Latest / The Follio Property Podcast / Why Investors Have a Buying Window Right Now | Prepare for Big Price Crash

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Why Investors Have a Buying Window Right Now | Prepare for Big Price Crash · The Follio Property Podcast

0:00
Pretty much every real estate market is going down except for Darwin.
0:04
Markets that have been repriced between 10 and 20 percent.
0:07
If rates were to go up again in November, right, I think we move into a most likely recession.
0:15
If something goes down by 5%, but your borrowing capacity goes down by 10%, that means that thing is less affordable.
0:23
You'll probably get more money from the bank today than what you will in a few months' time.
0:30
So that says to me now's probably a good time to buy for a lot of people because they might find the thing they want to buy in the future, they won't be able to buy it.
0:41
Why is now arguably an okay time to buy?
0:44
To be very, very clear, I'm buying and I haven't bought for some time.
0:50
You're listening to the Folio Property Podcast, the number one property podcast.
0:54
I'm here with my co-host, Lachlan De La Hunty, but there's a lot going on in the market right now, Lachlan.
0:59
A lot of economic headwinds, I would say.
1:01
There's no better voice in the Australian property market than Mr. Tom Panos.
1:06
Tom?
1:06
Thank you.
1:06
It's great to be here.
1:07
I love property.
1:08
I can't get enough of it.
1:08
I love talking about it and really pumped to have this conversation with you guys.
1:13
Mate, I think, look-
1:14
What we'd love to pick your brain on today are a load of different subjects, but just the current landscape.
1:19
I think for those that have been sitting under a rock,
1:22
Wouldn't know, but you are, you know, you're the voice of the Australian property market.
1:26
You do a lot of, I think where I get a lot of the tidbits from is the social media videos where you're walking for your run, walking in the gym, but it's real time feedback in the market and not just the Sydney market where you're predominantly based, but you're always around the country.
1:39
So firstly, what's the feel like across the board in the Australian landscape?
1:45
So I would probably say the best way to segment the marketplace is either by geography or by price points.
1:51
So if you actually did both and sort of layered one over the other.
1:54
So let's go on price points.
1:56
It's pretty clear the higher the price point, the bigger it's dropped.
2:00
The lower the price point, the lower it's dropped.
2:03
Then you go around the country and you look at geography wise, pretty much every real estate market is going down except for Darwin.
2:13
They started going down at different times.
2:15
Sydney and Melbourne started going down long before the budget.
2:18
It was triggered more by interest rates and that happened late in 2025.
2:24
The rest of the marketplaces have caught up.
2:27
A lot of those marketplaces actually were triggered by the budget.
2:31
So overall, you're pretty accurate in your intro.
2:35
Headwinds, more headwinds to come.
2:37
And I don't know, by the time this podcast is played, we would have been into more rate rises and more to come.
2:45
So I would say that this is probably not the greatest time in the world if you're a seller, probably an okay time if you're a buyer.
2:55
It's pretty well said.
2:55
I think that's some of the messaging we've said across the podcast.
2:58
I'm buying at the moment.
3:00
To be very, very clear, I'm buying and I haven't bought for some time.
3:04
I mean, and I don't know if we're at the bottom of the market, but I don't look at buying at the bottom of the market.
3:09
There's no bill that goes at the bottom of the market.
3:12
All you're trying to do is buy well, right?
3:15
And I think buying well at the moment in the markets I'm looking at, they're there.
3:18
I mean, we're talking about markets that have been repriced between 10% and 20%.
3:23
I'm not buying to live in.
3:24
I buy as an investor.
3:25
Negative gearing, it's neither here nor there.
3:27
I mean, I've never, like, negative gearing, I've only negative geared for one or two years at a time anyway.
3:33
Like, I get to the point where I sort of, I don't want to be, you know, having a certificate, you know, up on the top of the mountain, hey, guys, I made another loss this year.
3:43
I'm trying to get out of losses as soon as you can and make things stack up.
3:48
So, to me, prices have gone down, rents have gone up, there's less competition, right?
3:54
Good times for an investor, actually.
3:56
You made a point there that you've seen 10% to 20% price falls, depending on the markets.
4:00
Going back in time, and we can always use history as a bit of a benchmark of what's happened in the past.
4:05
It doesn't always happen.
4:06
History doesn't always repeat itself.
4:08
When was the last time you saw this type of market?
4:11
I heard you on another podcast talking about the late 80s.
4:14
GFC in the 2007 there was a decline when APRA stepped in and now we are in 2026.
4:21
What era does this feel like and is it similar or is it different?
4:25
Not as bad as 91, 92, 93.
4:27
That was worse.
4:28
That was when interest rates were 17, 17 and a half percent.
4:32
That was worse.
4:33
I would say it's a touch better than the GFC.
4:37
There's buyers around.
4:38
There's still deals being done.
4:40
I mean, I run an auction business on Saturdays just to keep me in the market, not for any other reason.
4:45
And, you know, properties are selling.
4:49
vendors that are realistic, there's two types of listings on the market at the moment.
4:53
There's old listings and new listings.
4:54
The new listings sell.
4:55
New listings are educated people that have accepted it is what it is.
5:00
Old people, old listings are anchored on their old prices saying, Bob, my home was worth 4 million back then
5:05
and they can't psychologically come to grips with it.
5:08
But the new people that are coming in, they're actually sort of buying cheap so they don't mind selling cheap, right?
5:13
So it's probably better than the GFC.
5:17
But having said that, if we get three rate rises, it probably will be like the GFC, maybe if not worse, because rates will be at a comparable level, and we've got to accept it.
5:27
Rates are not just a consumer sentiment thing.
5:30
They are a physical constraint.
5:32
A bank gives you less money with rates that are higher, which means that if you're operating in a marketplace where you're borrowing money, which most people are, it's going to affect values, not for any other reason, because you can't pay more even if you want to pay more.
5:48
On the auction clearance rates, you know, one of the big things we're probably seeing in the media post-budget is every Monday and, you know, we commentated on our podcast.
5:56
I know you're probably the voice of reason on the weekend.
5:59
We do your Saturday update is auction clearance rates in Sydney and Melbourne.
6:04
They obviously are well down from where they were 12 months ago.
6:07
Looking at some of the data in Melbourne, Melbourne starts to be creeping up a little bit as well.
6:10
And Melbourne's actually, over the last four weeks, from a price growth perspective, although negative, it's the best performing capital city outside Darwin.
6:19
Now, what about Sydney?
6:20
On the ground in Sydney at the moment, you seem to have a bit more positivity where buyers, like you said, they're being a bit more realistic with price guides.
6:27
Are you starting to see that market move a little bit at the moment?
6:30
Look...
6:31
A little bit, yes.
6:32
I can't say comprehensively because I can say that for the last two weeks, it feels it's better.
6:40
I sold a property at Marrickfield that sold for $3.6 million or thereabouts.
6:48
That had a reserve of around $2.8 million.
6:50
Sorry, I got those numbers wrong.
6:51
Had a reserve of $2.6 million and it sold for $3.2 million.
6:54
So $600,000 more.
6:57
Right?
6:57
That wasn't happening in June and July.
6:59
So to me, June and July was where the shock came in.
7:02
Right?
7:03
Then last week, I did two out of four.
7:06
The week before, I did two out of two.
7:08
So there are some green shoots coming out, right?
7:10
No question about it.
7:12
However, I'm a little bit cynical with auction data.
7:15
And the reason why is at the moment auction data, I feel, is not clear.
7:22
And the reason I say it is that a lot of real estate agents, both in Sydney and in Melbourne,
7:28
whether they choose to publicly say it or not, are using auctions with the view of creating a deadline decision of a buyer, but really had no intention or expectation that the property would be sitting through a public auction.
7:44
that what would happen is there's this deadline date.
7:47
And at the moment, we're in a marketplace of hesitancy and procrastination and real estate agents, like all sales professionals, are trying to do deals and they're not doing anything illegal.
7:58
All they're sort of saying is they're using a deadline of this date because what real estate agents are telling me is that private treaty sales can become very, very challenging to get decisions off people because people are in hesitancy mode, right?
8:13
So that auction date creates a bit of a closure, right, and tries to bring some of those offers forward in a timely manner.
8:18
Is that the intention?
8:19
Correct.
8:20
Correct.
8:20
You know, like saying to a buyer, I'm letting you know you could buy it at this price or otherwise this is what's happening on this day.
8:28
So the issue that I think is going on is that you're having a lot of properties that get triggered and picked up by the data companies.
8:36
through the portals as an auction.
8:38
Then that property actually doesn't go to auction.
8:42
It gets withdrawn, right?
8:45
So what you're actually seeing is numbers in auctions that are 100% not complete.
8:53
And you're also, particularly on the weekends, you're getting incomplete data sets from real estate agents.
8:59
No agent likes to report properties that haven't sold.
9:02
Right.
9:03
They don't like the street not seeing it sold and they don't like the whole of Australia reading about it on Sunday not being sold.
9:10
So sometimes that information is actually not reported, not in a negative way.
9:15
They just won't answer the phone call.
9:16
Right.
9:17
So.
9:17
So auction numbers on the weekend, right, I start to think to myself, and then you've got different companies.
9:23
You've got PropTrack, Hotality, Australian Property Monitor, sorry, SQM, right?
9:28
So there's all these other data sets.
9:31
So I don't necessarily look at auctions and saying this is a number.
9:34
And everyone needs to know this.
9:36
Your viewers need to know this, that 83% of properties in Australia that are sold are not sold by auction.
9:42
Not 50-50, 83%.
9:47
are sold by private treaty.
9:49
Sydney and Melbourne, it's highly triggered towards auction, but even there, it's not the majority.
9:57
So I don't necessarily use auctions only, even though I'm seen as I do auctions on the weekend, on the block and all of that stuff, right?
10:06
The real game in real estate is private treaty, a buyer and a seller doing a deal, whether it's on market or off market.
10:15
Look, regardless, they are some indicator.
10:18
And the bottom line is Sydney is doing worse than Melbourne.
10:24
No question about it.
10:25
And it's coming off a much higher base, right?
10:27
So that's a lot further to fall.
10:30
Melbourne really didn't get any benefit of any market uplift post-COVID.
10:34
It was probably the one capital city that missed out, right?
10:37
Brisbane, Adelaide, Sydney, Perth all went on a run.
10:41
Melbourne's that still.
10:42
So that's partly the playoffs.
10:45
If you grabbed a person and took them for a tour around Australia, did a one day tour of each city and they had no idea what's going on, they should probably say Sydney should be the most expensive place to live in Australia, just ahead of Melbourne.
11:03
Then they'd probably say Brisbane.
11:06
Then they'd probably say, you know, Perth, Adelaide, Hobart, Darwin.
11:12
But that's not what it is at the moment.
11:14
It's wrong.
11:15
I think the chart means that Melbourne is undervalued.
11:21
It does not make sense to have Sydney, Brisbane, Perth, Adelaide, then Melbourne.
11:28
And I think that's why we're seeing some optimism there, obviously fuelled a lot by the election in November.
11:36
And if you look at where the money is in betting agencies at the moment, I think the last time I looked at it last week, $1.50 coalition, $5 Labor.
11:46
I mean, it's just the markets, but that's a pretty clear market.
11:49
And I think what people are sort of thinking to themselves, Melbourne, undervalued, hasn't gone up like you've said, catch up, new government,
11:57
buy a house there for 700 grand and it's not in the middle of nowhere.
12:03
So all of a sudden you start seeing Melbourne's probably the next place to have a run.
12:08
It's the green shoots, isn't it?
12:09
It's starting to turn.
12:10
There is so much negativity out there, Tom.
12:13
You hear it, you read it, our podcast listeners are reporting on it, and there's no doubt it's tough and it's likely to get worse, as you said before, it gets better.
12:23
Put in your investment hat on because off air we're talking, you're an active investor yourself.
12:28
Why is now arguably an okay time to buy?
12:30
And I'm not saying it's the best.
12:32
People out there think they can pick the bottom.
12:34
I've been around for a period of time and I've never been able to pick the exact bottom or the exact top.
12:38
You've been around a lot longer than I and probably assume that's the same scenario.
12:41
Talk to us about investing with that hat on and why now might be an okay time in comparison to three, six, 12 months.
12:48
It still might be a good time in three months and six months.
12:51
I think realistically...
12:54
What you should be looking at is a wider period and maybe why I think we're going to look back in a couple of years and say that was a window buying opportunity.
13:06
The reason why is that, number one, you've got...
13:12
Less competitors when you're buying at the moment, right?
13:16
You've got less competitors, less other people that you're fighting against.
13:20
So it stands to reason if you were to go to an auction or if you're negotiating on a private treaty, the fact that there's no other buyer there means that you can bargain with that owner, number one.
13:30
Number two, you should also have a look at, yes, property prices can still drop, right?
13:39
However, if you've been around like me for 40 years and you've learned that you've picked the bottom every time three months after the bottom, right?
13:49
You've learned that.
13:50
The only way you know the bottom as bottomed is when you can look back and say that was a bottom back then.
13:55
But by that stage, there's no replay button, right?
13:57
To me, I've gone past as a real estate investor hat on trying to buy at the bottom.
14:04
And what I do is to try and buy well.
14:07
And what does well look like?
14:10
A-grade property, A-grade location.
14:13
I can keep it for a few years, which means I get rid of the risk and volatility of if it does go down, right?
14:23
I've got income that's coming in with some level of certainty.
14:28
Those boxes are ticked.
14:30
It feels safe to buy.
14:32
But the number one reason why I feel safe to buy right now is that I don't buy.
14:38
I look at life as the weather on the day and what the actual climate is.
14:44
The weather right now means it's scary.
14:49
Right?
14:50
Noise.
14:50
You need to have guts.
14:51
You need to have courage in this market because you know that you can buy and it's worth 5%, 10% less in the next few months.
14:59
But I have a fundamental thing in my life.
15:01
And maybe it's just the way that I've been brought up working professionally, and that is to always look at fundamentals.
15:08
And the fundamentals are very clear.
15:10
We're fighting to work out a number of migration that we can handle.
15:16
So we know whether it's half a million or it's 250,000 people, net migration a year.
15:23
That's happening.
15:25
So just picture the demand bit is there and it's not going away.
15:29
All right.
15:30
So then you look at the supply bit.
15:32
The supply bit is these people that come to this country, they don't go, they can't go and sleep at Macca's car park.
15:41
They can't go sleep in the hotel lobby, right?
15:44
They're going to need to sleep in real estate.
15:47
We have an issue, and that is the supply.
15:50
Not only are we way behind, every day there's another story that it's going to get worse.
15:57
Company goes belly up in the southwest of Sydney, 15,000 homes.
16:01
Another developer says, I'm not touching anything now for the next few years.
16:05
So we've got this fundamental issue of demand and supply that more people want what they can't have.
16:13
And that's why I think it's really safe to get some of the stuff that people can't have if you can afford it now.
16:18
That's my issue that I think it's safe.
16:21
And the reason why I think to myself right now is as good a period as any period is that we are in an area of increasing rates.
16:30
And a lot of people don't understand the difference between a price going down and affordability of real estate.
16:36
So on the surface, the average person, I explained this to my 21-year-old daughter, where she goes, but daddy, I was hearing you scream on the phone the other day to someone trying to explain to them just because something becomes cheaper does not mean it's more affordable.
16:54
Like there's a story in today's press.
16:56
that Sydney has become the most unaffordable place, whatever, some dramatic headline clickbait line, right?
17:02
Even though property prices have gone down more in Sydney than other areas.
17:05
And that's the reason why is that borrowing capacity often drops at a faster speed of property prices, which means that it becomes unaffordable.
17:16
Does that make sense?
17:17
Right?
17:17
So if something goes down by 5%,
17:22
but your borrowing capacity goes down by 10%, that means that thing is less affordable.
17:28
So what I'm saying is you'll probably get more money from the bank today than what you will in a few months' time.
17:37
So that says to me now's probably a good time to buy for a lot of people because they might find the thing they want to buy in the future,
17:52
It's a really good point.
17:53
I think making an example to the listeners.
17:55
So, to sort of dumb this down for the viewers or the listeners a little bit, you got a million dollar property of which you can afford today to buy up for a million dollars, but you're concerned that in three to six months' time, that million dollar property is going to be worth 950, which if we can pick it up cheaper, fantastic.
18:12
But the problem in three to six months' time, if we see three
18:16
the property would be worth $950,000, but your borrowing capacity might only be $900,000.
18:20
Correct.
18:20
Therefore, you can't get that same asset.
18:23
And I think that's really important.
18:25
If you believe interest rates are going to go up and therefore prices are going down and you want to wait for that, fantastic.
18:31
But if you're a pay YG or your borrowing capacity is limited based on your income,
18:38
They're going to crunch you.
18:39
And the worse the sentiment, the tighter the banks get, and the higher the interest rates, the tighter the banks get.
18:45
So albeit, as you've said it perfectly, prices may continue to fall.
18:50
Your service ability is going to fall harder.
18:52
Correct.
18:52
And that's going to have more of an impact on the market and people's ability to buy.
18:56
And in three to six months' time, you may not be able to buy anything because banks won't like you.
19:00
And we've been talking, so we have been talking about investors here, right?
19:04
Correct.
19:04
Pure investors.
19:05
Pure investors.
19:05
Because the truth of the matter is if there's a person that's watching this that is thinking to themselves, oh, you know, I'm looking at buying a home to live in.
19:16
Well, that's different.
19:17
If you're buying a home to live in and you currently have a home, and I don't know, you're in Preston and you want to move to Ellswick or move to wherever –
19:26
I don't know whether people do that, actually.
19:28
They go from there.
19:29
But the point is that if you're selling and buying, you might find that this is actually a silver lining market for you because your price may have gone down by 100, but the one you're buying has gone down by 200.
19:43
So you're actually making money if your principal place are residence, right?
19:48
But for investor, that would be it.
19:51
Like, and I totally get it.
19:52
I understand why a lot of people are apprehensive at the moment.
19:55
Maybe if I had a property and I wanted to sell it and I was not going to buy again, and this was my last hooray, I'd probably wait.
20:04
That's the truth.
20:04
I'd probably wait.
20:05
If I didn't have to sell it and I just wanted to get the most I could and there was no need, right, I'd probably wait, right?
20:14
But...
20:15
For most people at the moment, I'd be transacting.
20:19
I'm only recommending to people what I would do myself, right?
20:23
I'd be transacting.
20:24
It's a lot better to transact when there's less people to transact against, you know?
20:29
It feels like first-time buyers, although the policies off the back of the budget were there to help the first-time buyers or the younger generation, they are the ones that have been impacted the most post-budget and in this economic climate.
20:42
Because you've only got to look – Cotality released their report a couple of weeks ago for July.
20:47
And out of all the capital cities, the only market that's actually trending up is Melbourne price point sub $750.
20:53
So you've got investors playing in there, and that's where first-time buyers are playing.
20:56
Now, they're getting impacted by competitive market and also the rates as well.
21:00
So they feel like they're the most impacted in this market.
21:03
Is that kind of what you're hearing on the ground as well?
21:04
100%.
21:05
I mean, we're talking about...
21:08
A budget that was all about intergenerational wealth, a budget that was to help first home buyers.
21:15
And I don't know how they've done it.
21:17
It's maybe bad luck more than anything.
21:18
I'm not going to, you know, like I voted for Labor more than I voted Liberal, right?
21:24
Which a lot of people would find very, very surprising.
21:28
And I'm not going to point the finger 100%, but the truth of the matter is, I don't know how they were able to create a business plan, the budget, that somehow repriced all bits of real estate except the one market they wanted to actually help.
21:44
And it's actually gotten harder.
21:46
I mean, to give you an idea, there's 30% less first home buyers now than there was last year.
21:53
This is data, black and white.
21:57
And I get their point of view, but because you're spot on, the buyers have come down in price point, the 5% deposit scheme and the 2% deposit scheme, because there is a 2% deposit scheme, has actually meant that there's buyers there at the lower price point in all capital cities.
22:16
Investors are buying the lower price point properties, the ones that are remaining at the moment.
22:21
Some investors are still there.
22:23
So you end up having...
22:26
This competition at the price point that you wanted, and a lot of these buyers are very, very concerned, these first-home buyers, because of negative equity.
22:36
I don't think they've got to worry too much about it, right?
22:40
And the reason I say it is that there is enough competition in that lower price point that they're not getting the 20% falls.
22:48
But the way these first home buyers have been impacted is that banks have gotten harder lending them the money, right, number one.
22:56
So they've been impacted now because they can't buy some of those properties.
23:03
And then the second thing, which a lot of people are not talking about, is a lot of these first home buyers –
23:09
We're being helped by family.
23:12
I know this qualitatively.
23:15
I'm there on a Saturday next to Sarah with her parents, and I can see them.
23:21
And when we go to sign the contract, the parents are there with the daughter, right?
23:26
And then sometimes, like, I can't help it.
23:28
I'm a curious, inquisitive person.
23:30
I said, oh, you're going to, you know, move into it?
23:33
Yeah, it's my first home.
23:34
You know, mum and dad are paying the stamp duty for me.
23:37
Now, what's happened?
23:39
or whatever they're helping out, maybe a 50 grand deposit, the parents are disappearing because the parents are thinking, hang on a second, my whole life has been turned upside down now.
23:50
I have to worry about the future.
23:52
Life was not like it was in March or April.
23:56
The budgets changed my life.
23:58
So they're moving away from helping their kids.
24:02
So there's all these unintended consequences.
24:04
I mean, I haven't even heard of that term as much as I've heard it in the last few months, unintended consequences.
24:10
All these little things that Treasury didn't realise would end up happening that would make it less affordable for first home buyers.
24:19
The impact in terms of property employs so many businesses, right?
24:22
And I think you talk about those unintended consequences.
24:25
You've got settlement agents.
24:26
You've got furniture companies.
24:27
You've got real estate agents.
24:28
You've got buyer's agencies.
24:29
You've got builders.
24:31
You know, as soon as someone buys a home, what do they buy?
24:33
New TV.
24:34
All these businesses that feed off the Australian residential market.
24:38
And you're right.
24:40
What?
24:40
A trillion bucks overnight, essentially, in values, on track for another trillion dollars gone.
24:45
Yeah.
24:46
You disrupt the whole ecosystem of the Australian economy, which is underpinned by property.
24:51
And look, I can tell you, a lot of the public will be having zero sympathy for real estate agents making less money or mortgage brokers at this time or buyers agents.
25:01
Because as far as they're concerned is they've been...
25:04
You know, living off the gravy train for many, many years.
25:08
And some of them not only don't care, but probably happy because they've been sick and tired of seeing real estate agents shove Rolex watches on their social media posts and all that sort of stuff.
25:20
So I get that.
25:22
I will say this, as you said, real estate agents, mortgage brokers, conveyancers, solicitors, removalists, stylists, photographers, all that ecosystem has a significant impact to gross domestic product.
25:38
Significant.
25:39
People don't realise what it actually means for the economy.
25:44
And I haven't even started with state government revenues.
25:47
I mean, stamp duty, man.
25:49
Like New South Wales, 25% of its revenue comes from properties.
25:57
All these premiers have had to go, you know, re-forecast their whole budgets, right?
26:04
So there's those impacts as well.
26:07
So you do want a healthy real estate system in Australia.
26:13
for none other reason than the wealth effect.
26:17
And the wealth effect says this, when someone is feeling wealthy, they invest in things, they put stuff on in their business, they buy things, they keep the economy going.
26:30
But when you tell them, hey, listen, you're poorer, and I'll give you an example, I was talking to someone that I know, I'll give you the numbers.
26:42
Million dollar property.
26:43
It's in an area where it has gone down.
26:46
There's lots of investment properties around there.
26:48
So it's gone down.
26:49
It's probably worth about where it is.
26:52
Probably worth around $850, $900.
26:55
So let's say $850.
26:58
So it's gone from a million to 850.
27:01
His mortgage is 500,000.
27:04
His mortgage is still 500,000, right?
27:07
So what's gone down is his own money.
27:10
So basically what he was saying to me is, Tom, you don't understand.
27:14
I've lost $150,000.
27:15
I need to tighten up the belt.
27:19
I'm not going to make that trip away.
27:21
I'm not going to help that person.
27:22
I'm not going to do that.
27:23
That's called the wealth effect.
27:25
And the wealth effect says that when you feel prosperous and you're going well, like you act and behave in that way.
27:33
When you feel like you're poor, you go inward.
27:37
You disconnect.
27:38
And you don't spend.
27:40
And in some ways, maybe the government –
27:43
wouldn't mind some elements of that because of inflation, right?
27:47
I mean, I find it ironic.
27:49
Like we've got the government and the Reserve Bank trying to tell Australians spend less money when the government should spend less because they are a very, very big driver of inflation.
28:04
And everyone knows that.
28:07
And probably one of the reasons...
28:09
that over the last few days you've seen a discussion that I can't remember which Liberal MP it was, but he questioned the Reserve Bank on the modelling that Treasury had done if the government had spent less money.
28:23
And more or less they said, we've never done that modeling.
28:26
We haven't done that modeling, which I find ironic.
28:29
They actually said that they didn't have the manpower, which I also find ironic in a world of AI and in a world where we've had public service that has been heavily staffed.
28:41
It wouldn't take too much difficulty to say what would happen to inflation if we actually reduce spending by X percent.
28:50
That's not a difficult thing to do.
28:53
But I think sometimes in life, like if you've eaten really bad for a week and you don't want to get on the scales.
29:01
I think you don't see the results, do you?
29:03
Yeah, denial is easier.
29:05
Yeah, that's my view, you know.
29:07
Not everyone will sympathize with the real estate agents, buyers agents driving nice cars and watches, but small business employees more than anyone else in Australia.
29:15
And it's, you know, gyms mowing, it's a hairdresser, that discretionary spend that you might hold back on.
29:21
Instead of getting five coffees a week, you might only get one.
29:23
It's these smaller businesses that get impact, which has such a flow-on effect into the economy.
29:28
And I think you've nailed that perfectly.
29:30
Yeah.
29:30
It's an ecosystem, right?
29:33
Things work in combination, not in isolation.
29:36
And I think what's happened is we've come to learn this five months past the budget, that there is this ecosystem, you know, of things, yeah.
29:48
Yeah.
29:49
You spend a lot of time in New Zealand as well, and they've obviously gone through a similar political change or policy change over there, particularly with the removal of negative gearing.
29:59
And they've then reversed that decision a couple of years later.
30:03
Is there anything that we can learn as a country from what New Zealand did to sort of get out of this current situation we're in?
30:10
Probably reverse things quicker.
30:11
Yeah.
30:12
It took them three years, you know.
30:14
It's going to be good to learn from it.
30:16
Maybe learn from the mid-'80s, you know.
30:20
Like, we need some good leadership.
30:24
Whether we like it or not, and I'm a benefactor of it, I think about it regularly.
30:29
I finished my HSC in 1985, and I went through an era, Hawk Keating, Howard Costello, four amazing leaders,
30:40
during those 83, for the next, I think it was probably 15, 20 years, they were days Australia was put on the map, man.
30:53
And we're talking about both Labor and Liberal, right?
30:57
Put on the map because it was about aspiration, opportunity.
31:01
And where we've moved to now,
31:06
is away from aspiration into redistribution, right?
31:11
And redistribution is about like move things on the monopoly board, not actually make the monopoly board even bigger.
31:17
That's been the big change that we've had.
31:21
The truth is, and it's terrible, and I feel terrible about saying this right now because there'll be probably people in the 20s and 30s that will probably say we don't get the same benefits that they got, right?
31:36
I still have to tell you, we're still in the best, like I will no way in the world.
31:41
Every day I'm asked, but people say to me, Tom, you'll double your money if you move your business overseas for tax reasons, right?
31:47
I still love the product in Australia.
31:49
I still love Byron Bay.
31:50
I still love the Aussies.
31:52
I still love everything.
31:53
And I know that the truth is that it's going to get better.
31:59
What we're going through right now is temporary.
32:02
It's not permanent.
32:03
I mean, the truth of the matter is, and I'm just talking aloud here, and this is going to be on video and it's not going to come off so people could turn around and say, well, geez, he was either a genius or he got it wrong.
32:13
I just think that overall, people are unhappy with the direction that Australia is taking.
32:21
I think that what will end up probably happening is that some person in the Labor Party is going to pay a political price.
32:32
And then what will happen most likely after the Victorian election, if the coalition were to win, Labor will go into lockdown and say, guess what?
32:47
WA four weeks ago,
32:50
was not a one-off.
32:51
We've just had two places in Australia that have been diehard Labor people walk away from us.
32:58
Everyone's walking away from us.
33:00
And then what I think they'll do is get someone to pay the price.
33:06
Could be the Prime Minister.
33:07
Could be the Treasurer.
33:10
And then what you'll do is you won't say, hey, we're reverting everything back.
33:14
Oh, we believe that based on what we've seen, this needs to get done.
33:19
It'll be a bit like, you know, changing our position.
33:21
Yeah, because they have a history of being able to say we've changed our position on this.
33:26
We're going to change our position on this.
33:28
So I think that will happen.
33:29
So I'm still really, really, really, really hopeful.
33:32
And I think some of the simple things will be like the self-managed super in residential.
33:36
That will be like that.
33:37
the no-brainer straight away that will have an impact.
33:40
I mean, to me, anyway, it could have been just we didn't have to go down all this path.
33:46
All we had to have done is turned around and said, listen, we don't like people having lots and lots of properties.
33:51
Let's just do negative gearing to a certain amount, three or four properties, right?
33:56
capital gains tax rules, you would just create them in a way that you would say, the longer you keep the property, you're providing adequate housing for tenants, the less you'll pay in tax.
34:05
If you're going to be a flipper, you're going to pay a lot more.
34:08
That should have been the path instead of just turning the country inside out.
34:11
Common sense, you would have thought.
34:13
Yeah.
34:13
You need how many people in Canberra to make a simple decision.
34:17
But you're right.
34:17
I think we're in a cycle.
34:18
We're in a season and we're in winter at the moment.
34:21
And we know what comes after winter.
34:22
It will take some time.
34:24
Do you think based on where we are today and where we're going over the next few months, we are going to go into a recession?
34:30
That's the question everyone's talking about at the moment.
34:32
And then the second part to that, will it be the recession that we need to have?
34:36
You know, maybe it's...
34:38
The finger pointing that will come out of this that, okay, we got this wrong and it will create the change that we need.
34:43
I think it's 50-50.
34:45
So I consume a lot of content from certain economists.
34:49
I like Alan Kohler.
34:51
When I was doing my uni, I used to look at his stuff a lot and I watch his stuff.
34:56
Here's what's going to happen.
34:57
We've got a rate rise coming and unfortunately the inflation numbers get reported the day after the interest rate.
35:05
announcement.
35:06
So I think what will happen is we'll have an interest rate rise in September because I think if they hold back to wait to look at the numbers the day after, what will happen if the number's not good, then they're only getting November and December.
35:25
They've got to wait because there's no Reserve Bank meeting in October.
35:29
So I think based on everything, the easiest thing to do is to put the rate up in September, then see what happens.
35:38
Now, if rates were to go up again in November, right, I think we move into a most likely recession.
35:48
If the rates were to go up September, right?
35:51
November and December, right?
35:54
Which is a possibility.
35:55
It's not a strong possibility, but it's definitely a possibility, right?
35:59
Definitely, I think we're going into recession territory.
36:02
But I also think we're still a possibility in going to recession having September and November, right?
36:08
Yeah.
36:10
And then people thinking we're still going to get a rate rise in the new year, you know.
36:15
Best case scenario, best case scenario, unlikely scenario, but best case scenario is that they don't put the rates up in September.
36:22
They wait for the numbers.
36:23
They realize things –
36:25
are working and then they don't have to put the rates up in November, they don't have to put the rates up in December, I think we have a chance of avoiding a recession.
36:33
So if your viewers and listeners understand, it's a paradox.
36:37
When people say it's the recession we have to have, essentially what you're trying to do is if you can just picture an aeroplane,
36:45
And what you're trying to do is get that plane to have a soft landing, not a plane that has a crash.
36:52
The levers that you've got to do to do that is not easy because you've got to cause pain, but not so much pain where unemployment.
37:03
So unemployment is the main issue with recessions, right?
37:06
So you've got to somehow, you know, create pain to control the behaviour of people, but not in a way that the plane crashes.
37:17
Right.
37:17
I know I've gone a long way about answering, but I think it's 50-50.
37:20
I think the next month is going to give us the best indicator is Australia going into recession.
37:27
I've lived through a recession.
37:30
And I've thought about it.
37:31
I was a younger kid.
37:32
There's only one recession that I've lived through, and it's the one, the Paul Keating one.
37:37
I was like, and I actually owned a business.
37:39
I opened up an office, and all I can tell you is it's a weird feeling.
37:44
It's a bit like COVID, actually.
37:46
Not as quiet as COVID, but what you notice is the phone stopped ringing.
37:53
Right.
37:54
Right.
37:55
And not just for you, for all businesses.
37:56
Yeah.
37:57
It was weird.
37:58
I remember it.
37:59
It was the phone stop.
38:01
You sit there at Open for Inspection as an agent and you sit there for weeks and months and no one comes in and you just sit there.
38:09
I still remember it.
38:10
Victoria Road, I'll never forget.
38:12
I did an open home in 1991 in Victoria Road and I did an open home, 20-year-old kid, 16 weeks in a row, not a single buyer.
38:20
Well, it wasn't a buyer.
38:21
On the 16th week.
38:24
That was the day I gave the keys back to the owner.
38:26
I clearly remember because someone pulled up in the car and I thought it was a buyer.
38:30
They put their window down and they said, I'm lost.
38:33
Do you know where Roseland Shopping Centre is?
38:36
So I just said to myself on that day, I'm going to give the owners the keys.
38:39
I'm out of here.
38:40
Do you think there's been some positivity to come out
38:44
of this potential correction.
38:46
And we kind of alluded to it earlier with people manipulating, not necessarily manipulating the system, but playing to the rules of the system, but over leveraging themselves and using negative gearing benefits.
38:56
There's a lot of buyers, agents out there that were pushing very speculative assets.
39:00
Some still here today, but a lot have actually either gone on or restructured some of their businesses.
39:05
You've looked at...
39:06
particular Sydney as well, some big prominent agents getting done for under quoting and pumping up the market.
39:12
Do you think this correction is actually going to, you know, there's going to be some positivity out there where there'll be a bit more regulation from particularly the buying side, definitely, because that's been a new industry that's risen in this property cycle, but even on the selling side as well.
39:25
So is the question about regulation?
39:28
More regulation.
39:28
So there's some positivity, like the consequences of the back of the budget was some of these operators, and now there's a lot more attention on them or they're starting to exit the market as well.
39:37
I guess it's somewhere.
39:38
Does it clear the decks and get rid of the bag of guys?
39:40
Okay, so there's two clear issues.
39:42
The first thing is before the budget –
39:45
The Consumer Affairs Office of Fair Trading in Melbourne, they're changing the auction laws in New South Wales, which I know the guy, Angus Aberdee, the commissioner, very good person.
39:56
So in some regards, they're clearing the act of the unethical agents.
40:01
The budget is clearing the act of the nonproductive agents.
40:06
So if you're a real estate agent that was doing one to two sales a month back then, you're...
40:12
You're now doing none.
40:15
If you're an agent that was doing five or six or seven sales, you've probably dropped down to three to four.
40:22
We're talking about a month.
40:25
So 100%.
40:26
For me, there is a positive.
40:28
There.
40:30
And that is that between all these shows, million dollar listing and what have you, you get all these people coming into real estate that are looking for fast, quick money.
40:44
And they normally come when you look at markets going up.
40:48
So does real estate recruitment.
40:50
They all come in.
40:52
When the market goes down, you see those people going down.
40:55
So a lot of the veteran real estate agents, a lot of my clients who have been doing it long term, they've probably are not happy about the fact that volume has come down and volume is something we haven't spoke a lot about, but volume has come down dramatically.
41:11
And real estate is a volume based business.
41:14
Real estate agents are
41:16
don't get rewarded on how high a home sells, but how many they sell.
41:23
So volume has come down, and agents aren't happy about that, but the good agents are happy about the fact that some of the cowboys, some of the clowns that would sit on social media putting posts of how good they are, right, that's all sort of slightly disappeared.
41:38
You're not seeing a lot of those anymore.
41:39
You're not seeing people hashtag killing it, hashtag million-dollar agent,
41:46
Hashtag wanker to me.
41:47
That's what it is, right?
41:49
You do not see other professions.
41:51
You do not see the dentist, hashtag 10 root canals today, hashtag number one dentist in build.
41:58
You don't see that, right?
42:00
So that's probably one of the humbling things that the industry has had to cope with, right?
42:05
To let you know that, hey, it's not always going to be good.
42:10
Have a reality check, right?
42:13
So there are positive sides.
42:17
I've got two daughters, 22 and 20, turning 21.
42:19
I want...
42:23
property prices to be attainable.
42:27
But I actually know that what has actually happened is not helping my two daughters.
42:31
What would have been better is if the first home buyer price points have gone down or if there was a strategy in place that actually said, hey, Australia, we've got good news for you.
42:40
We're going to have a million homes being built.
42:42
We're cutting the red tape out of that.
42:44
We're bringing modular homes here.
42:46
We're going to provide these grants for people that are first home buyers.
42:50
Oh, by the way,
42:51
If you're a nurse, if you're a fireman, if you drive an ambulance, you get this subsidy.
42:55
If they did sorts of things like that, right, that would be really, really good.
42:59
And I still think to myself that Australia is a kind of country that it's only going to take a few people that are care, that have got brains, that will actually change the direction again of this country, right?
43:10
And it could be, listen, it could be, I'm not saying, it could be labor as well.
43:15
But at the moment, the current model is not working.
43:19
Normally...
43:20
What you've got is when governments do things, you normally have one group, hooray, hooray, and then you've got another group, no good, no good.
43:30
Here, we've got everyone, pretty much everyone, on one side.
43:35
Tenants aren't happy.
43:36
First homebuyers aren't happy.
43:37
Small business people aren't happy.
43:39
Real estate agents aren't happy.
43:41
Whoopie doo.
43:42
Mortgage brokers aren't happy.
43:44
No one seems to be happy.
43:46
Except probably a group of people that have got a – I think if you're a public service employee, you'd be less unhappy.
43:55
But you still might not be happy overall because let's face it, things are hard.
43:59
Right?
44:00
Yeah.
44:02
That was awesome.
44:02
Yeah.
44:03
That was great.
44:04
That was really, really good.
44:05
I was going to follow up question, but I thought that final statement and sort of even a mini rant there was perfect because I think you nailed it there perfectly, Tom.
44:15
You know, the consequences of what's happened from decisions made over the last 12 months has actually made a lot of people unhappy, not necessarily a cohort group that it was designed to do.
44:25
And I've got to say, look, you know, that bit that you talked about,
44:32
I don't like the concept of people going into these cheap areas, buying homes, buying homes.
44:45
like regional areas where you can get really, really cheap properties, right?
44:51
Everything looks great on a spreadsheet until it doesn't, right?
44:55
And now we're beginning to see these areas across Australia, right, that were heavily based on a model that required an investor to buy cheap properties
45:09
and purely needed the negative gearing for it to happen.
45:13
Otherwise, the deal would collapse, right?
45:17
And you'd see people on pretty low incomes owning six or seven properties, right?
45:26
Like, I was never in favour of all of that, right?
45:29
Because at the end of the day, I mean, maybe it's because I've been in real estate a long time, that you need things to go up, right?
45:39
And all these years, these things, look, they look great, but they don't go up anywhere near as good quality real estate does.
45:49
But good quality real estate, actually, you'll probably find doesn't get the yield.
45:56
We could go on and on and on.
46:08
about the fact that some people would own 5, 10, 15 properties and then other people couldn't buy a house.
46:15
And I actually don't even think for the person that owned 5, 10, 15 properties, I don't necessarily think that that strategy was the best strategy in the world.
46:24
You do need an area to go up.
46:26
I know people that have owned properties in areas that haven't gone up for decades.
46:31
Right?
46:33
What's the point of having it?
46:35
You know, now the tide's washed out.
46:37
You're going to see who was swimming naked, right?
46:39
Like when the tide's rising, all ships rise, and we're seeing the reverse of that.
46:43
So unfortunately, those people with 10, 15, 20 properties in regional areas or very volatile high speculation areas are going to find them unstuck.
46:52
Well, there's no buyers there.
46:54
You can't sell it.
47:10
Closer to the city as possible for work.
47:13
So you've just got to keep thinking to yourself.
47:15
You've got to keep thinking fundamentals, right?
47:18
Aging population.
47:19
Okay, people are getting older, right?
47:22
So as they're getting older, think to themselves.
47:24
I want to move into things that are smaller, flat, more villas, right?
47:27
That's a good investment.
47:28
It's a villa.
47:29
It's not going to have stairs.
47:29
You've got to think chess when you're doing real estate, not checkers, you know?
47:33
Just –
47:34
To go on to that point as well, actually, Tom, where do you see the regional market?
47:38
You mentioned some classic examples that me and Lachlan talk about on the show all the time.
47:43
And we see a lot of these portfolios.
47:46
We were just in a business meeting yesterday with a mortgage broker who specialized in building these portfolios.
47:51
And it was almost like a badge of honor.
47:53
And we were kind of looking at each other pretty concerned.
47:55
And I was saying to Lachlan, like...
47:57
Jeez, this reminds me of a scene on The Big Short where there's just that sense of pride of leveraging that debt in pretty speculative areas.
48:04
Do you see with the conditions that are happening right now that we're going to start seeing some of those regional towns that were flooded with investors?
48:11
I'm talking like your Gladstones of the world, Townsville to a certain extent, a lot of these areas in the Mildura, a lot of these areas are being flooded with buyer's agent activity.
48:20
Do you start to see those cracks will start to appear first in terms of the market conditions?
48:24
I do.
48:25
And the reason why I see, and please don't, you know, you mentioned a few suburbs.
48:31
I've got to go off and look at, you know, the data, but they remind me of suburbs that have probably been heavily populated with buyer agents picking up $300,000, $400,000, $200,000 homes.
48:42
I get that concept.
48:45
The issue that you're going to have is the demand and supply.
48:47
Again, back to the fundamentals, if they want to offload it.
48:51
Who's going to go off and buy that property?
48:53
Because they bought that property because there were certain rules in place.
48:57
Those rules are not in place anymore.
48:59
So who are you going to sell that property to?
49:01
Why will someone go live there?
49:04
Why do they want to go live there?
49:05
So they would be there.
49:09
the higher risk areas I would expect, and the lower risk areas would be the areas that meet the fundamental issues, transport, hubs, employment,
49:25
infrastructures, communities.
49:27
But having said that, a lot of regional parts, then you've got lifestyle regional areas, right?
49:33
And lifestyle regional areas have had a bit of a COVID benefit and many of these still live off that benefit in the sense that there are people that are employed that can live in those areas.
49:48
I'll give you an example.
49:49
So all you've got to do is go to Byron Bay
49:52
At Ballina Airport on a Monday morning, you'll see a heap of people.
49:58
You see specialists, you see judges, right?
50:01
They're getting on a flight from Ballina to Sydney.
50:04
They're hanging out in Sydney Monday, Tuesday, Wednesday.
50:07
They're doing Zoom Thursday, Friday.
50:10
So they're basically living in a lifestyle area for four days a week, right?
50:16
A lot of those areas, and listen, I should put on there, I mean, I mentioned an area, conflict of interest, I own real estate in that area as well.
50:23
So I want to make, I'm not saying it for that reason.
50:26
I'm not just talking about buyer and I'm talking about the difference between a lifestyle regional area that people, you know, can set up and have an infrastructure.
50:35
I mean, places like the Gold Coast.
50:37
I mean, Gold Coast is getting smashed at the moment, but the Gold Coast is another example of an area that you can live, lifestyle area.
50:43
Some people would say it's more of a city these days anyway.
50:48
Yeah, but I still believe in regional areas that have got underlying fundamentals that need them, not these areas that no one wants to touch.
51:01
Oh, look at this.
51:02
There's all these cheap houses there, right?
51:05
I treat those regional areas differently.
51:07
Before we get you out, I just want to get your thoughts or even predictions on where we're going from a property cycle perspective.
51:15
We've been speaking about on the podcast that there's been a two-speed economy up until the budget where you had Sydney and Melbourne on the decline.
51:23
Perth, Adelaide and Brisbane were still going gangbusters at the time.
51:27
Now we're actually looking at the latest data.
51:29
We're seeing Brisbane and Adelaide starting to fall the hardest in the weekly data.
51:34
You're seeing Melbourne now looking almost being the strongest capital city across the board, mainly from affordability price point we'd expect.
51:43
But it almost feels like it could be like a five-speed economy here.
51:45
Do you see markets like Sydney and Melbourne entering out of this before the markets that have been going around for the last five years?
51:53
100%.
51:54
And the reason why is they entered it first.
51:57
They leave it first.
51:59
So they're actually, if you look at history, Sydney and Melbourne are good indicators as to what's going to happen next.
52:07
So you'll normally find that they feel an impact first.
52:12
So they go down first and they can smell, hey, there's light at the end of the tunnel first and they start going up first.
52:22
So I would say that one thing is very clear.
52:27
We no longer now talk about how's the market going, which how is your market going?
52:34
because we know that Australia now works with sub-markets that can operate with having too much of a connection on what's going in the next place.
52:45
Like, all you've got to do, like, you mentioned Townsville before.
52:48
Was I there?
52:50
I was there last week.
52:52
No, I was in Cairns last week, sorry.
52:53
I was in Cairns last week, the week before.
52:57
So Cairns and Townsville, they're next to each other.
53:00
They're operating differently, right?
53:04
So you can also now have sub-markets in markets.
53:09
Example, Concord.
53:11
Cheap does better than expensive.
53:14
New properties versus old properties.
53:15
So there's not one market, but if you had to say overall...
53:19
I would probably say Sydney, Melbourne, come out of it first.
53:22
And I would say that at some point next year, we begin as a country on a new cycle after we bottom.
53:32
Tom Panos, thank you for joining the Follow-up Podcast.
53:34
Thank you so much, gentlemen.