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Property versus shares: we have a winner · The Money Puzzle

0:08
Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
0:11
Speaker 1: James Kirby from The Australian. Welcome aboard everybody today. I
0:14
Speaker 1: want to pose a simple, single question, something I will
0:20
Speaker 1: freely admit I am not the first to ask, but
0:23
Speaker 1: I can tell you the answer is not set in stone,
0:26
Speaker 1: and I expect everybody who listens to this show wonders
0:30
Speaker 1: about the appeal of property versus shares? Is one better
0:35
Speaker 1: than the others, one easier than the other? I also
0:38
Speaker 1: want to cover some great questions that have come in
0:40
Speaker 1: from you, the listeners. My guest today is Anthony Keene.
0:44
Speaker 1: He's a personal finance writer at News Corporation, regular guest
0:47
Speaker 1: on the show and has recently written quite a bit
0:51
Speaker 1: about this and I think on usually four commentations and
0:55
Speaker 1: writers has come down quite firmly on one side. But
0:57
Speaker 1: we won't tell you what side that is till we
0:59
Speaker 1: actually kick it around first. How are you, Anthony, I'm good.
1:02
Speaker 1: Thanks James, Thank you for coming on the show again.
1:04
Speaker 1: I know it's a big week, budget week. This comes up,
1:07
Speaker 1: right property versus shares? Sometimes it comes up in the
1:10
Speaker 1: guys of whether people should put their money into super
1:14
Speaker 1: or property. That's something that comes up all the time
1:18
Speaker 1: of late what people have been saying, and these are
1:20
Speaker 1: very powerful points. I not the issue of which is easier.
1:24
Speaker 1: I think traditionally always the thing people said. Look, I
1:27
Speaker 1: find it all too hard with shares. I don't understand
1:29
Speaker 1: frank dividends. I don't know one company from another. I
1:32
Speaker 1: do understand property. It's easier. But in recent times, buy
1:37
Speaker 1: and selling shares has become terribly easy and much cheaper
1:40
Speaker 1: as a percentage of how much you're spending. It's become easy,
1:44
Speaker 1: it's become cheap, hassle free. This is not an advertisement
1:47
Speaker 1: for exchange traded funds or index funds, but it's beyond
1:51
Speaker 1: dispute that the creation of exchange traded funds has meant
1:55
Speaker 1: that you don't have to know a damn thing about
1:58
Speaker 1: the share market these days to be quite usefully and
2:01
Speaker 1: diversified in your investment approach through ETFs. What do you
2:06
Speaker 1: think of that approach that people are starting to talk about.
2:10
Speaker 2: I think you're absolutely right, James etf. I mean, they've
2:13
Speaker 2: been around for a good sort of twenty odd years,
2:15
Speaker 2: but they just keep going from strength to strength. Warren Buffett,
2:19
Speaker 2: the famous US billionaire is a big fan of them,
2:22
Speaker 2: as are a lot of sort of successful investors, because
2:26
Speaker 2: with every dollar that you put into an ETF, you
2:29
Speaker 2: don't have to choose a company, you don't have to
2:31
Speaker 2: research them, you just can track the index. So one
2:35
Speaker 2: dollar of investment puts you across the top two hundred
2:38
Speaker 2: stocks on the ASX or the S and P five
2:40
Speaker 2: hundred index in the US, or whatever you want. So
2:43
Speaker 2: you're just getting that simple access. And as you said,
2:47
Speaker 2: there's lower costs as well, and it's great and I
2:50
Speaker 2: have a lot of them in my personal superfund, and
2:52
Speaker 2: it is great way just to ride the market. You're
2:55
Speaker 2: not trying to do stock picking and that sort of thing.
2:57
Speaker 2: I've tried that over many years. Like most I reckon,
3:01
Speaker 2: I came out in the red rather than the blacks.
3:03
Speaker 2: So it's a great way to do it. And at
3:05
Speaker 2: the same time, I think property to a degree has
3:08
Speaker 2: become trickier, especially in some states of Australia. There's just
3:12
Speaker 2: constant changes to the rules for and if we're talking
3:15
Speaker 2: about residential investment property, which is still with vast majority
3:19
Speaker 2: of where Ossie's investing rule changes, tax changes, election promises
3:24
Speaker 2: that may or may not happen. We just don't know.
3:27
Speaker 2: So that seems to have become more complex over the
3:31
Speaker 2: last five or ten years as well.
3:32
Speaker 1: Yes it does. I mean we don't on the shore
3:34
Speaker 1: recently about the ten separate property taxes in Victoria and
3:38
Speaker 1: that they had created two new ones in January. Believe
3:41
Speaker 1: it or not, I'm out of date. There's a thirteen
3:43
Speaker 1: tax and they've just announced that the emergency services level
3:47
Speaker 1: would be higher for property owners than for homeowners. So
3:50
Speaker 1: there you go, folks, thirteen taxes lined up for you
3:53
Speaker 1: should you choose to invest in one stage versus another
3:56
Speaker 1: state like Queensland, which has less taxes. Before we get
3:59
Speaker 1: into that one thing we're saying, though, we're putting shares
4:02
Speaker 1: up against property here and asking the question, posing the question,
4:06
Speaker 1: which is better now when we talk about shares. Of course,
4:11
Speaker 1: there's a part of it which is so easy. It's
4:14
Speaker 1: it's hard to underestimate. Like if I own a property
4:17
Speaker 1: and Anthony, you won't invest in property, so have I
4:20
Speaker 1: even if you had the managed and I use the
4:23
Speaker 1: word managed in sneak quotes because even if you have
4:26
Speaker 1: a property managed, you know the manager is going to
4:28
Speaker 1: call you a lot and you're walking down the street,
4:31
Speaker 1: and then you get these calls about details of and
4:33
Speaker 1: if you have several properties, you get several calls about
4:36
Speaker 1: several details. So you can't really outsource this in any
4:42
Speaker 1: substantial way unless you pay. The more you pay, obviously,
4:46
Speaker 1: the more you can outsource it, then the less you
4:48
Speaker 1: make on the property. But the marvelous thing about chairs
4:52
Speaker 1: is that there's so little work. And you mentioned ETFs,
4:56
Speaker 1: I mean there's absolutely no work with them. Mister. You
4:58
Speaker 1: go and you bought your straight share market, your US
5:01
Speaker 1: share markets, you're NASDAK. Maybe you buy a world index,
5:04
Speaker 1: Maybe you buy a single team that you're particularly interested in,
5:08
Speaker 1: like say AI or something like that, or electric cars,
5:10
Speaker 1: whatever you like, you buy them and really you don't
5:15
Speaker 1: have to do a damn thing month after month. And
5:18
Speaker 1: that contrasts substantially. And our listeners who have property would
5:22
Speaker 1: know that. Do I make it sound too easy?
5:25
Speaker 2: No? I think it is as simple as that. Still,
5:29
Speaker 2: obviously there's the issues that you're going to have with
5:31
Speaker 2: rises and falls in stock markets here and overseas, they
5:34
Speaker 2: do tend to be a lot more volatile. So but
5:38
Speaker 2: you're right, the simplicity seems to have gone. It. You
5:41
Speaker 2: just to seem simple to Number one investment for Ozzie
5:44
Speaker 2: once I'd paid a bit off their own home, was
5:46
Speaker 2: to buy an investment property. But it has become more difficult,
5:50
Speaker 2: as rightly you say, share ownership has become simpler and
5:54
Speaker 2: cheaper on the Internet has done a lot that not
5:57
Speaker 2: only to make those processes cheaper, but also provide research
6:02
Speaker 2: for those who want to do the research.
6:03
Speaker 1: And that's a very good point. It was upon a
6:05
Speaker 1: time you had to be a broker's client to get research,
6:09
Speaker 1: and now a lot of researchers out there for free,
6:11
Speaker 1: isn't it on stocks? And they're quite certainly the major stocks,
6:15
Speaker 1: the top twenty stocks. You can get quite a lot
6:17
Speaker 1: for free. Or you could just sign up with an
6:20
Speaker 1: online broker and do very little, like say one of
6:22
Speaker 1: the major brokers. You don't have to do much trading
6:24
Speaker 1: with them, and you're on forever and you can still
6:26
Speaker 1: access what they access and their research. So that's another attraction.
6:31
Speaker 1: Someone once said, you know, I thought it was very
6:32
Speaker 1: powerful that you said there about the market's being volatile.
6:36
Speaker 1: I mean, in truth, if residential property, if every house
6:41
Speaker 1: had a neon sign across the top which showed in
6:44
Speaker 1: real time, how much that house was valued per day.
6:48
Speaker 1: It would move around, of course, just like people. Super
6:51
Speaker 1: moves around, and people get obsessed with their super and
6:53
Speaker 1: they're looking at it every day, which they should not do.
6:56
Speaker 1: I'm not saying they shouldn't look at it all regularly,
6:59
Speaker 1: but looking at it up simply isn't very healthy. Now. Similarly,
7:02
Speaker 1: I wonder if we had if every house, by law,
7:04
Speaker 1: had to have a sign around it, across the top,
7:06
Speaker 1: a little box where you could see how much it
7:08
Speaker 1: was valued on that day, would people's attitude above comparing
7:12
Speaker 1: shares and property change.
7:15
Speaker 2: Perhaps a little, But I and maybe I haven't looked
7:18
Speaker 2: in the right spots, but it's extremely rare that you'll
7:22
Speaker 2: see a value of real estate by more than fifty percent,
7:26
Speaker 2: as we saw during their global financial crisis, And so
7:31
Speaker 2: there is that. And even during the COVID some that
7:34
Speaker 2: sort of march exactly five years ago, that was pretty
7:37
Speaker 2: hairy further stock market, but it was also scary for property.
7:40
Speaker 2: I remember writing stories five years ago how property investors
7:44
Speaker 2: were selling up everything at the time because they thought
7:46
Speaker 2: the world was ending. But probably the biggest investment mistake
7:49
Speaker 2: they made, because it's been generally pretty strong for everyone
7:53
Speaker 2: since then, some states have done a lot in cities
7:56
Speaker 2: a lot better than others, but everyone's recovered from that.
7:59
Speaker 2: So I think properly would move on a daily basis
8:03
Speaker 2: if it was a way of valuing it. But I
8:06
Speaker 2: still don't think it would move as much as shares.
8:08
Speaker 2: But you're dealing with much bigger numbers as well. Medium
8:11
Speaker 2: sort of house price at or nine hundred thousand only
8:14
Speaker 2: knows by one percent or whatever, it's still eight or
8:17
Speaker 2: nine grand that you've lost there, So yes, it probably
8:19
Speaker 2: wouldn't want to see how much you've made or lost
8:21
Speaker 2: in a particular day on the real estate market. That's right.
8:24
Speaker 1: You see this thing because it is moving up and down.
8:27
Speaker 1: But maybe people like that fact that there's an element
8:30
Speaker 1: of blind trust there that you just know over a
8:32
Speaker 1: lot period of time it's going to go up. It's
8:34
Speaker 1: also going to go up on the share market. The
8:36
Speaker 1: problem is, or the issue is that you can see
8:38
Speaker 1: it every day just turning things around on property. Anthony.
8:42
Speaker 1: The number of people who've come up to me in
8:45
Speaker 1: Sydney and Melbourne in the last two weeks or so
8:51
Speaker 1: and said, and they are older in the mean, and
8:55
Speaker 1: they have said, I can't see how property is going
8:59
Speaker 1: to be as good as it were. The number of
9:01
Speaker 1: people who have had a lifetime and property effectively a
9:07
Speaker 1: lifetime and property, it was said twenty five to thirty
9:09
Speaker 1: years investing and have now decided that they've already sold
9:15
Speaker 1: their property or they've decided to get out. Do you
9:19
Speaker 1: think that has changed the answer in any way to
9:22
Speaker 1: which is better?
9:23
Speaker 2: I don't know that it has. I think that and
9:26
Speaker 2: I mentioned before different cities have done differently with property.
9:31
Speaker 2: But we're lucky in a way. If you look nationally,
9:34
Speaker 2: you can always play the cycles if you're a serious investor,
9:38
Speaker 2: and it's not just the house next door to your
9:40
Speaker 2: own home. If you're a serious investor, you can look
9:43
Speaker 2: at other states when you save in land tax because
9:45
Speaker 2: you're your own home in those states, but also different
9:48
Speaker 2: points of the market. The fact now that people who
9:51
Speaker 2: have been living in Brisbane or Adelaide have had massive
9:55
Speaker 2: gains in the last few years, more than coreter of
9:57
Speaker 2: a million dollars each in their sort of median house
9:59
Speaker 2: price games, whereas Melbourne and Hobart have literally done basically nothing.
10:04
Speaker 2: I think that affects the view and I don't think
10:07
Speaker 2: there's going to be a shortage of property investors coming up.
10:11
Speaker 2: We've got half a million people coming into Australia every
10:13
Speaker 2: year dreaming of a better life, and bricks and mortar
10:17
Speaker 2: has been one of the best wealth creators in the
10:20
Speaker 2: history of this country.
10:21
Speaker 1: I think they used to see residential property doubles in
10:25
Speaker 1: value every seven to ten years. They said that for
10:27
Speaker 1: about fifty years. Don't say that anymore, do that. I
10:31
Speaker 1: think that that's old hat.
10:33
Speaker 2: Well, you think it is, given just the high price
10:36
Speaker 2: of median prices everywhere, even in those cities that have
10:39
Speaker 2: struggled in recent years. Get talking six seven, eight, nine
10:42
Speaker 2: hundred thousand dollars median value, and their prizes have grown
10:47
Speaker 2: so much faster than real wages growth. It just makes
10:50
Speaker 2: it harder and harder for people to get in there.
10:53
Speaker 2: One of my properties, i'd spent nine years where it
10:56
Speaker 2: went absolutely nowhere, but in the last five it's gone
11:00
Speaker 2: up by fifty percent. And I just kept telling myself
11:02
Speaker 2: for those nine years, it'll get good, it'll get good.
11:05
Speaker 2: I have the view that you do invest in property,
11:08
Speaker 2: you're only one property cycle away or boom away from
11:12
Speaker 2: being really comfortable with it because your initial loan, even
11:15
Speaker 2: if you haven't any paid anything off of the principle
11:18
Speaker 2: of this investment loan. You've just made such a big
11:22
Speaker 2: capital gain, which obviously there's tax issues later on and
11:25
Speaker 2: those sorts of things, but more so than an eight
11:29
Speaker 2: hundred thousand dollar property or versus one hundred thousand dollars
11:31
Speaker 2: that you might put of your own money into shares.
11:33
Speaker 2: So there's a lot of pros and cons for both
11:36
Speaker 2: of them.
11:36
Speaker 1: So people they got bigger in property and they take
11:38
Speaker 1: bigger loans, and maybe that's just part of it. I mean,
11:41
Speaker 1: maybe if they went as big on shares and took
11:43
Speaker 1: out loans on shares and negatively geared their shares, the
11:46
Speaker 1: gap wouldn't be as big.
11:48
Speaker 2: Yeah, so you're talking to me who still has post
11:50
Speaker 2: traumatic stress from the global financial crisis.
11:53
Speaker 1: When I did you mentioned this, it's obviously it's going
11:56
Speaker 1: to be for life, but the.
11:57
Speaker 2: Sing is for life when you're borrowed and in investment property.
12:00
Speaker 2: And obviously property wasn't as expensive back then, but in
12:04
Speaker 2: twenty ten, but I had borrowings of more than the
12:06
Speaker 2: size of an investment property loan and watched it drop
12:10
Speaker 2: by fifty five percent.
12:11
Speaker 1: You were negatively geared into shares. Yes, it exaggerated the
12:15
Speaker 1: difficulties it did.
12:17
Speaker 2: And I was listening to the experts. I was a
12:19
Speaker 2: financial writer back then, so I was talking to economists
12:22
Speaker 2: and advisors every day, and they were saying, market's down
12:25
Speaker 2: ten percent, is it it's time to buy Marcus? Down
12:28
Speaker 2: fifteen percent, time to buy all It's down twenty percent,
12:30
Speaker 2: it's not going any worse than this, and down fifty
12:33
Speaker 2: five percent at the end. And it did get worse,
12:35
Speaker 2: but it was the same as real estate, like I
12:38
Speaker 2: went for the decade with no growth. You just sit
12:40
Speaker 2: on it and eventually it comes back over time.
12:43
Speaker 1: So you're a believer in the reversion to the mean. Yes, okay, now, folks,
12:48
Speaker 1: We'll take a short break and then I'm going to
12:49
Speaker 1: come back and we're going to talk about what Anthony
12:51
Speaker 1: actually thinks about this issue of property versus shares. I
12:55
Speaker 1: want to talk to him about the side he's come
12:57
Speaker 1: down on and why olly back in the Hello and
13:08
Speaker 1: welcome back to the Australians Money Puzzle podcast. James Kirby
13:12
Speaker 1: here talking to Anthony Key, my colleague at News Corporation,
13:15
Speaker 1: personal finance writer based out of Adelaide. And maybe that's
13:18
Speaker 1: why he's so chirpy about property. Let's test him. So, Anthony,
13:23
Speaker 1: in recent times, you have come down quite clearly on
13:26
Speaker 1: one side over the other, property versus shares. Tell us
13:28
Speaker 1: what your conclusion was and why you came to it.
13:31
Speaker 2: It has been property, and it has been property for
13:35
Speaker 2: twenty odd years. And as I said earlier experience during
13:38
Speaker 2: the global financial crisis where I negatively geed into shares,
13:41
Speaker 2: I actually double geed into shares at the time. If
13:44
Speaker 2: I did not have a stable income at the time
13:47
Speaker 2: and my wife didn't have a stable income, we would
13:49
Speaker 2: have been in all sorts of trouble.
13:50
Speaker 1: Did you literally get margin calls.
13:52
Speaker 2: Or no, no margin calls because we were borrowing against it.
13:54
Speaker 2: There was margin loans in there, but that was secure
13:56
Speaker 2: against the property loans. So yes, it got pretty scary
13:59
Speaker 2: and prett much. But that said, I'm a fan of shares,
14:02
Speaker 2: like almost all of my superannuation is invested in ETF
14:06
Speaker 2: shares through ETFs and that sort of thing. But I've
14:10
Speaker 2: just found that property, and I have been criticized when
14:12
Speaker 2: I've written this in columns before as well, that property.
14:16
Speaker 2: I would always choose property over shares because number one,
14:19
Speaker 2: as we spoke about earlier, the size. You spend half
14:22
Speaker 2: a million dollars on a property, and that's cheap these days,
14:26
Speaker 2: I know, But if it rises by ten percent, you've
14:28
Speaker 2: just made fifty thousand dollars sitting there. I know that
14:31
Speaker 2: anyone who's bought real estate in Brisbane or Adelaide or
14:34
Speaker 2: Perth in recent years has made hundreds of thousands of
14:37
Speaker 2: dollars per property just based on the rise of the
14:40
Speaker 2: median home price there. So the gains are generally that
14:45
Speaker 2: much bigger. But as you said, you can put half
14:47
Speaker 2: a million dollars into the market and that sort of thing,
14:49
Speaker 2: if you can stomach sort of that volatility. I really
14:52
Speaker 2: believe you should have both. But if I had a choice,
14:55
Speaker 2: it would be property. And I actually looked at the
15:00
Speaker 2: only a week ago in a column the city I
15:02
Speaker 2: would buy in, and your talk earlier about thirteen taxes
15:06
Speaker 2: in Victoria's shaken up a little bit. But the fact
15:10
Speaker 2: that Melbourne prices are just so low compared to where
15:15
Speaker 2: they have been historically and versus the upper other capital cities.
15:18
Speaker 2: If I had a spare eight hundred thousand or whatever,
15:21
Speaker 2: or the capacity for aud it, which I don't, but
15:23
Speaker 2: if I had that, it would certainly be looking in
15:26
Speaker 2: that market, whether it's Melbourne or elsewhere in Victoria. But
15:29
Speaker 2: prices they will have to revert back at some stays
15:34
Speaker 2: the investors. You can't drive every investor out of the
15:38
Speaker 2: second biggest city in the country. So there will be
15:41
Speaker 2: changes of governments, there will be changes and things will happen.
15:44
Speaker 2: I remember, yeah, a few years ago Hobart's prices were
15:46
Speaker 2: just way ahead of Adelaide's. Adelaide was the lowest. And
15:49
Speaker 2: now I've did some sort of numbers as well. Adelaide's
15:52
Speaker 2: ahead of Melbourne for the average dwelling price and it's
15:55
Speaker 2: about two hundred thousand dollars medium difference between Adelaide positively
15:59
Speaker 2: compared to Hobad now.
16:01
Speaker 1: So so just to clarify then, as you see, if
16:05
Speaker 1: I demand the straight answers from you property versus shares,
16:08
Speaker 1: you say property, Just tell us a little bit more
16:10
Speaker 1: why property one? You know the poloctivity before.
16:15
Speaker 2: Property and the security as well as an investor who
16:18
Speaker 2: wants to grow their wealth, it is much easier to
16:22
Speaker 2: borrow against a property, whether it's your own home or
16:26
Speaker 2: even the equity you have in an investment property after
16:29
Speaker 2: some growth, much easier and much cheaper, to the interest
16:33
Speaker 2: rates are a heck of a lot cheaper. There are
16:35
Speaker 2: obviously more holding costs when it comes to owning real estate,
16:39
Speaker 2: which are all tax deductible, as is the cost such
16:43
Speaker 2: as interest.
16:43
Speaker 1: Obviously, there there's more work, isn't there, Anthony, I was saying,
16:46
Speaker 1: it's just more literally labor hours.
16:48
Speaker 2: Yes, And whenever the agent rings you, they're on you
16:52
Speaker 2: to give them more money to do some repairs or
16:55
Speaker 2: that sort of thing. I don't want to count how
16:57
Speaker 2: much I've spent on investment property sort of repair.
17:00
Speaker 1: Everyone's been through that. I had a properly one time,
17:03
Speaker 1: and there was a tenant therefore, I can't remember a
17:06
Speaker 1: year or two and never asked for a single thing,
17:09
Speaker 1: nothing whatsoever. And I remember thinking, oh, this is really good,
17:13
Speaker 1: you know, just the place must be quite better than
17:15
Speaker 1: I thought it was, because the months would go by,
17:17
Speaker 1: two years, not a thing. Then the tenant left and
17:20
Speaker 1: another tenant went in, and that tenant asked for something
17:24
Speaker 1: every month. It was like they sat there and looked
17:27
Speaker 1: around and tried to think of something. And I remember thinking,
17:30
Speaker 1: you know, it averaged out probably normal, probably averaged out
17:34
Speaker 1: as a normal tenant, so that I had one tenant
17:36
Speaker 1: that never complained and one tenant that never stopped complaining
17:38
Speaker 1: the same place. So maybe we all have to go
17:42
Speaker 1: through that. But it sounds to me like that aspect
17:45
Speaker 1: of property, it doesn't weigh against you. You don't put
17:49
Speaker 1: much into the easiness of We were talking about the
17:52
Speaker 1: ETFs and never having to think basically set and forget,
17:55
Speaker 1: which you can do to some extent of DFS. The
17:57
Speaker 1: labor part of property, the documentation, the property management, the
18:02
Speaker 1: tenant management, the huge documentation when it comes to buying
18:06
Speaker 1: and selling property. That doesn't seem to wear against.
18:09
Speaker 2: Chill, no, I think because it's such a long term investment.
18:13
Speaker 2: I don't think I've sold an investment property for ten
18:16
Speaker 2: years maybe or more so. It is it's not constant
18:22
Speaker 2: that side of things, and it's just obviously people will
18:25
Speaker 2: like to see and touch where their money is. It's well,
18:29
Speaker 2: you can go and hug a shopping trolley at will
18:32
Speaker 2: Wors if you own Woolworth shares, or touch the side
18:34
Speaker 2: of your Commonwealth Bank built which is probably not owned
18:36
Speaker 2: by them anyway. It's a property trust, but you could
18:39
Speaker 2: see that. But shares are effectively, in old fashion term,
18:42
Speaker 2: still a piece of paper whereas owning a house that's
18:45
Speaker 2: giving somebody a roof over their head and allowing them
18:48
Speaker 2: to have their pets and their family in this house.
18:51
Speaker 2: It's the problem is property investors, I think in Australia
18:54
Speaker 2: sort of become tall poppies and they're easy to have
18:57
Speaker 2: a go at.
18:59
Speaker 1: Well everybody has and who knows what your super etf
19:03
Speaker 1: is investing in it. I mean, you happen to clue
19:05
Speaker 1: the worst companies in the world by definition will be
19:07
Speaker 1: included because they buy everything. So you can kind of
19:10
Speaker 1: toss that one out the window pretty fast as an argument.
19:12
Speaker 1: I'm digressing. Okay, Now, one thing that strikes me though,
19:17
Speaker 1: despite your conviction that property is better than shares, you
19:22
Speaker 1: don't have any property in your super, really, do you no?
19:25
Speaker 2: And that's purely a factor of I've sought as an
19:28
Speaker 2: investor to use residential real estate to grow, to grow
19:34
Speaker 2: outside super and I see my super as I mean,
19:38
Speaker 2: everyone wants to retire early and I've sort of been planning,
19:40
Speaker 2: hoping for that, hoping slash planning for years and the
19:43
Speaker 2: plan was to maybe sell a property or closer to retirement,
19:47
Speaker 2: and then it's pretty easy to get money into a
19:50
Speaker 2: super fun then just when you're on a full time
19:53
Speaker 2: wage is probably not the time you want to be
19:54
Speaker 2: selling an investment property and banking just having to pay
19:58
Speaker 2: tens of thousand dollars in tax to time to do
20:00
Speaker 2: that would be from a tax purpose. My view is
20:03
Speaker 2: when you're not actually earning any other income, so then
20:06
Speaker 2: that capital gain becomes your income for the year and
20:09
Speaker 2: you're not being slugged a big chunk of any game
20:12
Speaker 2: that you get. So I still do hope to hold
20:14
Speaker 2: property in Super, but while my SUPER is not large enough,
20:19
Speaker 2: it's all in shares just to have that diversification. I mean,
20:22
Speaker 2: we talk about property versus shares, but really you should
20:25
Speaker 2: have both.
20:26
Speaker 1: Okay, And the negative gearing, of course is better outside
20:30
Speaker 1: super than inside SUPER, and I'm sure that's part of Europe.
20:33
Speaker 2: Yeah, yeah, negative gearing is good. But I think that
20:36
Speaker 2: the aim for every property investor should be to be
20:38
Speaker 2: positively geared as soon as they can so by properties
20:42
Speaker 2: that the rent is going to cover a lot of
20:46
Speaker 2: a lot of the costs that you've got. It's become
20:48
Speaker 2: harder obviously in the last three years when mortgage interest
20:51
Speaker 2: rates have gone so high, but there are still opportunities
20:54
Speaker 2: to get close, not to cover it completely, but there
20:58
Speaker 2: was a heck of a lot of positively geared property
21:00
Speaker 2: investors back before May twenty twenty two when reads through Yeah,
21:04
Speaker 2: when race yeah, yes. So now obviously interest has become
21:08
Speaker 2: their biggest by far their biggest cost.
21:11
Speaker 1: With reads roughly twice yields very broadly in the metropolitan cities. Anyway,
21:18
Speaker 1: is there positive gearing feasible?
21:22
Speaker 2: It is, and this is just from personal experience. It
21:24
Speaker 2: is to get pretty close to being positive, and you
21:27
Speaker 2: only need to, as we said earlier, how these things
21:29
Speaker 2: grow over time. What might have been a negatively geared
21:32
Speaker 2: property five years ago when prices were much lower. As
21:36
Speaker 2: we all know, rents have gone up a lot in
21:38
Speaker 2: the last five years as well, that sort of contributing
21:41
Speaker 2: and someone else is helping a property investor pay off
21:43
Speaker 2: their mortgage. So it is possible. And as I said,
21:47
Speaker 2: any property that's maybe been held for five or ten
21:49
Speaker 2: years is probably going to be positively geed or getting
21:53
Speaker 2: close to that, purely as a result of prices going up.
21:57
Speaker 2: Of course, there are pockets where prices have gone nowhere
22:00
Speaker 2: and interest rates have gone up, and I really feel
22:02
Speaker 2: for those investors, and I've spoken to a few colleagues
22:05
Speaker 2: over the years, and I think they experienced that in
22:10
Speaker 2: certain states and they're selling out. So I'm just tired
22:13
Speaker 2: of losing money. As we know, negative gearing is losing money.
22:17
Speaker 2: You're only getting a proportion of that money back from
22:20
Speaker 2: the tax office.
22:21
Speaker 1: So as years go by, you're putting more and more
22:24
Speaker 1: emphasis on the sale price that you're going to get.
22:27
Speaker 2: Yes, you do, exactly, that's right, And I just think
22:30
Speaker 2: that you've got to have a plan. I don't have
22:32
Speaker 2: a direct plan I'm doing this at this age and
22:35
Speaker 2: this at this age, but I do have a plan
22:37
Speaker 2: that hopefully if I do get to that dream of
22:41
Speaker 2: retiring a little bit earlier, to sell a property or
22:44
Speaker 2: more and then get that money into super and maybe
22:48
Speaker 2: use that for a property within Super purely because of
22:51
Speaker 2: the benefits of superannuation gives you with you retire after
22:54
Speaker 2: age sixty and you move it across to your sort
22:56
Speaker 2: of account based pension and it's tax free capital gains.
23:00
Speaker 2: It's just the biggest best deal that any investor can have,
23:04
Speaker 2: I think, And with a lumpy asset like a residential
23:07
Speaker 2: property or a commercial property or something like that, get
23:09
Speaker 2: that game tax free in your sixties or seventies is
23:12
Speaker 2: just huge.
23:13
Speaker 1: So listeners, I think with Anthony, if you hear between
23:17
Speaker 1: the linesbody's saying, obviously he does prefer property over shares.
23:20
Speaker 1: There's a lot of issues to do with security there.
23:23
Speaker 1: But there's a couple of issues. I think that's very
23:25
Speaker 1: clear from this conversation. You're a serious long term investor, Anthony.
23:30
Speaker 1: You're talking ten to fifteen years. That's a long time,
23:32
Speaker 1: right With an investment, you like the property to be
23:36
Speaker 1: outside Super because the tax benefits are better as you
23:39
Speaker 1: are working to keep it outside Super. But once you
23:42
Speaker 1: retire in retirement phase, your idea is to get those
23:45
Speaker 1: properties to take advantage of the tax benefits inside tax
23:48
Speaker 1: free retirement basically to the extent.
23:51
Speaker 2: You can, yes, yes. And also I imagine if I
23:54
Speaker 2: had more SUPER, I would probably be looking at it
23:56
Speaker 2: more closely. But being an investor in property outside of
23:59
Speaker 2: so to then use all of my SUPER to put
24:03
Speaker 2: towards a property inside Super. And it's quite complex borrowing
24:06
Speaker 2: within Super as well. It just it gets very messy,
24:10
Speaker 2: and that's not really good diversification. Having a whole lot
24:12
Speaker 2: of buzzy real estate outside Super and the only thing
24:15
Speaker 2: you've got inside is the same thing. So you've missed
24:18
Speaker 2: out on the global share market growth over the last
24:21
Speaker 2: sort of ten years or five years if you take
24:23
Speaker 2: that strategy.
24:24
Speaker 1: Okay, we've got questions. Maybe back in a moment. Hello
24:34
Speaker 1: and welcome back to The Australian's Money Puzzle podcast. James
24:38
Speaker 1: Kirby here with Anthony Keane, regular guest person, finance writer
24:42
Speaker 1: across NewsCorp and a guest who is not deliberating, is
24:47
Speaker 1: not covering what'sor I'm looking for vacillating on this issue.
24:52
Speaker 1: He is a property investor first and that's an interesting
24:57
Speaker 1: point of view and very interesting because since I asked
25:01
Speaker 1: you to come on the show, actually Anthony just pure serendipity.
25:04
Speaker 1: Louise asks, I love the podcast with Kate. That would
25:09
Speaker 1: have been Kate Becos, the buyer's advocate who was on
25:12
Speaker 1: last week, and the talk around investing in shares versus property.
25:16
Speaker 1: As someone who's had great luck with property, it's been
25:20
Speaker 1: my go to. However, I'm finding it hard to stom
25:23
Speaker 1: up investing again when the holding costs are forty six
25:27
Speaker 1: hundred dollars a week for a standalone property around a
25:30
Speaker 1: million dollar mark. I know it's possible to add value
25:33
Speaker 1: to a property, which is why I prefer it over shares.
25:35
Speaker 1: And it's actually I think the strongest argument Louise, But
25:40
Speaker 1: she asks, at what point does that argument become redundant
25:44
Speaker 1: when you can get ETFs to set and forget. I
25:47
Speaker 1: telling you that is straight from the listener, Louise. It's
25:50
Speaker 1: like we scripted it, but it's a genuine question that
25:53
Speaker 1: came in. So what would you say to Louise Anthony.
25:57
Speaker 2: I'd like to know where the holding cost of four
26:00
Speaker 2: to six hundred a week because that is that's getting
26:02
Speaker 2: pretty scary, those sorts of levels.
26:04
Speaker 1: And is that she's including big interest build there.
26:08
Speaker 2: Yes, yeah, interest billed as well. But if it's including
26:13
Speaker 2: interesting probably it may be a bit too low. Who knows.
26:16
Speaker 2: But obviously there's rental income from a tenant coming in
26:20
Speaker 2: and with pretty sort of tight rental markets, that's one
26:22
Speaker 2: thing property investors haven't had to worry about in recent years,
26:26
Speaker 2: is finding tenants. And it's true ETfr said and forget
26:29
Speaker 2: and property is not. We're not sure where Louise is from,
26:33
Speaker 2: so maybe her feelings are colored by the market in
26:37
Speaker 2: her particular city over the last five years. It would
26:40
Speaker 2: be a lot different if you were living in Melbourne
26:42
Speaker 2: than if you were living in Brisbane. I would say
26:44
Speaker 2: your views on property and also the outlook property is
26:49
Speaker 2: as you said, it's great to add value to And
26:51
Speaker 2: I think we covered a lot of the points earlier
26:53
Speaker 2: when we were talking like discussing this.
26:55
Speaker 1: We did it all for you, Louise. But it's a
26:58
Speaker 1: very topical issue and question, and I think what Anthony
27:03
Speaker 1: is saying is highly relevant. If you had been in Adelaide,
27:08
Speaker 1: for instance, which was not a great market for long
27:11
Speaker 1: stretches of time in the last five years. I mean,
27:14
Speaker 1: it's so good it would color reviews. And similarly, if
27:17
Speaker 1: you had been in Melbourne or even parts of Sydney
27:20
Speaker 1: where your property is doing very little, your yield is
27:24
Speaker 1: very low, your rates just went up, they would colory
27:27
Speaker 1: review as well. All Right, we will move on. Thank you, Louise.
27:30
Speaker 1: I hope the earlier segment of the show was useful
27:32
Speaker 1: to you. I imagine it was, Lucas there's been an
27:35
Speaker 1: increased talk of heavy market falls in world markets. I'd
27:40
Speaker 1: love to hear more advice on steps you can take
27:42
Speaker 1: to be prepared for this. In particular, what are the
27:45
Speaker 1: opportunities and how can you take advantage of a crash.
27:48
Speaker 1: Longtime listener, first time country Abuti, Thanks Lucas. Okay, broadly,
27:53
Speaker 1: very broadly. Obviously, the rolling answer is diversification, and that
27:59
Speaker 1: just as we were talking about Anthony and I a
28:01
Speaker 1: minute ago about having properly in shares that you want.
28:03
Speaker 1: Let's forget about the tax structures for a moment, but
28:06
Speaker 1: just if you look back at what Anthony was saying,
28:08
Speaker 1: he has properly he has shares, He has diversified shares
28:12
Speaker 1: all around the world in all sorts of markets because
28:14
Speaker 1: he's in ETFs. So you have that diversification, and I
28:18
Speaker 1: think that's absolutely rock bottom. How you defend yourself. So
28:22
Speaker 1: it turns out when things are going badly or they're
28:27
Speaker 1: of concern, then you have on listed assets, maybe you
28:32
Speaker 1: have some securitized that, maybe you have some gold, maybe
28:35
Speaker 1: you have some cash. That part of your investment portfolio
28:39
Speaker 1: is robust, resilient. Part of it is risk free. You
28:42
Speaker 1: don't have to worry about when the share market falls
28:45
Speaker 1: vice versa. When the share market's red hot, you've got
28:49
Speaker 1: the sphere of missing out. You have shares and you
28:52
Speaker 1: have risk assets that will move up with the markets
28:55
Speaker 1: when the market's moving up, so you have that diversity, Lucas,
28:58
Speaker 1: I think is seriously rock bottom. The answer to your
29:01
Speaker 1: question as for taking advice when there's a crash and
29:08
Speaker 1: taking advantage of when there's a crash, this is never advised.
29:11
Speaker 1: It's information only. But as we're taking advantage when there's
29:14
Speaker 1: a crash, again, textbook would suggest the answer is to
29:17
Speaker 1: have cash. Cash is king when the markets crash, but
29:23
Speaker 1: cash is expensive when the market's doing average because you're
29:27
Speaker 1: not going to get as good a return as shares.
29:29
Speaker 1: So that's the sort of fine balance. I think, what
29:31
Speaker 1: do you think, Anthony.
29:32
Speaker 2: Yes, I agree when I saw that question. The two
29:35
Speaker 2: things that I wrote down as far as being prepared
29:38
Speaker 2: for it is be prepared not to panic, don't mainly
29:41
Speaker 2: jerk reactions with these sorts of things. I think we
29:43
Speaker 2: saw the share market sink ten percent in the matter
29:46
Speaker 2: of weeks in here and also in the US, and
29:48
Speaker 2: it would bounce back a little bit since then. But
29:52
Speaker 2: and the experts, I'm often told by experts you only
29:54
Speaker 2: make a loss when you sell if you're not panicking,
29:57
Speaker 2: you're staying the course and you're sticking to your long
29:59
Speaker 2: term plan. Whether that's hold it for five years or
30:02
Speaker 2: ten years, oh whatever. Don't panic because these things are
30:05
Speaker 2: completely normal. Ups and downs are very normal. And the
30:08
Speaker 2: other thing as far as taking advantage is, as you said,
30:11
Speaker 2: keep some cash available or if you've got a mortgage
30:14
Speaker 2: and you've got cash, is better working off that have
30:16
Speaker 2: some money in your regional facility. If ready to pounce,
30:19
Speaker 2: then it becomes a timing issue. Do your pounds if
30:21
Speaker 2: it falls by ten percent or do you wait and
30:22
Speaker 2: see if it falls by fifteen or twenty percent? You
30:25
Speaker 2: don't know. I've read something today in the Australian where
30:28
Speaker 2: one of the most respected economists in Australia was saying
30:31
Speaker 2: it could quite possibly be a fifteen percent fall here.
30:34
Speaker 2: So you just keep an eye on that sort of
30:37
Speaker 2: stuff and hope that if you buy in a fifteen
30:39
Speaker 2: percent it doesn't go to fifty five percent.
30:41
Speaker 3: Trauma, trauma from the GFC is kicking through again. By
30:44
Speaker 3: the way, what's worth knowing what any's talking about here.
30:48
Speaker 3: It was the great crash of the Great Recession of
30:51
Speaker 3: the GFC.
30:52
Speaker 1: If you are lucky enough to be young enough not
30:54
Speaker 1: to be familiar with this, and what happened was the
30:57
Speaker 1: share market. The Australian share market at all market's piked
31:00
Speaker 1: November two or seven, and as Anthony says, they fell
31:03
Speaker 1: fifty percent after that. For what was even almost more
31:07
Speaker 1: difficult than the fact that they fell fifty percent, was
31:10
Speaker 1: they took two years to do it. So it's slowly
31:14
Speaker 1: ground down from the peak in November two or seven
31:16
Speaker 1: to the bottom in March two oh nine. But it
31:20
Speaker 1: was worse than a crash, wasn't it, Anthony, because it
31:22
Speaker 1: just it was never obvious. There was little four starts.
31:25
Speaker 2: Oh that's right, and I swear down yes, I'm doing
31:30
Speaker 2: research on up until then. The big crash we'd had
31:32
Speaker 2: was the nineteen eighty seven massive crash, but in the
31:36
Speaker 2: prese that had doubled in twelve months and then halved again,
31:39
Speaker 2: so it literally you've only lost twelve months again, whereas
31:42
Speaker 2: the GFC people had lost years and years of gains,
31:45
Speaker 2: and then it took a good decade or more for
31:48
Speaker 2: the All Ordinaries Index to get to it recover November
31:51
Speaker 2: two thousand and seven levels as well. So don't panic.
31:55
Speaker 2: Keep some powder dry, ready to dive in when you
31:58
Speaker 2: think it's right. But I wouldn't dive in, go all in,
32:00
Speaker 2: because at any time you never want to go all
32:02
Speaker 2: in on anything. I now entrepreneurs will disagree and say
32:06
Speaker 2: that the big, massive bet that they've made is paid
32:09
Speaker 2: off in big time. But there's a lot more that
32:12
Speaker 2: it hasn't than there are those who have.
32:13
Speaker 1: They only tell you about the bets that win. I've
32:16
Speaker 1: never seen anybody in the paper saying I took a
32:17
Speaker 1: massive bet and I lost all right, as you say,
32:21
Speaker 1: a measured approach dollar cost averaging. As we've often mentioned
32:24
Speaker 1: on the show, final statement of all the questions from
32:28
Speaker 1: Andrew and I make the point that Andrew operates out
32:32
Speaker 1: of north Haven, which is in Adelaide, and he says
32:35
Speaker 1: I right. With regards to your podcast on the fifteenth
32:39
Speaker 1: of October where you were aghast that Melbourne property prices
32:43
Speaker 1: were on a part with Adelaide despite Melbourne having five
32:46
Speaker 1: million people, Yes, I was aghast economically, Andrew that a
32:50
Speaker 1: city of five million that houses in that city should
32:53
Speaker 1: be considerably lower than houses in another city. What's the
32:57
Speaker 1: population of Adelaide.
32:58
Speaker 2: Roughly one point five I believe, and not a lot
33:02
Speaker 2: over one point five.
33:03
Speaker 1: So eclonumbists would suggest that the bigger city you think
33:08
Speaker 1: about it, splinder Man, should be more expensive and traditionally
33:11
Speaker 1: for one hundred years, perhaps two hundred years, that has
33:13
Speaker 1: been the case. Anyway, Andrew says there's two reasons, actually, James,
33:17
Speaker 1: you've missed them. There's two reasons. One Melbourne is a
33:20
Speaker 1: and there's a well known expletive here which basically says
33:23
Speaker 1: it's not a nice place at all. So he runs
33:26
Speaker 1: Melbourne down badly as the most unattractive location. And then
33:30
Speaker 1: he says Melbourneians are both ignorant and arrogant and have
33:34
Speaker 1: a chip on their collective shoulder and they think the
33:37
Speaker 1: cafe culture is the standout in Australia. Well, I don't know.
33:41
Speaker 1: I think about that. It was entirely an economic observation.
33:45
Speaker 1: What do you think's been based?
33:48
Speaker 2: It was very entertaining question. I doing that a lot
33:51
Speaker 2: of South Australians and I am one of them. We
33:53
Speaker 2: still have a chip on our shoulder about Melbourne stealing
33:55
Speaker 2: our Grand Prix for years ago.
33:57
Speaker 1: We stole it and stole it. Well we are.
34:00
Speaker 2: There's chips on shoulders all over the place. But as
34:03
Speaker 2: I said earlier, if I was to pick one city
34:06
Speaker 2: to invest in now with real estate, I would choose
34:09
Speaker 2: Melbourne purely because I've never seen anything like that. The
34:13
Speaker 2: latest figures from prop Track, the average dwelling price in
34:16
Speaker 2: Adelaide is now eight hundred and forty nine thousand, and
34:19
Speaker 2: in Melbourne it's seven hundred and ninety three thousand. So
34:21
Speaker 2: not only is it on a par Adelaide's gone fifty
34:24
Speaker 2: grand ahead of Melbourne. And I just can't see that
34:27
Speaker 2: staying forever. No matter what various governments try to do
34:30
Speaker 2: to destroy or spruce up property markets. I just think
34:33
Speaker 2: that eventually we will revert to the fact where our
34:36
Speaker 2: biggest cities have our most expensive houses. And that's just
34:41
Speaker 2: based on your twenty or thirty years of following this so.
34:44
Speaker 1: Just could be a lifetime of expertise.
34:46
Speaker 2: It could be wrong, but yes.
34:47
Speaker 1: Okay Andrews, you heard it here first. But take you
34:50
Speaker 1: very much for correspondence, and keep them ruling folks, and
34:54
Speaker 1: keep sending the voice memos to love to get them.
34:57
Speaker 1: The first few have come in. We really like them.
35:00
Speaker 1: When you're doing your voice memo, remember you can write
35:02
Speaker 1: to us on an email or if you like, just
35:04
Speaker 1: do a voice memo. And when you're doing the voice memo,
35:06
Speaker 1: just keep it short, you know, thirty seconds. So that's
35:09
Speaker 1: just for broadcasting purposes for collecting them. Let's have some more.
35:13
Speaker 1: Let me tell you the people who come in first
35:15
Speaker 1: with the voice members will get published and I will
35:18
Speaker 1: deal with their answers. Okay, that's a promise. So if
35:21
Speaker 1: you really want to make sure your question gets answered,
35:23
Speaker 1: try a voice membo. All right, Thank you very much,
35:26
Speaker 1: Anthony Keen. Great to have you on the show again.
35:28
Speaker 2: Thanks James, great to be here.
35:30
Speaker 1: You're going into the lock up? Yes, do you think
35:32
Speaker 1: you're going to have enough to do?
35:34
Speaker 2: I think yes. They keep me pretty busy. I'm trying
35:36
Speaker 2: to work out how many I've done. I think I'm
35:38
Speaker 2: over twenty five federal budgets now, somewhere around the twenty
35:41
Speaker 2: five mark. I think I reckon from the late nineties.
35:44
Speaker 2: I started as a business wrider going into budgets, and
35:46
Speaker 2: I don't think i've missed one since then.
35:48
Speaker 1: You're not from the vintage that remembers bringing typewriters into
35:51
Speaker 1: the lockdowp are you ye?
35:53
Speaker 2: Typewriters?
35:53
Speaker 1: Now?
35:54
Speaker 2: I am from the vintage where we had to share
35:56
Speaker 2: computer screens in the afternoon approaching deadline. So oh, they're big,
35:59
Speaker 2: huge behind the Fords in the newsroom waiting for that.
36:03
Speaker 1: Yes, are you finished? Excuse me, are you finished that? Story?
36:07
Speaker 1: I do have this one I must put through in
36:09
Speaker 1: the next hour. Yes, I've I had a little bit
36:12
Speaker 1: of that, just a little bit of that in Hong
36:13
Speaker 1: Kong of old places that. Yeah, I don't listen. Okay,
36:16
Speaker 1: Thanks Anthony, Thanks everyone for listening. Thank you Leah Samaglue
36:20
Speaker 1: for producing today's show. Talk to you soon.