Latest / The Follio Property Podcast / You Have 6 Weeks to Beat the SMSF Property Ban (Property Experts)

Transcript

You Have 6 Weeks to Beat the SMSF Property Ban (Property Experts) · The Follio Property Podcast

• 0:00
  This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify.
• 0:31
  This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required. Compatibility and availability varies 18+.
• 0:56
  Auction clearance rates across the country continue to fall, with Sydney's housing market hitting its weakest point in six years. You could get one on your phone right now and probably have one in an hour. It isn't too late, but I have to act quick. Absolutely. Key date is the 10th of August. You must have contracts in place by then to be able to be kind of grandfathered under the old borrowing legislation.
• 1:15
  My phone's blown up from people looking to introduce this strategy and try to get in before. The clearance rate data that's getting reported at 47%. In reality, it's more like 30 or 25%. Eastern suburbs of Sydney, it's lower than 20%. We're talking the lowest clearance rates, certainly since I've been alive.
• 1:34
  Every headline report or media report that you read about clearance rates is on the basis of typically a junior, a grad, at realestate.com on a Saturday afternoon, probably after a couple of pints, sending out a few text messages.
• 1:47
  Lock on big episode today. We got someone coming in, Katie Timms actually, to speak about SMSF. So lots changed since we went live to our reaction last week on SMSF. More news to come to light, positive news to come to light with the outgoing policy that there is there. Also want to talk through the around the grounds. I know you've got some key data you want to discuss in terms of the two-speed economy and also looking at some of the inflation data as well.
• 2:12
  Welcome, we did an exclusive update live last week around SMSF and the latest stab in the back from the Labor government in Australia. We kind of reacted to it live, came out with our thoughts on the changes to policy. But since then, there's probably been a lot more information at hand. So we thought...
• 2:30
  Let's get a special educated guest in this area, I should say. Katie Timms, who is the partner at RSM who specialises in SMF planning. Katie, welcome. Thank you very much for having me.
• 2:43
  We thought we needed something I'm an expert on because myself and Lachlan, we know a fair bit about SMSFs, but it's not sort of our bread and butter, especially from a financial side of things. It's a specialised field, right? Specialised field. And they've dropped this on us essentially from nowhere, right? And last week I came out and said, look, to the listeners, there's not enough time to consider setting something up and buying through your super. Obviously, we spoke to you 24 hours after the news and –
• 3:12
  To the guests listening, you know, there may be an opportunity to still, you know, utilize your self-managed super fund and get some debt in there, potentially purchasing property. Do you want to talk us through the landscape of sort of what it looks like for someone to actually set something up in time for this legislation? Because when's the cutoff?
• 3:28
  Yeah, so the key date is the 10th of August. So 10th of August, you must have contracts in place by then to be able to be kind of grandfathered under the old borrowing legislation. The trick is that you have to have everything done by then. So there can't be anything that is done after. You have to have the contracts in place. So your super fund structure has to be set up. You know, you need to have your ABN numbers if you can. You need to have contracts. You need to make sure that, you know, everything is in place by that date.
• 3:56
  Because my phone's blown up from people looking to introduce this strategy and try to get in before it's taken away, essentially. Let's talk through. So those that already have a self-managed super fund set up, huge tick, they're going to be in a position to be able to move on this and move on this no problem at all. Absolutely. I mean, they've done all of the hard work. So, you know, the only thing left for those people is find the property and get a contract signed. That's before the 10th of August. Before the 10th of August. Yeah.
• 4:20
  For those which will probably be a lot of people listening who haven't had one set up, probably been thinking about it for some time, I know, Risha, in that position, been on the to-do list for a couple of years and just haven't got around to it. In theory, they still have time. What does that actually look like? If they come see you tomorrow, and we're going to have in the show notes a list of priority to get access to you to get this set up if people choose to do it. So click the link or the QR code if you want to catch up with Katie and get this set up. I mean, you've done...
• 4:49
  thousands I'd imagine of these over your time. What's sort of an average time that you've seen on these applications, you know, looking at the medium, taking away some of the extreme and some of the ones that have probably gone through pretty quickly? Yeah, look, in recent times, I think because we spend that little bit of extra time up front to make sure we've just got everything right, you know, whether it's a hyphen in a name, whether it's you're known by another name at the tax office. There's all these little traps and we've learned through bad experience, unfortunately. Usually it's a week, a week on average, you know, depending on,
• 5:18
  how many they've got. I'm really interested to see how the ATO reacts. If there is a big push over the next sort of month or so, are they going to go, hang on a minute, we're a bit concerned, let's pause, let's slow things down, let's dig into this to make sure that people are getting into these for the right reasons, I guess, which is supposed to be their roadblock.
• 5:40
  I mean, a week is... Well, you've essentially got, from listening to this podcast, you've got about six weeks. And if you can get it done in a week, I mean, there is time. And I spoke on the podcast and got it wrong last week to the listeners saying that there wouldn't be enough time, which, Cody, thank you for bringing this to light. Yeah.
• 5:56
  So that is the process. Get it set up. And then obviously, you know, the most important piece, which we'll discuss further today, Rhys, is you don't want to just go out there and buy property. You're playing with your retirement income, right? This is probably the caveat to the whole thing. Still got to be super careful because if you're just going to go and buy a property because they're taking this away from you, it sort of defeats the purpose. Let's talk through what it looks like for someone who wants to get in but doesn't have one set up.
• 6:23
  So really practical steps. So first thing that has to happen is you need to have your companies established. So there's two companies that come with it. One is the trustee of the super fund and one is the trustee of the bear trust. And that's kind of this special, you know, entity that just holds for this borrowing. First hold up there is usually director ID numbers. So if you want to set up a new company, you have to have a director ID number. Talk me through that. How long does that take for those who don't know?
• 6:46
  The reality is for people who are able to use MyGov, you know, and do all of that sort of thing, it can happen instantly as long as you don't have any red flags, you know, so any dodgy dealings in the background that might hold that up. But you have to have that in place first. Then you get your companies, then you get your super fund. That all sounds like a lot. That can be done within 24 hours. That bit is easy. You get the documents. So I can set up a self-managed super fund in 24 hours? You could get one on your phone right now and probably have one in an hour with, you know, certain providers.
• 7:14
  What about from an income perspective? So we've mentioned here most people that are going to activate this at these late stages have probably been planning it for months. Like you said, 20% there potentially. For those, and like we both have been in undoubted with inquiries this week, it's always that fear of missing out once something is taken away from you. But if someone was kind of on the fence thinking about it, income from a super balanced perspective, what's roughly the minimum that they should be expecting to jump into something like this?
• 7:44
  Look, I mean, ASIC has done a lot of research in this and they say pretty firmly that the minimum that you should have for a self-managed super fund is $250,000. Like they say, you know, we've had some that have started lower, but again, with good strategy and good planning and they know where they're going to get to.
• 7:58
  Lachlan, just touching on asset selection for these SMSFs as well. So Katie's obviously going to give us a bit of an understanding on what type of clients would be looking to leverage this and what stage of their life, I guess, and what they're looking to do from a wealth creation. And Katie, I want to get your opinion as well on some – you've probably seen some horror stories. But from an asset selection, what should someone be looking for in this SMSF?
• 8:21
  Yeah, for me, in my self-managed super fund, you asked before, is this a defensive or an offensive play? For me, getting residential real estate into your self-managed super fund is defensive for me because I really don't trust the equities market at the moment and if you look at any global events where to happen –
• 8:39
  Equities in your self-managed super fund fell by 40% to 45% in the GFC. Commercial properties fell by 35% to 37%. And residential property in Australia held its value in some markets went up to 5%. So if I look at that in a time of so much uncertainty globally, I see residential real estate in your self-managed super as a defensive strategy. It's a hedge to shelter, it's a hedge to real estate where people typically in times of uncertainty.
• 9:06
  will go to where it's less liquid and real estate does that, right? Less liquid and it's a necessity in terms of shelter. So I see that point of view as a defensive strategy. I also see it on the offence in the fact that we talk about property, the power of property is leverage and this whole component is
• 9:25
  your cash on cash returns are significantly disproportionately higher when you can leverage them. And that's when you can lend at 70% LVR and you buy an asset for 600,000 of which, you know, you've only had to tip in 30% of that of cash. And then it doubles in values over seven to 10 years where your cash return on that capital is so much higher. And that's where it becomes an offensive play. In terms of the asset types,
• 9:48
  agreed there's no benefit and there wasn't pre-budget and now post-budget, there's no capital gains benefit anyway. But there was never any benefit in your super to get negative geared properties because you don't get that benefit in that environment. So we were looking towards assets where it carried a higher cash flow. You get that with lower LVRs anyway. So if you gear something at 90%, obviously compared to 70%, you're less likely to have a significant negatively geared property.
• 10:15
  So at 70%, if we can get something that is yielding somewhere between, say, 4.5% to 5.5% on most of those assets, the rental will be covering the debt. And that's a real tick because, you know, you can hold that for the long term. It means you're going to be less likely to sell prematurely. But you want assets where you don't need to do a lot of work. Definitely location for me fundamentally is the most important. You're not speculating with your retirement funds. It is...
• 10:42
  buying the best real estate in terms of the best location you can fundamentally afford at that point in time because these are where it's done really poorly, which, Katie, I'm sure you'll speak about, is some of these regional plays or off-the-plan apartments or house and land packages, they're the ones that can really suffer. And when you do need it at retirement, you want to make sure you can sell this property regardless of market conditions because retirement will come for people...
• 11:09
  prematurely and they'll need to call upon their super before they ever forecast that they need it. If they're in a market or have an asset where they can't sell it because the market cycles and the asset they bought is very much a volatile market, be that a regional or off the plan or something like that, that's a real problem. But if you've got a really good location backed by an own occupier asset in an own occupier location, well, regardless of market conditions, you're always going to have a buyer for that. And I think fundamentally, that's the most important asset type in your super fund.
• 11:40
  When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs.
• 12:09
  Experience a membership that backs what you're building with American Express Business Platinum. Enjoy complimentary access to the American Express Global Lounge Collection and apply to find out your welcome offer, which could be as high as 300,000 membership rewards points. American Express Business Platinum. There's nothing like it. Terms apply. Welcome offers vary and you may not be eligible for an offer. Learn more at AmericanExpress.com slash business dash platinum.
• 12:40
  I couldn't agree more. I think everything you said there, they're exactly the ones we see go well. And the ones you said go bad, exactly like the people that, you know, get this wrong.
• 12:50
  The people that hear other people doing this or think, hey, this is a great idea or I can negative gear in my super and then don't buy the right asset. That's where it falls apart. You know, that's where they don't get to see the returns and things. But when someone is buying something for long term, exactly as you've said, right location, you know, not just buying something because they've only got $100,000 in super and all they can afford is something that's not in a good spot or, you know, is going to struggle to get tenants and so they're going to run into cash flow problems.
• 13:18
  that's where these things fail and they have long-term issues. Any time that someone has thought this out, has a strategy, has talked to the right people, actually knows what they're looking for and what is a smart decision rather than an emotional decision. Sometimes we see people who love to buy property
• 13:35
  And they think, oh, I can get another property using my super. And then they get excited by it and they get emotionally attached to a certain property. You think that's not like you're buying that because you like it. That's not a good investment. That's the worst thing to do in your super. So they're the ones that we see go wrong. A lot of people, you know, like property in super because it is, you're right, it's a good long-term investment play.
• 14:00
  And the trick is just balancing the liquidity. You just never want to get stuck at retirement phase and go, oh, no, I'm stuck with a poor property purchase that I can't sell. And now I don't have cash flow to fund retirement. You know, my parents, I tell this story all the time, they're obsessed with property and they did really well in property over the years.
• 14:18
  And at the time that my dad wanted to retire, they could not sell the three properties they had because they maybe weren't the best properties. And my dad had to keep working, you know, for another 12 months when he didn't want to. Now, it turns out that worked out great and he's still not properly retired at, you know, 78. But that's where this all falls apart.
• 14:36
  Yeah. So it is. It's like fundamentally your self-managed super fund strategy is so dependent on the asset itself. And that's where, you know, again, cave it the whole day. Don't just go out there and buy a property to try to utilize the potential fear of not being able to lend. It's okay.
• 14:54
  what sort of markets, what sort of strategy is going to fit. And that's why I think, Rhys, you know, if people are going to activate this, make sure you speak to people like Katie to see if it's actually going to suit you and your strategy and then speak to sort of experts around, you know, property. Yeah.
• 15:11
  We've obviously seen quite a lot of questions about this. A lot of people coming out of the work saying, oh, no, I was thinking about this was the next thing that I was going to do. And, you know, that's the conversation we've sort of had is, OK, well, have you have you started looking for a property? Like, have you done your research? Are you talking to professionals about the right property for you?
• 15:27
  You know, or is this just, you're exactly right, that feeling of I'm going to miss out. You know, everyone else has had the opportunity to do this and I've missed out and I don't want to miss out. So I want to get in there. And that's a really important thing. I think, you know, that reactiveness probably is, and I don't want to get too political or I'm happy to, you know, a lot of the resistance, you know, why there was such an anti-racist.
• 15:49
  bias to this is it was seen as spruikers, you know, flogging people, these properties. I mean, we have seen that, you know, we've had people come in that, you know, we had one person come in once and they said, I think I've got a property in Queensland because I set this thing up from a guy in a shopping centre, you know, and that was,
• 16:06
  right horrible turns out he didn't have a property in Queensland um so we were able to unwind the structure but you know that's kind of the a lot of the political messaging and the you know that goes around these and for a lot of them it's not the case it's people that want to actually buy into something use borrowing as a way to actively grow their retirement quicker than they would be able to otherwise um but that's the important thing that you know we would have the conversation with people around is all right hang on
• 16:31
  Do you have one? You know, what's the strategy? What's the strategy at the end of the day? This isn't just a reactive, you know, sort of feeling like I'm missing out.
• 16:40
  Yeah, and I suppose that's a caveat to listeners. If you do want to do this and it forms part of your strategy or something you've been planning to do, because I know, like, Rhys, you're in that category. A lot of phone calls I had last week are people that actually had been planning to do this for some time and had done a fair bit of the initial due diligence around how it fits in their portfolio, understanding that in your super it is lower LVRs. People probably don't understand that. You're typically borrowing at 60% to 70%. Is that correct?
• 17:05
  Yeah, that's right. So for resis, you know, you're looking at about that 70%. So you're not going to be able to borrow, you know, the 90 to 95% that you can outside. They're a different product as well. Which is a good defensive mechanism, right? Absolutely. That's what they're designed to do, you know, so that they don't want people heavily gearing their, you know, super. Their retirement funds. Exactly. They want people to have retirement at the end. They need people to have retirement at the end. They can't afford to pay the age pension. There has to be.
• 17:29
  encouragement for this. So, you know, they're a different product. They're a little bit more expensive, you know, so you have to make sure that you've got the right property. This has to be a property that is for long term. There's a lot of rules around what you can do with the properties. You know, it's not sort of a you can't borrow to buy something that you're going to knock down and, you know, develop. No, no, no. Large scale renovations are excluded. Right. So there's a lot of rules and regulations around this. So that's probably the reason why we've seen a bit of if you're kind of not already –
• 17:58
  20% down the path, you probably are too late because you've got to do that due diligence. So it's combined. So mum and dad together or 200 to 250 is sort of entry point as combined super, so not individual. So me and my partner have 200 to 250. We would qualify to look at potentially buying a property with leverage. According to ASIC, ASIC says, you know, that is the minimum balance that they think.
• 18:23
  is reasonable for people to start looking. Anything lower than that, then they're worried that you're putting all of your retirement, you know. All your eggs in one basket. Exactly. And that's really what they want to, you know, stop people from doing. Okay. Absolutely. So just to summarise the conversation today then, there still is potentially time and in a lot of cases that you've seen over the thousand transactions you've done, it's roughly about a week.
• 18:44
  $200 to $250 is the minimum balance you should be looking at if you want to activate this. If anyone listening to this meets some of those characteristics and has been thinking about SMSF lending, it isn't too late. Katie, we'll have a link in the description to get in contact with yourself and from a property perspective, someone from our team can reach out as well. But there is time, but I have to act quick. Absolutely.
• 19:09
  Welcome. Great to have Katie Timms come straight off the plane into the studio last minute. So it's good to get her in for a quick 10, 15 minutes there. We've got to get the experts, Rhys. Obviously, it's a qualified space. It's a very specialised space and Katie's the best in the business. Like I said numerous times, I was unaware that there still is time to set up our self-managed super fund, get it all ready and buy a property all before August 10. It sounds pretty manic, but...
• 19:37
  You know, she filled us with a bit of confidence that it's achievable for those that it's got to suit, right? Exactly. Well, very achievable. If you can nail the timeline a week on average, she said. So if it takes you a week on average, you just got to have your property selection in play. But let's move around the grounds. Something we've been doing pretty recently on the podcast now each week, which we're getting really deep into the data.
• 19:58
  Um, let's talk through, I think it's important because it's so much uncertainty, right? People have never been this fearful. There's a lot of fear mongering, uh, rather than just having an opinion on this stuff. It's, it's, it's data driven. We just got to speak through the data and tell it how it is. Let's kick off with Sydney, which is, you know, driving a lot of the media attention, mostly for the negative. Um, and, and, you know, we had recent guests on, uh,
• 20:22
  Reidam Saeedu could kind of talk through in more detail from a sentiment level. Oxygen clearance rates remain weak again, so below 47%, below since 2020. From a clearance rate perspective, these numbers are low, but you've been telling me some information off air where potentially these are much lower than 47%.
• 20:40
  Yeah, it's part of our due diligence research. You know, we call around all markets in Australia on a Monday to get a sense check of what's happening on the ground. And a lot of that's led by agents. The clearance rate data that's getting reported at 47%, in reality, it's more like 30 or 25%, which is staggering, right? So think of a market where there's only 25% of those properties that are going to auction or actually selling at auction. Yeah.
• 21:06
  And people will be like, it doesn't make any sense, but the core logic and the domain and the realestate.com data suggests it's 47%. Do you know how they ascertain these figures, Rhys? Tell me. On Sunday or even Saturday afternoon after the auction's taken place, they'll get people from realestate.com and domain to call, ideally call. In a good market, it's typically a call. They believe in a soft market. It's a text message to the agent saying, did your property sell? Yeah.
• 21:35
  And do you think a real estate agent that's had five auctions and not one of them had sold is going to pick up that phone call or text back and say, none of my five sold? Absolutely not. So it's such a misreading and it blows my mind that every headline –
• 21:50
  report or media report that you read about clearance rates is on the basis of typically a junior, a grad at realestate.com on a Saturday afternoon, probably after a couple of pints, sending out a few text messages to rely on a real estate agent, to be honest, which is a stretch in itself, to report the right data. So that 47% in reality speaking to, you know, valuers on the ground, real estate agents, of course, and, you know, experts in the market, they're like, it's...
• 22:19
  It's lower than 30%. Eastern suburbs of Sydney, it's lower than 20%. We're talking the lowest clearance rates, certainly –
• 22:30
  since I've been alive and potentially for a lot of other investors or those that have been in the market, it's pretty crazy. Looking at the dwelling values, they fell to 0.3% last month. So just to give context, the previous week was a record low at the time for the year at 0.45%. So in the last two weeks, nearly lost 0.8% of the percent.
• 22:51
  Yeah, you're forecasting out we're looking at potentially negative 2% house declines in Sydney on a monthly basis, which is pretty staggering. And obviously that's blended. We've talked about different quartiles moving at different speeds. A lot of this price decline is happening at the top end, particularly in sort of the eastern suburbs of Sydney.
• 23:12
  Let's move on to Melbourne. So Melbourne is an interesting market where on a macro level it's seeing some significant declines across the board. However, we mentioned this on last week's podcast, there is a segment of the market or markets within markets, as you would say, that actually has been holding steady and performing well. Looking at the figures from last week in Melbourne, 0.38% drop for the month. And then when we're looking at auction clearance rates, 0.38%.
• 23:40
  They are a little bit above from where Sydney was, but sitting around the mid-50s, 54%. Yeah, mid-50s, which were likely about 35% in reality, Rhys, based on how they report this information. And I think that's the biggest price decline in a week of Melbourne prices, which is concerning. Obviously, we know that, again, is at the top and medium quartile. The lower quartile, up to sort of $1.5 million, is performing extremely well.
• 24:07
  Well, and again on the ground, reporting from yesterday when we spoke to various agents and valuers and experts that we rely on in Melbourne, the sentiment at home opens was strong for those sort of one sub $1.5 million price points. So before we go on to the other markets, I think it is always the two biggest markets in the country, Sydney and Melbourne. Got to address them. Got to address them. It is, they're the only auction driven markets like Brisbane, Melbourne, Melbourne, Melbourne,
• 24:32
  The data from auctions can't always be reliable because there is so few that get recorded or reported. But just kind of summarising those two markets together, and I know we shouldn't always link the two markets together, do you see more sort of downward pressure on house pricing over the coming months? Certainly until there's a shift in narrative and some positive news surfacing and we're about to speak about inflation rates, which was another blow, you could say. Like we're just...
• 25:01
  These markets now are so dependent on sentiment. I think it has to come from the inflation data and hopefully an easing of inflation, which could result in potentially some cutting interest rates. There's nothing else on the horizon that's going to shift in any sort of magnitude these markets from falling. They're falling like a brick at the moment, right? And we really need some positive sentiment.
• 25:23
  And for Melbourne, the saving grace could be that November election. Changing government can do significant things to sentiment and an economy itself. So that is coming sooner rather than later. For Sydney, I don't know what that is. It's such an interest rate driven market and there doesn't seem to be any short term relief there.
• 25:44
  Let's go to Brisbane where it actually had its first weekly decline of 2026. You did make a call earlier in the year that you will start to see this market coming off. So, you know, six months in, we've, you know, if we go back and look at the predictions, I think you did say first half of the year would be strong. Second half would start to come off. We've seen that on the first weekly data where it fell, you know, minimal, but maybe the start of a trend at 0.13%.
• 26:06
  Looking at Adelaide, second consecutive weekly decline, much larger than Brisbane in that case at 0.25%. So momentum really starting to turn in that market as well where you've been calling it all year regarding the affordability ceiling being hit on that particular market.
• 26:25
  The only, I guess, capital city with positive growth, no surprise, Perth, although albeit very minimal growth, borderline neutral, 0.04% growth for the month. What's your take on that two-speed economy? Is that finally now starting to slow down and catch up with the other two majors?
• 26:42
  I think it just shows that significant impact sentiment made budget has done to the broader economy. But you're starting to see the likes of Adelaide now, two weeks consecutively, falling in values. Brisbane's come off. Perth's held its own. It probably shows the resilience and the strength of those three particular markets in terms of supply and demand, very outbalanced. They're still undersupplied, which is going to give it a...
• 27:10
  a far larger cushion through this tumultuous period. And the same will be true when we get on the other side of this. And that's what we know, Rhys. What we're experiencing now, and the audience, I hope they're not getting sick of this, it's just it feels like bad news after bad news. We're not here to cushion this information. We're not here to provide a non-informed or a bias, right? We're in real estate. We want to see positive growth stories come through.
• 27:36
  Reality is this is the data and we're going to report the data exactly how it comes through on a weekly basis. That's what we're here to do. What I do know is that at the moment there is a lot of negative sentiment and Australia is feeling that. And you can see that in the sentiment figures and you can also see that in the median house price declines across four of the five capital cities that we've just reported.
• 27:57
  But this is a moment in time and it won't be too far away, I'm sure. And forecasting out this year, I think before the end of the year, we're going to start to see that trend change. And the likes of those three markets, Perth, Brisbane, Adelaide, I think will benefit...
• 28:12
  towards the back end of the year. If you had to look at summarise this year, I said it would be extremely strong start. It would peter off towards the back end of the year. I think we'll start to see those green shoots come through towards sort of spring and into sort of potentially November that may correlate with the Victorian election.
• 28:29
  You referenced this earlier when you were talking through the Sydney and Melbourne markets regarding inflation and sentiment, obviously, you've just been speaking about there, and inflation results are going to drive sentiment as well, obviously. Massively because they sort of forward predict what's going to happen with interest rates. So some change in inflation data.
• 28:49
  We'll flick this market very, very quickly. So the latest May results, the good news is headline inflation is falling faster than expected, but 4% versus a 4.3% forecast. We've mentioned this on the podcast previously. A lot of that is helped by cheaper fuel and the subsidies that the government's been providing. The bad news is the RBA's preferred measure, which is the trimmed inflation, rose to 3.6%.
• 29:15
  From 3.4, so 0.2% increase. What's your take on that? You know, hearing some positive news here, some bad news here. That is negative news and there's no – you can't fluff that up. Although the headline inflation numbers were positive, all the RBA look at is the trimmed inflation numbers, right? Right.
• 29:32
  And what was even more concerning, Rhys, because you think what the RBA do, they're there to change behaviour and they're to change consumer behaviour. But when you look at the consumer behaviour, Rhys, when you look at the consumer reason, you look at discretionary spend –
• 29:47
  That was down. If you look at clothing spend was down 3% or over 3%. You had recreation was down 3%. So Australians are feeling it. They're feeling the pain. They're spending less, yet the trimmed inflation data is still rising. And that comes down to the government. Like they have been spending, and I'm not getting into a political podcast today, but they've just been spending way too much. That's where I get disappointed because we are seeing inflation,
• 30:14
  And, you know, I was recently up in Cairns for that Ironman. It's the quietest peak season they've had in, you know, six or seven years since COVID because no one can afford flights at the moment. So no one's traveling. So you can see it play out in reality that people are spending less, yet the inflation data is still going up. And that's purely on the government. So where do I see this going? People, we can see it. And you can see it in the...
• 30:38
  the insights of the data people are spending less and that will play out there's no doubt about that and we will start to see i believe inflation stabilize and over the next three months potentially start to come off the moment that happens like i said the idea of an event has more impact than the event itself so if we start to see inflation data come down
• 31:01
  The conversation around interest rates goes from a potential another rate rise, that's sort of what's been priced in, to, okay, there's no more rate rises, we're going to see rates come off. And, you know, potentially if inflation was to fall quite aggressively, we could see rates come down equally as aggressively.
• 31:17
  And then that positive story around real estate starts to play out and you start to see this environment of Sydney, Melbourne falling like a brick, so to speak, to positive market sentiment conditions. And there's been a few predictions in 2027 that we're going to see pretty significant growth again into Perth, Adelaide and Brisbane, less growth than in Sydney and Melbourne. But
• 31:40
  we're so driven by the sentiment. So we're going to have to watch this inflation data. I think of all the things we're tracking, it's going to have an impact on sentiment. This inflation data is key. We'll be reporting on this monthly to give you an idea of what's changed in this landscape because the moment the dialogue and the conversation, the headlines change around inflation, you'll see that correlate directly into the market.
• 32:02
  Big episode there. A lot to unpack there. So from the SMSF side of things, markets across the board, seems like most are struggling. Two-speed economy starting to slow down. Perth, the only one not dropping. And then inflation still probably below where we'd like to see it. You've been listening to Folio Property Podcast.