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Fancy bidding against a super fund for your house? · The Money Puzzle

0:09
Speaker 1: Hello and welcome to The Australian's Money Positive podcast. I'm
0:13
Speaker 1: James Kirby. Welcome aboard everybody. Well, as they say in
0:16
Speaker 1: the cricket, it's all happening across property market. Just now
0:20
Speaker 1: we've had a raid cut, we've had a surprise acceleration
0:24
Speaker 1: of the universal home deposit scheme from the government, and
0:28
Speaker 1: off the back of the economic we've got all sorts
0:30
Speaker 1: of things happening on the environmental regulations around housing, some
0:36
Speaker 1: which will make houses get built faster, believe it or not,
0:41
Speaker 1: some that will change the whole nature perhaps of housing.
0:45
Speaker 1: I'm joined today by regular guest Nearada Connor Species, the
0:48
Speaker 1: chief economist at Ray White. How are you, Nerida, I'm well,
0:52
Speaker 1: thanks for having me. I think the last time you
0:54
Speaker 1: were on were probably we were just discussing this that
0:57
Speaker 1: this was a big step, this universal five percent home
1:01
Speaker 1: deposit for first home buyers. Anyone in the country can
1:05
Speaker 1: now buy a house at a five percent deposit if
1:09
Speaker 1: they are a first home buyer. And it's staggered how
1:12
Speaker 1: much you can spend. I think like nine to fifty
1:14
Speaker 1: in Melbourne, a million plus in Sydney. But it's really
1:17
Speaker 1: going to add that segment of the market is pretty hot.
1:20
Speaker 1: Already good thing or a bad thing.
1:23
Speaker 2: Well, there's two sides to it. On an individual level,
1:27
Speaker 2: it's obviously a good thing because it does allow a
1:30
Speaker 2: first time buyer to get in quicker than they otherwise
1:33
Speaker 2: would and it is one of the key reasons why
1:36
Speaker 2: Later's housing policy going into the election was so popular.
1:40
Speaker 1: We should mention they've actually accelerated. It happened. It was
1:42
Speaker 1: supposed to start January next year, and Prime Minister Abenez
1:45
Speaker 1: has just announced it's going to start in September.
1:47
Speaker 2: Yeah, okay, yes, So an individual level, very popular. On
1:52
Speaker 2: an affordability level, not so great, because we know that
1:56
Speaker 2: when you give people the ability to borrow more money,
2:00
Speaker 2: we'll give them more money. It does lead to much
2:04
Speaker 2: higher acceleration of pricing in a constrained supply environment, and
2:07
Speaker 2: we do have a housing supply issue, and there's not
2:10
Speaker 2: enough homes particulate those cheaper price points, and this will
2:13
Speaker 2: lead to an acceleration of those cheaper homes in terms
2:16
Speaker 2: of pricing.
2:17
Speaker 1: So the estibus were up to five percent higher.
2:21
Speaker 2: Yeah, it's already happening. I mean, we have a look
2:23
Speaker 2: over the last couple of years in markets like Sydney.
2:26
Speaker 2: Sydney pricing has been fairly flat, but it has been
2:30
Speaker 2: flat mainly at the top end, or even declining at
2:33
Speaker 2: the top end. If we have a look at sub
2:35
Speaker 2: a million, we have seen quite strong growth at for
2:37
Speaker 2: homes priced at that level.
2:39
Speaker 1: Yeah, I mean, the argument in favor of it is
2:42
Speaker 1: that it increases home ownership. And the same report that
2:48
Speaker 1: said if we push up prices also said it would
2:51
Speaker 1: increase participation or whole ownership rates from six five percent
2:56
Speaker 1: sixty six to sixty seven, So more people get to
2:59
Speaker 1: own a home than would have previously. Is the trede
3:03
Speaker 1: off worth it?
3:05
Speaker 2: The issue is that it will push more homes outside
3:10
Speaker 2: of that affordable price point. So it is worth it
3:14
Speaker 2: for those that can get in, and it's worth it
3:16
Speaker 2: for those that can afford to pay off a loan.
3:19
Speaker 2: But to put this policy in isolation without looking seriously
3:24
Speaker 2: at housing supply is a challenge. So I know the
3:26
Speaker 2: federal government is looking seriously at housing supply, but we
3:30
Speaker 2: can't just keep giving people access to more funds assuming
3:34
Speaker 2: that it won't lead to continued strong price growth.
3:37
Speaker 1: And that's a challenge we have. So from an investor,
3:40
Speaker 1: the investors' investors listening and looking at this market. It's
3:45
Speaker 1: what it means is that a segment of the market,
3:49
Speaker 1: the first home buyer strata, the million dollar market in
3:55
Speaker 1: a little bit higher in Melbourne, but a little bit
3:57
Speaker 1: lower than a million in Melbourne, and then lower again
3:59
Speaker 1: in the other cities. But something in that region eight
4:02
Speaker 1: hundred thousand plus across the country, seven to fifty plus
4:07
Speaker 1: across the country. That's the hottest segment of the market.
4:09
Speaker 1: Is that fair to see? Is that the investment messages
4:12
Speaker 1: such to investors, that is the hottest part of the market.
4:15
Speaker 2: Yeah, absolutely, it is the hottest part of the market.
4:18
Speaker 2: So it is really been driven by first home buyers,
4:20
Speaker 2: but we also know that part of the market is
4:23
Speaker 2: popular with renters and investors are also in that market
4:27
Speaker 2: as a result, so it will continue to get strong.
4:31
Speaker 2: I mean, we've seen it very clearly in markets like Brisbane.
4:33
Speaker 2: So do you have a look at a market like
4:35
Speaker 2: It's witch house prices have more than doubled over the
4:39
Speaker 2: past five years, and it is because It's witch medium
4:42
Speaker 2: was about four hundred thousand at the start of twenty twenty,
4:45
Speaker 2: it's now at about eight hundred thousand and really being
4:49
Speaker 2: driven by affordability, So people buying there as first home buyers,
4:54
Speaker 2: but also investors too because it was at a price
4:57
Speaker 2: that investors are pretty happy putting their money into.
5:01
Speaker 1: Yes, right, but it's an entry level, isn't it, and
5:03
Speaker 1: people have doubled their money. It's not interested in the
5:05
Speaker 1: market that's moving it five percent a year or whatever.
5:08
Speaker 1: Tell me more broadly, you did something very interesting this week,
5:12
Speaker 1: a deep dive as you do on these research notes
5:14
Speaker 1: on what's happening around energy ratings in homes. That's to
5:19
Speaker 1: put it simply, more broadly, what the government is doing
5:23
Speaker 1: right is they are suspending temporarily the environmental layer, if
5:31
Speaker 1: you like, in the new home approval process. But you
5:35
Speaker 1: were worried about this. I'm not surprised that you were worried.
5:38
Speaker 1: I just thought that you would be pro supply of
5:42
Speaker 1: homes as the primary driver over anything else.
5:46
Speaker 2: I mean, one of the challenges with housing supply, or
5:50
Speaker 2: pushing through housing supply quickly is that to do so
5:55
Speaker 2: the government the main labor that they can is planning.
5:58
Speaker 2: So we have certainly seen that they have relaxed a
6:01
Speaker 2: lot of planning around Australia to allow for more development
6:05
Speaker 2: to take place. The next state. What they're looking at,
6:08
Speaker 2: which was an outcome from the Federal government's Economic Roundtable,
6:12
Speaker 2: was a relaxation of National Construction Code, where they've said
6:16
Speaker 2: no more changes on environmental aspects of the code, so
6:22
Speaker 2: you know for things such as energy efficiency or you know,
6:26
Speaker 2: shading or whatever that we know changes for four years.
6:28
Speaker 2: They will adjust the code for their safety obviously, so
6:33
Speaker 2: that will continue be adjusted. But their idea being that
6:37
Speaker 2: they do want to push through more homes. They're doing
6:40
Speaker 2: it through planning, they're doing it through relaxing the construction code.
6:44
Speaker 1: So the trade off is that they will build more
6:46
Speaker 1: homes and they will not be as environmentally sophisticated as
6:49
Speaker 1: they might have been.
6:51
Speaker 2: Yes, and also the neighborhood might not be as livable.
6:54
Speaker 2: And so I think that's the other aspect too with
6:56
Speaker 2: the planning, the relaxation of planning.
7:00
Speaker 1: So from an investment point of view, again this is
7:02
Speaker 1: all in the new home area, isn't it? Broadly from
7:05
Speaker 1: the summit, Productivity Summit, Wealth Tax Summit as we like
7:10
Speaker 1: to call it in the Australian tell me looking at
7:13
Speaker 1: what was said around the table and what the treasure
7:16
Speaker 1: is set afterwards for property investors what do you think
7:20
Speaker 1: is coming down the line that property investors should be
7:23
Speaker 1: aware of.
7:26
Speaker 2: Well, I think particularly buying new So it does apply
7:29
Speaker 2: to new house and land, but it also applies to
7:31
Speaker 2: new apartments. You do need to be careful as an investor.
7:35
Speaker 2: You always need to be careful buying off the plan
7:37
Speaker 2: obviously that even buying a new home in a new area,
7:39
Speaker 2: that the area does have a high level of amenity,
7:43
Speaker 2: and also that it does have a certain level of
7:48
Speaker 2: environmental sustainability, so you know, you don't want to be
7:51
Speaker 2: caught in a situation. I mean, a really good example
7:54
Speaker 2: is a flammable cladding issue that came up last decade
7:58
Speaker 2: that you know leads projects get pushed ahead very quickly.
8:01
Speaker 2: They may be trying to cut costs and maybe trying
8:04
Speaker 2: to get them up quickly, and you are left with
8:06
Speaker 2: a very hefty bill down the track because they do
8:09
Speaker 2: have to make adjustments. So you know, that's always something
8:12
Speaker 2: to be wary of. But I think particularly now because
8:15
Speaker 2: we are seeing an enormous level of development proposed and
8:19
Speaker 2: as a result, there may be some issues with the
8:20
Speaker 2: developments that take place.
8:22
Speaker 1: Okay, so that is from an investment point of view,
8:25
Speaker 1: there is the concern that the standards, if they are
8:29
Speaker 1: suspended or rushed or diluted in any fashion during an
8:33
Speaker 1: acceleration of the housing target, could cause economic risks that
8:39
Speaker 1: aren't immediately obvious.
8:41
Speaker 2: Yeah, and also I mean even the ability to leave
8:44
Speaker 2: the property and also the capital growth of that property.
8:47
Speaker 2: So you know, there's definitely risks associated with investing in
8:51
Speaker 2: an environment where we are going, you know, ideally, because
8:54
Speaker 2: that's what the government is trying to do is ideally
8:56
Speaker 2: get high levels of development taking place.
9:00
Speaker 1: We'll take a break because I wanted to talk to
9:02
Speaker 1: you about this idea again at the summit was that
9:05
Speaker 1: the big super funds would could should provide housing. Now,
9:11
Speaker 1: what we've never really discussed on the show is what
9:13
Speaker 1: would that reality be at the moment this show exists.
9:16
Speaker 1: And particularly the property dimension of this show is aimed
9:19
Speaker 1: at people who are investors in property. Most people have
9:21
Speaker 1: one property, maybe too. It's a backbone of every day
9:26
Speaker 1: investing in Australia. What if that was replaced by institutional investments?
9:30
Speaker 1: What would it mean. We'll be back in a moment. Hello,
9:43
Speaker 1: Welcome back to The Australian's Money Puzzle podcast. James Kirby
9:47
Speaker 1: talking to narrative Conspy regular guests on the show talks
9:50
Speaker 1: to us about the big picture in for property investors,
9:54
Speaker 1: and the big picture having remained relatively stable for a
9:57
Speaker 1: long time, there is a lot happening policy wise which
10:00
Speaker 1: is directly relevant to investors just now. I mean, here's
10:04
Speaker 1: the thing, for instance, narrative, if the big super funds
10:07
Speaker 1: did get the green light to go into housing, and
10:11
Speaker 1: by that I mean a green light would be that
10:14
Speaker 1: they are allowed, they are encouraged, and the deals are
10:17
Speaker 1: put on the table that they would be keen to
10:19
Speaker 1: participate in. Tell me what has happened around the world
10:25
Speaker 1: when big funds have gone into property, private equity funds, etc.
10:29
Speaker 1: Say in the UK, in the US. What's the experience there?
10:33
Speaker 1: Is it better? Is it different than market that's controlled
10:36
Speaker 1: by private investors as we have our market just now.
10:40
Speaker 2: So Australia has it had much institutional investment at all.
10:44
Speaker 2: Is quite different to what we're seeing in the US
10:47
Speaker 2: and the UK and most of Europe, where we have
10:49
Speaker 2: seeing tension funds, super innovation funds. We've seen a lot
10:52
Speaker 2: of private equity getting into housing renting them out. I
10:56
Speaker 2: think for Australia we do need a bit of a
10:58
Speaker 2: diversification of who I own rental properties, because at the
11:02
Speaker 2: moment it's very heavily geared to mum and dad investors,
11:05
Speaker 2: and we know it's certainly in recent years that if
11:09
Speaker 2: there's not enough investment in housing from that group, then
11:12
Speaker 2: we do have rental problems. So this would ideally help
11:17
Speaker 2: if we see more investment from these other groups and
11:19
Speaker 2: would ideally help with keeping rental growth calm the problem.
11:23
Speaker 2: So what are emerging in the US is around very
11:26
Speaker 2: similar issues to hear that people feel well, So if
11:31
Speaker 2: you have a look at it, if you have a
11:32
Speaker 2: good mum and dad investor in Australia, often they're quite
11:35
Speaker 2: okay with very low rental yields because they're relying on
11:38
Speaker 2: capital growth. If you have a look at institutional investors,
11:42
Speaker 2: they need that rental yield to make the development, to
11:46
Speaker 2: make the projects that come.
11:47
Speaker 1: Oh yes, so the year is okay, This is very
11:49
Speaker 1: important point. Yeah, okay.
11:51
Speaker 2: So if you look at an institutional investor, if they
11:55
Speaker 2: build an apartment building or they buy a whole suburb,
11:58
Speaker 2: which has happened in the US, they may be they
12:02
Speaker 2: may quite substantially push up rents to be able to
12:06
Speaker 2: generate that decent return. So I think there is a
12:08
Speaker 2: perception in Australia that if we get this institutional investment in,
12:13
Speaker 2: it will calm rents and it will make it you know,
12:16
Speaker 2: it will make it cheaper or better for renters. So
12:19
Speaker 2: I don't think that's necessarily the case.
12:21
Speaker 1: You think super funds are institutionalization, but big funds own
12:25
Speaker 1: literally tracks of the suburbs that actually would push rents.
12:29
Speaker 2: Up potentially, yes. And also, you know, we all have
12:34
Speaker 2: super that if they don't push rents up and they
12:37
Speaker 2: don't get a decent yield, how do you feel about
12:40
Speaker 2: that being part of your superannuation balance? Because I think
12:45
Speaker 2: on one hand, most of us, I mean, most people
12:49
Speaker 2: feel that housing is too expensive and it would be
12:52
Speaker 2: great if we could calm rents and calm house prices.
12:55
Speaker 2: But at the same time, are you willing to take
12:57
Speaker 2: a hint on your superbalance for that to take place?
13:00
Speaker 2: And I think that's the that's kind of the uncomfortable
13:03
Speaker 2: question we have around super funds getting into.
13:07
Speaker 1: And it's that the experience overseas that rents did do
13:10
Speaker 1: go higher when institution investors because the yield is more
13:14
Speaker 1: the running yield is more important to them. Than it
13:16
Speaker 1: would be for a moment, Dad.
13:18
Speaker 2: Yeah, it has. If you look at the anger around
13:21
Speaker 2: rental housing the US in particular, it's not anger directed
13:25
Speaker 2: towards individual investors. It's now anger directed towards the big
13:30
Speaker 2: funds or the big groups or the big companies that
13:33
Speaker 2: I that I need properties and the same problems. They're
13:37
Speaker 2: the same problems around upkeep. They're the same, you know,
13:40
Speaker 2: they're very similar problems that the anchor now is directed
13:43
Speaker 2: more to individual investors. Here, it's directed towards large companies.
13:46
Speaker 2: So it's necessarily solve those problems.
13:48
Speaker 1: So the retor, the rector here complains to mister and
13:51
Speaker 1: missus Smith, but the rent in Chicago complains to Gigantic
13:55
Speaker 1: Corporation Limited, And it's completely different. Dynamic about bidding at
14:00
Speaker 1: auction or if you were bidding for the house around
14:02
Speaker 1: the corner and you were up against amp.
14:06
Speaker 2: Yeah, well this is the much statement pockets and then
14:09
Speaker 2: an individual investor absolutely.
14:11
Speaker 1: Yeah, I mean, I digress, but it's true, as you say,
14:14
Speaker 1: deeper pockets are Remember going I was a property reporter
14:16
Speaker 1: once upon a time, commercial property, and you would go
14:18
Speaker 1: downtown there would be an auction city building, you know,
14:22
Speaker 1: and everyone would stand on the street and the bidding
14:25
Speaker 1: would start, and if the person from AMP put their
14:27
Speaker 1: hand up, everyone would just go, oh, hell, ampre here,
14:31
Speaker 1: you know, because they wanted, if they wanted. It's a
14:33
Speaker 1: completely different dynamic than the individual investor who's looking at it.
14:37
Speaker 1: And we've never had that in housing. That's a really
14:39
Speaker 1: interesting point you make and that you bring up. I mean,
14:42
Speaker 1: at its worst, I think is the vulture funds, which
14:45
Speaker 1: of course swoop on housing when there's a crash. This
14:48
Speaker 1: is a different dynamic. This is we're assuming under normal circumstances,
14:53
Speaker 1: with a normal, gently growing economy. What would happen if
14:56
Speaker 1: big funds came into the market just to develop that
14:59
Speaker 1: a little bit more. Or there's also and it hasn't
15:01
Speaker 1: been here at all, but we must allow for it.
15:03
Speaker 1: I think now the sooner or later companies themselves buying
15:07
Speaker 1: housing in Ireland. At the moment I noticed where there's
15:09
Speaker 1: a lot of dependence, of course on multinationals companies like
15:13
Speaker 1: I think it's certainly Ryanair and I think Intel have
15:18
Speaker 1: been buying housing for their staff and they come out
15:21
Speaker 1: and they say we cannot get the staff. The staff
15:24
Speaker 1: can't afford to live in Dublin. So our answer is
15:26
Speaker 1: we will buy houses for them. We haven't had that here.
15:30
Speaker 1: It's got to be a potential outcome. Hasn't it our
15:34
Speaker 1: market sooner or later?
15:36
Speaker 2: Yeah, I mean we have had it here. I guess
15:38
Speaker 2: places like man Easa we're probably originally, yes, traditionally mining
15:43
Speaker 2: mining towns.
15:44
Speaker 1: Yes, there was specific Dunlop houses actually where I lived
15:47
Speaker 1: at one stage. Once upon a time, Pacific Dunlop had
15:49
Speaker 1: owned a whole pile of houses. This was, once upon
15:53
Speaker 1: a time, big conglomerate. But I'm talking about a different
15:56
Speaker 1: dynamic where the company was not in housing. It's not
15:59
Speaker 1: patron such. It's an urgency where they say we can't
16:03
Speaker 1: get the workers, they can't live in the middle of
16:05
Speaker 1: Melbourne or Sydney, so we've bought houses for them. Do
16:08
Speaker 1: you think that's going to happen here ever?
16:11
Speaker 2: Yeah, well, I think it's happening in a very mile
16:14
Speaker 2: way in places like Bayer and Bay. You know, you
16:15
Speaker 2: hear of hospitality companies providing some sort of accommodation, not
16:20
Speaker 2: on mass you know, it hasn't happened here. But you know,
16:24
Speaker 2: besides big infrastructure projects or big mining projects where they've
16:27
Speaker 2: had to provide housing in quite isolated areas. But it's
16:31
Speaker 2: one option. I mean, if you do need young staff
16:34
Speaker 2: in Sydney, and young staff in Sydney really find it
16:38
Speaker 2: difficult to live in such an expensive place, it is
16:41
Speaker 2: an option to be providing that absolutely.
16:43
Speaker 1: Okay, now we've covered favorite ground here. As I said,
16:48
Speaker 1: there is a It's one of those times for a
16:50
Speaker 1: policy sometimes doesn't matter an awful lot if you're an investor.
16:53
Speaker 1: There are ties where it really matters. We have a
16:56
Speaker 1: fairly active government outlining a policy in front of us
16:59
Speaker 1: just now. A lot of it is pertinent property and
17:02
Speaker 1: you can see how they can pull the lever so quickly,
17:04
Speaker 1: like for instance, accelerating that first home deposit scheme and
17:09
Speaker 1: opening it up from September on, which will instantly, I think,
17:12
Speaker 1: feed into the home buyer market. And if you think
17:14
Speaker 1: the prices are lifting quickly in that strata now where
17:17
Speaker 1: they can only accelerate it, I would think. Okay. I've
17:20
Speaker 1: kept some very interesting questions for Narrada right smack in
17:24
Speaker 1: her area. We'll talk about them in a moment. Hello
17:33
Speaker 1: and welcome back to the Australians Money Puzzled podcast. James
17:36
Speaker 1: Kirby here with neared economspy chief economist at the Rape
17:40
Speaker 1: White Group, someone who's willing to take questions of all
17:43
Speaker 1: types from all types, which is good because we have
17:46
Speaker 1: some pretty curly questions for her. First once from Sean.
17:50
Speaker 1: I often hear of people using renovations as a strategy
17:54
Speaker 1: to increase equity or the sale price of their home.
17:57
Speaker 1: This polarized opinion on the merit of this, particularly with
18:00
Speaker 1: construction labor costs increasing. I know many success stories failed
18:05
Speaker 1: to account for all the costs in this area. So
18:07
Speaker 1: are the days of renovating for profit behind this? Hey,
18:11
Speaker 1: this is really interesting. We had talked through last year
18:14
Speaker 1: how people were afraid to renovate, but I noticed you've
18:17
Speaker 1: been doing some work on replacement cost, and that replacement
18:21
Speaker 1: cost is Could you explain to people what happened and
18:24
Speaker 1: how that's improving again?
18:27
Speaker 2: Yeah, So what happened through the pandemic is that it
18:30
Speaker 2: became apparent that it was cheaper to buy an established
18:34
Speaker 2: home then buy a brand new home. So hard to measure,
18:37
Speaker 2: but we saw it in the outskirts of many capital
18:40
Speaker 2: cities that when we had to look at house and
18:42
Speaker 2: land developments, anything that was built in twenty twenty could
18:46
Speaker 2: be sort of thirty forty percent cheaper then something that
18:49
Speaker 2: was being built in twenty twenty four and not dramatically
18:54
Speaker 2: different in terms of quality. And so what happened is
18:57
Speaker 2: that we've started to see a lot of people moving
18:59
Speaker 2: into buy homes built in twenty twenty and.
19:02
Speaker 1: You don't buy the new one, You're buy the one
19:03
Speaker 1: that's one year old, because you know, I.
19:06
Speaker 2: Think, yeah, like you said, buying a used part. It's
19:10
Speaker 2: basically it's around replacement costs that if you have a
19:12
Speaker 2: look at trying to bridge that gap, it was too
19:16
Speaker 2: why that construction costs have really blown out even their
19:19
Speaker 2: house parts seen strong growth, we've seen it narrow and
19:23
Speaker 2: it's not because house construction costs have dropped, they have stabilized.
19:28
Speaker 2: But what we have seen is that house prices have
19:30
Speaker 2: now caught up in many areas and as a result
19:33
Speaker 2: that that gap has substantially narrowed. So I think ideally
19:37
Speaker 2: a lot of people would have hoped construction costs come down,
19:39
Speaker 2: but they haven't. That we have seen it increased in
19:43
Speaker 2: the cost of buying it home.
19:45
Speaker 1: Okay, back to Sean, Then in that scenario, are renovations
19:51
Speaker 1: financially more promising than there would be.
19:56
Speaker 2: It depends on what you're doing. And you know, this
19:59
Speaker 2: is a thing. If you're doing like a really super
20:02
Speaker 2: unusual backyard sculpture or something, you know, maybe not. But
20:07
Speaker 2: if you're doing something like painting and it saves someone time,
20:11
Speaker 2: then you know that would definitely work out. I mean,
20:13
Speaker 2: at a base level. You know, we generally say the
20:16
Speaker 2: cost of your home now plus the renovation would equal
20:19
Speaker 2: the cost you could sell at. But you know that's
20:21
Speaker 2: not necessarily the case. We know that some renovations do
20:25
Speaker 2: add a lot more value than others.
20:26
Speaker 1: And okay, yeah, but I suppose usefully people that variability
20:30
Speaker 1: has improved, that sense of oh, having no idea how
20:34
Speaker 1: much costs would blow out, that period has calmed.
20:38
Speaker 2: It has come. And I think the other thing too,
20:40
Speaker 2: is that when we have a look at properties that
20:41
Speaker 2: go up for option, a fully renovated family home will
20:46
Speaker 2: absolutely do a lot better than something that's unrenovated. So
20:49
Speaker 2: people are taking into account the fact that it is
20:52
Speaker 2: hard to build at the moment, or still pretty hard
20:54
Speaker 2: to build and still pretty expensive.
20:56
Speaker 1: Yes, okay, so that's still highly valued. That you have
21:00
Speaker 1: put yourself through the torture of dealing with the spectrum
21:03
Speaker 1: of treaties as it should be. Okay, final question from Carl.
21:06
Speaker 1: I was reading the Productivity Commission found that productivity in housing,
21:09
Speaker 1: measured by dwellings completed per hour, has dropped by fifty
21:14
Speaker 1: three percent. It made me wonder whether the decline is
21:17
Speaker 1: due to the increasing size of homes we're building today.
21:20
Speaker 1: Is that true? The productivity in housing has dropped and why?
21:23
Speaker 2: Yeah, so it takes on average six it's gone out
21:26
Speaker 2: from six months to build a home to over almost
21:28
Speaker 2: eleven months.
21:29
Speaker 1: So there's you know.
21:30
Speaker 2: It is taking a lot longer. It's kind of it's
21:33
Speaker 2: quite it's not complicated at all. I mean, basically what
21:36
Speaker 2: happened through the pandemic is we had supply chain blockages.
21:40
Speaker 2: Things like if you're building a house and then a
21:42
Speaker 2: bas doesn't turn up, then you can't finish the house.
21:45
Speaker 2: It then slows through to labor challenges, so again, if
21:48
Speaker 2: you can't find a tiler, you can't finish your house.
21:51
Speaker 2: And so that increased time. We then start to see
21:54
Speaker 2: a lot of builders going to receivership. So the availability
21:57
Speaker 2: of trades continue to be problematic, and even things like
22:00
Speaker 2: the green energy transition is quite challenging in places like
22:04
Speaker 2: Wa because very brick dependent and bricks need gas and
22:08
Speaker 2: gas is expensive and then trying to find brick layers
22:11
Speaker 2: is really difficult. So we do have an aging trade
22:15
Speaker 2: trades profile in Australia, so very complicated, but definitely productivity
22:22
Speaker 2: is low and there's quite amazing numbers of trades that
22:26
Speaker 2: are required to increase productivity that the hi I have mentioned.
22:30
Speaker 2: I can't remember off the top of my head, but
22:32
Speaker 2: it was, you know, tens of thousands of trades are
22:34
Speaker 2: required to try and fix the productivity.
22:37
Speaker 1: So it's I see. So it's a flash flash point
22:40
Speaker 1: basically in this area.
22:42
Speaker 2: Yeah, absolutely, very.
22:44
Speaker 1: I did not know that, all right, Thank you, Carl.
22:46
Speaker 1: Very interesting question. They were. None of this, of course
22:48
Speaker 1: is advice. It's information only. Terrific Keith, thank you very much.
22:52
Speaker 1: Narrative Cando spy, very interesting. As always, this government is
22:57
Speaker 1: an interventionist government. If you're an investor, you're really on
23:00
Speaker 1: to keep your eyes open as to what is happening
23:02
Speaker 1: around you. I think is the message from today's show.
23:05
Speaker 1: We'll talk again fans, great, Thank you Narrador and thank
23:08
Speaker 1: you folks. The email the money puzzle at the Australian
23:11
Speaker 1: dot Com dot Au talk to you soon.