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Top end tips : Upmarket property unmasked · The Money Puzzle

0:10
Speaker 1: Hello, and welcome to the Australians Money Puzzle Podcast. I'm
0:13
Speaker 1: James Kirkby. Welcome aboard everybody something different today. I'm coming
0:17
Speaker 1: to you from the Gold Coast at the National Property
0:20
Speaker 1: Conference here and marvelous hunting ground for finding good guests.
0:24
Speaker 1: Someone I have wanted to have on the show for
0:26
Speaker 1: a while is Shane small And of the Central Element Group.
0:30
Speaker 1: Shane's owned a real estate chain and more recently is
0:33
Speaker 1: doing some very interesting property developments, mostly around Sydney. You
0:36
Speaker 1: might know them the Minerva Building at King's Cross and
0:39
Speaker 1: a very interesting hotel he's doing on Paddington Street in Sydney,
0:45
Speaker 1: which is going to be the first twenty five hours
0:46
Speaker 1: hotel in Australia. And they're very interesting. But what I
0:50
Speaker 1: like about this is these developments in particular is that
0:52
Speaker 1: they are thoughtful and they actually improve the fabric of
0:56
Speaker 1: the areas. Often they are art deco. He's somebody who
0:58
Speaker 1: can really articulate of what matters to investors in today's market.
1:02
Speaker 1: How are you, Shane?
1:02
Speaker 2: Thanks you great, James, Yeah, thanks thanks for the chat.
1:05
Speaker 1: Lovely to have you. Many of the listeners of the
1:07
Speaker 1: Money Podcast, they're at the starters there where you were
1:11
Speaker 1: once upon a time, right, So they're interested in properly,
1:13
Speaker 1: they might have some investments they might start, and residentially
1:16
Speaker 1: they might be thinking of subdivisions, that sort of thing.
1:19
Speaker 1: Just basically they're just getting going. You're at a very
1:23
Speaker 1: advanced stage in it. But I imagine calculating risk is
1:29
Speaker 1: the core of what you do. Am I on the
1:31
Speaker 1: right tracker is a fair assessment.
1:32
Speaker 2: Yeah, definitely, and more so than ever in the post
1:35
Speaker 2: COVID environment. It's been a really interesting journey just trying
1:38
Speaker 2: to stay on top of course of construction environment and
1:41
Speaker 2: effects on program and it's really interesting the off plan environment.
1:45
Speaker 2: It's an interesting place to be as well. So yeah,
1:48
Speaker 2: calculating is probably an understatement. There are many inputs and
1:52
Speaker 2: it's constant working progress.
1:53
Speaker 1: You say COVID, you mean the inflation kick on the
1:56
Speaker 1: building materials?
1:57
Speaker 3: Is that what? Yeah?
1:58
Speaker 2: Definitely the effect on cost and I think what's been
2:02
Speaker 2: probably not promoted in the same way we all know.
2:04
Speaker 2: It's been an inflationary environment for construction, which is which
2:07
Speaker 2: has made a lot of sectors quite tough, particularly the
2:11
Speaker 2: lower market sectors, which is certainly one of the reasons.
2:13
Speaker 2: It's predicated our move to the ultra luxury area.
2:17
Speaker 3: But it really, it really was particularly.
2:20
Speaker 2: Compounded by program time that it started with the supply
2:23
Speaker 2: chain constraints, and of course, so time in itself has
2:26
Speaker 2: been a challenge I think for all developers, because of
2:29
Speaker 2: course time is money, and any compounds.
2:31
Speaker 1: This is why all these development seemed to take ages. Yeah, yeah,
2:35
Speaker 1: I mean I drive past that looks started in COVID.
2:38
Speaker 1: It's still not finished.
2:39
Speaker 3: Yeah, that's right.
2:40
Speaker 2: I mean there's all types of delays that are potential delays,
2:44
Speaker 2: and of course it all starts in the planning area,
2:46
Speaker 2: and that's that whole sort of red tape area, bureaucratic
2:49
Speaker 2: area that of course is front and the center. And
2:53
Speaker 2: still I think the governments are trying in some cases,
2:57
Speaker 2: but there are just so many forces at play that
2:59
Speaker 2: it's difficult. It's a difficult space to unwind in a
3:03
Speaker 2: way that will have a meaningful effect on both supply
3:05
Speaker 2: and affordability. So yeah, so's it's a time that you
3:11
Speaker 2: have to be more prudent. The one percenters, zero point
3:15
Speaker 2: one percenters, and as I said, they all compound through
3:18
Speaker 2: and we've worked really hard to make sure that we
3:21
Speaker 2: focus on the areas that we think we can be
3:23
Speaker 2: best in class at and work to a best in
3:25
Speaker 2: the world standard at. It's not without its challenges because
3:28
Speaker 2: we're in that very luxurious and more complex end of
3:32
Speaker 2: the premier market.
3:34
Speaker 1: And there's always been there, right, but I imagine it's
3:37
Speaker 1: of recent times it's become more defined in the market.
3:41
Speaker 1: Like if someone was a starting and property they they
3:44
Speaker 1: might almost be afraid. You say, oh, well, it's really tough.
3:47
Speaker 1: It's very uncertain, there's some inflation, we don't know where
3:51
Speaker 1: we're going at rates, planning regulations are very severe. But
3:55
Speaker 1: tell me, I imagine it's always tough. Right, If it
3:57
Speaker 1: was easy, everyone would do it.
3:59
Speaker 2: Everybody be doing it. That's exactly right. And if you
4:01
Speaker 2: stick to the proven things of sticking to what you understand,
4:05
Speaker 2: sticking to what you're best at, having the best possible
4:07
Speaker 2: people around you. And I think for busy people we
4:11
Speaker 2: talk about part time investors or even sophisticated investors, and
4:15
Speaker 2: most of these people listening right now have.
4:17
Speaker 3: A day job.
4:18
Speaker 2: Yes, So whilst it's very tempting to look at more
4:22
Speaker 2: complicated strategies in terms of the development of a property
4:26
Speaker 2: et ce, a lot of times there's an opportunity cost
4:30
Speaker 2: and I think it's super important for all of all
4:33
Speaker 2: of us to really think about that opportunity, cost and risk,
4:37
Speaker 2: and if you're normally bring your strategies back to simplicity,
4:41
Speaker 2: staying with quality, taking a longer term view. Most people
4:45
Speaker 2: that embark upon that making sure that their investments are
4:48
Speaker 2: underpin by sustainable income flows. Obviously the better at the
4:52
Speaker 2: position normally, the lower the return and finding a balance,
4:54
Speaker 2: and oftentimes that's certainly dedicated by what type of cash
4:58
Speaker 2: flows that the investor enjoys outsid part of their property investments.
5:02
Speaker 2: But I think there's a lot to be said for
5:03
Speaker 2: keeping it simple.
5:05
Speaker 1: Yeah, right, Yes, like you're looking at as I was
5:07
Speaker 1: saying when you mentioned the market now in a way
5:11
Speaker 1: you might say it's deductive, really right, So the richer
5:14
Speaker 1: getting richer. This is the point I was trying to
5:16
Speaker 1: make at the start. So you would think you can
5:18
Speaker 1: see how it happens in every industry. You look at
5:21
Speaker 1: the hotel industry. I'm sure you know the hotel industry
5:23
Speaker 1: very well. You're developing hotels, some hotels are actually getting
5:26
Speaker 1: Some of these hotels in Europe that are famous old
5:28
Speaker 1: hotels once upon a time they would have got bigger
5:32
Speaker 1: now they're getting smaller. They're actually redeveloping and they're smaller
5:36
Speaker 1: and they're consciously moving up market. You did that strategically
5:40
Speaker 1: in your business. Is it a crowd becoming a crowded space?
5:44
Speaker 1: But will it always be that sort of eleaset level?
5:48
Speaker 2: Well, I mean, certainly, Europe's very interesting tourism. I don't
5:52
Speaker 2: know where it sits in terms of the eurozones leading industries,
5:55
Speaker 2: but there's no doubt that the more exclusive European hotels
5:58
Speaker 2: have been able to increase their premium significantly, and that's
6:04
Speaker 2: always going to suit a more boutique luxury experience. In
6:07
Speaker 2: terms of our business moving up market, I think it's
6:10
Speaker 2: a combination of what we enjoy, what we believe we're
6:13
Speaker 2: good at, and also where the market opportunity is at.
6:17
Speaker 3: I mean, it's an area that does have a.
6:19
Speaker 2: Close relationship to the prestige housing market, which has been
6:23
Speaker 2: a star performer. It's an area that is closely influenced
6:27
Speaker 2: by the overall baby boomer and downsizeer evolution.
6:30
Speaker 1: You think that's going to keep going, there's nothing to
6:32
Speaker 1: stop that.
6:33
Speaker 2: I can't see why. It also is an economic strategy
6:37
Speaker 2: to dilute increasing construction costs, because even though you're increasing
6:41
Speaker 2: construction costs by way of reducing a much more high
6:45
Speaker 2: quality product, in all ways, as a proportion of the
6:49
Speaker 2: overall investment, you're actually increasing land component and decreasing the
6:53
Speaker 2: relative input of construction. So it is a strategy to
6:58
Speaker 2: actually combat increasing construction costs.
7:01
Speaker 1: Just to simplify this for our listeners, I'm imagining cutting
7:04
Speaker 1: back to basics. If a brick costs ten dollars, it
7:09
Speaker 1: costs ten dollars, whether you're around a two million dollar
7:11
Speaker 1: side or a half a million dollar side. Yeah, that's
7:14
Speaker 1: the economics of it.
7:15
Speaker 3: That's exactly right.
7:16
Speaker 2: So if you've got a ten dollar brick that goes
7:18
Speaker 2: into a two million dollar apartment, we will probably spend
7:22
Speaker 2: for example, eleven dollars fifty so it's better profile and
7:26
Speaker 2: a more interesting finish. But it might go into a
7:28
Speaker 2: ten or twenty million dollar apartment.
7:30
Speaker 1: Yeah's it. Economics there for example, very interesting. Just tell
7:33
Speaker 1: me one thing before we go to the break. I
7:35
Speaker 1: like what you do those buildings, and you see, I've
7:38
Speaker 1: late you seem to be specializing, if for want of
7:41
Speaker 1: a better word, with our deco and restoration and heritage.
7:45
Speaker 1: Most people find that most people would find that it's
7:48
Speaker 1: such a headache to do and such a challenge to
7:51
Speaker 1: do property development anyway. It must take all your diplomatic
7:55
Speaker 1: skills to get the heritage side of things done. Yet
7:58
Speaker 1: harder than it as hard as it sounds.
8:01
Speaker 2: It is it is well first of all, because we
8:04
Speaker 2: work in inner city blue ribbon areas. Naturally there are
8:08
Speaker 2: going to be more more properties that are of heritage importance,
8:12
Speaker 2: and we genuinely, we generally do want to work to
8:17
Speaker 2: the line unlucky remarkable places. And there have been times
8:21
Speaker 2: where we could have proposed to local council's demolition and
8:27
Speaker 2: clean skin approach and we elected to restore, which we
8:30
Speaker 2: did most recently in an ord witting development in kuji
8:34
Speaker 2: and development called and another development we're doing in Kujie
8:38
Speaker 2: at the moment called Baalomack House. It's the original Lord
8:40
Speaker 2: Mayor's House from the eighteen sixties with a new build
8:43
Speaker 2: in front, enjoying beautiful views back over the ocean and
8:47
Speaker 2: converting that beautiful mansion into two heritage style apartments and
8:51
Speaker 2: we seek a lot of enjoyment. The twenty five hour
8:54
Speaker 2: Sydney which is due for opening a little later this year,
8:57
Speaker 2: a property well known to many people.
8:59
Speaker 1: Yeah, what was it?
9:00
Speaker 2: Originally it was the Olympia Theater, but a lot of
9:04
Speaker 2: people more of our general age group probably remember for
9:07
Speaker 2: the blue specific room and.
9:09
Speaker 1: A lively night spaff it was right.
9:12
Speaker 2: So it's been an absolute joy, but at the same
9:15
Speaker 2: time it does bring its challenges. We've been blessed to,
9:19
Speaker 2: i guess more vertically integrate with some great people in
9:21
Speaker 2: the planning and obviously development management and more recently construction area.
9:25
Speaker 2: We now we're building Coujie Central. Animal Constructions was birthed
9:30
Speaker 2: last year and we've had a really great experience again
9:33
Speaker 2: because we've found some very high quality, like minded people
9:37
Speaker 2: and so that's that's been a really great process to
9:41
Speaker 2: actually enter the construction arena and take a little more
9:44
Speaker 2: control in that area.
9:45
Speaker 1: I want to ask you one of the things that
9:47
Speaker 1: I've seen you see, which is this importance of saying no,
9:50
Speaker 1: I reckon. It's important in any career at all, but
9:52
Speaker 1: particularly when you're in an area like yours and you're
9:55
Speaker 1: in property investment. We're going to come back after the
9:58
Speaker 1: book and talk about that in a moment. Hello and
10:07
Speaker 1: welcome back to the Australians Money Puzzle podcast. I'm James
10:11
Speaker 1: Kirby talking to Shane Smollen. Now, Shane, as you've heard
10:15
Speaker 1: the first part of the show is experienced a developer,
10:18
Speaker 1: also under a real estate agency. At one stage we're
10:22
Speaker 1: going to talk Shane. I've been listening to some of
10:25
Speaker 1: the interviews you've done in the past, and I think
10:27
Speaker 1: one of the really interesting things you're talking about in
10:30
Speaker 1: being in property is there's some things that you say
10:33
Speaker 1: you've already said them there, about having basically a squad
10:37
Speaker 1: of your own that you build this people, your people
10:40
Speaker 1: around you, knowing clearly who you are and where you
10:44
Speaker 1: are and what you want to do. There was a
10:46
Speaker 1: quote here which was a terrific podcast you did. By
10:49
Speaker 1: the way, Shane is also a racing car driver, but
10:51
Speaker 1: you wouldn't have guessed that from his modulated calm tone.
10:55
Speaker 1: Or maybe that's what you need, is a racing car driver.
10:57
Speaker 1: But he's also a rady car driver, which is not
11:00
Speaker 1: as unusual as you might think in the property business.
11:03
Speaker 1: And I can tell you I know a couple of them.
11:05
Speaker 1: But you mentioned on this podcast with Anthony Denman, which
11:08
Speaker 1: was mostly about car racing, that most of your best
11:10
Speaker 1: wins come in your ability to say No, it's really
11:16
Speaker 1: just going through all of the elements of due diligence,
11:19
Speaker 1: being confident, but not to the point where your optimism
11:21
Speaker 1: gets the better of you and your numbers are simply wrong,
11:24
Speaker 1: in which case you can in which case you chase
11:28
Speaker 1: your tail from day one. Now, that's the thing I
11:31
Speaker 1: think with property development that this is always this terror.
11:34
Speaker 1: I think that people have it if they get it wrong,
11:36
Speaker 1: especially on their first one, and never recover. Is it
11:38
Speaker 1: as severe as that?
11:41
Speaker 2: It's no doubt if people who are ill prepared set
11:44
Speaker 2: out on the wrong development, by the time it winds
11:47
Speaker 2: itself out, you could be talking about certainly no less
11:49
Speaker 2: than half a decade, and then the financial implications could
11:52
Speaker 2: take up most of the rest of that decade.
11:54
Speaker 3: So the answer yes, But in terms of no, yeah,
11:57
Speaker 3: it's critical.
11:58
Speaker 1: What were you said, like, what give us an EXAMPP
12:00
Speaker 1: And I'm starting, Okay, I'm thinking I'm doing my first
12:02
Speaker 1: ever property development. I'm subdividing this suburban block. I've got
12:06
Speaker 1: these options. Everyone's suggesting things, Where is the idea where
12:12
Speaker 1: you would say, now, where would it make a difference.
12:14
Speaker 2: Look, I think it's about just having the right advice
12:17
Speaker 2: up from the outset and also really under I think
12:20
Speaker 2: when it comes to that level of development, just understanding
12:23
Speaker 2: which your fallback position is. I mean a lot of
12:25
Speaker 2: people in that space will be embarking upon subdivisions or.
12:29
Speaker 3: Adding a duplex to a house side, et cetera.
12:32
Speaker 2: But just understanding that if all files in something relating
12:35
Speaker 2: to planning, which typically at that level, the risk is
12:38
Speaker 2: largely mitigated. I mean, you're normally working. You might be
12:41
Speaker 2: trying to build a little bit outside of the constraints potentially,
12:44
Speaker 2: but it's unlikely that a developer at that level is
12:47
Speaker 2: going to be embarking upon totally non compliance style developments.
12:51
Speaker 2: So I would have thought in that case the risks
12:55
Speaker 2: are quite mitigated and they generally represent great opportunities. Of course,
12:58
Speaker 2: when you start getting into a larger, more complex developments,
13:02
Speaker 2: it's a different story. And I guess my device is
13:07
Speaker 2: to make sure that we have a large funnel so
13:08
Speaker 2: we're building great relationships our acquisitions. Directed does a great
13:12
Speaker 2: job in bringing quite a lot of opportunities for that
13:15
Speaker 2: initial assessment. But again it's just it's very easy because
13:19
Speaker 2: the natural instinct is to want to push ahead. I mean,
13:22
Speaker 2: there are a few more it's very exciting when you
13:24
Speaker 2: finish a development, but equally, it's extremely exciting when you
13:27
Speaker 2: have the promise of a new development. And it's very
13:29
Speaker 2: simple to be despite experience. It's fairly simple to potentially
13:36
Speaker 2: think that every apartment is worth a little more, or
13:38
Speaker 2: it costs a little bit less to develop, or the
13:40
Speaker 2: program time can be delivered on a more idealistic time frame,
13:44
Speaker 2: et cetera, et cetera. And of course, as it when
13:46
Speaker 2: you start to compound all those elements through, I mean,
13:49
Speaker 2: another trap can be the larger style development that enjoys
13:52
Speaker 2: view corridors from a good chunk of the development stuff
13:55
Speaker 2: that start to really price the average per square meter
13:58
Speaker 2: rate as if it all enjoys the whereas sometimes could
14:01
Speaker 2: be a lack of car parking. It could be just
14:04
Speaker 2: that you're not able to deliver the development without a
14:07
Speaker 2: high amount of southern south facing apartments or that are
14:11
Speaker 2: departments that are view or solar impaired or privacy impaired,
14:13
Speaker 2: et cetera, and they have significant per square meter rate impacts.
14:16
Speaker 2: So it's just important to make sure you've done a
14:18
Speaker 2: reality check on all of that. And yeah, it's of
14:22
Speaker 2: course it's challenging to preserve margin. I think for a
14:26
Speaker 2: lot of the people that I think that are possibly
14:29
Speaker 2: short on time, there's just so much to be said
14:33
Speaker 2: for in terms of longer term wealth creation. For just
14:38
Speaker 2: focusing and on holding residential income producing property that sits
14:43
Speaker 2: in an area that is under redevelopment into a higher
14:47
Speaker 2: class and a higher density style of property, and there's
14:52
Speaker 2: some of the best outcomes that I see. It's differently,
14:55
Speaker 2: we're properly developers that we do we do that, We
14:58
Speaker 2: do that for a job.
14:58
Speaker 1: It sounds like inter city to property as it always
15:01
Speaker 1: has been.
15:01
Speaker 2: Well, if you look at if you look at what's
15:03
Speaker 2: happening right at the moment in Sydney, if you've got
15:05
Speaker 2: what is basically once in a generation type change with
15:08
Speaker 2: the with the reforms in terms of mid to high rise,
15:11
Speaker 2: and you've got tracts of prime housing and areas as
15:15
Speaker 2: salubrious as Rose Bay or Mossman, et cetera that are
15:18
Speaker 2: now being option and for that matter sold at twice
15:22
Speaker 2: their residential value, give or take. Now that's a great opportunity.
15:26
Speaker 2: Now it might have been hard to pick that, but
15:27
Speaker 2: in another way, from another point of view, it actually wasn't.
15:30
Speaker 2: Because there's been talk for a long time, but a
15:33
Speaker 2: lot of people would either be living in as houses
15:35
Speaker 2: or that bought those houses as interesting rental investments for
15:38
Speaker 2: a long term. For a long term you.
15:40
Speaker 1: Have an end in mind which is much further down
15:42
Speaker 1: the track, which is a transformation of that neighborhood.
15:44
Speaker 2: I think so, yeah, I think there are some obvious opportunities.
15:48
Speaker 2: I look at areas of Brisbane. We're sitting here on
15:50
Speaker 2: the Gold Coast. I mean, the Gold Coast is a
15:51
Speaker 2: great example. I mean there are when you see something
15:55
Speaker 2: like the light rail that is moving now at least
15:57
Speaker 2: as far as Burly.
15:58
Speaker 3: It was supposedly go a little further, but.
16:01
Speaker 1: Going through a hell down there at the moment.
16:03
Speaker 2: Yes he's going through hell end, going through hell and
16:05
Speaker 2: not Palm Beach at the moment. But it goes without
16:09
Speaker 2: saying that governments don't invest in these sort of whether
16:11
Speaker 2: it be council, state, federal, They don't invest in this
16:13
Speaker 2: type of infrastructure without backing it with significant increases in
16:17
Speaker 2: nearby density. So there are opportunities at the moment in
16:21
Speaker 2: older strata total buildings. Now Queensland doesn't enjoy the same
16:26
Speaker 2: or doesn't have the same strata renewal laws in other words,
16:29
Speaker 2: it does have a strata renewal law, but it's a
16:31
Speaker 2: little more complicated than say New South Wales. But logically,
16:36
Speaker 2: if you take a long term view, a decade long outlook,
16:39
Speaker 2: there are quite affordable strata opportunities in older buildings which
16:44
Speaker 2: inevitably will be amalgamated at some point in the years
16:47
Speaker 2: to come. That may not be today, and nor should
16:51
Speaker 2: they be assumed to be today, but these type of
16:53
Speaker 2: examples are everywhere. And I think it's a way. If
16:56
Speaker 2: you take the view that if you just sit on
16:58
Speaker 2: a vanilla property in Astra and it'll compound at seven
17:01
Speaker 2: percent per year, which seems to be about the historical rate,
17:05
Speaker 2: I think it's I think it's a good way to
17:07
Speaker 2: double that.
17:08
Speaker 3: Yeah, it goes.
17:08
Speaker 2: Without saying that a smart development is going to see
17:11
Speaker 2: a much higher bounce, but just like with anything without
17:15
Speaker 2: the higher return, it comes with a higher.
17:17
Speaker 1: You seem to have that faith though, that it will
17:19
Speaker 1: keep going as it has for a long time, because
17:22
Speaker 1: more recently that that idea you could say to anybody
17:25
Speaker 1: on the street, look, you'll double your money every ten years,
17:27
Speaker 1: or you'll do your seven percent. There was there was
17:29
Speaker 1: also some questions over that of recent times.
17:32
Speaker 2: Yeah, look, the under supply issue is not going away quickly.
17:37
Speaker 2: There are just way too many constraints for that to
17:40
Speaker 2: change anytime soon. There is net migration, it'll the dial
17:44
Speaker 2: will be turned from time to time, But overall, Astraight
17:46
Speaker 2: has a need for a net migration increase. And there
17:51
Speaker 2: are just certain areas as well that are more and
17:53
Speaker 2: more attractive, some because of affordability, some because of commercial opportunity,
17:58
Speaker 2: some because of the significant and moved to lifestyle. And
18:02
Speaker 2: COVID did accelerate in terms of the move north into
18:05
Speaker 2: sunnier coastal climates, etc.
18:07
Speaker 3: Et cetera.
18:08
Speaker 2: COVID accelerated that, and in some cases those trends were
18:11
Speaker 2: reversed back to the cities as people sort to find
18:13
Speaker 2: work and had to move back to the offices. But
18:15
Speaker 2: you know, some of these generational changes are very real
18:17
Speaker 2: and I think we'll go on for some time. It
18:19
Speaker 2: makes sense to sell the forty or fifty year old
18:22
Speaker 2: familyhouse and move to a beautiful boutique apartment with views
18:25
Speaker 2: and close to amenity and locked the door and head
18:29
Speaker 2: to Sydney Airport. It makes sense to enjoy the last
18:31
Speaker 2: thirty or forty years Sydney.
18:34
Speaker 1: There's a lot of negative negativity around Melbourne at the moment,
18:38
Speaker 1: prices very soft. It's a market that people didn't move
18:42
Speaker 1: to in COVID. They moved out of in COVID. What's
18:46
Speaker 1: your view.
18:48
Speaker 3: I'm positive about Melbourne.
18:50
Speaker 2: It's such a big, dynamic city. It's attractive to a
18:54
Speaker 2: broad range of demographics and nationalities, and it seems to
18:58
Speaker 2: be a real focal point for migrant populations and it
19:02
Speaker 2: enjoys it.
19:02
Speaker 1: Do you think now? Just now?
19:05
Speaker 2: I think my view on the high density market, and
19:10
Speaker 2: just a personal view, I think it was somewhat manufactured.
19:14
Speaker 2: I know, the type of incentives that have been used
19:16
Speaker 2: for many years compared to the.
19:17
Speaker 1: City that the people didn't Is that what you mean?
19:20
Speaker 2: No, it's I don't think the high density developments as
19:27
Speaker 2: a rule, and I'm generalizing. I don't believe that they
19:31
Speaker 2: were necessarily based on a waiting demand. I think the
19:35
Speaker 2: demand to some extent had to be created, and I
19:39
Speaker 2: wouldn't put Sydney in the same category as that in
19:41
Speaker 2: nor do I put the current For example, the current
19:43
Speaker 2: Gold Coast market where we sit, which in days gone
19:46
Speaker 2: by was a different story. I think there's a genuine
19:48
Speaker 2: market there for the right product. But in terms of
19:50
Speaker 2: Melbourne in generally we're seeing increases in the in demand
19:54
Speaker 2: in the quality of Melbourne housing market, and there is
19:57
Speaker 2: certainly a market there in the boutique again and downsize
20:00
Speaker 2: a high quality premium areas close to amenity that people
20:04
Speaker 2: have enjoyed for some decades with their families. But I
20:07
Speaker 2: think high density is still quite challenged and it's difficult
20:12
Speaker 2: to build things in Melbourne, and you don't sell a
20:15
Speaker 2: thing in Melbourne for the same price as you do
20:17
Speaker 2: in Sydney. So you've just got that element again where
20:20
Speaker 2: it's costing as much or more to build in the town,
20:23
Speaker 2: but you just simply can't sell it for as much
20:25
Speaker 2: as you can in Sydney. Naturally, the land per unit
20:28
Speaker 2: is more affordable, but it's still just a really challenging
20:31
Speaker 2: place to build high density. And of course there's been
20:35
Speaker 2: massive one area where under supply hasn't been so much
20:38
Speaker 2: an issue. It's just the broad acre land releases.
20:41
Speaker 1: So that so that kind of can dilute demand to
20:44
Speaker 1: some extent.
20:45
Speaker 2: There's been a lot, yes, there's been a lot, and
20:47
Speaker 2: there's still a lot to come.
20:48
Speaker 3: And of course Sydney is landlocked.
20:50
Speaker 2: Yes, that's right, so city has to build up.
20:53
Speaker 1: Yeah, all those lovely national parks, they have a bow
20:56
Speaker 1: product of creating intense demand within those sort of that's
21:00
Speaker 1: very good. All right, Look we'll take one short break
21:02
Speaker 1: and we'll be back in a moment. As a crucial
21:03
Speaker 1: question I want to ask Shane. Hello, welcome back to
21:12
Speaker 1: the Australians Money Puzzle podcast, coming to you today from
21:16
Speaker 1: the AREK Conference are the Gold Cost where there are
21:18
Speaker 1: simply thousands of real estate agents and real estate people
21:22
Speaker 1: here this morning and we are talking to Shane Small
21:25
Speaker 1: and here in the main auditorium. Shane, there is some
21:29
Speaker 1: questions I cover every week on property, which i'll do
21:31
Speaker 1: with in a moment. Hope you can chip in if
21:33
Speaker 1: you wish. You can have completely dodged them if you want.
21:35
Speaker 1: But what they I want to ask you was on
21:37
Speaker 1: the show. A lot of people talk all the time
21:39
Speaker 1: about macro right, they talk about interest rates, they talk
21:42
Speaker 1: about the conditions of the market, whether they talk about
21:47
Speaker 1: governments and whether they're helping or not helping. But I
21:49
Speaker 1: wonder with someone like you, when you've had a career
21:51
Speaker 1: where you've built a real estate chain, agency chain and
21:55
Speaker 1: soldiers where you do these not just risk developments where
21:59
Speaker 1: you have to calculate at risk, but obviously stressful difficult
22:03
Speaker 1: developments where there's heritage dimensions. To what extent do you
22:07
Speaker 1: look at the macro picture? Does it matter to you?
22:09
Speaker 1: Do you start looking at your development and then get
22:12
Speaker 1: a surprise that inflation kicked in and all the building
22:14
Speaker 1: materials went up a thirty percent? Or do you keep
22:16
Speaker 1: an eye closely on macro? How important is it to
22:19
Speaker 1: you the big picture?
22:21
Speaker 2: I think there have definitely been surprises in terms of
22:25
Speaker 2: just to what extent there is inflation in the construction market. Yeah,
22:29
Speaker 2: we've obviously seen some stabilization of not decreases in the
22:32
Speaker 2: interest rate environment. So it's hard to it's hard to
22:35
Speaker 2: pick those changes in the funding environment. I mean, there's
22:38
Speaker 2: obviously been a quite a large and burgeoning non bank
22:41
Speaker 2: sector that is still very active, and that's provided developers
22:45
Speaker 2: with i think greater choice and only wants.
22:47
Speaker 1: For instance, lending to property superannuation smsfs in property, Yeah.
22:53
Speaker 3: For sure, doing it for sure. Yeah.
22:55
Speaker 2: And then and look a lot of those non bank
22:57
Speaker 2: they're great to work with, and whether they're purely dead
23:00
Speaker 2: or taking on a dead equity appetite. But there's some
23:04
Speaker 2: very progressive players out there. But look, we made a
23:07
Speaker 2: decision some time ago which I think has been vindicated
23:11
Speaker 2: to It was a flight to quality, and it was
23:14
Speaker 2: a flight to very high quality under occupy a stock.
23:18
Speaker 3: We haven't fallen.
23:19
Speaker 2: Into the trap of regardless of increasing costs in value
23:23
Speaker 2: engineering stock. It's a multi generation business. We're very conscious
23:28
Speaker 2: of reputation and brand and so and that sometimes means
23:32
Speaker 2: that you might be slightly compromised in the moment for
23:36
Speaker 2: the sake of a bigger picture. But our reputation is
23:39
Speaker 2: everything to us.
23:40
Speaker 3: So yeah, but.
23:41
Speaker 2: It goes without saying it's impossible to forecast over three,
23:44
Speaker 2: four or five years and get it right. But we're
23:48
Speaker 2: probably doing a better job than most governance.
23:50
Speaker 1: So you stick as you said at the start, you
23:53
Speaker 1: stick closely to and you have a clip, you have
23:56
Speaker 1: a cleip of who you are and what you do.
23:58
Speaker 3: Yeah, that's right.
23:58
Speaker 2: I mean, look, it's very tempting based in this area now,
24:01
Speaker 2: so I sort of fly to work, but you see
24:05
Speaker 2: opportunities and it's very tempting. But we're trying to stay
24:08
Speaker 2: disciplined and to stay at what we're best at. We
24:10
Speaker 2: think We're very strong in our perl development in Bondai,
24:15
Speaker 2: that is with our good partners, the Family Office of Quaramantha.
24:20
Speaker 2: We're about to release that and whilst I can't give
24:23
Speaker 2: away the exact prices, but I can say that they're
24:25
Speaker 2: well north of one hundred thousand dollars per square meter
24:28
Speaker 2: and we're confident and we're excited and it's just really stimulating,
24:32
Speaker 2: satisfying work.
24:33
Speaker 3: To be able to work at that level of quality.
24:35
Speaker 1: Bok to that level and execute at that level very interesting.
24:38
Speaker 1: I have a couple of listener questions, as always, just
24:42
Speaker 1: two quick ones, the ones from Anton A and Ton
24:45
Speaker 1: High Anton. Anyone talking about a legal challenge or a
24:49
Speaker 1: class action over a division two ninety six. That's the
24:51
Speaker 1: new super tax which I'm sure everyone knows, which is
24:54
Speaker 1: going to be applied on on realized gains, creating something
24:57
Speaker 1: of a sensation in terms of ulter to cross the
25:00
Speaker 1: investment community. Anton, I am not aware of a class action.
25:05
Speaker 1: I have asked regularly if someone is going to mount
25:08
Speaker 1: a constitutional challenge on it. I wonder if they could
25:12
Speaker 1: land tax in its way?
25:13
Speaker 3: Is it?
25:14
Speaker 1: Would you agree is a tax on realize gains? Shane?
25:17
Speaker 1: Would you see it as that. I mean, you own something,
25:19
Speaker 1: it goes up. It's a paper game, so I suppose
25:22
Speaker 1: in that respect, In that respect there is a legal precedent. Sorry,
25:27
Speaker 1: but that doesn't mean someone couldn't contest it, So we'll see. Anton.
25:30
Speaker 1: Thank you very much. Always welcome to have questions, and
25:33
Speaker 1: remember this is never advice information only. Nathan, thanks for
25:36
Speaker 1: your excellent podcast. I listened regularly ever since moving from
25:40
Speaker 1: Australia to the Netherlands. Okay, my question is if I
25:44
Speaker 1: own a property in a self managed super fund, can
25:46
Speaker 1: I move into that house in a tax effective way
25:49
Speaker 1: once I enter the pension phase. Nathan, you can do
25:51
Speaker 1: just about anything, but you cannot move into that house.
25:53
Speaker 1: There is an incredibly elaborating where you could perhaps sell
25:56
Speaker 1: it to your fund, could sell it and move it
25:59
Speaker 1: out and to you at the market price, which would
26:02
Speaker 1: be incredibly awkward and elaborate and almost a kind of
26:07
Speaker 1: counterintuitive for the reason you did it in the first place,
26:10
Speaker 1: or one might have done it in the first place.
26:12
Speaker 1: So short answer, it's not impossible, but not worth doing,
26:16
Speaker 1: is what I would think most financial advisors would say
26:18
Speaker 1: to you. Thank you Nathan for that question, and thank
26:20
Speaker 1: you very much Shane Smollen for coming in today. Really
26:22
Speaker 1: nice to talk to.
26:23
Speaker 3: You, James, thanks for your time.
26:24
Speaker 1: To thank you everyone. Let's have some more questions the
26:27
Speaker 1: money Puzzle at the Australian dot com dot au. Talk
26:31
Speaker 1: to you soon.