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Transcript

Melbourne property rebound… it’s happening · The Money Puzzle

• 0:11
  Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
• 0:14
  Speaker 1: James Kirkby. Welcome aboard everybody. Now you know that in
• 0:18
  Speaker 1: the property market this year has been one outstanding question.
• 0:24
  Speaker 1: Is Melbourne a bargain or is this a city which
• 0:29
  Speaker 1: is going to be stuck in the second division from
• 0:32
  Speaker 1: a property perspective from now on? And we touched on
• 0:35
  Speaker 1: this issue more than once in recent shows. And we
• 0:40
  Speaker 1: know also that property taxes hit Melbourne heard last year,
• 0:43
  Speaker 1: and the question is will we see nationwide property taxes
• 0:45
  Speaker 1: this year? We look at that as well. But first
• 0:48
  Speaker 1: we're going to investigate are the numbers telling us anything
• 0:53
  Speaker 1: now in mid twenty twenty five and has this station?
• 0:57
  Speaker 1: Has this city turned really interesting? My guest is Stuart
• 1:01
  Speaker 1: Whims of the pro Solution Group, something of an expert
• 1:04
  Speaker 1: on this veccin question. How are you, Stuart?
• 1:07
  Speaker 2: I'm really well, James. Thanks for having me back.
• 1:10
  Speaker 1: It's great to have you back. You know what I
• 1:11
  Speaker 1: want to I can't think if I think of anybody
• 1:14
  Speaker 1: who has sort of articulated how bad Melbourne prices have
• 1:19
  Speaker 1: been on every measure, it's been you. And so why
• 1:23
  Speaker 1: don't you tell us just in a snapshot from a
• 1:27
  Speaker 1: numbers perspective, how poor this city has been compared to
• 1:30
  Speaker 1: what it should be over said the last ten years.
• 1:33
  Speaker 1: And by the way, folks, the figures go back ten years.
• 1:35
  Speaker 1: This is not a one year thing. This is a
• 1:37
  Speaker 1: decade long.
• 1:39
  Speaker 2: And I think that's a good point to kick off
• 1:41
  Speaker 2: for James, because a lot of common tree is quite
• 1:44
  Speaker 2: short term, whereas when we look at ETFs and other investments,
• 1:48
  Speaker 2: quite often we're presented with, you know, what's happened over one,
• 1:52
  Speaker 2: five and ten years and allows us, you know, to
• 1:54
  Speaker 2: weigh up short, medium and long term returns. I think
• 1:57
  Speaker 2: we should be doing the same in the property market
• 1:59
  Speaker 2: as well. I mean, the numbers are pretty ordinary over
• 2:04
  Speaker 2: a ten year period, and this is just the median
• 2:06
  Speaker 2: house value so excluding apartments is about half a percent
• 2:11
  Speaker 2: per annum growth over the last ten years, or sorry,
• 2:15
  Speaker 2: three percent growth over the last ten years. But we
• 2:18
  Speaker 2: know that inflation's been about three percent as well, so
• 2:21
  Speaker 2: in real terms native inflation, no change over a teen
• 2:26
  Speaker 2: year period.
• 2:27
  Speaker 1: And the nwide median is about six percent right well
• 2:32
  Speaker 1: for ten.
• 2:32
  Speaker 2: Years, so three percent above inflation.
• 2:34
  Speaker 1: Yes, and that's on every measure. Then on the five
• 2:38
  Speaker 1: year measure, Melbourne's five year numbers are hopeless, so less
• 2:41
  Speaker 1: than one percent a year, and nationwide you know what
• 2:45
  Speaker 1: we're doing ten that's extraordinary. And even right up to
• 2:50
  Speaker 1: one year figures, the medium was east and Melbourne was
• 2:56
  Speaker 1: zero in front of it, zero points six to five,
• 2:58
  Speaker 1: so half percent, so it actually got it almost got worse,
• 3:01
  Speaker 1: did for a mint?
• 3:03
  Speaker 2: Yeah, over five years neative inflation, it's an approximate annualized
• 3:07
  Speaker 2: decline of about three percent per annum, which means in
• 3:11
  Speaker 2: real terms, house prices or median house price is fourteen
• 3:14
  Speaker 2: percent lower today than it was five years ago. So
• 3:19
  Speaker 2: in I mean, if you've been an investor in the market,
• 3:21
  Speaker 2: hopefully you outperform the median. But if you're an investor
• 3:24
  Speaker 2: in the Melbourne market, you know, like everything in a rising,
• 3:28
  Speaker 2: title ships rise and vice versa, really hard to buck
• 3:31
  Speaker 2: the trend. When the trend is you know, property prices
• 3:34
  Speaker 2: are ten to fifteen percent lower in real terms than
• 3:37
  Speaker 2: they were five years ago.
• 3:39
  Speaker 1: And they were just add folks, you know this is houses, right,
• 3:41
  Speaker 1: which is the best apartments one in five per selling
• 3:45
  Speaker 1: at a loss. Okay, so we'll just park that for
• 3:47
  Speaker 1: one mon We say, okay, well that's the recent history
• 3:49
  Speaker 1: of what our listeners want to know from every stat
• 3:53
  Speaker 1: including obviously in Victoria. But you know, it's interesting, Stuart.
• 3:57
  Speaker 1: I had lunch with a financial advisor in last week
• 4:00
  Speaker 1: and he said that all the action among these clients
• 4:06
  Speaker 1: was will you should you buy in Melbourne? And some
• 4:10
  Speaker 1: of them have been buying in Melbourne. Why wouldn't they
• 4:14
  Speaker 1: when you well, on a strict metric of just looking
• 4:17
  Speaker 1: at the numbers, if you're in Sydney and you've watched
• 4:21
  Speaker 1: your prices tick along so nicely, say over five years
• 4:25
  Speaker 1: at seven point six percent a year, which is pretty juicy,
• 4:28
  Speaker 1: and you look at the other city in Melbourne, which
• 4:31
  Speaker 1: is not that very different, and it's tracking at no percent.
• 4:34
  Speaker 1: Basically it's doing nothing. Then it would seem but it's
• 4:38
  Speaker 1: seemed for a long time to be a bargain. So
• 4:42
  Speaker 1: here's a million dollar question that everyone's been hanging on for.
• 4:45
  Speaker 1: Is there anything in the numbers now that suggests to
• 4:49
  Speaker 1: us that a turn I believe, I'm sure you believe
• 4:53
  Speaker 1: there will be a turn, But is there anything in
• 4:55
  Speaker 1: the numbers that suggests a turn could be occurring?
• 5:00
  Speaker 2: Yeah, it's certainly changed. At the beginning of this year,
• 5:02
  Speaker 2: James and I should say, and we'll be familiar with
• 5:05
  Speaker 2: this with all the discussion around Perth. Interstate investors are
• 5:09
  Speaker 2: the first ones to re enter the market. It's always
• 5:13
  Speaker 2: interstate investors, and we saw that in Perth. And if
• 5:16
  Speaker 2: you speak to any buyers agents in Melbourne, they'll tell
• 5:18
  Speaker 2: you that the majority of inquiry from investors are interstate investors.
• 5:24
  Speaker 2: And I guess you know, probably because we've been beaten
• 5:27
  Speaker 2: down in Melbourne in terms of how bad the government
• 5:30
  Speaker 2: is and the debt and all these sorts of things,
• 5:32
  Speaker 2: maybe we don't have that perspective that interstate investors do.
• 5:36
  Speaker 2: But cautality produce a daily price index, and I quite
• 5:41
  Speaker 2: like it relative to meeting house price movements because it
• 5:46
  Speaker 2: uses a hedonic methodology, which means it's trying to compare
• 5:50
  Speaker 2: apples with apples, so it's looking at land sized number
• 5:53
  Speaker 2: of bedrooms and so forth, where a Meetian house price
• 5:56
  Speaker 2: comparison really isn't a comparison of like with like. And
• 6:00
  Speaker 2: so if we have a look at how that's tracking,
• 6:02
  Speaker 2: it turned. In fact, all states started to turn positive
• 6:05
  Speaker 2: in terms of growth early February this year and we're
• 6:08
  Speaker 2: tracking about five point eight percent annualized growth in Melbourne
• 6:12
  Speaker 2: between February and today, it's the last six months. To
• 6:15
  Speaker 2: put that in context, Sydney's about six point one, Perth
• 6:18
  Speaker 2: about seven point one. Adelaide's slowing down. It's three point nine,
• 6:22
  Speaker 2: which is kind of interesting. Brisbane's the standout eight and
• 6:25
  Speaker 2: a half percent, so they're all sort of six to
• 6:28
  Speaker 2: eight percent really in that range. In Melbourne is in
• 6:31
  Speaker 2: that range, which is very rare. We haven't seen that
• 6:33
  Speaker 2: for five years, probably haven't really seen it for ten years.
• 6:38
  Speaker 2: But I think when markets change, you know, it's the
• 6:41
  Speaker 2: data lags a little bit, and so we'll see it
• 6:44
  Speaker 2: in the data probably towards the end of this year
• 6:47
  Speaker 2: in terms of compelling case. But the word is from
• 6:51
  Speaker 2: buyers agencies that certainly demand is increased, so there's greater
• 6:55
  Speaker 2: people going to open houses, inspections, more interest parties, more
• 7:00
  Speaker 2: bidders at auction and so forth. There isn't any major
• 7:04
  Speaker 2: price movements yet, but it's always that sort of activity
• 7:09
  Speaker 2: that precedes price movements.
• 7:11
  Speaker 1: So you're saying the Deadly index is now pretty good.
• 7:15
  Speaker 1: It's showing six percent YEP for it's showing six percent
• 7:21
  Speaker 1: annualized return over the last six months. So on that
• 7:25
  Speaker 1: basis if it did what it's been doing everyd for
• 7:27
  Speaker 1: the last six months. We're coming back, we're coming back
• 7:30
  Speaker 1: into investible territory from the numbers. And then you're also
• 7:34
  Speaker 1: saying that though this is harder to get data on
• 7:38
  Speaker 1: the signals bitter numbers, the very tempo of the market
• 7:45
  Speaker 1: is improving as well. Are you convinced by that those numbers.
• 7:49
  Speaker 2: Are totally convinced? And we've seen it on the seller
• 7:52
  Speaker 2: and buyer side, so James. So we've seen some clients
• 7:56
  Speaker 2: sell apartments or houses and for whatever reason, for different reasons,
• 8:01
  Speaker 2: and the results that have been able to achieve have
• 8:04
  Speaker 2: been exceeded expectations, whereas again that hasn't happened for the
• 8:08
  Speaker 2: really the last ten years, when we've had a client
• 8:11
  Speaker 2: sell of property, normally we've been a bit disappointed with
• 8:14
  Speaker 2: the results rather than pleasantly surprised. So definitely the market's changed. Definitely,
• 8:21
  Speaker 2: we're starting to see green shoots of growth and it
• 8:25
  Speaker 2: doesn't surprise me after ten years of no real growth.
• 8:27
  Speaker 2: You know, there's always that pent up demand and also
• 8:30
  Speaker 2: that when you look at relative performance, you know, Adelaide
• 8:33
  Speaker 2: looks like it's cooling off a little bit. It's had
• 8:35
  Speaker 2: a significant period of growth. You know, the best performing
• 8:39
  Speaker 2: market across the capital city through to March Brisbane, I
• 8:43
  Speaker 2: mean Brisbane. I think we will continue to kick along,
• 8:45
  Speaker 2: albeit maybe a slower growth than in the past. And Sydney's,
• 8:50
  Speaker 2: you know, from an affordability perspective, in terms of entry
• 8:53
  Speaker 2: level investment grade property really difficult for most people.
• 8:57
  Speaker 1: Oh well, that's a crucial point, isn't it. From the
• 9:00
  Speaker 1: interstate perspective, can you tell us a little bit more
• 9:04
  Speaker 1: about entry level differences?
• 9:06
  Speaker 2: Yeah, certainly.
• 9:07
  Speaker 1: So.
• 9:07
  Speaker 2: If you want a house in Sydney and you're not
• 9:10
  Speaker 2: prepared to make any compromise, any significant compromises, you're probably
• 9:14
  Speaker 2: going to buy a cottage somewhere between five to ten
• 9:19
  Speaker 2: kilometers from the city on one hundred and one hundred
• 9:22
  Speaker 2: and fifty square meters. You're going to probably have to
• 9:24
  Speaker 2: pay two to two and a half million for that property,
• 9:28
  Speaker 2: whereas in Melbourne you can get something that fits similar description,
• 9:33
  Speaker 2: maybe slightly larger land and your budget needs to be
• 9:37
  Speaker 2: sort of one point one to one point two and above,
• 9:40
  Speaker 2: say one one to one five for instance. So that's
• 9:44
  Speaker 2: more manageable for a lot more people than what Sydney is.
• 9:47
  Speaker 1: That gap is enormous. Can you recall when the gap
• 9:50
  Speaker 1: was ever so big?
• 9:52
  Speaker 2: No, I mean because Melbourne had a really strong run
• 9:55
  Speaker 2: up until the last decade. Melbourne actually had quite a
• 9:59
  Speaker 2: strong run in terms of property growth really between well
• 10:02
  Speaker 2: starting ninety eighty until twenty fifteen or circle that amount.
• 10:07
  Speaker 2: It was from memory about eight percent compounding or something,
• 10:10
  Speaker 2: so it's above average. So we had a really strong
• 10:13
  Speaker 2: market in Melbourne until that time. It's taken a breather,
• 10:16
  Speaker 2: not a surprise. We know markets move in cycles, flatt
• 10:19
  Speaker 2: and growth cycles, so no, but the gap is certainly significant.
• 10:24
  Speaker 2: And I guess when we look at the other major
• 10:25
  Speaker 2: capital city being Brisbane, people might be a bit reluctant to,
• 10:29
  Speaker 2: you know, invest in Brisbane. After it's done almost twelve
• 10:32
  Speaker 2: percent per annum after over five years, they might think, Okay,
• 10:36
  Speaker 2: you've got the Olympics. There's a lot of positive sentiment still, but.
• 10:40
  Speaker 1: Hard to keep that up with in a twelve percent
• 10:42
  Speaker 1: pe it's not.
• 10:43
  Speaker 2: Going to get that. That's definitely not going to keep up.
• 10:45
  Speaker 2: But I think it'll still be positive right through to
• 10:47
  Speaker 2: twenty thirty two, right through to the Olympics, because sentiment
• 10:51
  Speaker 2: in the short run drives markets. But I don't think
• 10:54
  Speaker 2: the Olympics fundamentally changes the market. So the fundamentals aren't changing,
• 10:58
  Speaker 2: but I think the positive sentiment will continue.
• 11:01
  Speaker 1: What we might do here, folks, and this is really good.
• 11:03
  Speaker 1: Of what I wanted to get Stuart to do was
• 11:05
  Speaker 1: to tell it to basically took us through strictly on
• 11:08
  Speaker 1: the numbers, whether Melbourne looked like it had turned and
• 11:12
  Speaker 1: the evidence, the hard evidence is actually that it is turning.
• 11:17
  Speaker 1: Now we only have six months and it's only houses.
• 11:20
  Speaker 1: But as as Stewart said, he's totally convinced that it
• 11:24
  Speaker 1: is turning. And I think just if you're a believer
• 11:27
  Speaker 1: in reversion to the mean, which I am, then you
• 11:30
  Speaker 1: have to think that this is the start of it. Now,
• 11:32
  Speaker 1: what do I do is just park it there for
• 11:33
  Speaker 1: one moment. What I'm going to do, by the way,
• 11:35
  Speaker 1: next next Tuesday, and this Cavallo is going to come
• 11:39
  Speaker 1: on the show and she's going to talk about Melbourne
• 11:41
  Speaker 1: deep dive right the actual city, the areas, the districts,
• 11:45
  Speaker 1: if you're interested, I'm sure you are, and how it's
• 11:47
  Speaker 1: going to how she thinks it's going to perform. But
• 11:50
  Speaker 1: there's one big question which Stuart again has been very
• 11:53
  Speaker 1: across and one of the perhaps one of the reasons
• 11:56
  Speaker 1: that Melbourne's trough extended at least a year further than
• 12:02
  Speaker 1: a reasonable person might expect, and it's got to do
• 12:05
  Speaker 1: with tax and I think we will pick that up
• 12:08
  Speaker 1: on the second part of the show because first of all,
• 12:10
  Speaker 1: it's a hot issue remains an issue in Victoria, a
• 12:13
  Speaker 1: cloud if you like, over a potential rebound there, but
• 12:16
  Speaker 1: also something of a cloud over the wider market because
• 12:20
  Speaker 1: it seems to me every second suggestion and submission going
• 12:24
  Speaker 1: into this tax summit later this month from the government
• 12:28
  Speaker 1: is going to hit property. We'll be back in a moment. Hello,
• 12:45
  Speaker 1: Welcome back to The Australian's Money Puzzle podcast. I'm James
• 12:48
  Speaker 1: Kirby and I'm talking to Stuart Weams of the pro
• 12:51
  Speaker 1: Solution Group. Stewart is, among other things, a regular contributor
• 12:54
  Speaker 1: of course to the Wealth vertical on The Australian, which
• 12:58
  Speaker 1: I hope you have had a look and checked out.
• 13:00
  Speaker 1: It was launched last week or into our second week.
• 13:04
  Speaker 1: You'll see a lot more stories, commentary videos on wealth
• 13:11
  Speaker 1: and of course the Money Postle is there and getting
• 13:14
  Speaker 1: some oxygen which is great and I think you'll find
• 13:18
  Speaker 1: that we've got a bigger team now on wealth and
• 13:21
  Speaker 1: it's really I think it's something that the paper has
• 13:23
  Speaker 1: really got behind, which is terrific and I'm delighted to
• 13:25
  Speaker 1: see it now. Folks. We talked about property, and we
• 13:29
  Speaker 1: talked about Victoria, and we talked briefly about tax and
• 13:31
  Speaker 1: I want to put a couple of things to Stuart.
• 13:34
  Speaker 1: The obvious question is whether Victoria itself, whether the tax
• 13:38
  Speaker 1: regime there halted or extended the trough and the poor prices. Now,
• 13:46
  Speaker 1: there's been a lot of noise around the tax in
• 13:47
  Speaker 1: Victori because there's a lot of taxes. There's ten taxes.
• 13:50
  Speaker 1: But actually you were saying on close inspection, hear this, folks,
• 13:54
  Speaker 1: on closed inspection, Victoria's taxes aren't that bad for most
• 13:58
  Speaker 1: people most of the time.
• 14:01
  Speaker 2: Yeah, So I had to look, James, what happened over
• 14:03
  Speaker 2: the last ten years in New South Wales, Victoria and
• 14:06
  Speaker 2: Queensland to give some context around this. And certainly all
• 14:10
  Speaker 2: the states are as bad as each other. I mean,
• 14:12
  Speaker 2: that's the answer, and that's really I mean, that's where
• 14:15
  Speaker 2: they get a lot of their tax revenue from that.
• 14:16
  Speaker 2: But a big one, yeah, land tax and stamp giddy
• 14:20
  Speaker 2: So if you look at the growth over the last
• 14:21
  Speaker 2: ten years, New South Wales has increased land tax revenue
• 14:25
  Speaker 2: by twelve point six percent compounding perannum over a teen
• 14:29
  Speaker 2: year period, Queensland a little bit more, thirteen percent, and
• 14:34
  Speaker 2: Victoria fifteen percent compounding each year on average over the
• 14:38
  Speaker 2: last ten years. So certainly Victoria is the worst there,
• 14:42
  Speaker 2: but not by a huge margin. Maybe not. I was
• 14:44
  Speaker 2: kind of surprised by this.
• 14:45
  Speaker 1: Yeah, So thirteen for Sydney and thirty in for Brisbane
• 14:50
  Speaker 1: obviously and fifteenth Forts. So they're all been they've all
• 14:54
  Speaker 1: been racking up the land taxas and of course they've
• 14:56
  Speaker 1: been a top of prices have been They've become the
• 14:59
  Speaker 1: key revenue your owner for governments. Okay, but picking up
• 15:04
  Speaker 1: on what happened to Victoria and whether their land tax
• 15:08
  Speaker 1: was much worse than other states didn't really martin it.
• 15:10
  Speaker 1: I think the issue was the impression the state gave
• 15:14
  Speaker 1: by introducing ten separate property taxes of perhaps seven of
• 15:19
  Speaker 1: them are quite arcade, then most people will never pay them.
• 15:21
  Speaker 1: But the impression they gave was that they were out
• 15:24
  Speaker 1: to tax property and the outcome was that investor stead away.
• 15:29
  Speaker 1: What do you think of that? Contention.
• 15:30
  Speaker 2: First of all, one hundred percent is said in the
• 15:34
  Speaker 2: short term sentiment rather than fundamental strives markets. And if
• 15:38
  Speaker 2: you already own property in Queensland or New South Wales,
• 15:41
  Speaker 2: you know, buying an additional investment property in that jurisdiction
• 15:45
  Speaker 2: might actually give rise to a lot more land tax
• 15:48
  Speaker 2: because it's a marginal rate system compared to say investing
• 15:52
  Speaker 2: in Melbourne. But a lot of people have been dissuaded
• 15:55
  Speaker 2: from investing in Melbourne because certainly the government has been
• 15:58
  Speaker 2: out to tax property investors, which is true across the board.
• 16:03
  Speaker 1: You by just experience the listeners the distinction you were
• 16:06
  Speaker 1: making between the two states and the tax I've what
• 16:09
  Speaker 1: the margin reate means.
• 16:11
  Speaker 2: So we did a analysis. I remember it's probably about
• 16:14
  Speaker 2: twelve months ago now for a client comparing you know,
• 16:17
  Speaker 2: do you buy another investment property in Queensland or do
• 16:20
  Speaker 2: you buy one in Melbourne? And the client already held
• 16:23
  Speaker 2: an investment property in Queensland. And because it's in a
• 16:26
  Speaker 2: marginal rate system, I think the first around six hundred
• 16:29
  Speaker 2: thousand is tax free in Queensland and then as you
• 16:32
  Speaker 2: climb in terms of land value, the higher the rate
• 16:35
  Speaker 2: of tax. Much like our individual income tax rate system,
• 16:40
  Speaker 2: and so we did the comparison just on a land
• 16:42
  Speaker 2: and land tax is only one of many considerations, but
• 16:44
  Speaker 2: we did the comparison. Although Victoria had introduced higher rates
• 16:48
  Speaker 2: of land tax in a dollar value perspective, for this client,
• 16:52
  Speaker 2: it was going to be cheaper to invest in Victoria
• 16:54
  Speaker 2: compared to adding a second investment property in Queensland.
• 16:57
  Speaker 1: Isn't that interesting?
• 16:59
  Speaker 2: Yeah, So we've got to be conscious of these things,
• 17:02
  Speaker 2: and we're not going to structure something purely around land tax.
• 17:05
  Speaker 2: But I think looking at these numbers puts it all
• 17:07
  Speaker 2: in context. And actually, James, they give us a four
• 17:10
  Speaker 2: year projection of what they think is going to happen
• 17:12
  Speaker 2: to land tax. So in New South Wales they're predicting
• 17:16
  Speaker 2: a six percent increase per annum over the next four years,
• 17:20
  Speaker 2: Victoria seven point eight so are just below eight percent,
• 17:23
  Speaker 2: Queensland thirteen point one percent. So in four years time,
• 17:27
  Speaker 2: if their projections are correct, Queensland will be the highest
• 17:31
  Speaker 2: taxing state from a land tax perspective. So again, I
• 17:34
  Speaker 2: guess it puts all in context, doesn't it.
• 17:36
  Speaker 1: Whose projections are there? Again, Well, they're treasury, the state
• 17:40
  Speaker 1: treasure or you're rocking budget yeah, you're rocky off the forward estimates. Yeah,
• 17:44
  Speaker 1: well I certainly believe them, right.
• 17:47
  Speaker 2: Yeah, Well they're not going to underplay it, are they.
• 17:49
  Speaker 1: Yeah, no, they're not. Okay, now you heard it hear
• 17:52
  Speaker 1: first folks. All right, So that's very interesting what we
• 17:55
  Speaker 1: have we have been not the impression. Certainly the Queenslander
• 17:57
  Speaker 1: is the little taxing steed and Victoria's a high one
• 17:59
  Speaker 1: close and space suggests it's a closer run thing, and
• 18:02
  Speaker 1: I think listeners would be worth knowing. Stuart's exercise looking
• 18:06
  Speaker 1: at state budgets et cetera suggests that actually Queensland's going
• 18:09
  Speaker 1: to race up and wanted champion here. Okay on tax Now,
• 18:13
  Speaker 1: on the broader issue of nationwide tax the tax sum
• 18:17
  Speaker 1: are coming up. Everyone's got two per spies about what
• 18:20
  Speaker 1: they might do to property. It does seem property as
• 18:23
  Speaker 1: are setting duck here, particularly homes, particularly negative gearing CGT.
• 18:28
  Speaker 1: Every submission that I see suggests zoning, you know, zoning
• 18:32
  Speaker 1: in basically wealth taxes, but wealth tax become de facto
• 18:35
  Speaker 1: of property taxes many times. What do you think is
• 18:37
  Speaker 1: coming down the line.
• 18:40
  Speaker 2: Well, I mean there's been a lot of talk about
• 18:42
  Speaker 2: capping negative gearing rather than abolishing it completely. And you know,
• 18:47
  Speaker 2: of the times, James, I've seen some investors gear very
• 18:51
  Speaker 2: heavily to the extent where which is kind of stupid,
• 18:54
  Speaker 2: to the extent where they're taxable incoming zero and they're
• 18:57
  Speaker 2: not paying any income tax whatsoever to me, So at
• 19:02
  Speaker 2: the fringes, that doesn't make a lot of sense to me.
• 19:04
  Speaker 2: I think a cap probably makes sense, and that cap
• 19:07
  Speaker 2: probably should be a dollar cap. So maybe you can
• 19:10
  Speaker 2: claim up to fifty thousand dollars per individual or something.
• 19:13
  Speaker 2: Who knows what that number looks like. But I think
• 19:16
  Speaker 2: having open ended to the extent where you could have
• 19:19
  Speaker 2: a very high income earner aggressively gear to the extent
• 19:23
  Speaker 2: that they pay no tax doesn't probably make a lot
• 19:26
  Speaker 2: of sense.
• 19:27
  Speaker 1: Right, So it's one of those extreme it's extreme with
• 19:29
  Speaker 1: someone having you know, twenty million in a SMSF. It's
• 19:33
  Speaker 1: an extreme yep, yeah, yeah, optimization for one of a
• 19:38
  Speaker 1: better word of the rules. Yeah.
• 19:40
  Speaker 2: And the federal government, I mean, they wouldn't like the
• 19:42
  Speaker 2: increase in land tax either, by the way, because you
• 19:44
  Speaker 2: can claim a tax doduction for it. So really the
• 19:47
  Speaker 2: federal government is picking up what thirty or between thirty
• 19:50
  Speaker 2: and fifty percent of the bill in terms of in
• 19:53
  Speaker 2: terms of state land tax, So that's sort of problematic
• 19:57
  Speaker 2: as well. You know, I think that it'd be great
• 19:59
  Speaker 2: for the government to do something around affordable housing, more
• 20:03
  Speaker 2: affordable housing, I should say, not affordable housing in the
• 20:07
  Speaker 2: way we normally refer to it.
• 20:08
  Speaker 1: So is there any market initiative they can take to
• 20:11
  Speaker 1: do that. There's a very good question actually coming up
• 20:13
  Speaker 1: in a moment to round this. We'll get to it
• 20:15
  Speaker 1: in a second. But do you see anything they can
• 20:17
  Speaker 1: do well.
• 20:18
  Speaker 2: They had a few years ago, they had the National
• 20:20
  Speaker 2: Rent Affordability Scheme NAZRA, where they gave some tax benefits
• 20:25
  Speaker 2: if you rented a property twenty percent blow market value. Yes, yes, Well,
• 20:29
  Speaker 2: maybe if they play around with negative gearing capital or something,
• 20:32
  Speaker 2: maybe there's an additional incentive that they can give to investors,
• 20:36
  Speaker 2: particularly investors that are renting out established property rather than building. You,
• 20:41
  Speaker 2: because we're talking about we want to spread the extra
• 20:45
  Speaker 2: supplier geographically, maybe they could do something like that, have
• 20:49
  Speaker 2: a tax incentive if you decide to rent your property
• 20:51
  Speaker 2: twenty percent below blow market and maybe even offer longer
• 20:56
  Speaker 2: rent tendancy agreements to provide security for pans that might
• 21:01
  Speaker 2: be a smart initiative.
• 21:03
  Speaker 1: Yes, I certainly think they could explore, as you say,
• 21:06
  Speaker 1: initiatives and investor incentives, and we just hope it doesn't
• 21:10
  Speaker 1: become a sumbat about slashing investor incentives, because if you
• 21:15
  Speaker 1: get the investor incentives right, you can really make a
• 21:17
  Speaker 1: difference in a positive way. Think of the downside of
• 21:19
  Speaker 1: the program for instance, which has been you know, has
• 21:21
  Speaker 1: made a difference and it's an investment incentive. We'll come
• 21:24
  Speaker 1: back to that in a moment, because we've got some
• 21:26
  Speaker 1: great questions. All right, back in a moment. Hello, Welcome
• 21:40
  Speaker 1: back to The Australian's Money Puzzle podcast. James Kirkby talking
• 21:43
  Speaker 1: to Stuart Weems. Okay, Carl says, this is a really
• 21:49
  Speaker 1: good question. I don't understand why governments are not doing
• 21:52
  Speaker 1: more to enable people in inner city suburbs to build
• 21:55
  Speaker 1: townhouses or other forms of medium density housing. It seems
• 22:00
  Speaker 1: like we're missing that middle, the gap between high rise
• 22:03
  Speaker 1: apartments and detached homs. And I know this one off
• 22:06
  Speaker 1: all of the housing issues, but it's a big part
• 22:08
  Speaker 1: of the solution. I completely agree with you, Karl. So
• 22:12
  Speaker 1: you know, we think about certainly Melbourne and Sydney the
• 22:15
  Speaker 1: fabric of the cities. We are starting to have apartment
• 22:18
  Speaker 1: towers and houses very little in between, townhouses, great investments,
• 22:25
  Speaker 1: law maintenance classified with houses I think really ultimately rather
• 22:30
  Speaker 1: than apartments in the volosophy of things. Would you agree
• 22:33
  Speaker 1: with that, Stuart.
• 22:35
  Speaker 2: Yeah, And we're having this discussion. It's having this discussion
• 22:38
  Speaker 2: yesterday with some people from the property industry talking about
• 22:42
  Speaker 2: unwillingness of older people to downsize their homes just because
• 22:46
  Speaker 2: they can't find something that they want to live in
• 22:48
  Speaker 2: the location that they're in. So they don't necessarily want
• 22:51
  Speaker 2: to go to a retirement village, of course, but you know,
• 22:54
  Speaker 2: a large apartment complex doesn't necessarily suit them. They would
• 22:57
  Speaker 2: like to downsize to something, you know, that's relatively attractive,
• 23:01
  Speaker 2: but maybe a townhouse or something like that, or a
• 23:04
  Speaker 2: villa unit style accommodation. But there really just aren't that
• 23:08
  Speaker 2: many being built. The Gratton Institute did some work on
• 23:11
  Speaker 2: this James earlier this year about the density of Australian's
• 23:15
  Speaker 2: capital cities and tagged you know, Melbourne is probably one
• 23:19
  Speaker 2: of the least dense cities of its size compared to
• 23:23
  Speaker 2: cities around the world, and you know, Melbourne can spread out.
• 23:27
  Speaker 1: You know.
• 23:27
  Speaker 2: Of course where Sydney's got the challenge, they're going to
• 23:29
  Speaker 2: have to face it either way because of course geographically
• 23:33
  Speaker 2: they're yeah, they're hemmed in, so they've got to got
• 23:36
  Speaker 2: to find a solution. It's interesting to say that both
• 23:38
  Speaker 2: state governments Victoria and New South Wales have come up
• 23:41
  Speaker 2: with some planning around this in terms of to try
• 23:44
  Speaker 2: and streamline at townhouse and low rise construction. It only
• 23:49
  Speaker 2: happened in March in Victoria and February in New South Wales,
• 23:53
  Speaker 2: so it's early days to see whether that's going to happen.
• 23:56
  Speaker 2: But one hundred percent there's got to be more density
• 24:00
  Speaker 2: and that's good for existing investments to change because it
• 24:03
  Speaker 2: increases the productive value of land. So anyone that's invested
• 24:08
  Speaker 2: in those investment grade locations, Whilst we might think more
• 24:11
  Speaker 2: density is bad news, it's actually good news. And because
• 24:14
  Speaker 2: it does increase that underlying land.
• 24:16
  Speaker 1: Value it yes, of course it does, yeah, which is
• 24:18
  Speaker 1: what it's all about. Yeah, that's very interesting observation, and
• 24:21
  Speaker 1: I would back it. One other thing, Carl. We're saying
• 24:25
  Speaker 1: just about not that much in between. It's interesting. I
• 24:27
  Speaker 1: saw Murvac an executive meet the point that forty percent
• 24:31
  Speaker 1: of their apartment, says are to downsizers now, so they're
• 24:37
  Speaker 1: obviously zoning in there are the sort of middle to
• 24:39
  Speaker 1: upper end and creating property that those sort of people want,
• 24:45
  Speaker 1: and as Carl is pointing out, it's not there. Really
• 24:48
  Speaker 1: good question and thanks for picking it up, Stuart. Okay,
• 24:51
  Speaker 1: there's a question from Steve and Dylan. They're on the
• 24:55
  Speaker 1: same issue. If you'd like to read those questions.
• 24:58
  Speaker 2: Yeah, okay. So Steve says, I'm an engineer who has
• 25:01
  Speaker 2: experienced a highly unorthodoxed wealth management journey due to intergenerational
• 25:06
  Speaker 2: wealth transfer, and it's attracted me to the financial advisory sector.
• 25:11
  Speaker 2: I'm currently studying the graduate diploma of Financial planning. Can
• 25:15
  Speaker 2: you offer some advice for a mid career professional transitioning
• 25:19
  Speaker 2: into financial services? Noting that one of the breadcrumbs that
• 25:22
  Speaker 2: led me down to this path was how frequently you
• 25:25
  Speaker 2: state that financial advisors will be in short supply. Any
• 25:29
  Speaker 2: advice would be greatly appreciated, and then Dylan goes on
• 25:32
  Speaker 2: to ask, you know, what is the outlook for financial
• 25:35
  Speaker 2: advisors and the financial advice industry and how may AI
• 25:39
  Speaker 2: impact its future?
• 25:41
  Speaker 1: Okay, terrific. We might put the AAI one's probably hard
• 25:44
  Speaker 1: to tackle in the context of this show, in that
• 25:47
  Speaker 1: we'll find ourselves drifting all over the place to every
• 25:50
  Speaker 1: other conceivable practice of AI. I saw this morning a
• 25:54
  Speaker 1: rating or bit writing some funeral FLMs using AI to
• 25:58
  Speaker 1: write a bitcheries and it backfired badly. Okay, now you're
• 26:01
  Speaker 1: in a great position to answer this, and we're flattered
• 26:04
  Speaker 1: by the way on the show that we have people
• 26:06
  Speaker 1: who are thinking about becoming financial advisors listening to the show,
• 26:08
  Speaker 1: people who are training as financial advisors, which tells us
• 26:11
  Speaker 1: that we're taking seriously, which is good. So Okay, I
• 26:15
  Speaker 1: always say I am saying it's something I'm saying. The
• 26:18
  Speaker 1: numbers are there. The financial advisory sector is shrinking, it's
• 26:22
  Speaker 1: still shrinking. It went it actually got smaller this year.
• 26:27
  Speaker 1: The number of whether the Australians have doubled, the number
• 26:29
  Speaker 1: of financial advisors will be cut in half. You would
• 26:31
  Speaker 1: think it's an opportunity for Steven dinnan. What do you
• 26:34
  Speaker 1: have to tell them, Stuart.
• 26:37
  Speaker 2: I think it's a great opportunity. I mean, you look
• 26:38
  Speaker 2: at the projections around just superannuation industry. It's about over
• 26:43
  Speaker 2: just a little over four trillion today by twenty thirty
• 26:46
  Speaker 2: five ten years time, it's eight trillion, is the RBA projections.
• 26:51
  Speaker 2: And then you have intergenerational wealth transfers, so baby boomers
• 26:54
  Speaker 2: passing moneys on. I guess the three million dollar super
• 26:59
  Speaker 2: tax will probably exacerbate that or bring it forward. So
• 27:03
  Speaker 2: there's a lot of positive you know, sort of tail
• 27:06
  Speaker 2: winds for the industry. And you know, the banning of commissions,
• 27:10
  Speaker 2: which I think was back in twenty thirteen. James might
• 27:13
  Speaker 2: you might know it better than me.
• 27:15
  Speaker 1: It was pretty hein which was two sixteen. Yes, absolutely, yeah.
• 27:19
  Speaker 2: It was the best thing that I think the country
• 27:21
  Speaker 2: did for financial advice because before that we had commission
• 27:25
  Speaker 2: based people and their core competency was really salesmanship. Today
• 27:30
  Speaker 2: an advisor's core competency has to be advice. And the
• 27:34
  Speaker 2: younger generation that's coming through, you know, in their thirties,
• 27:37
  Speaker 2: are really engaged with it. They want to learn more
• 27:41
  Speaker 2: about property. You know. Unfortunately, as Steve will find out,
• 27:45
  Speaker 2: that the formal education has nothing about property, which is
• 27:49
  Speaker 2: ridiculous given it's a major asset.
• 27:51
  Speaker 1: I mean, the advisor qualifications, it's a listed securities, it's
• 27:55
  Speaker 1: all that.
• 27:55
  Speaker 2: It's all listed securities, insurance, all that sort of stuff
• 27:59
  Speaker 2: nothing about property. So I think anyone getting into the industry,
• 28:03
  Speaker 2: you know, they want to probably get some good work
• 28:05
  Speaker 2: experience because that's really where you're going to learn the trade,
• 28:08
  Speaker 2: I guess, and learn more about property and how it intersects.
• 28:12
  Speaker 2: It's not all about property, but it's a missing part
• 28:14
  Speaker 2: of the piece. And what I hope for the industry
• 28:17
  Speaker 2: moving forward is that we have more asset class agnostic advisors,
• 28:22
  Speaker 2: so that you can go to someone and say what
• 28:25
  Speaker 2: combination of property and share should I have, and you're
• 28:27
  Speaker 2: going to get impartial advice on them.
• 28:30
  Speaker 1: Okay, I think that would be the best type of advisor.
• 28:32
  Speaker 1: Of course, it would be the advisor who's maltias to,
• 28:34
  Speaker 1: who has no biases, who doesn't say I really understand shares,
• 28:37
  Speaker 1: so you should buy shares, or doesn't say I really
• 28:40
  Speaker 1: understand property so you should buy property, which I'm sure
• 28:42
  Speaker 1: happens very good.
• 28:44
  Speaker 2: Okay.
• 28:44
  Speaker 1: Final questions are from Don, and Don has led outs
• 28:48
  Speaker 1: some pretty difficult questions on the new Supertax, but we'll
• 28:54
  Speaker 1: try and bounce to them at speed because they are
• 28:57
  Speaker 1: actually what most of them are, actually relatively easy to answer. Okay,
• 29:02
  Speaker 1: He's first question, if you are over seventy five. Is
• 29:04
  Speaker 1: it true that you can't use strategies such as recontribution etc.
• 29:09
  Speaker 1: In relation to managing your super and the super tax
• 29:13
  Speaker 1: I'll take that one on the answer on that one
• 29:15
  Speaker 1: is that once you're over seventy five, you are restricted
• 29:20
  Speaker 1: to a SGC super guarantee charge contributions and whatever is
• 29:25
  Speaker 1: allowed in the very relative restricted area of downsizing where
• 29:29
  Speaker 1: you'd have to sell the family home and you'd have
• 29:31
  Speaker 1: to prove that you did that to get those later
• 29:33
  Speaker 1: contributions into super, So that area is very limited to you,
• 29:37
  Speaker 1: I would think, Don, And none of this, by the way,
• 29:39
  Speaker 1: is advice. Is information only? Okay, Stuart? Are the rules
• 29:42
  Speaker 1: different if yourself a super fund is fully in pension mode?
• 29:47
  Speaker 1: Are the rules different? About? What the rules different?
• 29:51
  Speaker 2: On?
• 29:52
  Speaker 1: What does he mean there? I wonder?
• 29:54
  Speaker 2: I don't know, maybe if it relates to the recontribution strategy.
• 29:59
  Speaker 2: Maybe Don was asking whether you can still do the
• 30:01
  Speaker 2: recontribution strategy if your self managed super funds in pension phase,
• 30:05
  Speaker 2: and the answer is yes. A self managed super fund
• 30:08
  Speaker 2: can have multiple pension accounts or accumulation account that will
• 30:11
  Speaker 2: relate to one member, and it's very flexible in that regard.
• 30:15
  Speaker 1: Yeah, what I thought. So, okay, does the fifteen percent
• 30:19
  Speaker 1: extra tax on values over three million? Okay? What's talking
• 30:23
  Speaker 1: about here is the new supertax, which is fifteen percent
• 30:26
  Speaker 1: tax on earnings over on earnings on amounts above three million?
• 30:31
  Speaker 1: Will it apply? Will pension withdrawals during the year be
• 30:37
  Speaker 1: added to the year end value? In other words, he
• 30:39
  Speaker 1: wants to know, in terms of their calculation computation stacking
• 30:44
  Speaker 1: up to get to that three million figure, do pension
• 30:48
  Speaker 1: withdrawals during the year Are they included? The answer is yes,
• 30:55
  Speaker 1: of course there are.
• 30:56
  Speaker 2: Yeah, so you can't magically avoid the tax just by
• 30:59
  Speaker 2: withdrawing a little bit of money on the twenty ninth
• 31:01
  Speaker 2: of June. They'll add that back to levy the tax.
• 31:06
  Speaker 1: That's how the Frank dividend came in too, wasn't it
• 31:08
  Speaker 1: that the Frank evident were basically rolled in there? So
• 31:11
  Speaker 1: you've got to look very close. Yet, this is an
• 31:13
  Speaker 1: extraordinary tax. It's a completely new tax. The reason there
• 31:15
  Speaker 1: are so many questions is people have never been taxed
• 31:18
  Speaker 1: on unrealized games before, and it has all sorts of consequences.
• 31:23
  Speaker 1: Just like Darnas pointed out on for instances, your pension,
• 31:26
  Speaker 1: our pension withdrawals included, Yes, they're added back. Are Frank
• 31:29
  Speaker 1: dividend included, Yes, in a way they are. It takes
• 31:33
  Speaker 1: some explaining, but take it from me that that your
• 31:36
  Speaker 1: Frank dividend income is relevant to the computation of the
• 31:39
  Speaker 1: number and all sorts of things coming up. For instance,
• 31:42
  Speaker 1: another one the other day was about it works like
• 31:45
  Speaker 1: it works like CGT. So it's a personal tax. So
• 31:48
  Speaker 1: you get this bill and you can pay it yourself
• 31:50
  Speaker 1: or your super fund must pay it. If you've got profits,
• 31:53
  Speaker 1: they are tax If you've got losses, you don't get compensated.
• 31:56
  Speaker 1: You can only carry them forward, which is all fine,
• 31:59
  Speaker 1: But from Harrison's point of view, for instance, if you
• 32:02
  Speaker 1: were unfortunate enough that in the end you were talking
• 32:05
  Speaker 1: about in the state rather than your active super fund,
• 32:08
  Speaker 1: your inherent tours would not get that. They'd get taxed.
• 32:11
  Speaker 1: They'd get the tax buil for your profits, but your credits,
• 32:16
  Speaker 1: if you had losses, would just be chucked in the win.
• 32:18
  Speaker 1: They would have no value. So there's all. There are
• 32:21
  Speaker 1: twenty different sort of outcomes here, which oftens like us
• 32:25
  Speaker 1: find fascinating and most people and the more you dig
• 32:29
  Speaker 1: into it, the more you realize, Oh my, this is
• 32:31
  Speaker 1: one messy, sloppy tax that's just going to be a nightmare.
• 32:35
  Speaker 2: I think it's like inheritance tax, James, like in the UK,
• 32:38
  Speaker 2: no one actually pays it, Like no one's said the
• 32:41
  Speaker 2: government's not going to raise any revenue from these unrealized
• 32:43
  Speaker 2: gains tax because no one's going to pay it.
• 32:45
  Speaker 1: But what's the number? I don't want to go in this.
• 32:48
  Speaker 1: Oh yes it is, but I shouldn't guess on air.
• 32:50
  Speaker 1: So so they are not going to raise anything like
• 32:53
  Speaker 1: the amount they said they'd raise, Unlike the land tax
• 32:55
  Speaker 1: forward estimate Stewart that you can't take seriously. Don't take
• 33:00
  Speaker 1: the two nine six perceived income from the government seriously
• 33:04
  Speaker 1: because unlike land tax, you can avoid the division two
• 33:08
  Speaker 1: nine six terribly easy. You just simply ensure that you
• 33:11
  Speaker 1: never get three million, or you ensure that it's split,
• 33:14
  Speaker 1: or you ensure that it comes out before it hits
• 33:16
  Speaker 1: three There's so many things you could do, not to
• 33:18
  Speaker 1: mention valuations, which, gosh, guess what you can get a
• 33:24
  Speaker 1: variety of them, I depend I imagine and depending on
• 33:26
  Speaker 1: who you call, would that be? Is that an outrageous
• 33:30
  Speaker 1: thing to say?
• 33:31
  Speaker 2: No, it's not but there's got to go through an audit.
• 33:33
  Speaker 2: So it depends on how flexible you're order to read.
• 33:38
  Speaker 1: Yes, okay, it has to be, of course it does.
• 33:40
  Speaker 1: But there would be shall we say there there would
• 33:43
  Speaker 1: be variables around around unrealized valuations. Deffinitely, Yeah, for sure,
• 33:50
  Speaker 1: you thought so. Okay, maybe we'll leave it at that
• 33:52
  Speaker 1: for this week. Hey, Stuart, thank you very much for
• 33:55
  Speaker 1: coming on the show. Very interesting. My pleasure is always
• 33:57
  Speaker 1: I am just about convinced. Yes, I think that Melbourne
• 34:01
  Speaker 1: has turned and I don't see anything to stop that
• 34:03
  Speaker 1: turn extending. Now is if it can do it in
• 34:06
  Speaker 1: this if we can do it in the middle of
• 34:07
  Speaker 1: the winter season where the rates happened fallen yet to
• 34:11
  Speaker 1: anything like they're supposed to, you have to think that
• 34:13
  Speaker 1: the wind is behind those numbers. Okay, thanks Juart pro
• 34:17
  Speaker 1: Solutions coming on the show, and thank you folks for
• 34:20
  Speaker 1: everything in the way of correspondence. The email is the
• 34:26
  Speaker 1: money Puzzle at the Australian dot com dot au. We'll
• 34:30
  Speaker 1: hear from you soon.