaker 1: go and buy a home. And I was skeptical about
25:19
Speaker 1: not so much about the agreements about the way they
25:21
Speaker 1: might ever be enforced. So Billy says, he explained that
25:27
Speaker 1: they did all this, that they drew up alone and
25:32
Speaker 1: they had all parties sign it for the loan that
25:35
Speaker 1: was given to one of his adult children. He says,
25:39
Speaker 1: the reason we did it was from the point of
25:40
Speaker 1: view of acid protection against the remote possibility that the
25:44
Speaker 1: marriage can to end up in the divorce courts. Fair enough,
25:47
Speaker 1: that's putting it on the table, That's what it's all
25:49
Speaker 1: about really, isn't it Most of the time when people
25:52
Speaker 1: do these effectively what you can call pre nups on
25:56
Speaker 1: property acquisition, where the parents bankroll one of their adult children.
26:01
Speaker 1: That adult child is probably in a couple, they have
26:04
Speaker 1: a loan agreement, and really, behind the scenes, the logic
26:08
Speaker 1: of the loan agreement is that half the property or equal,
26:12
Speaker 1: they won't walk away should their adult child be divorced
26:15
Speaker 1: from their partner. Now, Billy concludes, I don't know if
26:20
Speaker 1: our loan agreement would have held up in court. We
26:22
Speaker 1: never needed it. Our daughter's marriage remains solid, free of
26:26
Speaker 1: the burden of morgad stress. Our money was paid back
26:28
Speaker 1: to us over the course of a few years, and we.
26:30
Speaker 2: Were happy to play our part.
26:32
Speaker 1: Okay, terrific, Billy, thank you for that. Interesting. What do
26:38
Speaker 1: you think, Terry about this bank of mom and dad
26:40
Speaker 1: loan agreements. I'm sure we know what happens all the time.
26:43
Speaker 1: I mean, we know the figures now, and we know
26:46
Speaker 1: that they can their parents put up to two hundred
26:48
Speaker 1: thousand pert time where they help adult children buy whether
26:55
Speaker 1: if there's a loan agreement formalized between the parent and
26:59
Speaker 1: the adult child blame property. Do you think it would
27:02
Speaker 1: ever really work legally or is it just a terrent
27:07
Speaker 1: like I think Billy had it there.
27:10
Speaker 3: Honestly, James, I've never actually thought about it in those terms.
27:13
Speaker 3: I guess I always made the assumption that you know,
27:15
Speaker 3: it's all within the family, and you know, this kind
27:19
Speaker 3: of thing in ninety nine percent of cases would never
27:21
Speaker 3: be needed because it's a family situation. It's kind I
27:25
Speaker 3: kind of like it because it's like I think, it's
27:27
Speaker 3: always a shame that your parents have to die before
27:30
Speaker 3: you get to your inheritance, and this is a way
27:31
Speaker 3: where an inheritance can happen while your parents are alive
27:35
Speaker 3: and kicking and you can all enjoy the situation together.
27:39
Speaker 3: It's just one of the realities of the modern world
27:42
Speaker 3: and the modern real estate situation in Australia that real
27:46
Speaker 3: estate is so expensive, and there are lots of reasons
27:49
Speaker 3: for that. I certainly lay the blame for most of
27:51
Speaker 3: the problems at the feet of politicians who have exacerbated
27:55
Speaker 3: the poor affordability in Australia, in particular the incredibly high
27:59
Speaker 3: cost of building new dwellings. I just want to throw
28:03
Speaker 3: some figures. There's a little bit of the off topic,
28:06
Speaker 3: but it's relevant to the overall discussion. And the last
28:09
Speaker 3: week we've had two figures out, one from the Bureau Statistics,
28:12
Speaker 3: so we said that the average cost of building a
28:14
Speaker 3: new house in austral is now five hundred and thirty
28:16
Speaker 3: seven thousand dollars. And then we had from the HIA
28:20
Speaker 3: core Logic Residential Land Report the medium lot price in
28:23
Speaker 3: our cities is now four hundred and eight thousand. So
28:25
Speaker 3: you had those two figures together, we're getting scarily close
28:28
Speaker 3: to the point where it costs a million dollars for
28:30
Speaker 3: the standard house and land package. This is a very
28:33
Speaker 3: boring brick and tile.
28:34
Speaker 1: House on it to build anything anywhere, just to build
28:36
Speaker 1: a box thirty cares out from the city, Yeah, coming
28:40
Speaker 1: off two a million dollars very interesting.
28:42
Speaker 3: Yeah, And so I mean, and those figures are really alarming.
28:46
Speaker 3: And the Productivity Commission has just published a report which
28:49
Speaker 3: spreads the blame across a number of features, but by
28:52
Speaker 3: far the biggest one, according to the Commission's report, is
28:55
Speaker 3: regulation and red tape. State comment's tinkering with the design
28:59
Speaker 3: of houses and ways it adds to the cost of
29:01
Speaker 3: construction delays. You know, the building industry is now half
29:06
Speaker 3: as productive as it was in the nineteen nineties, is
29:08
Speaker 3: taking twice as long to build houses because of regulation
29:11
Speaker 3: and red tape. So all of that feeds into the
29:14
Speaker 3: fact that it's very hard for young people to get
29:16
Speaker 3: into housing without the help of the bank of mum
29:19
Speaker 3: and dad. And not every family is do we have
29:22
Speaker 3: the situation where the parents can actually afford to loan
29:25
Speaker 3: or give money to their adult children to buy a house,
29:28
Speaker 3: but some do. Obviously it's become increasingly a large factor.
29:32
Speaker 3: But the reality is that for many young people, without
29:35
Speaker 3: their assistance from family members, they can't get into the market.
29:39
Speaker 1: Yeah, yeah, very true. And I suppose that just to
29:42
Speaker 1: cover off on Billy and the whole scene. As you see,
29:46
Speaker 1: not everyone can afford it, but maybe some people can.
29:50
Speaker 1: And perhaps the most upbeat way of looking at it is,
29:52
Speaker 1: as you said, Terry, you know, people are getting their
29:56
Speaker 1: inheritance should they ever get an inheritance, but those who
29:59
Speaker 1: do are getting them in their sixties. That's you need
30:03
Speaker 1: the money in your thirties and forties, when you're buying
30:06
Speaker 1: a house, that's when you really need it. And I
30:09
Speaker 1: think if it can be done, it's certainly worth exploring,
30:12
Speaker 1: and if it needs to be done in a formalized manner,
30:15
Speaker 1: as Billy outlined there, Well, then if it works that
30:18
Speaker 1: way for everybody, or the better if everybody comes to
30:21
Speaker 1: the table in the right spirit. Okay, very interesting, Thank
30:24
Speaker 1: you very much, Terry Ryder from Hotspoting. Great to have
30:27
Speaker 1: you on the JAMS.
30:27
Speaker 3: I always love coming on talking to you, and I
30:29
Speaker 3: love talking about real estate, as you may have noticed,
30:32
Speaker 3: such an important topic and so very much top of
30:35
Speaker 3: mind for so many Australian individuals and families right at
30:39
Speaker 3: this time.
30:40
Speaker 1: It is always is and investors too. Okay, folks, keep
30:43
Speaker 1: those emails coming the Money Puzzle at the Australian dot
30:47
Speaker 1: com dot Au. Today's show was produced by Leah Samulu
31:00
Speaker 2: Four