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Secrets of buying your first home · The Money Puzzle

0:12
Speaker 1: Hello and welcome to The Australian's Money Puzzle Podcast. I'm
0:15
Speaker 1: James Kirby, the Wealth Editor at The Australian. Welcome aboard, everybody.
0:18
Speaker 1: It's Tuesday. We're talking property and one of our regular
0:23
Speaker 1: guests on the show with me today, Jared McCabe of Wakelin,
0:26
Speaker 1: will be here in the studio with me. We've got
0:29
Speaker 1: a lot on our plate. We wanted to talk to
0:31
Speaker 1: you particularly about buying a first home anywhere in the country.
0:34
Speaker 1: If you had a buyer's advocate standing beside you, wouldn't
0:36
Speaker 1: that be nice? Whether you're a first home buyer or
0:38
Speaker 1: any type of buyer, it would be nice. What would
0:40
Speaker 1: they say, especially on first homes? What particular guidance would
0:43
Speaker 1: they give? We had a big response on the shows
0:47
Speaker 1: about land tax. Hardly a surprise. New tax basically coming
0:50
Speaker 1: through the system on property around the country. Victoria leading
0:54
Speaker 1: the way on that one. But you noticed in the
0:56
Speaker 1: New South Wales budget last week, they came in on
0:59
Speaker 1: land tax as well. And land tax costs will go
1:02
Speaker 1: up across the state there. And also interesting response from
1:06
Speaker 1: a lot of listeners about weather. On the basis that
1:10
Speaker 1: the land tax has driven Victoria into something of a
1:12
Speaker 1: slowdown for sure, whether Victoria and Melbourne in particular, is
1:16
Speaker 1: a bargain in this market. Lots to talk about. Hello there,
1:20
Speaker 1: Gerard McCabe. Hello, James.
1:21
Speaker 2: How are you?
1:22
Speaker 1: Of Wakeland. Thank you for coming in. No problem.
1:24
Speaker 2: Thanks for having me again.
1:25
Speaker 1: Gerard, you might know, is a buyer's advocate on the street,
1:28
Speaker 1: on the ground, and has his own podcast as well,
1:30
Speaker 1: and is a very articulate member of the advocate community,
1:34
Speaker 1: you might say. So just on what we've promised, first
1:37
Speaker 1: of all, at the top about If you were buying
1:40
Speaker 1: a first home, as opposed to an investment property, there's
1:42
Speaker 1: probably particular things there. First home buyers probably don't use you.
1:45
Speaker 1: Do they use advocates very often?
1:47
Speaker 2: No, they do. Look, sometimes they are very cost conscious,
1:49
Speaker 2: which is understandable because budgets are very restrictive and you've
1:52
Speaker 2: got to take into account a lot of things. We
1:54
Speaker 2: do certainly work with first-home buyers. Sometimes it's with parents
1:57
Speaker 2: wanting to assist and making sure that they're getting guidance
1:59
Speaker 2: to make the right decision. But we do find that
2:01
Speaker 2: we do work with first-home buyers. It's not probably a
2:04
Speaker 2: regular stream, but there are advocates around who that's what
2:07
Speaker 2: they pitch at too, that they will work pretty much
2:10
Speaker 2: solely with first-home buyers.
2:11
Speaker 1: And are they different than, say, an investor?
2:13
Speaker 2: Not necessarily.
2:14
Speaker 1: I mean, well, the buyer is.
2:15
Speaker 2: I mean, the advocate is still looking for the same
2:17
Speaker 2: sorts of things, but the buyer is different and you
2:19
Speaker 2: need to have a different mentality as well. I think
2:22
Speaker 2: from a first-time buyer's perspective, one of the key things
2:24
Speaker 2: to do is make sure you've got the support mechanisms
2:28
Speaker 2: around you before you really get too far down the track.
2:31
Speaker 1: Yeah, right.
2:31
Speaker 2: And what I mean by that is mortgage brokers or
2:34
Speaker 2: person at the bank, whoever you're dealing with in that space,
2:37
Speaker 2: a solicitor or a conveyancer to make sure that your
2:39
Speaker 2: contracts can get reviewed in a timely manner. If it's
2:42
Speaker 2: a property that's going to need a building inspection done,
2:44
Speaker 2: make sure you know that they're going to be able to.
2:45
Speaker 1: Are you in a position to bid for the house?
2:47
Speaker 2: And to be able to respond quickly, because depending upon
2:50
Speaker 2: where you are and the type of property that you're
2:52
Speaker 2: looking at, auctions, you can quite often have a bit
2:54
Speaker 2: of a timeline that you can work towards. But with
2:57
Speaker 2: a private sale, things can move very quickly. And if
3:00
Speaker 2: you're not ready to submit an offer or don't know
3:03
Speaker 2: any terms that you may need to put forward with
3:06
Speaker 2: that offer, then you can get caught off guard quite quickly.
3:09
Speaker 1: Does everyone get a building inspection these days? No. No.
3:13
Speaker 1: They don't. No, it's optional, right? It is. Absolutely, it's optional.
3:16
Speaker 2: I mean, and depending on the type of property that
3:17
Speaker 2: you're looking at, we tend to find apartments, some of
3:21
Speaker 2: the older style ones, it's worth doing. Sometimes you can
3:23
Speaker 2: find that a building inspection with an apartment can only
3:25
Speaker 2: tell you so much.
3:26
Speaker 1: Yes.
3:27
Speaker 2: And without them being able to take plaster and things
3:29
Speaker 2: off the walls, which not many vendors are going to
3:31
Speaker 2: allow you to do, it's not necessarily all that beneficial.
3:35
Speaker 2: But if you're looking at a period home, for instance,
3:37
Speaker 2: you'd be mad not to.
3:38
Speaker 1: Yeah, or if you knew nothing about building. Correct. Like me.
3:42
Speaker 1: First time buying a house many years ago, we used
3:46
Speaker 1: a building inspector. He came out, there was one of
3:48
Speaker 1: those old fashioned outside standalone dunnies, you know, with a
3:52
Speaker 1: timber door. And he came through the roof. He came
3:55
Speaker 1: through the roof and somehow landed on his feet and
3:57
Speaker 1: wasn't hurt and never mentioned anything or complained or anything.
4:01
Speaker 1: But when I think about it, The things that happen
4:03
Speaker 1: when you buy an old place, but that's what a
4:05
Speaker 1: lot of people used to do. At least we're told
4:08
Speaker 1: that a lot of buyers are shy for a variety
4:12
Speaker 1: of reasons, including the trade, the shortage of going near
4:15
Speaker 1: period homes, but just so on that issue, then those principles,
4:19
Speaker 1: if you like about buying a first home, if you
4:21
Speaker 1: were an advocate. and you're helping someone, are they the
4:24
Speaker 1: same in every state?
4:25
Speaker 2: They vary from state to state. I mean, the principles
4:27
Speaker 2: around what will be included and what you should do
4:30
Speaker 2: are the same, but there's different things that will be
4:33
Speaker 2: included at different stages too. So, for instance, if you
4:36
Speaker 2: are in Victoria and you're buying somewhere within a 10
4:39
Speaker 2: to 15 kilometre radius of the city, there's a good
4:41
Speaker 2: chance that it could well be an auction. Therefore, you
4:43
Speaker 2: need to get your building inspection done prior to bidding
4:46
Speaker 2: at that auction. Whereas if you go to a regional
4:48
Speaker 2: area or you go to perhaps... Adelaide, Brisbane, where yes,
4:52
Speaker 2: they do auctions, but there's also a larger percentage of
4:54
Speaker 2: private sale, then you may be able to submit an
4:58
Speaker 2: offer subject to that building and pest inspection.
5:00
Speaker 1: Yeah, right.
5:01
Speaker 2: And there's different things that are included within contracts as
5:03
Speaker 2: well around owners' corporations, certificates or minutes from previous AGMs.
5:07
Speaker 2: So some states require that to be included within the
5:09
Speaker 2: vendor statement. Others require the buyer to do the research
5:12
Speaker 2: on that side of things themselves.
5:13
Speaker 1: Okay. A fair bit of discretion around it all still.
5:16
Speaker 1: That's what you're there for.
5:17
Speaker 2: And as you said, that's where you need to do
5:20
Speaker 2: your due diligence so that you know what's required so
5:22
Speaker 2: that when you are ready to go and to start
5:25
Speaker 2: searching seriously, that you're prepared.
5:29
Speaker 1: We did have, as I mentioned, a lot of people
5:31
Speaker 1: were interested in the show where we talked about whether
5:35
Speaker 1: Melbourne was a bargain at the moment relative to the
5:38
Speaker 1: other states. And certainly in terms of price increases, it's
5:42
Speaker 1: way behind the pace, isn't it? And you're on the
5:45
Speaker 1: ground here. Is there a sense that it's a good
5:48
Speaker 1: time to buy?
5:48
Speaker 2: I certainly feel there is. I mean, there's a lot of,
5:51
Speaker 2: it depends on who you are as a buyer. There's
5:53
Speaker 2: a lot of negativity around investors at the moment with
5:57
Speaker 2: exactly as you said, the discussions around land tax, but
6:00
Speaker 2: there's been a number of other changes. There's also further
6:02
Speaker 2: changes proposed around requirements on landlords as to what they
6:06
Speaker 2: need to do to comply.
6:08
Speaker 1: From a tenancy perspective, which are proposed for... Compliance is endless,
6:11
Speaker 1: isn't it?
6:11
Speaker 2: Yeah, and there was an introduction about two years ago,
6:14
Speaker 2: and they're discussing further around insulation and air conditioning requirements
6:18
Speaker 2: and those sorts of things as well. So investors in
6:21
Speaker 2: Victoria feel as though it's almost death by a thousand cuts.
6:24
Speaker 2: And then when you look and see that the growth
6:26
Speaker 2: patterns haven't been as strong in the past five to
6:29
Speaker 2: seven years as what they perhaps have been in other states...
6:32
Speaker 2: they're starting to look at, well, is this property worth
6:34
Speaker 2: continuing to hold or should I look at alternative investment strategies?
6:37
Speaker 2: Should I look at investing in other states? So that's
6:40
Speaker 2: part of the reason why the market hasn't kicked along.
6:43
Speaker 2: But I think that is another reason why when the
6:46
Speaker 2: market does move, Victoria, Melbourne particularly, is going to look
6:50
Speaker 2: quite good in terms of its value for money.
6:52
Speaker 1: Yeah, right. And if you're a first home buyer, obviously,
6:54
Speaker 1: you want to buy anyway. I'm always shy of going
6:58
Speaker 1: too local because we have a nationwide audience. That's right. Now, quickly,
7:03
Speaker 1: are there parts of the city you think are ripe
7:06
Speaker 1: for the first home buyer?
7:07
Speaker 2: Well, there's always, I mean, first home buyers need to
7:10
Speaker 2: look at what they want to because there'll be lifestyle requirements.
7:13
Speaker 2: And that's, I guess, where we differentiate between what you're
7:16
Speaker 2: looking for from a personal perspective versus what an investor
7:19
Speaker 2: might look for from a growth point of view. But
7:20
Speaker 2: the other thing to always keep in mind as a
7:22
Speaker 2: first home buyer is that this is highly unlikely to
7:25
Speaker 2: be a property that will be used as a stepping stone.
7:27
Speaker 2: It's most likely not going to be your forever home.
7:31
Speaker 2: So if you get too caught up in what might
7:33
Speaker 2: and what I might want right now, you may forego
7:36
Speaker 2: other attributes that enable you to take those steps up
7:39
Speaker 2: the ladder, the property ladder going forward. So there's almost
7:42
Speaker 2: sometimes with a first-time buyer, it's a good thing to
7:45
Speaker 2: have almost a bit of an investor's mindset so that
7:47
Speaker 2: you are looking at properties that potentially can build you
7:50
Speaker 2: some equity.
7:51
Speaker 1: Because the stats would say you're going to live there
7:53
Speaker 1: for what, five years, seven years?
7:54
Speaker 2: Something in that sort of range, yeah. I mean, ideally,
7:56
Speaker 2: from an investor's perspective, you'd be holding a property for
7:59
Speaker 2: 10 plus years. But if you can get a property
8:01
Speaker 2: that has a first home buyer that can build equity
8:04
Speaker 2: because it's got some good growth, but also potentially there's
8:07
Speaker 2: ways that you could add value yourself to build equity too,
8:10
Speaker 2: then that's going to help you to improve your financial
8:13
Speaker 2: position to be able to take steps up that property ladder,
8:15
Speaker 2: which is what first home buyers.
8:17
Speaker 1: Want to do. Okay. And other parts of town?
8:20
Speaker 2: Look, I think there's opportunities. I think the older style
8:23
Speaker 2: apartment market's been held back in Melbourne for a long
8:25
Speaker 2: period of time.
8:26
Speaker 1: Okay.
8:27
Speaker 2: And that's more than just COVID. That's been an extensive period.
8:30
Speaker 2: So I think there's value to be had in those
8:32
Speaker 2: sorts of areas.
8:33
Speaker 1: Yeah.
8:33
Speaker 2: I think villa units are a good option too from
8:35
Speaker 2: a first-home buyer's perspective. Some of the middle ring suburbs
8:39
Speaker 2: of Melbourne that have still got really good public transport linkages.
8:42
Speaker 1: Yeah, and you get– for the price of an average house,
8:45
Speaker 1: you're getting– There is that thing about units, they're not fashionable, right? No.
8:49
Speaker 1: You're talking about the single story, clinker 60s, 70s. Driveway
8:52
Speaker 1: down the side. But you get a little garden, you
8:54
Speaker 1: get a garage, you get a home basically. Yeah.
8:56
Speaker 2: There's a good land component to those sorts of properties
8:58
Speaker 2: too as opposed to say an apartment where you perhaps
9:01
Speaker 2: don't have that outdoor space. But with the villa unit,
9:03
Speaker 2: you've got that little courtyard. Most likely if you've got
9:06
Speaker 2: the right ones, you've got a lock-up garage. You've probably
9:08
Speaker 2: got a nice entry hallway with rooms leading off. So
9:10
Speaker 2: it's got a small house type feel to it. And
9:13
Speaker 2: then if you're in a good, quiet residential street that's
9:15
Speaker 2: got good access to the local amenities, then if you
9:19
Speaker 2: did choose to upgrade at some point, but you're in
9:22
Speaker 2: a strong enough financial position, then it may well be
9:24
Speaker 2: a good property to retain as an investment and continue
9:27
Speaker 2: to build that way too.
9:28
Speaker 1: Oh, right. Yeah. Except you probably can't do much with
9:30
Speaker 1: them on the development side.
9:31
Speaker 2: There's limitations, but as land values continue to increase, then
9:35
Speaker 2: we're seeing more and more, probably not so much in
9:37
Speaker 2: the middle ring suburbs, more in the inner suburbs of
9:39
Speaker 2: where particularly with some of the older style apartments, developers
9:42
Speaker 2: are now coming in because the land value is outstripping
9:45
Speaker 2: the value of the improvements. So the sum of the
9:48
Speaker 2: parts is actually not as great as the whole. So
9:51
Speaker 2: the developer comes in and says, well, your apartment might
9:55
Speaker 2: only be worth $ 500, 000 on its own, but if I
9:57
Speaker 2: can get this whole parcel of land, yes your apartment
10:00
Speaker 2: to me if i can get the lot.
10:01
Speaker 1: Is worth 750.
10:02
Speaker 2: Yeah right and so we are we've been expecting this
10:05
Speaker 2: if you speak to my mentor richard wakeland he's been
10:08
Speaker 2: saying this for 30 plus years, that this is going
10:11
Speaker 2: to happen.
10:12
Speaker 1: It's now starting to. And it's coming true. Tell me,
10:15
Speaker 1: did all the cities have those? It seems to me
10:17
Speaker 1: they do. Do all the cities have those? Villa units,
10:19
Speaker 1: you call them. They were built in the, what, 70s
10:22
Speaker 1: through 80s? 60s, 70s and 80s.
10:24
Speaker 2: I mean, there's even some that are 1930s down Bayside,
10:27
Speaker 2: Elwood sort of way.
10:28
Speaker 1: You can see some of them. Single story, six, as
10:31
Speaker 1: you say, driveway down the middle.
10:32
Speaker 2: Mostly it's 60s and 70s. Some in the 50s, but
10:35
Speaker 2: mostly 60s and 70s. So it's, And they can be
10:38
Speaker 2: as small as two or three to as big as
10:41
Speaker 2: 18 to 20, depending upon the size of the parcel
10:44
Speaker 2: of land.
10:44
Speaker 1: It's really interesting you say that. And I've always thought
10:46
Speaker 1: the same thing, but they are not cool. They're not fashionable.
10:51
Speaker 1: It's hard to move from here. It's hard to move
10:53
Speaker 1: from here. You know, you're a fashionable part of town.
10:55
Speaker 1: You might be in the middle of Sydney or Melbourne
10:58
Speaker 1: in some fashionable suburb and then you should tell your
11:00
Speaker 1: friends we've bought a villa unit.
11:02
Speaker 2: 15 kilometers further out.
11:04
Speaker 1: But gee, I think you're onto something there. Okay, we
11:07
Speaker 1: might take a short break and we'll be back in
11:08
Speaker 1: a moment. Hello, welcome back to the Money Puzzle podcast.
11:28
Speaker 1: I'm James Kirby talking to Jared McCabe, regular on the show.
11:32
Speaker 1: We're talking property around the nation, investment, first home buyers,
11:36
Speaker 1: guidance from a buyer's advocate there for you. The greatly
11:40
Speaker 1: underestimated appeal financially of the villa unit. Yes, those six
11:46
Speaker 1: units with the six bins outside you pass on Monday morning.
11:50
Speaker 1: Not fashionable, but we're talking land value smack in the
11:53
Speaker 1: middle of the major cities and definitely undervalued. And you
11:57
Speaker 1: get a lot for it. As you say, you bank
12:00
Speaker 1: for your book, you actually get a lot. Yeah, very interesting. Now,
12:03
Speaker 1: I wanted to ask you one other thing before we
12:05
Speaker 1: go to... We've got some great questions, but just a
12:08
Speaker 1: quick one. Mortgage brokers become very powerful. Yes. Actually, the
12:12
Speaker 1: majority of mortgages in Australia are now sold through mortgage brokers,
12:16
Speaker 1: though the banks... processed them. The banks' mortgages, the majority
12:19
Speaker 1: are sold by mortgage brokers. They grew from nothing. Once
12:23
Speaker 1: upon a time, John Simons, Aussie Home Loans, and they
12:25
Speaker 1: took over the market, basically. It suited the banks. Something
12:28
Speaker 1: big happening this year. Commonwealth Bank, the biggest bank in
12:31
Speaker 1: the market, the nation's biggest lender, has a plan to
12:36
Speaker 1: pull it back in-house and kind of cut the brokers out.
12:41
Speaker 1: What difference would it make if the brokers started to
12:43
Speaker 1: thin out?
12:44
Speaker 2: Look, I think From a buyer's perspective, or if you're
12:47
Speaker 2: doing refinancing, that sort of thing, people will always be
12:51
Speaker 2: financially conscious. So if there's ways and means to be
12:54
Speaker 2: able to save money, that's going to be a big consideration.
12:58
Speaker 2: But I think the other thing that probably hasn't necessarily
13:00
Speaker 2: been discussed quite as much is that the personal contact
13:04
Speaker 2: that you can get from a mortgage broker, I think,
13:06
Speaker 2: is really important, and the personal attention. Whereas you can...
13:10
Speaker 2: more often than not be dealing with the same person
13:12
Speaker 2: every time you pick up the phone.
13:13
Speaker 1: Sit down with you. Yeah.
13:14
Speaker 2: And so, you know, you'll as a personal connection, they
13:17
Speaker 2: know your circumstances. Whereas quite often with the bank, you'll
13:21
Speaker 2: pick up the phone and it'll be a different person
13:22
Speaker 2: that you'll speak to every time.
13:23
Speaker 1: Yeah.
13:24
Speaker 2: So it depends on what you're prioritizing to as a
13:27
Speaker 2: client as to whether or not that financial side of
13:30
Speaker 2: things is absolutely key. And perhaps for a first time buyer,
13:33
Speaker 2: that might be really important.
13:35
Speaker 1: Yeah.
13:35
Speaker 2: But for others where the personal contact, the understanding is vital.
13:40
Speaker 2: And I'd probably put myself into that category. I would
13:43
Speaker 2: rather have that connection than have to deal with a
13:45
Speaker 2: different person and explain my circumstances every time.
13:48
Speaker 1: Yeah, and if anyone's old enough to remember, that's what
13:50
Speaker 1: it used to be like, to ring every bank. You
13:52
Speaker 1: wanted to find out what three banks' mortgage rates were,
13:54
Speaker 1: you had to ring the three of them. And as
13:56
Speaker 1: Jared says, a different person every time. Okay, I just
13:59
Speaker 1: thought I'd bring that up with you. All right, I
14:00
Speaker 1: have some really good questions. I wanted to try and
14:02
Speaker 1: divide them up. So what I'm going to do is
14:04
Speaker 1: the first two are on, Land tax, because just to
14:08
Speaker 1: cover off for listeners, in case you've missed this, in Victoria,
14:13
Speaker 1: they pulled the threshold for paying land tax down to
14:17
Speaker 1: 50,000 from 300. So everyone is in the news. Everyone's
14:21
Speaker 1: actually getting their bills these few weeks and they are aghast,
14:23
Speaker 1: of course, because they never got this bill before out
14:25
Speaker 1: of the blue. But it's been a way for the
14:27
Speaker 1: Victorian state government, which is in deep debt, to find
14:31
Speaker 1: money in the market. And there is in parallel with that,
14:34
Speaker 1: they have a playing catch up on social housing, which
14:37
Speaker 1: they have to do. But in this case, unfortunately, they
14:40
Speaker 1: seem to have mapped the sort of price of it
14:42
Speaker 1: straight onto property industry alone. Controversial move. Victorian prices have
14:48
Speaker 1: been the softest in the nation since they did it.
14:51
Speaker 1: Victorian investors as a percentage of buyers in Victoria are
14:55
Speaker 1: only 30% or 40% in other states. But interestingly, last
15:00
Speaker 1: week in the New South Wales budget, they copied Victoria
15:04
Speaker 1: and they have not increased the land tax or whatever,
15:06
Speaker 1: but they've changed, just like Victoria did. They've moved, they're
15:10
Speaker 1: playing games with the thresholds where they won't index them
15:12
Speaker 1: so more people will be caught every year. People are
15:15
Speaker 1: aware of this now that there's basically, whether it's coordinated
15:18
Speaker 1: or not, it doesn't matter. The states are driving more
15:21
Speaker 1: taxes and revenues out of the property sector. to the
15:26
Speaker 1: two big ones already unleashed and we'll see what Queensland
15:28
Speaker 1: has to do. So here's the first question from Sally.
15:32
Speaker 1: I'm a long time listener of the show. Thank you
15:33
Speaker 1: for the podcast. On New South Wales tax changes, there
15:38
Speaker 1: was a fair bit of discussion how this would affect investors.
15:41
Speaker 1: I'd like to hear your view on how it might
15:43
Speaker 1: affect other groups, such as first home buyers. The land
15:47
Speaker 1: tax threshold, by the way, in Sydney is a million dollars.
15:52
Speaker 1: In Victoria, it's 50,000. I mean, whoosh. That's extraordinary, isn't it? Anyway,
15:56
Speaker 1: she says, given the threshold is a million dollars, 1.075
16:00
Speaker 1: to be precise, I would think this would drive up
16:03
Speaker 1: people's interest towards properties with low land values. Well, yes, Sally.
16:09
Speaker 1: None of this is advice, of course, only information. Yes,
16:11
Speaker 1: but in reality, you probably can't buy a house. Well,
16:14
Speaker 1: latex is only applicable for investors too.
16:15
Speaker 2: So for first- It's not going to be payable for
16:17
Speaker 2: those that are using the property as their principal place
16:20
Speaker 2: of residence. Yeah, yeah. But what it may do is
16:22
Speaker 2: that you may find that investors start to look at
16:26
Speaker 2: properties where the land component is worth below that threshold.
16:30
Speaker 1: To avoid it.
16:31
Speaker 2: So what it may do and what may be worth
16:34
Speaker 2: considering if you're in a fortunate enough position to be
16:35
Speaker 2: able to afford that bracket is that as an owner-occupier,
16:39
Speaker 2: you may be getting good value for money by looking
16:41
Speaker 2: at properties that have got land values in excess of
16:44
Speaker 2: the threshold.
16:44
Speaker 1: Yeah, right.
16:45
Speaker 2: Because there's less competition in that range.
16:47
Speaker 1: Because people are just trying to steer under it.
16:49
Speaker 2: So we saw that in reverse a number of years
16:52
Speaker 2: ago in around the first homebuyers grant when it was
16:55
Speaker 2: focused on around $ 600, 000. And at one stage there, it
16:58
Speaker 2: was a flat. Anything in excess of $ 600, 000, the grant
17:04
Speaker 2: was net void. Below $ 600, 000, there was discounts.
17:08
Speaker 1: So there was great competition. Up to $ 600, 000.
17:11
Speaker 2: As soon as the price went over $ 600, 000, they would
17:15
Speaker 2: just drop out. I remember going to an auction a
17:17
Speaker 2: number of years ago for an apartment in North Carlton,
17:21
Speaker 2: and I had an investor client looking at that property.
17:24
Speaker 2: And we had a budget of $ 610, 000 as a limit,
17:26
Speaker 2: and I paid $ 601, 000. And it was, I watched all
17:31
Speaker 2: of these first time buyers fight it out. As soon
17:34
Speaker 2: as it hit the 600, they all just stopped. Still,
17:37
Speaker 2: I put 601 in and that was it. And so
17:38
Speaker 2: there's elements of similarity with that, obviously for differing reasons.
17:42
Speaker 2: And it's not a hard and fast limit, particularly with
17:45
Speaker 2: the indexation, but. That's something that you may start to
17:48
Speaker 2: see in New South Wales. That could be something that
17:51
Speaker 2: plays out. Given the low threshold in.
17:54
Speaker 1: Victoria, everyone's susceptible. It doesn't matter, but you could play
17:57
Speaker 1: around the Sydney one, which is $ 1, 075, 000 for what it's
18:01
Speaker 1: worth before an investor has to pay land tax on
18:03
Speaker 1: the property. It's interesting. It just shows you that if
18:06
Speaker 1: you pick up on these changes in the market, if
18:09
Speaker 1: you know that, you can really have an advantage like
18:11
Speaker 1: you were talking about. If you're at an auction and
18:13
Speaker 1: you know that nobody wants to pay more than $ 600, 000,
18:15
Speaker 1: you You get it for 601. Really good story. Really
18:18
Speaker 1: kind of captures what we're talking about. Okay. Pete, having
18:22
Speaker 1: listened to your podcast on land tax, I am struck
18:24
Speaker 1: by how complex and inefficient the system is. Apart from
18:27
Speaker 1: sporting competitions, can you think of a single good reason
18:30
Speaker 1: why we still have state governments? Yeah, that's the one
18:34
Speaker 1: for another show, Pete. I was amazed. It was only
18:36
Speaker 1: in the COVID crisis that I realized the extent and
18:40
Speaker 1: the depth of potential power of the states, really. And
18:43
Speaker 1: how they did everything differently and were ignoring each other.
18:46
Speaker 1: It was just extraordinary. So I suppose that was it
18:50
Speaker 1: at its worst in some ways. But then there are
18:51
Speaker 1: other very strong reasons for states. It's a big country
18:55
Speaker 1: after all. All I can say on property investment is
18:58
Speaker 1: that you should know your state and know how things work.
19:01
Speaker 1: We're talking about land tax today. There's no land tax
19:03
Speaker 1: in the Northern Territory.
19:05
Speaker 2: So I think the important thing from Pete's perspective is
19:07
Speaker 2: if you're looking at other taxes and other states, like
19:10
Speaker 2: you said, James, that you probably need to have a
19:12
Speaker 2: good financial planner in your corner there so that they
19:14
Speaker 2: know and your accountant who knows your tax circumstances and
19:18
Speaker 2: knows your financial position so that they can say to you, well, look,
19:21
Speaker 2: you've already got one property in this state and if
19:24
Speaker 2: we buy another one, this is what's going to happen
19:26
Speaker 2: to your land tax because it'll go from single holding
19:28
Speaker 2: to multiple holding and how will that impact? So perhaps
19:31
Speaker 2: rather than going there, we could go to this state
19:34
Speaker 2: and look at an option that way as well. So
19:36
Speaker 2: I think the financial planner comes really much into play.
19:38
Speaker 1: Assuming that they know all that. Yeah. One other thing
19:41
Speaker 1: that struck me there was Queensland in a crazy brave
19:45
Speaker 1: stunt about two years ago, the same government, mind you,
19:47
Speaker 1: that's there now, tried to tax... people in other states,
19:51
Speaker 1: if you recall. Yes, I do remember that. That was extraordinary.
19:53
Speaker 1: They tried to bring in a tax whereby if you
19:56
Speaker 1: were in Melbourne and, say, Queensland, and you had a
20:00
Speaker 1: property in Melbourne and a property in Queensland, they were
20:03
Speaker 1: accounting the Melbourne property in it. They were literally raiding
20:07
Speaker 1: in other states to get money. That didn't get going.
20:09
Speaker 1: It got shot down. But there is an election in
20:12
Speaker 1: Queensland in a few weeks and we'll see what they
20:14
Speaker 1: plan to do because they'll do something. I mean, New
20:16
Speaker 1: South Wales has done something. Victoria's done something. So keep
20:19
Speaker 1: your eyes open, folks. On that one, and that's the
20:22
Speaker 1: land tax issue. I hope we've covered that properly for you.
20:26
Speaker 1: It really is an issue. Everyone thought that negative gearing
20:30
Speaker 1: would change or capital gains would change. Nothing happened. And
20:33
Speaker 1: they're sort of like ambushed from another corner. Come from
20:36
Speaker 1: a different direction, come from the States. OK, we'll be
20:39
Speaker 1: back in a moment with some really good questions. Hello,
21:00
Speaker 1: welcome back to the Australian's Money Puzzle podcast. I'm James Kirby,
21:04
Speaker 1: Wealth Editor at The Australian, talking to Jared McCabe, a
21:06
Speaker 1: buyer's advocate from the Wakeland Group. OK, Matthew says... Is
21:12
Speaker 1: the Gold Coast included in Brisbane property market? Everyone talks Sydney,
21:15
Speaker 1: Melbourne and Brisbane, just like we were there, Jared. They
21:18
Speaker 1: never mentioned the Gold Coast. All my colleagues in Sydney
21:21
Speaker 1: live two hours away and still live in Sydney. Is
21:23
Speaker 1: Brisbane actually Southeast Queensland? Well, I know when I talk
21:26
Speaker 1: to the researchers, they always talk about Southeast Queensland as
21:29
Speaker 1: a separate unit, not Brisbane. When they say things are
21:32
Speaker 1: really happening or whatever in Southeast Queensland, they mean Ex-Brisbane.
21:36
Speaker 2: And Brisbane, I mean, my understanding too with Gold Coast
21:38
Speaker 2: is that the population growth there is as big as,
21:41
Speaker 2: and there was talk at one stage, I believe, that
21:43
Speaker 2: it was going to become one of the biggest cities
21:46
Speaker 2: in the country outside of the three that we've just mentioned.
21:49
Speaker 2: So in terms of grouping together, it's definitely its own entity,
21:55
Speaker 2: so to speak.
21:55
Speaker 1: It is, yeah. Southeast Queensland, absolutely. And a lot of
21:58
Speaker 1: action there from property market really after Perth is probably
22:01
Speaker 1: the hottest zone in the country right now. And maybe
22:04
Speaker 1: even a bit more By that, I mean, there is
22:08
Speaker 1: great price action in Perth, but the stock's very tightly held. Yes.
22:12
Speaker 1: While you have a much deeper, diverse market. More opportunities
22:14
Speaker 1: around Gold Coast. Yeah, in southeast Queensland.
22:16
Speaker 2: Greater supply, increasing supply.
22:17
Speaker 1: Yeah, exactly. Yeah, you have that complexity of the market.
22:21
Speaker 1: And probably not as volatile in the long period of
22:25
Speaker 1: time because you've got the Perth market is invariably linked
22:29
Speaker 1: with the success or otherwise of the mining and resources group. Okay,
22:35
Speaker 1: Charles says, long-time listener, second-time questioner. Okay, I'm 54. I
22:41
Speaker 1: will paraphrase this. With a mortgage on a property, I'm
22:45
Speaker 1: hoping to downsize and pay off the mortgage and retire
22:50
Speaker 1: at 60. Would you suggest, not advice, with an inherited
22:54
Speaker 1: lump sum, I reduce the mortgage immediately or pay down
22:58
Speaker 1: the amount into my super to withdraw again? Okay, here's
23:02
Speaker 1: the question. put universally, should you pay down the mortgage
23:08
Speaker 1: or add to your super? I have a colleague, Cleo
23:11
Speaker 1: No Doubt, who did a piece in The Weekend Australian
23:13
Speaker 1: just last weekend. And it's funny, we can do this
23:16
Speaker 1: piece every year and not only does it always get
23:19
Speaker 1: great readership, but it often has a different answer. Okay.
23:22
Speaker 1: Depending on how things are going. And just now, it's amazing,
23:27
Speaker 1: but technically, mathematically, really, no matter what way you cut it,
23:32
Speaker 1: because of the tax advantages of super, If you had
23:35
Speaker 1: a choice between, in most cases, most of the time,
23:38
Speaker 1: if you had a choice between putting a dollar into
23:40
Speaker 1: super or a dollar against your mortgage, even at these rates,
23:42
Speaker 1: the dollar into super is more beneficial mathematically than the
23:49
Speaker 1: dollar into the mortgage. But I don't know. I know
23:52
Speaker 1: that's the answer, but personally, I'm not convinced by it
23:55
Speaker 1: because I find it really hard to put a proper
23:58
Speaker 1: value on their home. And Owning the home, the whole
24:02
Speaker 1: system is tilted towards you. Owning the home, the whole
24:04
Speaker 1: tax system is tilted towards the homeowner. Not just the CGT,
24:08
Speaker 1: but pension access and everything. With an investor, I'm not,
24:13
Speaker 1: it might be slightly different. And in this case, I'm
24:17
Speaker 1: thinking that Charles is an investor. He doesn't actually spell
24:21
Speaker 1: that out. But if you were an investor, then I
24:23
Speaker 1: suppose it would. you would be weighing it up slightly differently.
24:27
Speaker 2: It depends on your tax position and things then too.
24:29
Speaker 1: It does. With your investments.
24:30
Speaker 2: So yeah, I think that one's a, it's very much
24:33
Speaker 2: a personal circumstance type question. I think it probably needs
24:36
Speaker 2: a little bit more of an intimate understanding.
24:38
Speaker 1: Yeah, sorry, Charles, we are ducking that one. And that's
24:41
Speaker 1: fair enough because it's too, I'm sorry, but it's, you know,
24:44
Speaker 1: it really is a highly personalised situation. So I try
24:47
Speaker 1: to make it broader because we can't give advice, of course.
24:50
Speaker 1: But take a look at Cleono Dowd's piece. last Saturday
24:54
Speaker 1: in The Weekend Australian, where she measured the two things
24:57
Speaker 1: against each other to see the figures, which are, of course,
25:00
Speaker 1: invariably put together for us by superannuation groups. Guess what?
25:04
Speaker 1: They find that you're better off putting your money into super.
25:07
Speaker 1: The thing we don't know is how much is a
25:08
Speaker 1: property really worth long term. And it can be very
25:12
Speaker 1: hard to beat that in our tax system. Yes. Yeah.
25:15
Speaker 1: So just before we go, tell us about the mood
25:17
Speaker 1: on the ground for investors and first home buyers. People
25:22
Speaker 1: thought interest rates were going to come down. They haven't
25:23
Speaker 1: come down. Has that made it– has that cooled things
25:25
Speaker 1: a bit?
25:26
Speaker 2: Probably hasn't changed things too much at this stage. The
25:29
Speaker 2: market from a Victorian perspective is pretty well just ticking
25:32
Speaker 2: along at present. It tends to go into a bit
25:34
Speaker 2: of a hibernation through the school holiday July period. There's
25:38
Speaker 2: typically not as much activity around. And then once we
25:41
Speaker 2: move into August and September, things will start to build.
25:44
Speaker 2: So that'll be a really interesting time just to see
25:46
Speaker 2: whether or not how the supply levels go because typically
25:49
Speaker 2: if you see that supply lift– if the demand isn't
25:52
Speaker 2: there to meet it, then we can see the clearance
25:53
Speaker 2: rates start to come off and prices can come back.
25:56
Speaker 1: A little bit.
25:56
Speaker 2: And the expectation probably at the start of this year
25:59
Speaker 2: when all the talk was that we're going to see
26:00
Speaker 2: some interest rate cuts at the back half of the year,
26:02
Speaker 2: that that's where we might start to see a little
26:05
Speaker 2: bit of improvement. I think that's probably still 12 or
26:07
Speaker 2: 18 months off now, as in from a market movement perspective,
26:11
Speaker 2: because the interest rate cuts when they do eventually come
26:14
Speaker 2: won't necessarily lead to a market jump straight away.
26:18
Speaker 1: It'll take a bit of To percolate through, just like
26:21
Speaker 1: on the other side, when you raise interest rates, it
26:23
Speaker 1: takes a long time to actually come through. It doesn't
26:26
Speaker 1: have an immediate impact. Yeah, yeah, it builds. Okay, terrific. Well,
26:29
Speaker 1: thank you very much. Great to have you in the
26:30
Speaker 1: studio again. Thanks for having me. That was Jared McCabe
26:33
Speaker 1: of the Wakeland Group. He's a buyer's advocate and a terrific,
26:36
Speaker 1: as usual, friend of the show. You can catch him
26:38
Speaker 1: here regularly on The Money Puzzle. Thank you for all
26:41
Speaker 1: the emails. Keep them coming. I'd love to see some
26:44
Speaker 1: more on all subjects. themoneypuzzle at theaustralian.com.au. Talk to you soon.