Latest / The Money Puzzle / Lending limits return as a risk in a red-hot residential market

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Lending limits return as a risk in a red-hot residential market · The Money Puzzle

0:09
Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
0:13
Speaker 1: James Kirby. Welcome aboard everybody. Are you one of the
0:17
Speaker 1: investors behind the surge and investor borrowing? It's running at
0:21
Speaker 1: its quickest pace in a decade. I want to examine
0:25
Speaker 1: a few things today. My guest firmly believes now that
0:30
Speaker 1: interstate investing is the norm now, which is interesting. She's
0:34
Speaker 1: a bit skeptical about the not so much skeptical, but suspicious.
0:38
Speaker 1: Maybe that lift in investor activity conceals perhaps quite a
0:43
Speaker 1: number of rent investors. Okay, that's sort of subset, if
0:46
Speaker 1: you like, of people who wouldn't necessarily afford investment property,
0:50
Speaker 1: but their first property becomes an investment property, which they
0:53
Speaker 1: hope then allows them to buy the house they want
0:56
Speaker 1: to buy. We've had Stuart Ween to talk about that
0:58
Speaker 1: on the show before. She's also got something to say
1:01
Speaker 1: about the new and fairly controversial dictat from the ATO
1:07
Speaker 1: on holiday homes which wait to hear this, Wait you
1:10
Speaker 1: hear this. If you haven't heard this already, wait to
1:12
Speaker 1: hear this. Unless you conform to the letter on some
1:17
Speaker 1: new draft rulings of the ATO, they will dictate when
1:23
Speaker 1: you can rent out the property and you must, you
1:28
Speaker 1: will be compelled mandatory to rent the property at certain
1:32
Speaker 1: weekends Easter, Christmas, whatever is the big weekend in your
1:37
Speaker 1: part of the country. Not everyone is gonna like that,
1:39
Speaker 1: I can tell you pretty fast. My guest is Anissa
1:42
Speaker 1: Cavello of the Eida Eda Property Group. How are you
1:46
Speaker 1: a Nissa?
1:47
Speaker 2: Well, thank you, James, thank you so much for having
1:49
Speaker 2: me again.
1:50
Speaker 1: Oh good to have you on again. We will hold
1:52
Speaker 1: back on the holiday home thing for the moment, but
1:54
Speaker 1: we will deal with it momentarily, folks, except to say
1:57
Speaker 1: it's interesting, but not everybody has one, not everybody wants one.
2:00
Speaker 1: You would think that that was the case reading these
2:02
Speaker 1: draft rulings. First and foremost, I want to ask you
2:07
Speaker 1: about the two things. First of all, you're talking about
2:09
Speaker 1: interstate investing becoming the norm. So traditionally people didn't buy
2:16
Speaker 1: interested investors just didn't do it.
2:18
Speaker 2: Is that right? Well, very rarely. It was really the
2:22
Speaker 2: realm of people that had much higher So a lot
2:27
Speaker 2: of people think that property investors. Not a lot, but
2:29
Speaker 2: there are those, including the government. I think that real
2:31
Speaker 2: estate investors are is the realm of the very wealthy.
2:35
Speaker 2: I think we're realizing more and more through media that
2:38
Speaker 2: in fact it's the middle class Australian that is largely
2:41
Speaker 2: investing in, relying on leveraging into property to have a
2:44
Speaker 2: decent retirement. And so we originally it was more of
2:49
Speaker 2: those high end investors that would look into state because
2:53
Speaker 2: they had big portfolios and they had much larger research
2:55
Speaker 2: capabilities or the ability to engage people like us. I
3:00
Speaker 2: think that's changed enormously because of social media, because we're
3:04
Speaker 2: becoming much more investor savvy, and I think the middle
3:08
Speaker 2: class investor has got a lot more available to them
3:10
Speaker 2: in terms of research now.
3:12
Speaker 1: Yeah, the distribution of research, free research, so I can
3:15
Speaker 1: look at not just the house around the corner, but
3:17
Speaker 1: I can look at any street, at any state, and
3:20
Speaker 1: I can find out a hell of a lot without
3:21
Speaker 1: sort of leaving my desk. Yeah, that's interesting now one
3:25
Speaker 1: of the things that people are really interested in. And
3:28
Speaker 1: I can see from correspondence that this is so the
3:31
Speaker 1: lift in investor lending, which is now running at its
3:34
Speaker 1: fastest pace in a decade from a slow start. I
3:37
Speaker 1: might add, but tell me the rent investors, tell me
3:42
Speaker 1: what you think is happening there, and I might be wrong,
3:46
Speaker 1: But I doubt they're investing interested, but you could.
3:48
Speaker 2: Tell me, uh no, they are. They are absolutely not
3:51
Speaker 2: as much because there are a lot of people that
3:54
Speaker 2: we try to teach people that are property. There's two
3:57
Speaker 2: reasons to buy property, to either enjoy it or money
4:00
Speaker 2: out of it. But not everybody can get their mind
4:02
Speaker 2: around that, and so the idea of knowing that you
4:05
Speaker 2: may be able to move into it in the future
4:07
Speaker 2: provides a bit of comfort. But where most people can
4:10
Speaker 2: afford to buy as a first home buyer, even with
4:12
Speaker 2: five percent down, in fact almost more so because you're
4:15
Speaker 2: borrowing so much of the value of the property, the
4:17
Speaker 2: areas that they can afford to actually a service alone
4:21
Speaker 2: tend to be areas that they don't necessarily want to
4:23
Speaker 2: live in, particularly if they're looking for capital growth. So
4:26
Speaker 2: many rent I would say that of the first home
4:29
Speaker 2: buyers that we work with, more than eighty percent would
4:33
Speaker 2: become rent vestors now.
4:35
Speaker 1: Right, okay, And they typically they are living tell me
4:38
Speaker 1: if I'm wrong. Typically they're living in the inner city
4:41
Speaker 1: and buying in the inner city or are they buying
4:44
Speaker 1: the last time you're on the show, you were quite
4:46
Speaker 1: enthusiastic about sort of Ulter Sebbs basically that most people
4:50
Speaker 1: rarely mention where are you on that now?
4:53
Speaker 2: Very much so. So still the same James where we
4:56
Speaker 2: talk to, but it's not just us. I think there
4:57
Speaker 2: are a lot of people that have realized through their
5:00
Speaker 2: own research online that they cannot afford a growth investment,
5:04
Speaker 2: for example, a home on a piece of land in
5:07
Speaker 2: the inner urban regions of the city that they live in,
5:10
Speaker 2: and so they either have to purchase an apartment, and
5:14
Speaker 2: there is a lot of information about apartment purchases now.
5:17
Speaker 2: Unless you're one of the lucky people that can afford
5:19
Speaker 2: a very expensive apartment or townhouse, you're most unlikely to
5:22
Speaker 2: get a lot of growth. And if you want capital growth,
5:26
Speaker 2: then you'll be avoiding assets like apartments and townhouses unless
5:29
Speaker 2: you're in the minions. Unless you're buying a scarce apartment
5:32
Speaker 2: or a really scarce townhouse, even then there's a lot
5:34
Speaker 2: of risk. So these people are looking to buy a
5:37
Speaker 2: home and they have to look outside the inner urban
5:40
Speaker 2: sort of centers, and so they either go to and
5:43
Speaker 2: I have a number of clients that have actually moved
5:45
Speaker 2: for a year to get the first homeowners grant to
5:47
Speaker 2: get the five percent down deal. They've actually moved to
5:49
Speaker 2: Geelong for a year and then moved back. One of
5:52
Speaker 2: my clients actually moved her family to Bendigo and she
5:58
Speaker 2: would actually commute because she didn't want to take a
6:00
Speaker 2: daughter out of high school, but it was the only
6:01
Speaker 2: way that she could afford a first time So they're
6:05
Speaker 2: moving regionally and living in it for twelve months. If
6:08
Speaker 2: they need the first time owners grant with the intention
6:10
Speaker 2: of it becoming a rental property, not with the intention
6:12
Speaker 2: of staying in it, or if they're lucky enough to
6:15
Speaker 2: have access to enough to posit and not have to
6:18
Speaker 2: use the first time owners grant, then they're moving straight
6:20
Speaker 2: into rent vesting.
6:21
Speaker 1: Okay, So that a couple of things there. That the
6:24
Speaker 1: universally five percent home deposit ability, it's one year, you've
6:29
Speaker 1: got count rented for a year. That's the only restriction.
6:32
Speaker 2: There are other restrictions, so there's a number of different
6:35
Speaker 2: schemes that all sort of blend into each other. Obviously,
6:38
Speaker 2: you've got the state based grant, so I put ten
6:40
Speaker 2: thousand dollars in Victoria. I think it's more in some
6:43
Speaker 2: other states for first time buyers. And then in order
6:46
Speaker 2: to qualify for the five percent with no al ami.
6:50
Speaker 2: But also the other part to this qualifying for the
6:52
Speaker 2: five percent scheme, I can't remember what that one is,
6:55
Speaker 2: but that's a federal scheme.
6:56
Speaker 1: The first home buyer deposit scheme, federal scheme. We're talking
6:59
Speaker 1: about it. President, it's up and running. Just this is
7:02
Speaker 1: for listeners, just to catch up with you.
7:04
Speaker 2: Yes, yes, thank you, thank you, James, thank you for that.
7:07
Speaker 2: So that scaim. The other good thing about it is
7:10
Speaker 2: that even though you're going to ninety five percent and
7:12
Speaker 2: you're not paying ALAMAI, you're not paying the usual much
7:16
Speaker 2: higher interest rate. So if you and I went and
7:18
Speaker 2: bought a property and borrowed ninety five percent, we'd be
7:21
Speaker 2: hit with ALAMAI. We'd also have huge interest rates because
7:24
Speaker 2: the bank is taking so.
7:25
Speaker 1: Much frea sarier. And this's an LMI, of course, being
7:28
Speaker 1: the mortgage insurance that you must pay. And if you
7:31
Speaker 1: don't have a twenty percent deposit.
7:33
Speaker 2: Yeah, yes, that's exactly right to protect the banks in
7:36
Speaker 2: the event that you default, because they're very at risk now.
7:40
Speaker 2: So so you asked what the qualifying requirements are. One
7:43
Speaker 2: is to live in the property for a period of time.
7:46
Speaker 2: The other thing, though, is that you haven't owned a
7:48
Speaker 2: property before, and so you can't. You still have to
7:52
Speaker 2: be a proper first time buyer, and you are not
7:53
Speaker 2: supposed to have owned a property as an investor because
7:56
Speaker 2: it's not in the spirit of the scheme. Okay, whereas
7:59
Speaker 2: the cash money the first time buys grants generally allow
8:03
Speaker 2: you to be eligible for the grant whether you've earned
8:06
Speaker 2: a property as an investor or not, as long as
8:08
Speaker 2: you haven't lived you much. Right, that's the big.
8:10
Speaker 1: All, right, what's doing? And on the rent vestors, which
8:14
Speaker 1: you see as a heart growing area, So you're telling
8:17
Speaker 1: me that they are in the market. They are classified
8:19
Speaker 1: as investors, so they're part of this bump if you like,
8:23
Speaker 1: this lift up cycle in property investing we're seeing now
8:26
Speaker 1: in the residential market, and would explain the heat in
8:28
Speaker 1: some prices and that they are prepared to buy not
8:32
Speaker 1: just in their own town but in other towns wherever
8:37
Speaker 1: they can get the property they need. One thing I
8:39
Speaker 1: want to ask just about looking across at that group
8:43
Speaker 1: and the rent vestors, they must be struggling at the
8:48
Speaker 1: entry level because the entry level is the hottest part
8:51
Speaker 1: of the market. We saw the toutality figures during the
8:53
Speaker 1: week which said that the monthly growth in the housing
8:58
Speaker 1: market is running faster in the entry level than any
9:02
Speaker 1: other level of the market. So that's no good for investors,
9:07
Speaker 1: is it.
9:08
Speaker 2: Well, it's no good for first home buyers either, which
9:11
Speaker 2: was the whole ecs of the scheme, right. So whenever
9:14
Speaker 2: you have such an incredible benefit, if you want to
9:16
Speaker 2: perceive it as that, because you know, I've got issues
9:18
Speaker 2: with the ninety five percent, it doesn't necessarily get around
9:21
Speaker 2: the serviceability issues that a lot of clients have. But
9:25
Speaker 2: if you many of you pour you know, basically petrol
9:28
Speaker 2: on the market and a part of the market, you're
9:30
Speaker 2: going to get prices increasing. So for many home buyers,
9:34
Speaker 2: first time buys and investors, yes, the market is getting
9:37
Speaker 2: more expensive, and it's happening pretty quickly, we have seen.
9:40
Speaker 2: So we look at both purchasing existing properties, new properties,
9:43
Speaker 2: building properties. We do a raft of things. But when
9:46
Speaker 2: we were turning up to open for inspections in some
9:48
Speaker 2: of these growth areas, you know, six months ago, we
9:51
Speaker 2: would walk straight in, we'd be one of the only
9:53
Speaker 2: people there, and we'd be able to take a week
9:55
Speaker 2: or two to make an offer, whereas now there's a
9:57
Speaker 2: lot of people at these affordable open friends, if we
10:00
Speaker 2: make an offer twenty four hours later, it's generally sold.
10:03
Speaker 1: And is that do you think that's directly related to
10:07
Speaker 1: the universal five percent scheme?
10:11
Speaker 2: Absolutely, because the areas that we invest in mainly and
10:14
Speaker 2: that we focus on mainly are these affordable areas. Because
10:17
Speaker 2: they're more affordable, You've always got a much larger market
10:20
Speaker 2: that can afford it. So where there are issues, economic
10:23
Speaker 2: issues and crises, etc. You'll find that affordable part of
10:26
Speaker 2: the market doesn't have as experience as much volatility because
10:30
Speaker 2: people have to live somewhere. You know, it's usually the
10:33
Speaker 2: discretionary investments, all those really high end investments that people
10:36
Speaker 2: don't have to live in that will experience major volatility.
10:40
Speaker 1: So what do you say to the investor or whatever
10:43
Speaker 1: they are, re investor, traditional investor who wants to get
10:46
Speaker 1: into the market. They know there's good prospects, there are
10:49
Speaker 1: no rates have stabilized, but they also know that this end,
10:54
Speaker 1: the entry level end, is overcrowded.
10:56
Speaker 2: What do you say, I'd say there's still opportunity because
11:01
Speaker 2: you don't necessarily have an option. I mean, how we
11:04
Speaker 2: advise somebody that's got a million dollars to invest versus
11:07
Speaker 2: five hundred is different and what you got is what
11:09
Speaker 2: you've got, right, So you have to make it work.
11:11
Speaker 2: But as I've been saying for many years in property,
11:14
Speaker 2: for the twelve years I've now been focused on it,
11:17
Speaker 2: just what are you waiting for getting? Because it will
11:19
Speaker 2: get to a point where the base level is unaffordable
11:21
Speaker 2: for most Australians. And if we look at other economies,
11:24
Speaker 2: there are many First world economies where people will never
11:28
Speaker 2: own a home their generation. Right, we are moving that
11:31
Speaker 2: way and I think we believe that should never happen
11:34
Speaker 2: in Australia, but it will.
11:35
Speaker 1: Yeah, I don't have any argument with the sort of
11:39
Speaker 1: principles you're outlying there. I want to ask you one
11:42
Speaker 1: thing you've mentioned, and I wanted to pick up on it.
11:45
Speaker 1: You kind of lumped townhouses in with apartments there. I
11:49
Speaker 1: would have thought that they were closer to houses in
11:53
Speaker 1: their price patterns and opportunity.
11:57
Speaker 2: No, they're different to apartments. But a lot of the
12:01
Speaker 2: apartment the townhouses that I'm talking about that are still
12:04
Speaker 2: entry level, so we're still talking about under a million
12:07
Speaker 2: dollars and a build like quasi apartments right there. Fixters
12:12
Speaker 2: and fittings are basic. You know, the rooms. They're sort
12:14
Speaker 2: of called a townhouse, but it's almost an apartment. So
12:17
Speaker 2: it's about the quality and the price point that we're
12:20
Speaker 2: talking about. James doesn't allow to go into these sort
12:22
Speaker 2: of really high and beautiful townhouses. The other thing that
12:26
Speaker 2: if you think about it, if you have got if
12:28
Speaker 2: you've decided to purchase an investment or a house to
12:31
Speaker 2: live in or a property to live in, you will
12:33
Speaker 2: always favor a property that allows you to do what
12:36
Speaker 2: you want to it in the future, and a townhouse
12:38
Speaker 2: has got a lot of limitation.
12:40
Speaker 1: Still okay, but what about the argument that it is
12:43
Speaker 1: at least land capture as opposed to an apartment, and
12:47
Speaker 1: you can't do much with them, but you could do
12:49
Speaker 1: more than you could do with an apartment. Not much,
12:52
Speaker 1: you could do something more.
12:53
Speaker 2: Yeah, I think, Look, I have seen apartments and townhouses
12:57
Speaker 2: perform at that entry level very similarly. I don't say
13:00
Speaker 2: rate them, but I think when you're talking about, you know,
13:02
Speaker 2: a former five million dollar development complex in a bright
13:05
Speaker 2: And or a TURECT, that's probably a very different thing
13:07
Speaker 2: because you know, they make their scarcity value about them.
13:10
Speaker 2: But no, I would otherwise from an investment grade entry
13:13
Speaker 2: level perspective. I would put them pretty much together.
13:16
Speaker 1: And you would apply these concepts nationwide in every city.
13:21
Speaker 2: I think longer term, yes, a shorter term. We've seen
13:26
Speaker 2: apartments and townhouses perform in states where they hadn't performed
13:30
Speaker 2: for twenty years all of a sudden rise and value
13:32
Speaker 2: because of affordability, and you know interstag migration, et cetera.
13:37
Speaker 2: So it has it doesn't apply necessarily for the short term.
13:40
Speaker 2: A lot of my rules are very long term rules, right,
13:43
Speaker 2: which is what we've seen in over fifty years. So
13:45
Speaker 2: in the short term you might Newcastle, for example, apartments
13:49
Speaker 2: have had an incredible surge, but are they at their
13:52
Speaker 2: peak and what will they do for the next twenty years.
13:54
Speaker 2: So some of these markets that are not your growth
13:57
Speaker 2: focused markets can perform. If you time them right, you
14:00
Speaker 2: could make a lot of money in the short term.
14:01
Speaker 2: But if your time them badly, you've got ten years
14:04
Speaker 2: before you'll get any capital price or before you recover.
14:07
Speaker 1: Right, Okay, all property being local, folks, I suppose there's
14:10
Speaker 1: the message there, And as Anisa says, there are, of course,
14:14
Speaker 1: there are opportunities in certain places at certain times. But
14:17
Speaker 1: the point she's making I suppose are kind of universal
14:20
Speaker 1: and long term for all property in all places. Okay,
14:23
Speaker 1: very good. I really want to talk to you about
14:25
Speaker 1: the ato's Little holiday Cloud. We'll be back in a moment. Hello,
14:41
Speaker 1: Welcome back to the Australians Money Puzzle podcast. It's James
14:44
Speaker 1: Kirby here with Anissa Cavallo of the IDA Property Group.
14:48
Speaker 1: EDA Property Group, regular on the show. Always good to
14:52
Speaker 1: talk to. It's the time of the year, Anissa, where
14:54
Speaker 1: people think about holiday homes. Every spring people talk about
15:00
Speaker 1: holiday homes. Every November December, everyone tries to sell their
15:03
Speaker 1: holiday home because that's the time people start to fantasize
15:06
Speaker 1: about them. We won't go into the whole thing because
15:09
Speaker 1: there is actually a show on our archives. If you
15:12
Speaker 1: want to learn how to buy holiday home, I've done one.
15:14
Speaker 1: You can just search for that. But here's something that
15:18
Speaker 1: everyone should know if you are looking at the property
15:22
Speaker 1: market as an investor, and if you are considering holiday
15:26
Speaker 1: homes in that so that you may be thinking of
15:30
Speaker 1: investing in one, renting it then ultimately perhaps getting control
15:35
Speaker 1: of it yourself once you've paid it down. I've got
15:37
Speaker 1: some bad news for you. The holiday home owners soon
15:41
Speaker 1: could be denied tax deductions for their mortgage, interest rate
15:46
Speaker 1: costs and all other costs from July one next year.
15:48
Speaker 1: Wait to hear this unless they make their properties available
15:51
Speaker 1: for rent on popular holidays such as Easter and Christmas.
15:54
Speaker 1: This is from the ATO draft guidance that deductions will
15:59
Speaker 1: be Discillebert if the property is seen to be mainly
16:02
Speaker 1: for personal use. Whoosh, what are they up to? Tell us?
16:07
Speaker 1: What do you think they're up to?
16:08
Speaker 2: Oh? Well, I mean I think, as I've said offline,
16:11
Speaker 2: it's interesting because we don't have any other income where
16:16
Speaker 2: we are prescribed, we're told when we need to earn
16:18
Speaker 2: that income in order for it to be considered a
16:20
Speaker 2: deduction for tax purposes.
16:21
Speaker 1: Right, interesting even in I mean, let's even put shares
16:24
Speaker 1: to one side. I mean, there's no instructions from the
16:27
Speaker 1: ATO on if you're negatively gear shares. There's absolutely no
16:30
Speaker 1: instruction of what you should buy. You could buy the
16:32
Speaker 1: You could buy a whole pile of rubbish and they
16:34
Speaker 1: wouldn't mind. You could buy forty two speculative platinum companies
16:39
Speaker 1: in West Africa and they wouldn't have any observation to
16:42
Speaker 1: make so on negative gearing. Even is there any other
16:46
Speaker 1: ATO rule in property in this that that tries to
16:49
Speaker 1: dig in here in this way to tell you when
16:52
Speaker 1: and how to rent.
16:53
Speaker 2: No, No, not at all. It's very interesting, and I think,
16:56
Speaker 2: as we said, they also they don't tell an overdriver
16:58
Speaker 2: that unless they work on weekends, you cannot You know,
17:00
Speaker 2: it's not considered income for the purposes of tax, right.
17:04
Speaker 2: I do know, and I'm not an accountant, but I
17:06
Speaker 2: do know that there are guidelines in place to try
17:10
Speaker 2: and ensure that people are only deducting what is relevant
17:13
Speaker 2: to investment, which sounds very reasonable to me at the moment.
17:16
Speaker 2: The guidelines are loose, but they're looking for something like
17:19
Speaker 2: four to six months of the property's usage being as
17:23
Speaker 2: an investment property. Otherwise, if you're living in it largely,
17:25
Speaker 2: then you can't claim anything, but you're only allowed to
17:28
Speaker 2: claim for those parts that you used for investment purposes.
17:33
Speaker 2: So at the moment, as the law stands, it seems
17:35
Speaker 2: extremely reasonable. Now when and where you decide to rent
17:38
Speaker 2: it out, I think is very prescriptive, and we're getting
17:41
Speaker 2: into a world where what else is that? What are
17:43
Speaker 2: they going to do next? What are they going to
17:44
Speaker 2: tell us we need to do next to ian to
17:46
Speaker 2: climb our deductions.
17:47
Speaker 1: So what do you think it will do? I mean,
17:48
Speaker 1: do you think, well, just straight up, what is your
17:51
Speaker 1: response to Do you think it's are you surprised? Do
17:54
Speaker 1: you think it's fair? Do you think it's outlandish?
17:58
Speaker 2: I think it's outlandish. And the way that the laws
18:01
Speaker 2: or the guidelines are actually prescribed, or that they're delivered
18:04
Speaker 2: or is already intent, is already achieving the result. And
18:08
Speaker 2: for me, it's just a popularity stunt, another way of saying,
18:10
Speaker 2: look what we're doing for holiday makers. We're trying to
18:13
Speaker 2: make properties more affordable, like the five percent deposits game.
18:17
Speaker 2: You know, say look what we're doing, But in fact
18:19
Speaker 2: they're making houses more expensive with the five percent deposits game.
18:22
Speaker 2: So I think for me, it's just another way of
18:25
Speaker 2: getting botes and getting popularity.
18:27
Speaker 1: Yeah, thing, is this the ato, It's not the othernment.
18:31
Speaker 2: That's true. That's true. Well, that's actually really true. They
18:34
Speaker 2: can't get motioned in our art, can they.
18:36
Speaker 1: I'm sure it would be very interesting, be a very
18:40
Speaker 1: interesting call if they had a vote for them, but
18:43
Speaker 1: they are. I don't need to call I don't need
18:45
Speaker 1: to call the atl for them to say no, this
18:48
Speaker 1: is us ensuring that we are applying the tax laws properly.
18:53
Speaker 1: We're a tax collector. We're not trying to achieve anything
18:56
Speaker 1: more than the accurate collection of tax. Yes, but I
19:01
Speaker 1: don't know whether that will convince people would be convinced
19:05
Speaker 1: about that.
19:06
Speaker 2: But I mean saying, because one of the it hasn't
19:08
Speaker 2: come in, it's a proposal. We understand that if you
19:12
Speaker 2: don't make it available at particular times, then you're not
19:17
Speaker 2: eligible for tax deductions. It would be different if they
19:20
Speaker 2: said that we are going to crack down on people,
19:22
Speaker 2: because of course I might if you've got your property
19:25
Speaker 2: for lease that is deemed being leased, if you can
19:28
Speaker 2: show that you're genuinely trying to lease it out. So
19:31
Speaker 2: I think cracking down on making sure that people are
19:33
Speaker 2: using the property because you can't have your cake and
19:35
Speaker 2: eat it too. If you want to hearing, then I
19:37
Speaker 2: think it's important that you are being reasonable and that
19:40
Speaker 2: the property is being used for investment purposes. But I
19:45
Speaker 2: agree with cracking down and ensuring that people aren't trying
19:47
Speaker 2: to say that the property is rented and it's not
19:49
Speaker 2: and they've got no intention of renting it. But being
19:52
Speaker 2: scriptive about when you rent it seems it seems very
19:57
Speaker 2: very you know, I don't know, seems what's the word
20:00
Speaker 2: big brought up to me.
20:01
Speaker 1: Yes, well, I'm thinking of someone. I mean, of course,
20:05
Speaker 1: if someone's got a gorgeous place and you know, they
20:09
Speaker 1: it's worth ten million, and they put up an ad
20:10
Speaker 1: in the local shop, you know, and make sure no
20:12
Speaker 1: one sees it and say that it's rented. Yeah, I
20:15
Speaker 1: can see why the ATO wants to crack down. But
20:16
Speaker 1: if someone actually had a long term strategy, had taken
20:21
Speaker 1: the risk of buying a property, had taken all the
20:23
Speaker 1: risk on board, had done the work, had rented it
20:26
Speaker 1: out on the big weekends to get their cash flow
20:28
Speaker 1: in the early years, and were at the reward phase
20:31
Speaker 1: where they could finally get to this place when they
20:34
Speaker 1: wanted to because they had done all the hard work
20:36
Speaker 1: and risk beforehand. To be told suddenly, hang on, there's
20:40
Speaker 1: rules when you can't rent it out, I think that
20:43
Speaker 1: will get a lot of people angry. All right, interesting stuff.
20:48
Speaker 1: We will be back in the moment. I've kept I've
20:50
Speaker 1: curated some questions, especially for any talking the moment. Hello,
21:04
Speaker 1: Welcome back to The Australian's Money Puzzle podcast. James Kirby
21:08
Speaker 1: with Anisa Caballo Andnissa, I'll allow you thirty seconds no
21:10
Speaker 1: more to tell people what you actually do at Eida Property.
21:13
Speaker 2: Yeah, okay, So we help people build wealth by investing
21:17
Speaker 2: in property. So we do help people buy their first times,
21:19
Speaker 2: but our focus is very much helping middle class Australians
21:23
Speaker 2: build wealth using capital price.
21:25
Speaker 1: Very good. Gee, that elevator pitch is well honed. You've
21:28
Speaker 1: done that before. Very good. I used to say, I remember,
21:32
Speaker 1: even as a like a you know, junior reporter or
21:35
Speaker 1: business reporter, if you went into a business you know,
21:37
Speaker 1: and they took a while to explain what they did,
21:39
Speaker 1: you said yourself, I don't know about this business if
21:42
Speaker 1: you can't explain to me very quickly what you do.
21:45
Speaker 1: The elevator pitch. Very good, All right, Lisa. The analysts
21:49
Speaker 1: are talking about new lending rules like we had before,
21:52
Speaker 1: with limits on the investor lending in particular. I can't
21:55
Speaker 1: believe this is on the cards and we are still
21:57
Speaker 1: talking about redcots. What do you know now, Lisa, This
22:01
Speaker 1: is never advised. This is information only. This is not
22:04
Speaker 1: about the holiday homeless folks, and this is universe and
22:06
Speaker 1: this is everybody. I think what she's referring to is
22:10
Speaker 1: in the explanation from the banks as to why they've
22:13
Speaker 1: changed their forecasts and that they no longer believe there
22:15
Speaker 1: will be further red cuts. One of the banks, I
22:19
Speaker 1: don't want to guess which one, one of the big
22:21
Speaker 1: four banks, said that what we are seeing with this
22:24
Speaker 1: rush of investors into the market would under normal circumstance,
22:28
Speaker 1: prompt the RBA to consider macroprudential rules, and they are
22:33
Speaker 1: of course where the RBA says, okay, we won't lift rates,
22:35
Speaker 1: but what we're going to do is we're going to
22:37
Speaker 1: target certain areas and put a cap, for instance, on
22:40
Speaker 1: how many people can do interest only loans and that
22:42
Speaker 1: sort of thing. Any sense of that in the market
22:47
Speaker 1: turns about that, Anissa.
22:49
Speaker 2: It was actually when I read that question, I was thinking,
22:52
Speaker 2: I haven't heard of it, so I've got to investigate
22:53
Speaker 2: it further. But my understanding is, yeah, that it's more
22:56
Speaker 2: a risk mitigation as well, because the banks can't have
23:00
Speaker 2: too much risk on their balance sheets, and so sometimes
23:02
Speaker 2: if we've got huge investment flows, they might need to
23:04
Speaker 2: they're very much at risk of negative gearing, laws changing
23:07
Speaker 2: or you know, things like that. So my understanding is
23:11
Speaker 2: that it's a naturals risk mitigation tool that the banks
23:14
Speaker 2: must use. I do agree, while we do not want
23:17
Speaker 2: to tamper with investment in the market, we should be
23:20
Speaker 2: actually really encouraging investors because we need affordable rentals. And
23:23
Speaker 2: I think that's what they're getting at. But whether or
23:25
Speaker 2: not that's possible in terms of, you know, the bank
23:28
Speaker 2: taking on so much risk, I'm not sure. I need
23:30
Speaker 2: to understand a little bit more about it.
23:31
Speaker 1: Was whatty about ten years ago they did this for
23:34
Speaker 1: the first time when property around very hot, and instead
23:36
Speaker 1: of lifting rates, they're not in rules which the banks
23:39
Speaker 1: had to emit instantly sort of follow. They literally said
23:42
Speaker 1: to them, you can have this number of interest rate
23:45
Speaker 1: only loans for instance, et cetera. And that cooled the market,
23:47
Speaker 1: and it did cool the market pretty quickly. So that's
23:49
Speaker 1: I think on the table if the piece of investor
23:54
Speaker 1: lending we are seeing just now continues through the summer.
23:59
Speaker 1: See and I think that is from one of the
24:01
Speaker 1: big four banks, As I say, which one I can't recall,
24:04
Speaker 1: Navra Westpac. All right, Andrew says, after listening to the
24:07
Speaker 1: podcast with Cameron Kusher, I think I've come up with
24:10
Speaker 1: a solution which would work. Well, this is his solution, folks,
24:15
Speaker 1: This is Andrew's solution about trying to control property prices.
24:19
Speaker 1: It's currently accepted you can that you can have up
24:22
Speaker 1: to thirty thousand of salary sacrificed into super My idea
24:26
Speaker 1: is to apply this similar number to negative gearing as
24:29
Speaker 1: the maximum amount of tax return a person can put
24:33
Speaker 1: through per year. So what he's saying is we limit
24:38
Speaker 1: negative gearing, not by property numbers or whatever, but by
24:42
Speaker 1: how much that person, any person could put through each
24:46
Speaker 1: year at thirty thousand, which I expect to some people
24:50
Speaker 1: I think is a little low. Andrew, but he says,
24:54
Speaker 1: interested to hear your thoughts. Well, I'm interested to hear
24:56
Speaker 1: the thoughts of a guest. So, Anissa, what do you
24:59
Speaker 1: think of that sort of thing?
25:02
Speaker 2: Yes, I don't agree. You know how, I'm adamantly against
25:05
Speaker 2: tampering with negative negative gearing. And I wonder why it's
25:08
Speaker 2: always the property industry that's up for question and not
25:10
Speaker 2: all other industries. You know, we've discussed that, so I
25:13
Speaker 2: think that it's been tabled. A whole lot of different
25:16
Speaker 2: ideas have been tabled in terms of do we cap
25:18
Speaker 2: how much you can well that you can claim, et cetera.
25:21
Speaker 2: So there's probably a version of his idea that's out there.
25:24
Speaker 2: But I just think that if we're tampering with negative gearing,
25:29
Speaker 2: which is a huge part of tax rules and opportunities,
25:32
Speaker 2: why does it just have to be property right? Why
25:34
Speaker 2: is it applied only to the property industry and industry persecution?
25:38
Speaker 1: I would say you've got a persecution complex, because that
25:40
Speaker 1: would suggest that you're imagining it all.
25:44
Speaker 2: Thank you. I'm glad, I'm not. I wish I was.
25:46
Speaker 1: Yeah, no, I don't think you are. Clearly some property
25:48
Speaker 1: investment areas are in are being targeted. We know that
25:54
Speaker 1: the show has covered it quite thoroughly that obviously it
25:57
Speaker 1: was very much targeted in Victoria, where there are ten
26:00
Speaker 1: taxes on property. But interesting in the show today that
26:05
Speaker 1: we see it signs of that sort of disposition at
26:09
Speaker 1: at the federal level, this in particular through the ATO
26:13
Speaker 1: though a narrow channel though it may be, as you said,
26:16
Speaker 1: in this what will they get up to next? Okay, terrific. Hey,
26:21
Speaker 1: we might leave it there. Thank you very much for
26:23
Speaker 1: running out of time. Lovely to have you on the
26:25
Speaker 1: show again.
26:26
Speaker 2: Thanks for having me, James, always a pleasure.
26:29
Speaker 1: Always good to hear from you. And Issa Cavella the
26:31
Speaker 1: either EDA property group. Okay, folks, let's have some questions.
26:35
Speaker 1: Great to have ideas by the way, like Andrew's idea.
26:38
Speaker 1: Always interested to read out ideas, suggestions, complaints, whatever you got.
26:42
Speaker 1: Send them in the money puzzle at the Australian dot
26:45
Speaker 1: Com dot au. Talk you soon.