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Sunny outlook for Queensland property · 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, the Wealth Editor at The Australian and welcome
0:16
Speaker 1: aboard everybody. I imagine that every now and again as
0:21
Speaker 1: an investor, it makes a lot of sense for everybody
0:24
Speaker 1: to stand back a little bit and jump above the
0:27
Speaker 1: noise and take a look at some of the bigger
0:30
Speaker 1: questions and the bigger issues that are emerging and shaping
0:34
Speaker 1: the property market we're investing in. I have my guest today.
0:39
Speaker 1: I was looking for someone that could give us a
0:41
Speaker 1: helicopter view, if you like, of the property market. He's
0:44
Speaker 1: been on before. He is the ideal person. He fits
0:47
Speaker 1: the bill. It's Louis Christopher of SQM Research.
0:50
Speaker 2: How are you, Louis? G'day, James. Nice to be with
0:53
Speaker 2: you and your audience once more.
0:56
Speaker 1: It's great to have you on board. Some of the
0:58
Speaker 1: bigger themes, I think, through the market this year, I
1:01
Speaker 1: want to just put on the table today because we
1:03
Speaker 1: often talk about them and I want to actually sort
1:05
Speaker 1: of put them in properly and do them properly today.
1:08
Speaker 1: One of the sort of running issues all year is
1:11
Speaker 1: about whether this market that we all think we know,
1:15
Speaker 1: the Australian property market, whether it's really changing and whether
1:19
Speaker 1: the regional markets are, to some extent, sort of breaking
1:22
Speaker 1: off and going their own way. There was always a,
1:25
Speaker 1: we thought there was a natural order of things in property.
1:28
Speaker 1: Sydney was the dearest, Melbourne was the second dearest, then Brisbane,
1:31
Speaker 1: then Perth and Adelaide. Naturally enough, linked with the size
1:36
Speaker 1: of those cities. That's not happening this year. Very different story.
1:41
Speaker 1: Melbourne's about fourth on the ladder. Adelaide and Perth are
1:44
Speaker 1: very hot markets at the moment. Do you think that
1:47
Speaker 1: the market is changing into regional, distinct regional markets?
1:52
Speaker 2: I think for 2024, we've seen nationally a very mixed
1:57
Speaker 2: housing market. You're right to point out Adelaide and Perth
2:00
Speaker 2: have been the outperformers. I would like to add into
2:03
Speaker 2: that Brisbane as well. They are the three cities which
2:07
Speaker 2: on our numbers, and I'm aware of our peers as well,
2:10
Speaker 2: are recording still strong capital growth. So for instance, Perth
2:16
Speaker 2: over the past 12 months, we've got dwelling prices up
2:19
Speaker 2: near 24%, extraordinarily strong. I contrast that with say Melbourne,
2:27
Speaker 2: and at this point in time, over the last 30 days,
2:30
Speaker 2: we're actually recording some falls in dwelling prices in Melbourne,
2:33
Speaker 2: and the 12-month change coming in at just under 5%.
2:37
Speaker 2: So there is quite the contrast across the capital cities.
2:41
Speaker 1: Yeah, so you've got Perth growing four times as fast
2:45
Speaker 1: as Melbourne. It's a smaller city. I know there are always,
2:49
Speaker 1: to some extent, regional variations, but I wonder, when you
2:52
Speaker 1: look at the market, are you detecting something deeper? I mean,
2:55
Speaker 1: for instance, the Queensland market is very strong for years
2:59
Speaker 1: and years now. It's probably had a... It's probably had...
3:03
Speaker 1: certainly since COVID, a particularly strong run. And there is
3:06
Speaker 1: internal migration there. And they are getting very good numbers
3:11
Speaker 1: consistently across the state, not just Brisbane, but particularly through
3:15
Speaker 1: southeast Queensland. And the Melbourne market is soft and remains soft.
3:23
Speaker 1: And they are facing broadly the same fundamentals. Do you
3:26
Speaker 1: think there's any sort of disturbance to that natural order?
3:30
Speaker 1: that I laid out at the start, that Sydney's always
3:32
Speaker 1: the dearest, that Melbourne's always the second dearest, et cetera?
3:36
Speaker 2: Well, I think in terms of absolute dollars, we still
3:39
Speaker 2: have that. Sydney is still the most expensive housing market. So,
3:42
Speaker 2: for example, for freestanding houses, we have a median price
3:47
Speaker 2: in Sydney now running at about $ 1. 9 million. I compare
3:52
Speaker 2: that to, say, Perth, which has just crossed over $ 1 million.
3:57
Speaker 2: which of course for local residents in Perth, that will
3:59
Speaker 2: sound very expensive indeed, but it's nearly half the price
4:03
Speaker 2: of Sydney. So we still have this contrast and he
4:05
Speaker 2: is still by far the most expensive. But when we
4:09
Speaker 2: speak about performance, of course, we're looking at relative capital growth.
4:14
Speaker 2: And certainly over the past 12 months, Perth has been
4:17
Speaker 2: the number one outperformer, followed closely by Adelaide and then Brisbane.
4:23
Speaker 2: And then our two largest capital cities, well, no, they've
4:25
Speaker 2: not been performing well now, Getting to your question, well,
4:28
Speaker 2: what's driving? I think one of the key factors here
4:32
Speaker 2: is net interstate migration. Okay, so Queensland and Western Australia
4:40
Speaker 2: have been having, in very recent times, very positive net
4:44
Speaker 2: interstate migration flows, which have been coming from Victoria and
4:48
Speaker 2: New South Wales. That's definitely one of the key factors.
4:52
Speaker 2: People have been moving, I think in part for affordability,
4:56
Speaker 2: in part for job opportunities as well, into Queensland, into WA,
5:03
Speaker 2: to pick up those better paying jobs and to get
5:05
Speaker 2: a better priced house. Yes, right.
5:08
Speaker 1: Now, traditionally, people did move. There was always patterns and
5:11
Speaker 1: there was always some, you know, New South Wales and
5:15
Speaker 1: Victoria particularly, people would move up to Queensland to retire.
5:17
Speaker 1: But I noticed you said there, job opportunities. So is
5:21
Speaker 1: it a different sort of pattern? Are there different people moving?
5:25
Speaker 2: I think there are different people moving. Unfortunately, when it
5:28
Speaker 2: comes to the strict demographic data from the Australian Bureau
5:31
Speaker 2: of Statistics, it's not entirely clear who are these people
5:35
Speaker 2: that are moving, so we can only guess. But I
5:38
Speaker 2: would agree with you, based on what we can see
5:41
Speaker 2: through purchases of dwellings, that it's looking like they are
5:46
Speaker 2: first-time buyers. There is some property investment activity there as well,
5:52
Speaker 2: but it's first-time buyers Second home buyers buying freestanding dwellings
5:58
Speaker 2: predominantly in these cities and selling up in Sydney and Melbourne.
6:02
Speaker 1: Right, so they can buy a house. This is it.
6:04
Speaker 1: They can buy a house outside the two metropolitan centres.
6:09
Speaker 2: I think that's in large part what's been driving this change, James.
6:14
Speaker 1: So Louis, it's interesting you say that because one of
6:17
Speaker 1: the things I'm thinking about is there was a very
6:19
Speaker 1: big structural shift in the market after COVID where we
6:23
Speaker 1: realized people could work at home and there is a
6:25
Speaker 1: drift back to work, but it's never going to be
6:28
Speaker 1: the same again. I think most people will agree with that.
6:30
Speaker 1: The fact that you can work outside of Sydney and
6:33
Speaker 1: Melbourne has changed everything. And there was this huge shift
6:38
Speaker 1: to coastal regions, tree change regions, And some of that
6:42
Speaker 1: was almost like panic, if you like, in COVID. But
6:45
Speaker 1: there's a deeper pattern now of people working for whoever
6:49
Speaker 1: they like, wherever they like. So I'm just wondering whether
6:53
Speaker 1: in your data, that's coming through. Has that settled or
6:59
Speaker 1: is that process still happening, I wonder?
7:01
Speaker 2: James, I think we're still seeing it. I think there's
7:05
Speaker 2: actually been a recent shift back towards living in regional Australia.
7:10
Speaker 2: I say that because we've been recording falls in rental
7:15
Speaker 2: vacancy rates across regional Australia once again in 2024. So
7:21
Speaker 2: by way of background, our data strongly agrees with your
7:24
Speaker 2: point that during the lockdown period, 2021, 2022, rental vacancy
7:30
Speaker 2: rates in regional Australia tightened dramatically. Then we noticed at
7:35
Speaker 2: the end of 22 and into 2023, they eased, rental
7:39
Speaker 2: vacancy rates rose. And we started to record a slowdown
7:42
Speaker 2: in rents. But for this year, we're seeing the reverse
7:47
Speaker 2: yet again, where rental vacancy rates have been tightening in
7:50
Speaker 2: regional Australia. Now, obviously, we cannot point to a lockdown.
7:54
Speaker 2: That hasn't been happening. I found the data quite surprising.
7:58
Speaker 2: My expectation was that rental vacancy rates would continue to
8:02
Speaker 2: ease in 24 across regional Australia as more and more
8:06
Speaker 2: people return back to the office. But that's not the case.
8:10
Speaker 2: And I can only conclude that there must be more
8:13
Speaker 2: negotiations going on between employer and employee to allow that
8:17
Speaker 2: employee to continue to work and live remotely.
8:21
Speaker 1: Yes, yes, because I imagine if people prove their case
8:25
Speaker 1: and then they finally take the trip in by train
8:29
Speaker 1: to the centre of Melbourne or the centre of Sydney,
8:31
Speaker 1: and who knows, their boss might have taken a trip
8:33
Speaker 1: in on the train as well. Maybe they weren't in
8:35
Speaker 1: there at all. And they both meet in the centre
8:37
Speaker 1: of the city. And the employee says, well, you know,
8:43
Speaker 1: what's wrong with my work? Is there any problem? And
8:46
Speaker 1: the employer says, no, I would just like to have
8:49
Speaker 1: you in the office. It's not a very powerful point.
8:51
Speaker 1: I don't think it's going to swing people. I'm just
8:55
Speaker 1: thinking about that's the demand side. What about the supply side, Louis?
8:58
Speaker 1: Is there nobody building out in regional Australia that those
9:01
Speaker 1: rental vacancy rates have tightened again?
9:03
Speaker 2: That's the number one issue, I think, James. is that
9:07
Speaker 2: on the builder side, the supply side, regional Australia is
9:11
Speaker 2: regarded as high risk to build. And the issue is that,
9:15
Speaker 2: as I'm sure you're well aware, many builders and developers
9:17
Speaker 2: require financing and pre-sales before they can go off and build.
9:23
Speaker 2: The issue is that the financial sector or the banks
9:27
Speaker 2: have many black spots in regional Australia where they regard
9:30
Speaker 2: the risk profile of these areas as just too risky
9:33
Speaker 2: for their books. they will not lend.
9:35
Speaker 1: I didn't know that.
9:36
Speaker 2: Yeah. And so that combined with what has been a
9:41
Speaker 2: shortage of builders has been holding back many development companies
9:48
Speaker 2: from building in regional Australia. They just regard it as
9:50
Speaker 2: too high risk. They cannot get the financing properly. They
9:54
Speaker 2: cannot get the local labour into build. And so, yeah,
9:57
Speaker 2: it's been a big problem on the supply side for
10:00
Speaker 2: regional Australia.
10:01
Speaker 1: And that risk that the banks determine about house building
10:07
Speaker 1: outside the city centre, which keeps the vacancy rates tight
10:13
Speaker 1: in the regions, I just want to ask you, what's
10:15
Speaker 1: the risk? Is the risk in the building that it's
10:18
Speaker 1: so difficult to build anyway, it's harder to build outside?
10:21
Speaker 1: Or are there deeper risks like that, for instance, basically
10:25
Speaker 1: the economies of the regions are rarely as dynamic as
10:28
Speaker 1: the big cities? Which is it?
10:30
Speaker 2: I think it's a combination of factors, James. Historically, we've
10:34
Speaker 2: seen a lot of volatility in dwelling prices in many
10:37
Speaker 2: regional townships. The volatility has just been huge. I'll never
10:42
Speaker 2: forget what happened, for example, in Karratha in Western Australia,
10:46
Speaker 2: where back in 1993, the median house price was running
10:50
Speaker 2: at $ 200, 000. It ran up to over a million dollars
10:55
Speaker 2: for a house in Karratha at the peak of the
10:58
Speaker 2: mining boom. And then it came all the way back
11:02
Speaker 2: in 2014, back to $ 300, 000. Oh, my.
11:06
Speaker 1: And someone somewhere paid a million bucks for a house
11:08
Speaker 1: in Karratha at that time.
11:10
Speaker 2: And it got smashed. And the problem is that historical
11:14
Speaker 2: data features in the bank's books. They see this. They say, right,
11:21
Speaker 2: this is an area of very high volatility. We could
11:25
Speaker 2: see a situation where our loan-to-value ratios in this area
11:29
Speaker 2: really blow out if median dwelling prices fall like that again.
11:32
Speaker 2: And so we're only willing to provide very limited lending
11:37
Speaker 2: to this area. or no lending at all, and we'll
11:40
Speaker 2: just let another financier take care of it.
11:43
Speaker 1: It's interesting, isn't it? So there has this notion that
11:45
Speaker 1: you can always sell in the city, and the banks
11:47
Speaker 1: probably have that ingrained. But interestingly, if you are an
11:51
Speaker 1: owner in regional Australia, then you've got really good vacancy
11:58
Speaker 1: rates from a property owner's point of view. That is,
12:00
Speaker 1: they are really tight and remain tight. That's really interesting.
12:03
Speaker 1: That is a big picture development that I hadn't quite
12:06
Speaker 1: been aware of.
12:08
Speaker 2: Yeah, it's something I think we need to fundamentally resolve
12:11
Speaker 2: because I think Australia's long-term future does lie with the regions.
12:15
Speaker 2: Of course, once upon a time, we used to look
12:18
Speaker 2: at the United States as a very successful and very
12:21
Speaker 2: strong economy. Obviously, it's had its weaknesses of late, but
12:24
Speaker 2: one of the key drivers to its long-term success was
12:28
Speaker 2: the development of inland towns and cities, townships, small townships
12:33
Speaker 2: turning into large cities. And I've got a great belief
12:37
Speaker 2: that we need to see that here in Australia. We
12:40
Speaker 2: cannot just simply rely on our coastal townships forever when
12:45
Speaker 2: we have this massive land mass in Australia and these
12:48
Speaker 2: regional townships where their local economies, yes, they can be fickle,
12:53
Speaker 2: but there is an economy there. And so one way
12:57
Speaker 2: or the other, they will grow, but we should be
12:59
Speaker 2: doing everything we can to facilitate that growth.
13:02
Speaker 1: Okay, well, it's probably a long time since we saw
13:04
Speaker 1: consistent price growth and rental demand in regional centres, like consistent,
13:09
Speaker 1: which we've had for one reason or another, for four
13:13
Speaker 1: years now, basically. And as you say, what's really interesting
13:16
Speaker 1: is anybody familiar with the market would have said, okay, well,
13:19
Speaker 1: those vacancy rates in the region, watch them fly up
13:22
Speaker 1: when everything settles down post-COVID. And as you say, that
13:26
Speaker 1: hasn't happened, which is a very interesting point. Okay, we'll
13:29
Speaker 1: take a short break. We'll be back in a moment.
13:42
Speaker 1: Hello and welcome back to the Australian's Money Puzzle podcast.
13:45
Speaker 1: I'm James Kirby, Wealth Editor at The Australian. Talking today
13:48
Speaker 1: to Louis Christopher of SQM Research. Louis is one of
13:52
Speaker 1: the leading interpreters and researchers on property in Australia. Widely quoted,
13:59
Speaker 1: I'm sure you're familiar with him already. We know each
14:02
Speaker 1: other for a long time. I've always talked to him
14:04
Speaker 1: when I want to get a view of a studied view,
14:08
Speaker 1: if you like, of the market based on data, which
14:10
Speaker 1: is his own data that he works on in his
14:12
Speaker 1: own group, SQM Research. Louis, we're coming towards the end
14:16
Speaker 1: of 2024. And certain things are, certain sort of fundamentals
14:22
Speaker 1: in the market remain sort of broadly in place. We
14:26
Speaker 1: have rates that are perhaps higher than we're used to
14:29
Speaker 1: in recent times, certainly in the last decade. We've got
14:32
Speaker 1: vacancy rates consistently low. And then there's some interesting things
14:36
Speaker 1: happening in the market that every investor should know. One
14:40
Speaker 1: of them, which is, if nothing else, entertaining, is that
14:45
Speaker 1: units and apartments are doing better than houses just now.
14:51
Speaker 1: Could you explain to people why that's happening and then
14:53
Speaker 1: your view as to how long it could keep going?
14:56
Speaker 2: Yes, James. I might talk about it in terms of
14:59
Speaker 2: certain cities and why this is happening. It's not happening everywhere.
15:04
Speaker 2: But it has been happening in our two largest capital
15:06
Speaker 2: cities in more recent times. Now, what we've been finding
15:11
Speaker 2: and what I've concluded now is that during softening markets
15:17
Speaker 2: in Australia, what we tend to see is units outperforming
15:22
Speaker 2: houses in a softening period. During a growth period, we
15:28
Speaker 2: tend to see the opposite, freestanding houses doing better than units.
15:33
Speaker 2: And we can ask ourselves, well, why? I think in part,
15:37
Speaker 2: units essentially offer a little bit more of a defensive
15:40
Speaker 2: characteristic compared to houses. Houses now, of course, when we
15:46
Speaker 2: think about a house, as mentioned, the median freestanding house
15:51
Speaker 2: price in Sydney is running at $ 1. 9 million. That means
15:55
Speaker 2: not every investor can afford to jump into a house
15:59
Speaker 2: in Sydney to make an investment in Sydney. It's very
16:02
Speaker 2: high entry level, whereas units are far lower entry level. Also,
16:07
Speaker 2: and even above that, I believe units have been offering
16:11
Speaker 2: more stable income in terms of rents because they generally
16:16
Speaker 2: target the more affordable end of the tenancy market where
16:20
Speaker 2: there's a lot more demand. This combined with the fact
16:25
Speaker 2: that we've been under building units for a long time now,
16:29
Speaker 2: as we're well aware, we've got a significant shortage of
16:33
Speaker 2: residential dwellings in this country. And by the fact that
16:37
Speaker 2: we've been underbuilding homes, that means really we've been underbuilding
16:42
Speaker 2: units because we build more units than freestanding houses nowadays.
16:47
Speaker 2: And with that undersupply, I think that's meant that when
16:53
Speaker 2: we see downturns, we no longer see units underperforming or
16:58
Speaker 2: falling further. Now, a few caveats here. I wouldn't wish
17:03
Speaker 2: to be buying in off the planned development at the
17:06
Speaker 2: start of a downturn. I think you would see significant
17:09
Speaker 2: underperformance in that scenario. And I generally stay well clear
17:14
Speaker 2: of new dwellings on that front. So I think this
17:17
Speaker 2: is one of the key reasons why we've been seeing it.
17:19
Speaker 2: So yes, our data shows during downturns, more recent downturns,
17:24
Speaker 2: units have been performing better. During upturns, freestanding houses.
17:27
Speaker 1: There's some contradiction, maybe. The unit prices are performing better, right?
17:33
Speaker 1: Which you say, compared to houses, which you say happens
17:37
Speaker 1: in a softening period. But it's not softening. Or is
17:40
Speaker 1: it softening just now? We had a good start of
17:42
Speaker 1: the year. The first six months were strong. Would you
17:44
Speaker 1: see it as a signal that the market's going to
17:46
Speaker 1: get softer?
17:48
Speaker 2: I believe the Sydney and Melbourne markets, the markets in
17:51
Speaker 2: our two largest capital cities, are softening as we speak.
17:54
Speaker 1: Okay, right.
17:55
Speaker 2: So we're seeing it in weaker auction clearance rates of
17:59
Speaker 2: Sydney and Melbourne. We've been actually seeing it since about
18:01
Speaker 2: the month of June. We're seeing it and falling asking prices.
18:05
Speaker 2: So vendors in Sydney and Melbourne have become more negotiable. Now,
18:11
Speaker 2: I don't want to overtop this, James. We're not seeing
18:13
Speaker 2: any type of housing crash or anything like that. And
18:15
Speaker 2: we have to very unlikely we'll get such a major downturn.
18:21
Speaker 2: But I think we are falling in Sydney and Melbourne
18:25
Speaker 2: on an annualized rate now running about 4% to 5%.
18:30
Speaker 1: Right, so you see going into 2025, Melbourne and Sydney,
18:39
Speaker 1: you see them as soft.
18:42
Speaker 2: I see them as soft now, James, but I think
18:44
Speaker 2: there's a lot of water under the bridge still until
18:47
Speaker 2: we get to 2025, and the year 2025 itself will
18:50
Speaker 2: be most interesting. One of the big variables out there
18:54
Speaker 2: is what happens with interest rates. Yes, yes, yeah. So...
18:59
Speaker 2: Some months back, there was talk, of course, of potentially
19:03
Speaker 2: an interest rate rise. That's all changed given the recent
19:06
Speaker 2: market volatility. And the money markets are looking increasingly like
19:11
Speaker 2: they're pricing in multiple interest rate cuts in this country
19:14
Speaker 2: starting from towards the end of this year.
19:16
Speaker 1: That will change things in the big way, I expect. Yeah, okay.
19:20
Speaker 1: We'll put that to one side. There's something I want
19:22
Speaker 1: to catch. There's something I wanted to ask you. which
19:25
Speaker 1: I often ask guests who have that helicopter view and
19:28
Speaker 1: on the basis of what you've been saying. If, Louis Christopher,
19:33
Speaker 1: I said to you, I have a million dollars to
19:35
Speaker 1: invest in residential property anywhere in Australia, in any sort
19:41
Speaker 1: of property, where would you be pointing me?
19:47
Speaker 2: Well, I'm a great believer in diversification.
19:50
Speaker 1: Are you going to tell me to split it up?
19:51
Speaker 1: Hedge my bets.
19:53
Speaker 2: Yeah, very hard to split a million dollars, for example,
19:56
Speaker 2: in Sydney, where I live. Look, I'm also a believer
19:59
Speaker 2: that invest in an area you know well, and generally
20:02
Speaker 2: be an investment in an asset class you also know well.
20:05
Speaker 2: So for me personally, I probably would use the money
20:09
Speaker 2: to take out another property in Sydney.
20:11
Speaker 1: In Sydney, yes. But that is your personal, because you
20:13
Speaker 1: know it.
20:14
Speaker 2: That's my personal point of view. Now, if I had
20:18
Speaker 2: all my properties in Sydney already, then I would look
20:21
Speaker 2: to invest in another city. And that another city probably
20:25
Speaker 2: would be Brisbane. Oh, okay.
20:27
Speaker 1: So even though you know Melbourne has been weaker.
20:31
Speaker 2: I know Melbourne's been weaker, but that doesn't necessarily mean
20:35
Speaker 2: one should just automatically jump into that market. From a
20:38
Speaker 2: longer-term perspective, I'm interested in understanding the longer-term economic opportunities
20:44
Speaker 2: for a city and state. And I believe Queensland's got
20:46
Speaker 2: the better economic opportunities over the next 10 years. Yeah, right. Okay.
20:51
Speaker 1: What makes you say that, apart from the Olympics sort
20:54
Speaker 1: of buzz?
20:55
Speaker 2: The Olympics is one definite factor. Taxation regime's a little
20:58
Speaker 2: bit better in Queensland compared to Victoria right now. It's
21:01
Speaker 2: not a factor. We've spoken earlier about the state migration flows.
21:06
Speaker 2: Now that's been a longer term trend, as I'm sure
21:09
Speaker 2: you're well aware, but there's no evidence at this point
21:12
Speaker 2: in time to suggest that's about to slow in Queensland.
21:14
Speaker 2: If anything, it's been speeding up. I think too, that
21:17
Speaker 2: supply side of property has been changing in Queensland. So
21:22
Speaker 2: once upon a time, for example, on the Gold Coast,
21:27
Speaker 2: you would have a lot of builders and developers build
21:29
Speaker 2: their high rise developments there on the coast on speculation. Okay. Now,
21:34
Speaker 2: I've been noticing in more recent cycles that developers no
21:38
Speaker 2: longer do that. They cannot build on spec anymore. They
21:41
Speaker 2: need to pre-sales. And so the typical boom bus crunch,
21:46
Speaker 2: which the bus is generally delivered by oversupply, is no
21:50
Speaker 2: longer apparent in southeast Queensland. And I would also argue
21:54
Speaker 2: that's the case across Queensland, probably other states as well.
21:58
Speaker 2: But that combined with this longer-term increase in underlying demand,
22:02
Speaker 2: which I expect to continue on, With a better taxation
22:08
Speaker 2: profile for property investors, I believe that makes Queensland a
22:13
Speaker 2: pretty solid case for investment over.
22:15
Speaker 1: The long term.
22:17
Speaker 2: Okay.
22:18
Speaker 1: Very interesting. Always great to have a guest who will
22:20
Speaker 1: actually make a call. So thank you for that.
22:23
Speaker 2: All right.
22:24
Speaker 1: We will be back in a moment, folks. Hello, welcome
22:32
Speaker 1: back to the Australian's Money Puzzle podcast. I'm James Kirby
22:35
Speaker 1: with Louis Christopher. And we are talking big picture on
22:39
Speaker 1: property today, standing back and looking at all the data
22:42
Speaker 1: that we know, what are the big takeaways in the market?
22:45
Speaker 1: And I think in the first two segments of the show,
22:47
Speaker 1: some really interesting observations there about how the market has changed,
22:53
Speaker 1: how ex-Melbourne and Sydney, for instance, those markets are stronger
22:59
Speaker 1: and have deeper dynamics than we perhaps were used to traditionally,
23:05
Speaker 1: and the extended low vacancy rate sort of proves that.
23:08
Speaker 1: I like Louis' observations on Queensland as a potential property performer.
23:14
Speaker 1: All the talk, of course, in the market is about Melbourne,
23:17
Speaker 1: that if Melbourne is at a discount, basically, then it
23:19
Speaker 1: must be a bargain. Who's to say? that may not
23:22
Speaker 1: be the case. If you look at those internal migration figures,
23:26
Speaker 1: if you look at the property disposition, if you like,
23:29
Speaker 1: of the regime in Queensland compared to Melbourne, then they
23:32
Speaker 1: are certainly, well, to reverse that, the Victorian government are
23:36
Speaker 1: the least property-friendly state, that's for sure. These things are
23:40
Speaker 1: very important for long-term investors. Okay, Louis, a couple of
23:43
Speaker 1: other things I wanted to talk to you about. They
23:46
Speaker 1: are different than the first parts of the show, but
23:48
Speaker 1: interesting for all our listeners. First of all, One thing
23:53
Speaker 1: that homebuyers are doing at the moment or homeowners are
23:55
Speaker 1: doing at the moment in property and some investors, too,
23:58
Speaker 1: is they are finding it difficult just to keep the
24:01
Speaker 1: show on the road because of inflation, cost of living,
24:04
Speaker 1: everything else. Their expenses have probably gone through the roof
24:08
Speaker 1: and they used to have some space to pay their
24:12
Speaker 1: mortgage on an investment property or on their home. So
24:16
Speaker 1: without making more money, how do you get around that?
24:20
Speaker 1: There's one or two ways that people have put forward
24:22
Speaker 1: on the show. Extend your mortgage. Let's say you have
24:25
Speaker 1: a 25-year mortgage extended to 30 years. Switch from the
24:32
Speaker 1: traditional principal and interest model to just interest only. Are
24:38
Speaker 1: there any of those that you find... If you had
24:44
Speaker 1: to make that choice, would you go near either of them?
24:48
Speaker 2: Personally, James, I've always paid principal and interest. I've never
24:52
Speaker 2: personally gone interest only. I'm a strong believer in paying
24:56
Speaker 2: debt down as quickly as I possibly can. Now, when
25:00
Speaker 2: there's been times in my life where cash flow hasn't
25:03
Speaker 2: been as strong, for lack of better words, then I've
25:08
Speaker 2: reduced the principal component of I'm paying down. whether that's
25:12
Speaker 2: by extending the mortgage or just paying the minimum monthly repayments.
25:17
Speaker 2: That's what I've done. And then when times have been
25:20
Speaker 2: better cash flow wise, I've upped those payments.
25:24
Speaker 1: Yes, I thought you might say that. I wouldn't have
25:27
Speaker 1: picked you as a speculator. That's for sure.
25:29
Speaker 2: All right.
25:29
Speaker 1: Now, final question. And I have to preface this by
25:32
Speaker 1: saying I've changed on this one. In that, I had
25:36
Speaker 1: always been a believer that super is for super and
25:39
Speaker 1: the home buyer market can sort out its own problems.
25:43
Speaker 1: I have changed on this. I didn't want to. It's
25:46
Speaker 1: almost against my core textbook approach. But I think there
25:52
Speaker 1: is increasingly an argument to allow people to use their
25:55
Speaker 1: super to buy a home, not because it's the best
25:57
Speaker 1: idea in the world, but because in pragmatic terms, the
26:00
Speaker 1: entire tax system is loaded against the person who doesn't
26:04
Speaker 1: own their home. loaded against them. And on that basis,
26:07
Speaker 1: and on that basis alone, I think if you are
26:10
Speaker 1: better off, if you are close, if you are 50
26:14
Speaker 1: grand away or 100 grand away from getting that house
26:18
Speaker 1: for all your life against having some more in super,
26:23
Speaker 1: I think you would be better off getting that house.
26:26
Speaker 1: I'm just wondering, as someone who's spent decades in this market,
26:30
Speaker 1: always with interesting ideas on the market. What do you
26:33
Speaker 1: think about using super to access home funds or property funds?
26:40
Speaker 2: I understand your perspective there, James. And yeah, if I
26:45
Speaker 2: was $ 50, 000 away personally from buying my first home, I
26:48
Speaker 2: would be demanding to use my super myself, right? So
26:52
Speaker 2: we're on the same page on that front. However, I'd
26:55
Speaker 2: like to point out a few things. Firstly, from an
26:59
Speaker 2: investment perspective, I find faults with it. Okay. Number one,
27:04
Speaker 2: you're not getting the negative gearing benefits if you buy
27:07
Speaker 2: a residential home in your super trust. Remember, you cannot
27:11
Speaker 2: negatively gear your super fund. Therefore, strictly based on the numbers,
27:16
Speaker 2: a super fund and property, well, it's best for high
27:20
Speaker 2: yielding property, such as commercial property, if you want to
27:22
Speaker 2: go into property via super. Number two, I have an
27:28
Speaker 2: issue with diversification. I've always looked at super as something
27:34
Speaker 2: where I can diversify my own risk profile. So as
27:39
Speaker 2: mentioned before our segment, I have in my super account
27:42
Speaker 2: a lot of equities. I don't hold property in my
27:45
Speaker 2: super account.
27:46
Speaker 1: Sorry, this is an SMSF, is it, Louis?
27:50
Speaker 2: Yeah, absolutely it is.
27:52
Speaker 1: And you don't have property in it?
27:53
Speaker 2: I don't have property in it. I have all Australian equities. Okay, right, okay.
27:57
Speaker 2: That's just me, and obviously that has its own risk profile.
28:02
Speaker 2: But I hold property personally under our name or under
28:05
Speaker 2: the family trust structure, okay? But I do hold it
28:09
Speaker 2: against my name because I can then take advantage of
28:14
Speaker 2: negative gearing benefits.
28:15
Speaker 1: Right, yes, yeah, yeah. As an investor, though, Louis, I'm
28:18
Speaker 1: talking about buying a home.
28:20
Speaker 2: Yeah, that's right. Now, from the perspective of the greater good,
28:24
Speaker 2: what's good for the communities, All right, I have another
28:27
Speaker 2: issue with it. And that is you, by accessing superannuation,
28:34
Speaker 2: you're fundamentally stimulating underlying demand. Okay, it's like if you
28:38
Speaker 2: remember the first-time owners grant scheme some years back. Okay,
28:43
Speaker 2: the government brings in a first-time owners grant scheme for
28:46
Speaker 2: first-time buyers. Well, guess what happens? The benefits of that
28:50
Speaker 2: scheme quickly dissipate because prices rise very quickly. And I'm
28:54
Speaker 2: concerned that that if everyone had access to the supermarket,
28:57
Speaker 2: the buying prices would go up very quickly. Yes, okay.
29:00
Speaker 2: I hear you.
29:01
Speaker 1: Yes, I hear you, and I take that on board.
29:03
Speaker 1: It's an interesting issue. I don't think it'll go away.
29:07
Speaker 1: Always interesting to hear what guests have to say about
29:09
Speaker 1: it on the show. And I'd like to actually hear
29:12
Speaker 1: more from our own audience about what they have to
29:15
Speaker 1: say on the show. So let's have some correspondence on that, folks.
29:19
Speaker 1: I don't think we've actually seen much on that.
29:21
Speaker 2: All right.
29:21
Speaker 1: Terrific. Terrific. Louis Christopher, SQM Research. Thank you very much.
29:25
Speaker 1: Terrific to have you on as always.
29:28
Speaker 2: Thank you, James. It's been a good discussion.
29:30
Speaker 1: Thank you, Louis.
29:30
Speaker 2: Always good.
29:31
Speaker 1: That was Louis Christopher. We've talked to him before. We'll
29:34
Speaker 1: talk to him again.
29:36
Speaker 2: All right.
29:36
Speaker 1: And talk to you soon. Remember the email, themoneypuzzle at
29:39
Speaker 1: the