Latest / The Money Puzzle / Property pile-up warning: Bracing for a listings overhang

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Property pile-up warning: Bracing for a listings overhang · The Money Puzzle

0:11
Speaker 1: Hello and welcome to The Australian's Money Puzzle podcast. I'm
0:13
Speaker 1: James Kirby. Welcome aboard. You know nothing stays the same
0:16
Speaker 1: for long. If you're an investor and inside the property market,
0:20
Speaker 1: I would be on standby, folks for some key changes ahead.
0:24
Speaker 1: Now we know prices are falling and we know there's
0:26
Speaker 1: going to be some dramatic stories in terms of builders
0:29
Speaker 1: falling over. That's for sure, that's coming down the line
0:32
Speaker 1: in the days ahead. But also it's worth noting that
0:37
Speaker 1: interest rates, the single most important factor for you as
0:40
Speaker 1: a property investor, may have peaked. There's also a high
0:44
Speaker 1: level debate about immigration, with the Alberines government basically on
0:48
Speaker 1: standby with a plan that cuts immigration. What would that
0:51
Speaker 1: mean for property investors. My guest today is a genuine
0:54
Speaker 1: authority on the residential property market in Australia. He spent
0:57
Speaker 1: his entire professional life with the SQM Research Group and
1:01
Speaker 1: he is the managing director.
1:02
Speaker 2: It's Louis Christopher. How are you, Louisy Jane. It's nice
1:05
Speaker 2: to be with you once again.
1:06
Speaker 1: Lovely to have you on again. I think for many
1:08
Speaker 1: listeners that is such a key issue, and you know
1:12
Speaker 1: we've seen the big banks. Over the last couple of days,
1:15
Speaker 1: every single one of them have cut their term deposit rates,
1:19
Speaker 1: which tells me that they are of the opinion that
1:23
Speaker 1: we are at the top. But what do you think.
1:26
Speaker 3: I think the probabilities have increased that we're at the
1:29
Speaker 3: top in terms of interest rates, but we can't rule
1:35
Speaker 3: out at this.
1:35
Speaker 2: Stage another interest rate rise.
1:38
Speaker 3: It's still possible, but the probabilities have reduced. I'm just
1:43
Speaker 3: still concerned about the reserve banks hawky tone that they
1:48
Speaker 3: used on their last RBA meeting. It was rather hawkyh
1:53
Speaker 3: So they've made it absolutely clear that they could lift
1:57
Speaker 3: interest rates again. But we're also mine what is going
2:01
Speaker 3: on in the greater economy, which I did point to
2:03
Speaker 3: as well, that the economy has been slowly.
2:06
Speaker 1: In your experience, once the rates peak, how does the
2:09
Speaker 1: property market respond? Does it take some time?
2:12
Speaker 3: Once you start seeing interest right cuts, you normally see
2:17
Speaker 3: an increase in activity about three to six weeks after
2:22
Speaker 3: the cut.
2:25
Speaker 1: That quickly, yeah, right, okay, But once you see the cuts,
2:27
Speaker 1: so there is a straight line correlation may speak between
2:30
Speaker 1: the rate cuts and the property market, the residential property
2:33
Speaker 1: market coming alive, which it's obviously right now it's in
2:36
Speaker 1: something of a trough, and we've seen the big banks
2:40
Speaker 1: and others increasingly negative forecasts about the how much prices
2:46
Speaker 1: would drop. I think the worst I have seen is
2:48
Speaker 1: in the twelve percent order from peak to trough. Do
2:52
Speaker 1: you think we've seen the end of those forecasts? If
2:56
Speaker 1: rates are peaking, are we seeing the natural end of
3:00
Speaker 1: the sort of gloomy forecast for property or is it
3:02
Speaker 1: more to come to think?
3:04
Speaker 2: Well?
3:04
Speaker 3: I think we all need to keep in mind that
3:08
Speaker 3: the banks historically have really lagged a housing market in
3:12
Speaker 3: terms of forecasts. They have not got a good track
3:15
Speaker 3: record in picking the market. I think the latest updates
3:19
Speaker 3: that they've done in terms of revised forecasts, I've basically
3:24
Speaker 3: put themselves in line with earlier forecasts made by other
3:28
Speaker 3: experts out there, such as myself. I think that if
3:34
Speaker 3: we were just seeing a recovery in the market once again,
3:38
Speaker 3: they would lag in their forecasts. They would take up
3:40
Speaker 3: to six to eight months before they start revising their forecasts, right,
3:45
Speaker 3: So I think we need to be careful about weighing
3:49
Speaker 3: too much on the bank's forecasts. That said, we are
3:54
Speaker 3: still negative on the housing market ourselves. We've stuck to
3:59
Speaker 3: our revised padcasts we put out in March at city
4:03
Speaker 3: housing prices would fall by up to nine percent this
4:06
Speaker 3: calendar year in Melbourne by up to seven percent this
4:10
Speaker 3: calendar year. And it's not a paid to trough forecast
4:14
Speaker 3: de client, it's just what we expect for this calendar year.
4:17
Speaker 3: Our expectation is that unless our Reserve Bank of Australia
4:21
Speaker 3: does aggressively cutting just right to the next few months,
4:24
Speaker 3: I think that's going to happen, that the housing price.
4:27
Speaker 2: Falls will continue into twenty twenty seven. Okay.
4:32
Speaker 1: The other big issue that could be a turner, if
4:34
Speaker 1: you like, of the market is immigration, and it's a
4:37
Speaker 1: key factor. And we know that Tony Burker in the
4:40
Speaker 1: Alberanze administration has an immigration package. Basically he has held
4:45
Speaker 1: it back. It's a hot issue politically. I just want
4:48
Speaker 1: to talk about it economically. If there's any change, and
4:52
Speaker 1: any change would be less immigration that I think we
4:55
Speaker 1: can take as read. How does that play into the
4:57
Speaker 1: property market.
4:58
Speaker 2: Yeah, it's a really good question, James. Now, the population
5:04
Speaker 2: numbers that we rely on to make conclusions and deductions
5:08
Speaker 2: and so forth is a really really laggy measurement.
5:13
Speaker 3: So just so you know, the official population numbers from
5:18
Speaker 3: the ABS have only been updated through to December twenty
5:22
Speaker 3: twenty five. We don't know yet what's happened in the
5:25
Speaker 3: first quarter of twenty twenty six, let alone the second
5:28
Speaker 3: quarter of twenty twenty six, let alone what's going on
5:31
Speaker 3: in real time. However, what we do know is that
5:35
Speaker 3: December number showed a population expansion of about seventy eight
5:40
Speaker 3: thousand for the December quarter, which does represent a natural
5:45
Speaker 3: slowdown on what we've been recording previously. Now, if you
5:49
Speaker 3: were to annualize that number, okay, that would suggest that
5:54
Speaker 3: the population growth has been slowing down to an expansion
5:58
Speaker 3: of about three hundred and twenty thousand people. The official
6:01
Speaker 3: number for the twelve months of December is that the
6:04
Speaker 3: population expanded by about four hundred and ten thousand. Now,
6:08
Speaker 3: where I'm going to with this, James, is that it's
6:10
Speaker 3: possible that the population expansion is slowing down more rapidly
6:17
Speaker 3: than what we current than.
6:18
Speaker 2: What we realize. It's possible.
6:20
Speaker 3: I'm not saying it is happening, but I do note
6:23
Speaker 3: that our rental data, which I think is a really
6:26
Speaker 3: good proxy in terms of how underlying demand is increasing,
6:31
Speaker 3: rents have been going nowhere. In the last few months nowhere,
6:37
Speaker 3: the rate of growth of brents has slowed right down.
6:41
Speaker 3: And I've got this inklin that perhaps the population growth
6:46
Speaker 3: rate has been slowing faster than what we're all forecasting
6:51
Speaker 3: and anticipating. So if I'm right about that, there are
6:57
Speaker 3: ramifications for the economy and for the housing market. It
7:02
Speaker 3: will be on the flip side, good for ends if
7:05
Speaker 3: population is slowing down to say back down to say
7:08
Speaker 3: that three hundreds or indeed the high two hundred.
7:10
Speaker 1: When you say it would be good for ends, you
7:12
Speaker 1: mean it will be.
7:14
Speaker 2: Yes, good for enss, Yes for landlords. So good for that.
7:19
Speaker 2: It'll be a negative for existing property owners in terms
7:23
Speaker 2: of housing prices, because this would be a drag over
7:26
Speaker 2: and above the property taxation changes and the interestrate rises.
7:32
Speaker 3: And it will not be that good for new supply,
7:36
Speaker 3: which is already struggling under the way to the slower
7:39
Speaker 3: economy and the property taxation changes. So we need to
7:45
Speaker 3: watch this space. We can't make too many conclusions right now.
7:48
Speaker 3: Then the next update from the ABS is coming out
7:51
Speaker 3: in about.
7:52
Speaker 2: Two weeks from now, right, and I'll be watching that
7:55
Speaker 2: very closely.
7:56
Speaker 1: In DK, all these factors, everything literally we've talked about
8:00
Speaker 1: plays into the broader narrative that it's a buyer's market.
8:05
Speaker 2: Just it is a buyer's market. There's one hundred percent.
8:07
Speaker 2: It's a buyer's market. And as we.
8:10
Speaker 3: Head into spring, it's going to be even more of
8:13
Speaker 3: a buyer's market because seasonally you see a rise in
8:18
Speaker 3: property listings, quite a significant rise. It's normally a thirty
8:23
Speaker 3: to forty percent increase in the listings over the spring
8:26
Speaker 3: selling season compared to winter.
8:29
Speaker 2: So we're about to go into a period of increased supply.
8:36
Speaker 2: And those property owners who've got their property expectations, they're
8:41
Speaker 2: pricing expectations over and above the market.
8:44
Speaker 3: I can assure you now they're not going to sell.
8:47
Speaker 3: It just will not sell in this market right now.
8:50
Speaker 1: So will we get the usual with thirty forty percent
8:52
Speaker 1: lift and this thing's are even more or how does
8:54
Speaker 1: it work? Are they coming in on top of an
8:56
Speaker 1: already sort of elevated level.
8:59
Speaker 2: Yes, they are right. So nationally there's about two hundred
9:04
Speaker 2: and eighty thousand listings, which is about now about thirty
9:08
Speaker 2: thousand properties above the long term average for Australia. So
9:11
Speaker 2: we're now running above the long term marriage It wasn't
9:15
Speaker 2: so long ago. We were structurally running underneath the long
9:18
Speaker 2: term average for a long time, but that's changed, so
9:22
Speaker 2: there are there is definitely a lot more choice out
9:24
Speaker 2: there for buyers.
9:25
Speaker 3: And that is just to be clear. When I talk
9:28
Speaker 3: about total listings, I'm talking about new listings. I'm talking
9:31
Speaker 3: about listings that.
9:32
Speaker 2: Have also been on the market for over one hundred
9:34
Speaker 2: and eighty days, which now represent about thirty five to
9:39
Speaker 2: forty percent of the total listings market.
9:41
Speaker 1: And what would it normally represent, Louis about.
9:44
Speaker 2: In a good period less than twenty percent.
9:47
Speaker 1: Right there, it is. That's it there. That's the sort
9:49
Speaker 1: of pilot if you like.
9:51
Speaker 2: It's a pilot. The pileop's been occurring because there's less
9:54
Speaker 2: demand out there and now we're seeing sellers just piling
9:59
Speaker 2: up against each other, hitting with each job.
10:01
Speaker 1: Okay, on that note, we'll take shortbreak. Folks back in
10:03
Speaker 1: a moment. Hello, Welcome back to the Australians Money Puzzle podcast.
10:18
Speaker 1: James Kirby here with regular guests Louis Christopher and Managing
10:21
Speaker 1: director of the SQM Research Group, who is, as I
10:25
Speaker 1: have said at the start of the show, one of
10:27
Speaker 1: the real independent voices and experts on residential property, which
10:32
Speaker 1: I can tell you I find hard to find for
10:35
Speaker 1: the show for you, because this is what I want
10:37
Speaker 1: for you. I want people with an independent view. Now,
10:40
Speaker 1: louis one of the things, as we mentioned the buyer's market.
10:43
Speaker 1: On the other side, we think about you mentioned about rents.
10:47
Speaker 1: I know you're probably uncomfortable talking about individual forecast from
10:51
Speaker 1: other people, but there was quite a lot of attention
10:55
Speaker 1: paid in recent days to a very large real estate
10:57
Speaker 1: company in the residential space who estimated that there would
11:01
Speaker 1: be it could be a thirty percent increase in rents
11:05
Speaker 1: because of the entire sort of combination of the tax changes,
11:10
Speaker 1: higher rates, and the fact that property owners can do
11:14
Speaker 1: it right, they can do it. You can do it
11:16
Speaker 1: in this market because there's such a tiny vacancy rate.
11:19
Speaker 1: What did you think of that?
11:21
Speaker 3: Yeah, if you're talking about the rental fore class of
11:23
Speaker 3: rents could rise for the keeper.
11:25
Speaker 2: See I am the sort of property taxation changles, so
11:29
Speaker 2: mathematically that is possible.
11:33
Speaker 3: Where they're coming from, as where've been coming from with
11:36
Speaker 3: this discussion, is that investors are going to demand a
11:41
Speaker 3: rise in rental yields to compensate them for the loss
11:46
Speaker 3: of the taxation benefits, they had lots of negative gearing
11:49
Speaker 3: the increased tax on capital gains, and so yields will
11:56
Speaker 3: rise and have been rising in this country now. So far,
12:01
Speaker 3: the yields are being rising because of the property falls,
12:05
Speaker 3: less so the rents.
12:07
Speaker 4: However, there is a proper argument here that since there's
12:12
Speaker 4: less investors in the housing market, so will it be
12:15
Speaker 4: that there will be less rental properties compared to the
12:20
Speaker 4: number of renters that are out there, And so that
12:25
Speaker 4: then means okay, cutting the.
12:27
Speaker 3: Supply of rental properties relative to demand, you can expect
12:32
Speaker 3: the rental price to rise. That's logical. Does it go
12:37
Speaker 3: up by thirty percent? Well, I don't think it will
12:42
Speaker 3: go up by thirty percent because we're seeing the rising
12:46
Speaker 3: yields currently being generated by price falls. Now that could
12:52
Speaker 3: mean that, for example, housing price falls might happen pete
12:55
Speaker 3: the trough, say twenty percent, and then rents go up,
12:59
Speaker 3: say ten ten percent, to get ourselves back to the yield.
13:03
Speaker 3: That would entice investors back into the market once more.
13:07
Speaker 3: That's the mathematical logical rush now behind it. But of course,
13:12
Speaker 3: market to markets and it's full of emotion, and property
13:14
Speaker 3: is an emotional thing. I'm little concerned at the mode
13:19
Speaker 3: James by what we're calling demand destruction, because the truth
13:23
Speaker 3: of the matter right now is that since the property
13:28
Speaker 3: taxation changes have been announced, advertised rents have gone nowhere.
13:33
Speaker 2: Yeah, there's been rowing.
13:36
Speaker 3: Knee jerk reaction by landlords who've currently got a rental
13:40
Speaker 3: property available for rent and advertised for rents to suddenly
13:43
Speaker 3: lift their rent They're not doing it.
13:45
Speaker 1: Okay, So that's that's the so that the only year
13:48
Speaker 1: lift is to just because the prices is lower and
13:51
Speaker 1: the rental heights basically are forecast. But on your numbers,
13:56
Speaker 1: no one has been lifting rents yet.
13:58
Speaker 2: Yes, Now, I think this is really important a clarified
14:00
Speaker 2: because sections of the media I have been sounding like
14:06
Speaker 2: this is a beta complete a rents are going up.
14:09
Speaker 2: It's like I say, they're saying it's already gone up,
14:12
Speaker 2: but no, they haven't advertised rents have essentially laid stable
14:19
Speaker 2: since the property taxation changes. Now, that's not to mean
14:22
Speaker 2: that they won't go up, and we must als are considered.
14:25
Speaker 3: There may well be some seasonality in this, and that
14:28
Speaker 3: rents typically do not rise a lot during the winter months.
14:32
Speaker 3: When you get into the spring months, they tend to
14:34
Speaker 3: pick up, and that's why I think the jury still
14:38
Speaker 3: needs to be out in terms of how much this
14:41
Speaker 3: will impact upon rents. Logic says and mathematics says that
14:45
Speaker 3: we will see some type of increase in rents as
14:48
Speaker 3: a result of property taxation changes. I think there will be,
14:52
Speaker 3: but I'm a little bit more cautious in terms of
14:55
Speaker 3: saying it's a beta complete, and that is because number
14:58
Speaker 3: one e kondomy is slowing. I think there's a degree
15:01
Speaker 3: of demand destruction that's going out there as well. In
15:03
Speaker 3: other words, rents have already reached a real highly elevated
15:08
Speaker 3: level where the market's adjusting in terms of sharing together.
15:12
Speaker 3: More so, housing formation has been slowing right down. And two,
15:17
Speaker 3: if we are seeing a slow down a population growth
15:21
Speaker 3: rate to the point where population expansion is back to
15:24
Speaker 3: the two hundreds, okay, well, then demand and supply at
15:29
Speaker 3: getting closer to equilibrium once more.
15:33
Speaker 2: Okay.
15:33
Speaker 3: So there is a layls of the scenario that plays
15:38
Speaker 3: out here where the yield adjustment occurs all on the
15:41
Speaker 3: property price balls unless so rents. I'm not saying that
15:45
Speaker 3: it's definitely going to happen, but I'll always I always
15:48
Speaker 3: put a bit of weight into current trends, James, And
15:51
Speaker 3: like I said, if you look on our data, if
15:54
Speaker 3: your audience goes on our website and looks at the
15:57
Speaker 3: appetised rents at the capital city level, they will see
16:00
Speaker 3: very clearly nothing has happened since the party taxation change.
16:04
Speaker 1: Okay, that's interesting, isn't it? For the listeners? I mean,
16:06
Speaker 1: certainly the scenario if you're thinking of selling property in
16:10
Speaker 1: this spring, well you're coming on to a pretty crowded market.
16:15
Speaker 1: That is something that's worth keeping in mind. And if
16:17
Speaker 1: you are reviewing rents, then just keep it in mind
16:21
Speaker 1: that rental yields in and of themselves have got better anyway,
16:25
Speaker 1: folks as investors because prices are falling, Yeah, but not
16:29
Speaker 1: it doesn't necessarily mean that rents are rising.
16:32
Speaker 2: That's exactly right. So yields are already rising.
16:36
Speaker 3: One thing I'm willing to bet the house on excuse
16:38
Speaker 3: the part, is that yields have to rise, and they
16:42
Speaker 3: have been rising, and they're going to keep rising. That's
16:45
Speaker 3: a mathematical certainty. They are going to go up. But
16:48
Speaker 3: how they go up is where the jury is still out.
16:51
Speaker 3: Do they go up by all housing price falls, combinations,
16:54
Speaker 3: some price falls and rent increases or is it all
16:57
Speaker 3: only in increases. Well that thirds Nario has already rolled
17:01
Speaker 3: up because we're having housing prize falls.
17:03
Speaker 1: Okay, yeah, as you say, the reliable one is the
17:06
Speaker 1: mathematical one. These just go up when the prices go down, folks.
17:09
Speaker 1: And on that basis alone it becomes more attractive as
17:12
Speaker 1: an investor. Whether in turn rents as malleable as suggested
17:18
Speaker 1: is open question. Okay, terrific, we were taking short break.
17:21
Speaker 1: I've kept some questions for Louis. I want to get
17:24
Speaker 1: right to them back in a moment. Hello, Welcome back
17:39
Speaker 1: to the Australian's Money Puzzle podcast. James Kirby here with
17:42
Speaker 1: Louis Christopher of the SQM Research Group. And if you
17:44
Speaker 1: were listening to the first two segments, really interesting. Okay,
17:47
Speaker 1: we've got obviously we have a soft market. Obviously we
17:51
Speaker 1: have price falls nationwide. And crucially, as Louis was alluding to,
17:57
Speaker 1: the winter season is quieter bas then the spring season,
18:01
Speaker 1: and spring traditionally is when everyone puts their place on
18:04
Speaker 1: the market because it looks better.
18:06
Speaker 2: It is this old.
18:06
Speaker 1: Established principle the volumes go up. This year, the volumes
18:10
Speaker 1: are going to go up on top of elevated volumes, because,
18:13
Speaker 1: as Lubi said, a pile up of properties that haven't
18:17
Speaker 1: sold for you the listener means a couple of things.
18:19
Speaker 1: First thing it means is that it's a buyer's market.
18:21
Speaker 1: We'll examine that in shows to come and how to
18:24
Speaker 1: deal with that. It also means that prices obviously, well,
18:29
Speaker 1: we'll see how far they fallard. But Lewis made the
18:32
Speaker 1: point that the banks actually lag, and the banks do
18:34
Speaker 1: get it wrong all the time. That's quite true, but
18:37
Speaker 1: they are falling. And also rents rented yields, remember, are rising,
18:42
Speaker 1: but that's only because prices are falling. Whether rents in
18:45
Speaker 1: and of themselves in real terms can be raised in
18:48
Speaker 1: this market and the extent to which they will be
18:50
Speaker 1: raised that we didn't quite Well, we just simply don't know.
18:53
Speaker 1: And there's nothing to show us in the hard data
18:55
Speaker 1: in Louie's SQM group that it's happening. Okay, first questions
18:58
Speaker 1: from Phil. I appreciate the government won't do it, but
19:02
Speaker 1: wouldn't it have been simple to cool the property market
19:04
Speaker 1: just to introduce a levee on the mortgage book of
19:07
Speaker 1: all the banks. Presumably the banks would pass this on
19:10
Speaker 1: the UK has large bank levees on their UK band
19:14
Speaker 1: sheet and it doesn't seem to have hurt the sector
19:15
Speaker 1: very badly other than those who have to pay more
19:19
Speaker 1: on their margage. What's there not to like? Keep up
19:22
Speaker 1: the great show, thanks Phil, Well, the banks wouldn't like it.
19:24
Speaker 1: Scott Marson hit them with the Levey out of the
19:26
Speaker 1: blue one time, one of the budgets, but he did
19:28
Speaker 1: get it through the UK banks well, they were pretty
19:31
Speaker 1: hopeless investments for a long time, Phil compared to ours.
19:34
Speaker 1: There's a reason why Combank is one of the most
19:36
Speaker 1: highly regarded and highly rated listed stocks in the world
19:40
Speaker 1: and is our biggest stock.
19:41
Speaker 2: It's an interes seat one, Jade. What does the change
19:44
Speaker 2: of putting a Levey on the banks? I mean, I
19:48
Speaker 2: guess I would pass it on. So why are we
19:50
Speaker 2: using this? Boy? Are we trying to use this to
19:53
Speaker 2: slide down the housing market?
19:54
Speaker 1: It is this is his ideas to cool the property market,
19:57
Speaker 1: but it seems to.
19:58
Speaker 3: But there are other more efficient tools to use beyond
20:03
Speaker 3: a levee to slow down the market. They are, for example,
20:07
Speaker 3: let's lift interest rates. They are for example, let's tighten
20:11
Speaker 3: the budget. The issue that I've always seen with the
20:14
Speaker 3: housing market when it comes to lending, when it comes
20:18
Speaker 3: to supply or development, when it comes to renovations, is
20:23
Speaker 3: that it's a highly inefficient market.
20:25
Speaker 2: There's a lot of levees already there within the housing market.
20:31
Speaker 2: There's a lot of transaction costs already there. When you
20:35
Speaker 2: wish to buy and sell a property in this day
20:38
Speaker 2: and age in Australia, you can expect the total transaction
20:42
Speaker 2: cost of doing that buying and doing that selling to
20:45
Speaker 2: amount to about seven percent of the total property value.
20:50
Speaker 2: That is very high. It is very inefficient in part
20:54
Speaker 2: in large part is driven by stamp duty. And then
20:57
Speaker 2: of course are they overall holding costs. And when you
21:00
Speaker 2: own an investment property, of course you are likely to
21:04
Speaker 2: be subject to land tax as well as other rates
21:07
Speaker 2: and charges, as well as income tax as well as
21:13
Speaker 2: capital gains tax. The issue is not, you know, if
21:17
Speaker 2: we're wishing to try and bring in more affordable housing prices, okay,
21:23
Speaker 2: the issue isn't about let's create another levee, because that's
21:29
Speaker 2: just going to create a larger difference between a DC
21:34
Speaker 2: delibrium between buyers and sellers and create more burden. It
21:39
Speaker 2: won't necessarily increase affordability. The best way to improve affordability
21:44
Speaker 2: is number one, consider having a slow down in a
21:49
Speaker 2: population growth rate, which I'm arguing now I think is
21:51
Speaker 2: starting to happen. Number Two, make the supply side far
21:56
Speaker 2: more efficient. Okay, these are the way to get ourselves
22:01
Speaker 2: to more affordable housing. Putting a levee on, putting a
22:05
Speaker 2: tax on, these are the most inefficient ways to try
22:09
Speaker 2: and get to that point.
22:11
Speaker 1: And Louis, when you say slow the population rate, do
22:14
Speaker 1: you mean slow immigration rate?
22:16
Speaker 3: Yes, yes, I do, because our Courbet population expansion is
22:22
Speaker 3: essentially been running at three quarters migration and only one
22:25
Speaker 3: quarter natural population increase.
22:29
Speaker 1: Yeah, okay, all right, Well, and we did deal with
22:31
Speaker 1: that earlier in the show. Phil, I'm sure you heard
22:34
Speaker 1: us talk about that. Okay, Anna asks, I see the
22:36
Speaker 1: major banks are cutting their term deposit rates. Does this
22:39
Speaker 1: mean rates are coming down? Is there a connection between
22:42
Speaker 1: these two issues? Well, and the banks can compete, so
22:46
Speaker 1: sometimes they'll move their rates around. We mentioned at the
22:48
Speaker 1: start of the show that all four of the big
22:51
Speaker 1: four banks cut some savings rates in recent days. What
22:57
Speaker 1: does that tell you, Louis?
22:59
Speaker 2: The banks?
23:00
Speaker 3: You know, we're just talking about the facts of paints
23:02
Speaker 3: have been particularly bad at forecasting the housing market, but
23:05
Speaker 3: they're actually particularly good at forecasting future interest rates.
23:10
Speaker 2: That's a business.
23:12
Speaker 3: If they can't get if they can't manage to forward
23:15
Speaker 3: yell curve, well then they're going to lose money. So
23:20
Speaker 3: when you're seeing banks cutting t d's, and you know,
23:24
Speaker 3: we should also then soon see cuts on fixed interest
23:27
Speaker 3: rates for lending atmans, the banks are increasing.
23:31
Speaker 2: They're basically on their own books.
23:33
Speaker 3: They're increasing the probabilities that we've reached the top of
23:36
Speaker 3: the interest rates cycle, and potentially even the next move
23:40
Speaker 3: might be a cut, and I think the probabilities of
23:43
Speaker 3: that are increasing because of the slow down in the economy.
23:47
Speaker 3: But as discussed earlier, we still cannot rule out another
23:51
Speaker 3: interest rate rise. And as mentioned the Reserve Bank of Australia
23:54
Speaker 3: in terms of their last communication to the market, it
23:58
Speaker 3: was an extremely hawky smach music and as I understand,
24:03
Speaker 3: the governor herself said that she personally wanted to lifting
24:07
Speaker 3: just rights from the last meeting, but given the why
24:11
Speaker 3: the board is shaped these days, she was our the rules.
24:15
Speaker 1: So they actually publish the votes, don't they? Yeah, all right, well, look, Anna,
24:19
Speaker 1: action speaks louder than words. Whatever they're saying, they've been
24:22
Speaker 1: trimming their deposit rates. Now the question is, you know
24:26
Speaker 1: that may just be at the margins. They haven't taken
24:29
Speaker 1: the whole book down. But the more they do that,
24:31
Speaker 1: the more evidence there is that they are of the
24:34
Speaker 1: opinion that we have reached the top and that the
24:36
Speaker 1: next move is down, which I'm sure all property investors
24:38
Speaker 1: would be very happy to see. Okay, fine, question is
24:41
Speaker 1: from Ben. I was wondering if banks could offer a
24:45
Speaker 1: home loan product a very creative audience I've got here, Louis.
24:48
Speaker 1: As you probably know, I was wondering if banks could
24:50
Speaker 1: offer a home loan product where when interest rates go up,
24:54
Speaker 1: the term of the loan increases and the repayments stay
24:57
Speaker 1: the same, the RBA would not be keen. And then
25:01
Speaker 1: he puts an example, and then he says something along
25:03
Speaker 1: the lines I've answered my own question. We'll probably get
25:06
Speaker 1: a bit out of control, but I would say it's
25:08
Speaker 1: worth mentioning too, Ben and anyone listening, Louis that there
25:11
Speaker 1: is a deeper trend. Isn't there in the market to
25:13
Speaker 1: lengthen the mortgage tenure? If you like the life of loans,
25:17
Speaker 1: can you just tell us a little bit about that
25:19
Speaker 1: to close.
25:19
Speaker 2: I think it's possible now you can get a forty
25:21
Speaker 2: year term lone.
25:22
Speaker 1: A forty year term loan as a residential investor.
25:25
Speaker 2: Yeah, yeah, there are a nine or occupy I personally
25:29
Speaker 2: want to sign up for that. I think the goal
25:31
Speaker 2: for everybody should be to pay off their loan as
25:33
Speaker 2: quickly as possible. Yeah.
25:36
Speaker 3: Now, the beauty of all this, though, is that you
25:38
Speaker 3: can always negotiate with your bank in terms of the term. Generally,
25:44
Speaker 3: what happens when you're a homeowner and you hold on
25:49
Speaker 3: mortgage is that as time goes on, your income does
25:52
Speaker 3: rise and your ability to service that debt increases. And
26:00
Speaker 3: generally speaking, the population will increase their mortgage repayments open
26:05
Speaker 3: above the minimum requirements, and so therefore your redraw facility increases.
26:12
Speaker 3: But in truth, you're paying that homeland sooner and you
26:15
Speaker 3: can get out of your mortgage sooner.
26:17
Speaker 2: Now, when you've got.
26:20
Speaker 3: A redraw facility in place, where you've built up more
26:23
Speaker 3: than what you've paid, that gives you already existing an
26:28
Speaker 3: existing buffer that should you go through a cycle of
26:30
Speaker 3: rising interest rates, that that buffer is there to cover
26:35
Speaker 3: that scenario. Yeah, and it gets most people through with
26:40
Speaker 3: some ease. Unless interest rates are risen too ridiculous levels,
26:46
Speaker 3: then you know that then buffers don't work as well
26:50
Speaker 3: as what the other words could.
26:51
Speaker 1: What about for the investor, Louis, like from an investment
26:54
Speaker 1: point of view, where the investor is coming in from
26:56
Speaker 1: a totally different angle and probably doesn't plan to ever
26:59
Speaker 1: repeat it pains.
27:00
Speaker 3: Yeah, yeah, I know, I know that that is out there,
27:04
Speaker 3: that happens. I personally don't agree with it, and as
27:07
Speaker 3: a properly investor, I like I like to personally play
27:10
Speaker 3: a bit of principle and interest on investment property.
27:14
Speaker 2: But each to their of course.
27:15
Speaker 1: Okay, Yeah, it's very interesting. It's interesting, and it's very
27:20
Speaker 1: interesting to hear that you have that approach, and that
27:23
Speaker 1: in itself, I imagine is instructive. Folks, thank you very much, Louis,
27:27
Speaker 1: Thank you for your time. Great to have you on
27:29
Speaker 1: the show. As always, I've good.
27:30
Speaker 3: Agree with you and your audience once more, James, and yeah,
27:33
Speaker 3: we're live in interesting times.
27:35
Speaker 1: Indeed we do. Okay, that was Louis Christopher Folks, SQM
27:38
Speaker 1: Research Managing Director, thank you very much for listening. Keep
27:42
Speaker 1: the emails, Rolling the money puzzle at the Australian dot
27:44
Speaker 1: com dot au. Very interesting questions, very creative questions, as
27:49
Speaker 1: always from our highly intelligent audience. Today's show was produced
27:53
Speaker 1: by Leah Sammagloe. Talk to you soon. Enter the