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My super, my property - What's possible? · The Money Puzzle

0:11
Speaker 1: Hello and welcome to the Australian's Money Puzzle Podcast. I'm
0:14
Speaker 1: James Kirby, the Wealth Editor at The Australian. Welcome aboard everybody.
0:18
Speaker 2: I don't know about you, but it strikes me that
0:22
Speaker 2: if I can get money out of my super fund
0:26
Speaker 2: to do a tummy tuck or some cosmetic surgery and
0:32
Speaker 2: the cosmetic operators will help me fill out the form.
0:37
Speaker 1: To get my super out early. then I think you
0:41
Speaker 1: should be able to use your super for your own
0:44
Speaker 1: property plans. Now, there's a debate about this. I'm quite
0:47
Speaker 1: aware of that debate, and I've come down clearly on
0:49
Speaker 1: one side, which is, unfortunately, I think, there's no escape here.
0:54
Speaker 1: The tax system is totally loaded in favor of the homeowner,
0:59
Speaker 1: and then everything else flows from that. And on that
1:03
Speaker 1: basis alone, I think if it comes neck and neck
1:05
Speaker 1: between super and owning a home, you need to own
1:08
Speaker 1: a home in our tax system. And separately, as somebody
1:12
Speaker 1: who has had a self-managed super fund, I've already used
1:16
Speaker 1: my super to buy an investment property. And not only that,
1:20
Speaker 1: but I've used it in a fashion that is really
1:24
Speaker 1: worth checking out. Not many people do it, but you
1:27
Speaker 1: use the super fund in a non-leverage way. So your
1:31
Speaker 1: super fund, you, the investor, the listener, do a joint
1:37
Speaker 1: venture with your SMSF. And that joint venture buys an
1:42
Speaker 1: investment property. The super fund, your SMSF, simply puts in
1:48
Speaker 1: equity and nothing else. No leverage, no loans, pay, no
1:51
Speaker 1: costs whatsoever. They just put in a piece of equity,
1:54
Speaker 1: 50 grand, 100 grand. And then in the future, say
1:59
Speaker 1: 10 years time, when you go to sell that property,
2:02
Speaker 1: you simply, whatever you've made, whatever the super fund has made,
2:06
Speaker 1: you contribute that back into your super fund and you
2:09
Speaker 1: go your own way. It's a very interesting principle and
2:14
Speaker 1: there are bigger plans afoot around that which I'm going
2:17
Speaker 1: to introduce you to in a moment. My guest is
2:20
Speaker 1: a person who's actually devoted several years to this whole
2:23
Speaker 1: area and has a plan I think which will capture
2:25
Speaker 1: our imagination. We're going to talk about possibilities between super
2:30
Speaker 1: and property. We're going to talk about what he has
2:32
Speaker 1: in mind and also answer some questions. It's Simon Jones
2:35
Speaker 1: from HomeSuper. How are you Simon?
2:37
Speaker 3: Good thanks, James. Thanks for having me on and for
2:39
Speaker 3: your listeners for tuning in.
2:42
Speaker 1: Nice to have you on. Nice to have someone who's
2:44
Speaker 1: really across this whole concept. Before we talk about your ideas,
2:49
Speaker 1: let's just talk about what is and isn't possible just
2:52
Speaker 1: now with super. I want to sort of distinguish between
2:55
Speaker 1: what you can do and what you might be able
2:58
Speaker 1: to do in the future. And I brought up the
2:59
Speaker 1: cosmetic surgery thing there. It's provocative, but it's true. It is.
3:05
Speaker 1: And I've done quite a bit of work on that.
3:06
Speaker 1: A bit of journalism work, I mean. I haven't done
3:08
Speaker 1: some cosmetic work. Not as yet.
3:12
Speaker 3: It's an interesting lead-in because, as you write, there is
3:15
Speaker 3: some different ways you can withdraw your super. And one
3:19
Speaker 3: of those, super and housing has been interlinked for quite
3:22
Speaker 3: some time. And one of those early release mechanisms is
3:26
Speaker 3: in the event of financial hardship, and that's if the
3:28
Speaker 3: bank is looking to foreclose on your home or a
3:32
Speaker 3: local council for non-payment of rates. And as a last resort,
3:36
Speaker 3: you can essentially break the glass and withdraw those funds.
3:40
Speaker 3: That part I've had some experience with, unfortunately, helping some
3:42
Speaker 3: mums and dads and those in trouble with financial hardships. Unfortunately,
3:46
Speaker 3: in that circumstance, you would think someone's punished enough with
3:50
Speaker 3: the threat of losing their home, but government imposes a 22%
3:53
Speaker 3: withdrawal tax on that. And we could argue whether tummy
3:57
Speaker 3: tucks are a necessity in life, but for me, living
4:01
Speaker 3: in your own home certainly is. So I've been advocating
4:04
Speaker 3: for the removal of that 22% tax, and we also
4:08
Speaker 3: found a bit of a void, and we built an
4:09
Speaker 3: online calculator linked to our website to help people understand
4:14
Speaker 3: some of the pros and cons of using a super-class resort.
4:17
Speaker 1: Just about that 22% that you pay if you take
4:20
Speaker 1: super out, does that apply? If you were one week
4:23
Speaker 1: from retirement, would it still apply? It does.
4:26
Speaker 3: Unfortunately, yes.
4:27
Speaker 1: Yeah, right. Okay, very interesting. Just to kind of fill
4:29
Speaker 1: in the landscape, first of all, for people... Just now,
4:32
Speaker 1: there's very few things you can do. As Simon says,
4:34
Speaker 1: it's financial hardship, which oddly, some of the cosmetic treatments
4:37
Speaker 1: fall under, and that's where money is coming out the
4:40
Speaker 1: back door of super. It's very hard to take money
4:42
Speaker 1: out to buy property, especially if you are in a
4:45
Speaker 1: conventional big super fund. There is plans afoot. That is,
4:48
Speaker 1: at least the coalition has a plan which would allow
4:51
Speaker 1: people to take up to $ 50, 000 out of super, of
4:56
Speaker 1: any fund to put into their home. That's a plan.
4:59
Speaker 1: that's there at the moment. And in terms of what
5:01
Speaker 1: you can do, there's very little, but there is a plan.
5:05
Speaker 1: There is at least a scheme existing.
5:07
Speaker 3: It exists.
5:07
Speaker 1: It runs since the days of the Morrison government. It's
5:10
Speaker 1: called the First Home Super Saver Scheme, FHSS. It's a
5:13
Speaker 1: terribly elaborate and complex scheme. Some listeners have used it.
5:16
Speaker 1: It's a way you can kind of quarantine your contributions
5:20
Speaker 1: to super into a bucket, basically, which you can then
5:24
Speaker 1: use to put towards your first home. It's quite elaborate,
5:28
Speaker 1: it's quite niche, but that's all. Is that all that's
5:31
Speaker 1: out there so far, Simon?
5:32
Speaker 3: Have I missed anything? That is an incentive, yes, to
5:36
Speaker 3: help people save and a tax-effective mechanism, really. But it
5:40
Speaker 3: really does depend. You mentioned the self-managed circumstance there. And
5:44
Speaker 3: whilst this does not apply to everyone, a self-managed fund,
5:48
Speaker 3: as you know, can buy an investment property. I can
5:50
Speaker 3: also buy business real property. So for someone who's self-employed
5:54
Speaker 3: and they might be, let's say, a mechanic and they
5:57
Speaker 3: wish to buy the commercial property in which they operate,
5:59
Speaker 3: that's allowable. But there is some quirky ones where they
6:04
Speaker 3: may need to live on site to actually operate the business.
6:08
Speaker 3: So there is actually some circumstances where someone can essentially
6:12
Speaker 3: buy a property that's obviously commercial. There is a residence allowed.
6:17
Speaker 3: So there is all sorts of quirky and wonderful ways.
6:19
Speaker 1: And it's Oh, that would be like an olive farm
6:22
Speaker 1: or something.
6:23
Speaker 3: Well, depends. Again, I'm not going to say any specific
6:26
Speaker 3: and get myself in strife, but it could be an
6:27
Speaker 3: obvious one.
6:28
Speaker 1: If you bought a farm and it had a house
6:29
Speaker 1: on it, would that be the sort of thing where
6:31
Speaker 1: it might be possible?
6:33
Speaker 3: Sometimes the house is quarantined, depending. It could be a
6:35
Speaker 3: security measure where you need to be on site or
6:37
Speaker 3: various other circumstances. But look, they are few and far between,
6:41
Speaker 3: but Previously, you mentioned about doing a joint venture with
6:45
Speaker 3: your fund and liking it to the proposed $ 50, 000, as
6:49
Speaker 3: you mentioned, by the LNP. And in that way, you
6:53
Speaker 3: suggested you put the funds back into super. We argue
6:56
Speaker 3: that it should never leave. You should be able to
6:59
Speaker 3: do those joint ventures.
7:00
Speaker 1: But just to clarify for the listener, before we talk
7:03
Speaker 1: about what you're planning, just tell us about how that works.
7:07
Speaker 1: So someone with an SMSF, how they can actually use
7:10
Speaker 1: equity funds funds from the SMSF to buy a property
7:14
Speaker 1: and they, the individual, through a joint venture with the SMSF,
7:18
Speaker 1: can actually do everything else, pay the stamp duty, have
7:21
Speaker 1: the loan, etc.
7:23
Speaker 3: Yeah, correct. Depending on, again, lenders and circumstance, because the
7:27
Speaker 3: fund's assets should not be charged and held under a mortgage.
7:31
Speaker 3: But there is circumstances where, correct, there can be a
7:34
Speaker 3: joint venture with the fund. And that's not extraordinary. There's
7:38
Speaker 3: circumstances out there. It just gets a little bit complicated, though,
7:40
Speaker 3: when it is a residence in the current form. So
7:44
Speaker 3: just ensuring there's no financial benefits to the member, he
7:46
Speaker 3: or she are paying the market rent.
7:50
Speaker 1: Yes, you cannot stay a single night in that place
7:53
Speaker 1: if you own it in that arrangement because it's strictly
7:58
Speaker 1: for super returns, isn't that it?
8:01
Speaker 3: No, there is some carve-outs with respect to repairs or
8:05
Speaker 3: if it is a holiday home that's, say, independently managed
8:08
Speaker 3: and you are only staying for a week and if
8:11
Speaker 3: it's peak period, you might still have to pay full freight.
8:14
Speaker 3: So there is some circumstances and it's highly dependent on
8:18
Speaker 3: circumstance and ensuring that the fund obtains commercial returns no
8:22
Speaker 3: matter who is in the property. So... There is some quirks,
8:26
Speaker 3: and that's where often trustees can get themselves into strife
8:29
Speaker 3: if they just overstep that mark or not doing everything
8:32
Speaker 3: to satisfy the regulations.
8:35
Speaker 1: Okay, but the reason, listeners, that I'm trawling through this
8:38
Speaker 1: is I'm basically showing and trying to demonstrate to you
8:42
Speaker 1: that under law, if you like, or under the arrangements
8:46
Speaker 1: we have in super, there is the possibility already to
8:52
Speaker 1: use self-managed super fund not just buy property, but that you,
8:58
Speaker 1: an individual investor, in conjunction with your SMSF, can buy
9:02
Speaker 1: property together. And the SMSF can put in the equity
9:05
Speaker 1: and you do everything else. And then at the end
9:08
Speaker 1: of the arrangement, you sell and the super fund gets
9:11
Speaker 1: what it's entitled to. Something not dissimilar to the home
9:16
Speaker 1: equity shared scheme, which is just basically looks like it's
9:19
Speaker 1: going to get approved through parliament this week. And that
9:21
Speaker 1: would be where the government, for instance, shares with you.
9:24
Speaker 1: and they can take up to 40% of a property
9:27
Speaker 1: and you can take the rest. And then in five
9:28
Speaker 1: or 10 years time, when you sell, you split the proceeds.
9:31
Speaker 1: I'm just basically lining these things out, Simon, so that
9:34
Speaker 1: we can give people, we'll have some context to what
9:36
Speaker 1: we're going to talk about next. And I should have
9:38
Speaker 1: said also, Simon's background is in advice at all, at
9:43
Speaker 1: various levels over the years, at fairly high levels in
9:46
Speaker 1: the financial advice sector. Okay, we'll be back in a
9:49
Speaker 1: moment and we're going to talk about the possibility of,
9:54
Speaker 1: about how you and your super fund, any super fund,
9:58
Speaker 1: a big super fund could buy a home together back
10:02
Speaker 1: in the morning. Hello, welcome back to the Australian's Money Puzzle.
10:17
Speaker 1: I'm James Kirby and I'm talking to Simon Jones from HomeSuper. Okay, Simon,
10:23
Speaker 1: elevator pitch. Tell me what you've planned in the simplest
10:28
Speaker 1: terms that at its very best, if it came to pass,
10:30
Speaker 1: how would it work?
10:33
Speaker 3: You could buy your home with less debt and more security,
10:38
Speaker 3: utilising your super fund as a co-investment partner. So a
10:42
Speaker 3: shared equity arrangement whereby... Your fund takes an equity stake.
10:46
Speaker 3: You don't need as much money to buy the property.
10:50
Speaker 3: And there's obviously less opportunity going back to the bank
10:53
Speaker 3: and more to your fund. That's the elevator pitch. Okay,
10:57
Speaker 3: very good.
10:57
Speaker 1: And the fund can be any fund. It could be
10:59
Speaker 1: any of the big funds if they sign up to
11:01
Speaker 1: the idea. Okay. Now, I would have thought, I know
11:06
Speaker 1: a fair bit about super, but it's like a language,
11:08
Speaker 1: isn't it? It's endlessly full of surprises and contradictions here.
11:13
Speaker 1: I would have thought that it was impossible to do that.
11:16
Speaker 1: But you've had some legal, among other things, you've had
11:19
Speaker 1: some legal direction, if you like. On your board, you
11:23
Speaker 1: have an advisor who's also a partner at Minter Ellison,
11:26
Speaker 1: and she has established that there is no legal, there's
11:32
Speaker 1: no current legal blockade to what you're planning.
11:36
Speaker 3: Is that how it sits?
11:39
Speaker 1: Correct.
11:39
Speaker 3: And once again, it's all about It depends. It depends
11:42
Speaker 3: on the circumstance of the deal. And with respect to ours,
11:46
Speaker 3: the individual must be approved to buy the home on
11:50
Speaker 3: their own outright with a bank before we even get involved.
11:53
Speaker 3: Because otherwise we would be providing financial assistance and giving
11:57
Speaker 3: a member an opportunity that they wouldn't normally have. So
12:00
Speaker 3: that's a crucial hurdle, number one, that we addressed at
12:04
Speaker 3: the outset. So again... just ensuring that if they're eligible
12:08
Speaker 3: to borrow $ 600, 000, we know now the average mortgage is
12:12
Speaker 3: about $ 640, 000 and the average first-home buyer is 35 years
12:15
Speaker 3: of age. So if they're borrowing $ 600, 000, they've been approved
12:19
Speaker 3: for that amount and they've got their deposit and 20% deposit,
12:23
Speaker 3: we can then look at utilising some of their super
12:26
Speaker 3: to bring that $ 600, 000 down to an amount, depending on
12:30
Speaker 3: their balance, and invest that prudently in the property and
12:34
Speaker 3: So we're not providing, as I said, we're not providing
12:36
Speaker 3: that leg up. It's just another avenue of finance utilizing
12:40
Speaker 3: equity instead of just all debt and deposit.
12:44
Speaker 1: And then for the customer here, what it means is
12:47
Speaker 1: that their mortgage is smaller.
12:50
Speaker 3: Correct.
12:51
Speaker 1: Correct.
12:52
Speaker 3: And their serviceability buffer is essentially also increased. Not only that,
12:56
Speaker 3: most people when they're buying their first property will, and
12:59
Speaker 3: two thirds of properties are bought jointly. And you might
13:02
Speaker 3: be considering there with your mortgage broker, the bank, or
13:05
Speaker 3: laying in bed. Do we fix or do we leave
13:07
Speaker 3: it variable? And this also offers a little bit of
13:09
Speaker 3: a hedge against that because, as I said, to utilise
13:13
Speaker 3: this product, you must have your finance approved at $ 600, 000.
13:17
Speaker 3: And the banks have obviously used their buffer on top
13:19
Speaker 3: of that. So we've pulled that back even further and
13:22
Speaker 3: provided an additional buffer. And the equity from the fund
13:26
Speaker 3: going in obviously does not affect interest rate variations for
13:30
Speaker 3: the debt component.
13:32
Speaker 1: OK, now, folks, part of the logic here and the
13:37
Speaker 1: imperative behind this idea is that so many people, of course,
13:41
Speaker 1: now are retiring with a mortgage. And if you think
13:44
Speaker 1: about it, back not that long ago, say 10 years
13:48
Speaker 1: ago or so, about a quarter of lump sum withdrawals
13:51
Speaker 1: were used to pay off a mortgage. By 2017, that
13:54
Speaker 1: had gone to 30%. And now it's climbing higher and higher,
13:58
Speaker 1: where something like a slim majority of... Do you know
14:01
Speaker 1: the number, Simon? Is it something like half of all
14:03
Speaker 1: retirees now, as they approach retirement, they still have a
14:06
Speaker 1: mortgage and need to pay off something?
14:08
Speaker 3: Correct. I think it's between 55 and 64. The average
14:12
Speaker 3: balance is about 230-odd thousand. Speaking with some funds, the
14:17
Speaker 3: APRA figures are around 30% of all lump sum withdrawals
14:21
Speaker 3: are going to repay mortgages. So that's not the intent
14:24
Speaker 3: of SUFA. And some funds we've been speaking with, they
14:26
Speaker 3: said the number's actually closer to 40% for them. So...
14:30
Speaker 3: I love your point.
14:31
Speaker 1: Your point is that for all this talk that you
14:33
Speaker 1: can't touch your house with super, if one in three people,
14:37
Speaker 1: when they finally get their super and retire, they get
14:42
Speaker 1: a lump sum, and one in three people turn around
14:44
Speaker 1: and spend it on their home, having accumulated debt all
14:48
Speaker 1: their life.
14:49
Speaker 3: Yeah, correct.
14:49
Speaker 1: So this is the macro picture you're putting in. Now,
14:52
Speaker 1: just to... to try and see how this might really work.
14:57
Speaker 1: Has any super fund signed up with you yet to
15:00
Speaker 1: do this?
15:02
Speaker 3: No, no, a couple of signed NDAs and they're very interested,
15:05
Speaker 3: but like with most super funds, they're very, very slow
15:07
Speaker 3: and prudent. And this obviously is on their radar now.
15:11
Speaker 3: And the treasury's paper in, I believe it was 2020,
15:14
Speaker 3: Federal Treasury did a report on retirement and retirement income
15:18
Speaker 3: and found the vast majority of retirees who own their
15:21
Speaker 3: home were in a much stronger financial position. And we've
15:24
Speaker 3: known that for some time, but it's been great to
15:26
Speaker 3: have Federal Treasury confirm that in their studies. So, yeah, exactly.
15:30
Speaker 3: We're looking to do a front-end, essentially, arrangement rather than
15:33
Speaker 3: leaving it to the back-end and where it's not the
15:35
Speaker 3: intent of super whatsoever. And it's interesting now that banks
15:39
Speaker 3: are using super for that serviceability test and for elder Australians.
15:44
Speaker 3: to borrow money, utilizing super essentially as part of the
15:48
Speaker 3: credit assessment and not even really as a backstop anymore.
15:51
Speaker 3: For those that are 60 years of age who are
15:53
Speaker 3: looking to borrow funds, some of the banks are very
15:56
Speaker 3: happy to use super as the repayment plan. And yeah,
15:59
Speaker 3: that's an interesting one because as we know, the big
16:01
Speaker 3: four have essentially exited the funds management space. I think
16:04
Speaker 3: the last one left is BT and their platform with Westpac,
16:07
Speaker 3: but they're still essentially getting their hands on super in
16:11
Speaker 3: lump sums to repay that debt.
16:13
Speaker 1: To repay the debt, that's right. And they know it's there,
16:15
Speaker 1: of course, it's on their books. One of the things
16:17
Speaker 1: I think reading, and I have to freely admit, folks,
16:20
Speaker 1: I don't regularly read the Australian superannuation law bulletin, but
16:24
Speaker 1: if I could speed read, maybe I'd read it. But
16:26
Speaker 1: I have been pointed to a piece in it by Simon,
16:30
Speaker 1: and it's by Ruth Stringer, who is, as I say,
16:32
Speaker 1: a partner at Minter Ellison, a specialist in this area
16:34
Speaker 1: and advisor also to his operation, Home Super. Tell me
16:38
Speaker 1: if I'm wrong here. Simon, but it seems to me
16:40
Speaker 1: when you get through the whole thing and she comes
16:42
Speaker 1: to her conclusion, what she says is there appears to
16:45
Speaker 1: be no blockage in law to what you are planning.
16:48
Speaker 1: But unfortunately, the nature of the arrangements at the moment
16:52
Speaker 1: means that you can't get a sort of a binding
16:54
Speaker 1: ruling before you start. So it has to be sort
16:57
Speaker 1: of tested in real life. And that might be what's
17:00
Speaker 1: making the super funds slow. Would that be on my
17:03
Speaker 1: under eye tracker?
17:05
Speaker 3: Yeah, that's a fair point. But with most innovation in
17:08
Speaker 3: super with large funds, It is essentially that chicken and
17:11
Speaker 3: egg sort of scenario, unfortunately, because APRA do not have,
17:15
Speaker 3: and this is no fault of the regulator, it's policy.
17:17
Speaker 3: And I actually really do feel for the APRA staff
17:19
Speaker 3: in some of these circumstances. So there's no real window
17:22
Speaker 3: or avenue for the funds to say, hey, look, we're
17:24
Speaker 3: testing this product. What do you think? And speaking to
17:27
Speaker 3: another gentleman recently that built a retirement income product, where
17:31
Speaker 3: he had a battle with the regulator for quite some time,
17:33
Speaker 3: a number of years before APRA they essentially stopped any
17:37
Speaker 3: action towards him because they then said, okay, this is
17:39
Speaker 3: a fair product. We understand it now. So on one hand,
17:43
Speaker 3: you can get frustrated, but on the other, the whole
17:45
Speaker 3: point really is to innovate. It's not up to regulators
17:48
Speaker 3: or the government to innovate. That's an interesting one. So yes,
17:51
Speaker 3: it would be helpful. And in our discussions with APRA, yes,
17:54
Speaker 3: they pressed us on all manner of issues from liquidity, diversification,
17:58
Speaker 3: and how it will all work and couldn't find anything
18:01
Speaker 3: wrong with it. And their last piece of advice was, look,
18:03
Speaker 3: we'll just keep an eye on you. So- For some
18:05
Speaker 3: of the funds, they understand how that works. We were
18:07
Speaker 3: approached by quite a large fund just recently after Ruth
18:11
Speaker 3: Stringer's piece in that law bulletin. So I provided them
18:13
Speaker 3: with some confidence, and they understand that process with APRA.
18:17
Speaker 3: But it is, as I said, it's an interesting space
18:19
Speaker 3: in that regard where there's no avenue.
18:23
Speaker 1: So there you are, folks.
18:24
Speaker 3: How about that?
18:25
Speaker 1: That you could use your own super fund to put
18:29
Speaker 1: in equity in your own home. And your super fund...
18:34
Speaker 1: basically gets to diversify, it gets into a pretty conservative,
18:41
Speaker 1: reliable stream of investment compared to some of the stuff
18:44
Speaker 1: they're doing overseas in private equity at the moment. And
18:48
Speaker 1: you get to have less of a mortgage. I like
18:51
Speaker 1: the idea. I'd love to see it come into play.
18:54
Speaker 1: I will say to you, Simon, If you try to
18:57
Speaker 1: create something new, it can take a long time, but
18:59
Speaker 1: it can really pay off. I'm thinking of someone like
19:01
Speaker 1: Graham Tuckwell back in, oh, I don't know, the late 1990s,
19:05
Speaker 1: who spent years and years trying to get the first
19:08
Speaker 1: exchange traded fund off the ground in Australia, which was
19:11
Speaker 1: the gold exchange traded fund. And of course, he is
19:15
Speaker 1: now on the rich list. And ETFs are a household thing.
19:20
Speaker 1: So best of luck with it. And I hope that
19:22
Speaker 1: you get to break through soon. What would be the
19:24
Speaker 1: best thing that could happen to you next?
19:27
Speaker 3: The best thing would be for a fund to take
19:28
Speaker 3: it up and help us do some initial investments and
19:31
Speaker 3: break the ice, essentially. I don't see that being too
19:33
Speaker 3: far off. But yeah, look, we're not essentially inventing something
19:37
Speaker 3: here that people don't want to use. The idea really
19:40
Speaker 3: has come from Australians, and we've just listened and worked
19:43
Speaker 3: out a prudent way to do it. It's interesting, how
19:45
Speaker 3: do you get paid as a super fund or as
19:47
Speaker 3: a manager or as home super? And being in the
19:49
Speaker 3: industry for a long time, there's plenty of meat on
19:51
Speaker 3: the bone. So actual return to us was the last
19:54
Speaker 3: thing I worked out and how we actually get paid.
19:57
Speaker 3: I do appreciate some comparisons to others in the market
19:59
Speaker 3: that have done really well, but no, the real driver
20:01
Speaker 3: here really is, as I said, just building something that
20:04
Speaker 3: Australians can really want and deserve, in my opinion. An
20:07
Speaker 3: interesting discussion there about other avenues around the world. In
20:11
Speaker 3: the US, you can take up to $ 50, 000 from your
20:15
Speaker 3: 401k plan, but it must be in the form of
20:17
Speaker 3: a loan. And roughly just over 30% of US homebuyers
20:23
Speaker 3: do that. And it's actually even more convoluted. It's more restrictive.
20:27
Speaker 3: They do get to pay a slightly lower rate than
20:30
Speaker 3: they would with a bank. So they can essentially put
20:32
Speaker 3: pay the Fed reserves rate rather than the bank's rates.
20:36
Speaker 3: But it is very convoluted. If they miss repayments, they're
20:39
Speaker 3: in all sorts of strife with the IRS and the like.
20:41
Speaker 3: So we did research around the world. And yes, there's
20:44
Speaker 3: other avenues and some other countries that are a little
20:45
Speaker 3: bit more liberal on this. We've still taken a really
20:49
Speaker 3: prudent approach to make sure that the fund gets a
20:52
Speaker 3: commercial return and that the member does not essentially have that.
20:56
Speaker 3: And people might think, when I say have that sort
20:58
Speaker 3: of financial assistance, people might say, well, they're paying back
21:01
Speaker 3: less of the loan. So there's financial assistance there. But
21:05
Speaker 3: I must put the caveat on that you no longer
21:07
Speaker 3: own 100% of your home. You may only own 80%
21:11
Speaker 3: and your fund owns 20%. So that's essentially the trade-off
21:15
Speaker 3: as well.
21:16
Speaker 1: Okay, very good. Well, I wish you luck. Stick around
21:18
Speaker 1: and we'll do some questions. Hello, welcome back to the
21:28
Speaker 1: Australian's Money Puzzle. I'm talking to Simon Jones of HomeSuper.
21:31
Speaker 1: You probably don't know Simon Jones. You probably don't know HomeSuper.
21:35
Speaker 1: but you may soon because he's got a very ambitious plan.
21:37
Speaker 1: But it's actually quite practical, rational, and I would think
21:42
Speaker 1: that it may well get off the ground because the
21:45
Speaker 1: super funds, the big super funds, might, rather than trying
21:48
Speaker 1: to squash it because it's in some way a rival
21:50
Speaker 1: to them, could actually incorporate this idea. We'll see. Okay,
21:55
Speaker 1: question from Tim.
21:56
Speaker 3: Love the show.
21:57
Speaker 1: Have you heard of this piece of bureaucracy? I just
21:59
Speaker 1: received this from the Real Estate Administration. Are they for reals?
22:05
Speaker 1: Please note, as you may be aware, for Australian residents
22:07
Speaker 1: selling property when the contract price is over 750,000, that is,
22:12
Speaker 1: the seller must provide an ATO clearance certificate prior to settlement,
22:16
Speaker 1: or the buyer must withhold 12.5% of the purchase price
22:19
Speaker 1: to provide to the ATO. For more information and to
22:22
Speaker 1: obtain a certificate, please click here.
22:25
Speaker 3: Thank you, Tim.
22:27
Speaker 1: The paperwork and certification in relation to property settlement and
22:32
Speaker 1: buying and selling property remains... For all the talk of
22:35
Speaker 1: digital progress and simplification, it's still Dickensian as far as
22:41
Speaker 1: I'm concerned. I can't believe it. I'm talking with a
22:43
Speaker 1: friend who's buying a home at the moment and is
22:45
Speaker 1: late to the party, has never bought a home before,
22:48
Speaker 1: and they just cannot believe how much they have to sign, etc.
22:52
Speaker 1: Any comments on that one, Simon?
22:54
Speaker 3: No, it is a process. It can be a convoluted
22:57
Speaker 3: process and very detailed, but unfortunately it's a serious commitment
23:02
Speaker 3: and there is lots of hoops to jump and contracts
23:04
Speaker 3: to sign.
23:05
Speaker 1: I imagine you're in an advanced, an elite level of
23:09
Speaker 1: paperwork in what you're trying to do when you're actually
23:11
Speaker 1: trying to do something that is new to the system
23:13
Speaker 1: as opposed to inside the system, which at least you
23:16
Speaker 1: are at least inside the system, Tim. Okay, Cynthia, is
23:19
Speaker 1: it true that Sydney prices are falling? I see no
23:22
Speaker 1: evidence whatever of this in my neighbourhood. Yeah, you probably
23:26
Speaker 1: wouldn't notice a 0.2% monthly drop in your neighbourhood, Cynthia,
23:30
Speaker 1: unless you had some sort of extraordinary calculator and you
23:33
Speaker 1: were counting it all up. But it is happening. That
23:36
Speaker 1: is what the big researchers are telling us. I think
23:40
Speaker 1: the interesting thing is that on a monthly basis, prices
23:42
Speaker 1: are falling ever so slightly in Sydney and Melbourne. 0.2%, 0.1%,
23:48
Speaker 1: something like that. But it will accumulate, of course. And
23:51
Speaker 1: the very interesting aspect of it is that some As
23:55
Speaker 1: the rates, particularly as the rate cut forecasts get pushed
23:58
Speaker 1: out into next year, they've been pushed out from February
24:00
Speaker 1: to March, from March to April, up to May now,
24:03
Speaker 1: you see that there is forecast now that the big cities,
24:05
Speaker 1: Sydney and Melbourne, will actually see price declines next year,
24:08
Speaker 1: somewhere between 1% and 5%. And I imagine that's entirely possible.
24:13
Speaker 1: At the same time, don't forget that they're getting 10%
24:15
Speaker 1: plus just about everywhere else in the other cities. So
24:18
Speaker 1: very divided markets. market at the moment, property-wise. Was it
24:22
Speaker 1: always this divided, Simon, in your experience, that they're getting
24:26
Speaker 1: such different returns in different cities?
24:29
Speaker 3: Look, I believe so. It can be really geographically specific,
24:33
Speaker 3: certain areas. And really, the main drivers are population and
24:36
Speaker 3: the capacity of that population to purchase the property. So
24:41
Speaker 3: population number one, 25 people turning up at an auction
24:44
Speaker 3: instead of five, And those that have the capacity, thanks
24:48
Speaker 3: to lower interest rates or borrowing capacity, really are the
24:51
Speaker 3: main drivers. But we had such sensational growth throughout the
24:54
Speaker 3: COVID period. And we often don't see those pullbacks. But
24:58
Speaker 3: it happens more often than people realize. It's just that
25:00
Speaker 3: we see share market updates every evening. We don't see
25:03
Speaker 3: your specific home price update. And you can, these days, yes,
25:06
Speaker 3: you can even log on to your own bank. Some
25:09
Speaker 3: of those will give you those estimates, and they don't
25:11
Speaker 3: change as quickly as markets, and they can be quite
25:15
Speaker 3: opaque and have some ranges that seem hard to work out.
25:18
Speaker 3: But the reality is you only really know the true
25:21
Speaker 3: value the day you buy the property and the day
25:23
Speaker 3: you sell it, and everything else is a little bit
25:25
Speaker 3: of a guesstimation. But it certainly does vary a lot
25:28
Speaker 3: more than most people realize.
25:30
Speaker 1: Yes. I mean, look at Melbourne. It now is down
25:33
Speaker 1: this year 3%. They're talking about next year 5%. This
25:39
Speaker 1: is while Brisbane, Adelaide and Perth absolutely all seeing double
25:46
Speaker 1: figure increases in the same period. That is this calendar year. Okay,
25:51
Speaker 1: final one from Sean. I saw that rental affordability index
25:55
Speaker 1: was released. Too much gnashing of teeth in the media
26:00
Speaker 1: because rents are going up. But isn't this wonderful news
26:02
Speaker 1: for investors? Why is there so much negativity about rents
26:05
Speaker 1: going up? Shouldn't we celebrate this win for hardworking investors? Well,
26:09
Speaker 1: it depends on who you are, I suppose, Sean. If
26:10
Speaker 1: your rent's going up, you don't like it if you're paying.
26:12
Speaker 1: But if you are a property owner, then, of course,
26:16
Speaker 1: you like it. And rental yields, the big issue is
26:21
Speaker 1: whether your yield is going up. That is the percentage
26:24
Speaker 1: income you get as a percentage of the amount you
26:26
Speaker 1: paid for the property. And it has inched up a little,
26:29
Speaker 1: but only ever so slightly, actually, in recent times. And
26:35
Speaker 1: we will now see what happens next if we have falling. Oh,
26:39
Speaker 1: we could actually have falling prices and rents still rising.
26:43
Speaker 1: That's not impossible, but it would be very unusual.
26:45
Speaker 3: Wouldn't it, Simon?
26:46
Speaker 1: It's technically possible.
26:48
Speaker 3: And I think we often overlook, yes, we know that
26:50
Speaker 3: landlords and investors are may be affected by interest rate rises,
26:54
Speaker 3: but the actual cost of maintenance and the inflation essentially
26:59
Speaker 3: affecting some of the other things around being an investor
27:02
Speaker 3: really does have an impact on rents. And look, yeah,
27:05
Speaker 3: it is an interesting space. And I often think that
27:08
Speaker 3: the average mum and dad landlord gets a little bit
27:10
Speaker 3: of a hard time, particularly when affordability is so tight
27:15
Speaker 3: right now. And for my mind, having an investment property
27:18
Speaker 3: It really does favour actually a new build anyway, because
27:21
Speaker 3: there's a lot of non-cash deductions. And what I mean
27:24
Speaker 3: by that is depreciation on your property fixtures and fittings
27:28
Speaker 3: that investors can really assist them for incentivising them to
27:32
Speaker 3: go into property. So for my mind, with respect to
27:34
Speaker 3: rents and the market in general, I really can't understand
27:37
Speaker 3: for the life of me why the government does not
27:40
Speaker 3: purely put a pause on tax benefits for negative gearing
27:44
Speaker 3: or just tax benefits generally. for existing properties and just
27:47
Speaker 3: leave that door open for new builds. You'd grandfather the
27:51
Speaker 3: existing investors. But what that would do overnight would encourage
27:54
Speaker 3: a lot more local investors to invest in brand new
27:58
Speaker 3: builds and assist. The number one priority in my mind
28:01
Speaker 3: is more Huns. Okay.
28:03
Speaker 1: Very interesting. Well, look, thank you very much for that, Simon.
28:07
Speaker 1: And thanks very much for coming on the show. And
28:09
Speaker 1: great to hear your plans and best of luck with them.
28:12
Speaker 3: Thank you, James. And thanks again to your listeners.
28:14
Speaker 1: Thank you. And thanks to Leah Samoglu, who produced today's show.
28:19
Speaker 1: Let's have some correspondence, folks. Let's have some more questions.
28:23
Speaker 1: Don't let the property investors take over the inbox. The
28:28
Speaker 1: email is themoneypuzzle at theaustralian.com.au.
28:33
Speaker 3: Talk to you soon. Thank you.