Latest / The Follio Property Podcast / Gold Coast Crashes, Brisbane Holds: Where The Smart Money Is Moving? | Property Experts

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Gold Coast Crashes, Brisbane Holds: Where The Smart Money Is Moving? | Property Experts · The Follio Property Podcast

• 0:00
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• 0:56
  The capital gains tax changes also apply to property investors, except those buying new homes to boost supply. From next July, negative gearing is limited to new properties. Existing investments are grandfathered.
• 1:11
  There is now no incentive to invest in the regionals because you're not going to get the negative gearing benefit to offset it and you're not going to get the capital gain benefit. There is no buyer pool arguably for these areas. Might have cost them 15 grand per million pre-budget. It's more likely going to cost them 30 grand per million post-budget. 70% of transactions are investors in some cases. It's almost like pyramid scheme. I'm going to buy this thing for 800 grand at 6% and the next bloke's going to buy it off me at 5.5 for 900.
• 1:36
  We're seeing East Coast investment in Perth disappear. And do you have concerns for a market like Gold Coast and Brisbane? Do you see them falling off a cliff in terms of house prices? Yeah, some of them, absolutely. Gold Coast has always been that supply-hype market. They swing from 0.5% vacancies to 9%. Yeah, that market could get smashed harder than any.
• 1:58
  You're listening to the Folio Property Podcast. I'm Rhys Bettle and I'm here each week with my co-host Lachlan De La Hunty. Special episode today, Lachlan. First time I was doing this as well in terms of an online podcast, but with a guest of this quality with the birds screaming in the background, it has to be from only one place, I think, in the country. But Lachlan, do you want to introduce our guest actually rather than me doing it? Because you know this guest very well. Yeah, this guest taught me, I guess, the fundamentals of property, right? So...
• 2:26
  I hate to throw the term OG, but you're certainly one of the OGs in my mind. Josh Coleman, welcome to the podcast. Thank you, boys. Thanks for having me. It's good to be here. Now, based in Queensland, we're going to talk a lot about that today. What else are we covering, Rhys? Well, I thought if we had your OG mentor on, it'd be good to get some feedback on post-budget, what his thoughts are on the market. I had a 20-minute conversation on the phone yesterday and called you up after Lachlan and said, yeah, this guy switched on. So looking forward to getting his thoughts across the podcast on that.
• 2:53
  We do want to start a series where we do more in-depth market updates in particular areas. And, you know, we're experts in the Perth and Melbourne market. But beyond that, from a macro and a micro data perspective, we're knowledgeable. But from an on-ground sentiment, we lack. So I think this is a good starting point to get a Queensland market update.
• 3:09
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• 3:34
  And we get lots of questions around the Queensland market, right? Particularly Sunshine Coast, Gold Coast, Brisbane, and the regionals, like the Spruka-dominated areas. I'm sure you've got an opinion on all of them, Josh. So let's start off budget. Cool. I mean, look, new world order, let's say. I mean, it's been a ride over the last...
• 3:53
  I would say six weeks, really. I mean, like the sort of two weeks post-budget's one thing, but the sort of storm of media speculation leading in, I almost think creates more of a mess. You know, I think that we're finding that in almost every facet of life, whether it's the economics, whether it's just people's own comfort.
• 4:10
  certainty is paramount, you know, like with COVID and with the Middle East and, you know, whether we're coming or going, people care. But if we're going, fine. If we're staying, I think that sort of comfort came where people sort of know where they stood to some degree. But admittedly, I mean, I'm sure you guys have been watching the news cycle now that there's just as much speculation now of them repealing or watering down the policy as it runs through the Senate anyway. So,
• 4:33
  What we end up with at the back end is kind of anybody's guess at the moment. But as far as my experience up here, I mean, look, there's plenty of fear, which is to be expected. But interestingly, like I think budget day, probably Tuesday, Wednesday, I fielded a lot of calls from either people I work with or clients or whatever. I would say almost equal portions fear and optimism.
• 4:54
  opportunity, which is pretty interesting. It's a pretty interesting segment. And there wasn't a clear profile of person who was optimistic versus a profile who was fearful. I think the only test, as far as I could see, was maturity. People who'd done this before, who'd seen this before, like seen market changes, had that pretty common rhetoric of, I've never bought property for tax, that kind of approach. I mean, they'll temper.
• 5:17
  moving forward with the changes. But then the other side of things where markets only explode is their experience. And now all of a sudden the brakes might go on. That's a warning, warning, danger, danger type thing. But no, that's, I mean, that's the client side, agent side, look, plenty of discomfort, not sure about what's going. I mean, kind of churns their game, right? You know, selling whether it's good or bad is kind of what they're up to. So whether which way it goes probably doesn't matter so much. But yeah, that's probably the core stuff I've been hearing so far.
• 5:45
  That's interesting because that aligns with our sentiment index that we run here at Folio. And it was interesting that Rachel probably got the stats on it. But the sophisticated investors, those with more than two properties, were very confident in the market post-budget. However, first-time investors or less sophisticated were quite nervous. And that makes sense, right? Those that have seen a couple of cycles want to buy when there's uncertainty. And those that are new to this game...
• 6:11
  are just going to be sort of more misled by the noise in the marketplace, right? Be that the media, and I completely agree with your statement. Sometimes sentiment can drive markets more than the reality. And I think post-budget, whether it was good, bad, indifferent, it was irrelevant. The fact that there's some certainty around that, and I think what's more dangerous is the uncertainty of how it could look in terms of watering down. People just want certainty. Okay, world didn't collapse. Property prices haven't fallen dramatically.
• 6:38
  it's back to business as usual. And that's when you sort of see that smart money take advantage of it. Yeah. Well, I think there's next phase as well. Like I think there's some budget papers due yesterday or today, maybe that were coming out as far as like some of the more treatment, you know, some of the process around the July 1st hurdle date, how will that be assessed? What will they assess? All that's going to be that next phase. Like I know personally, that's the key one I'm looking for. You know, most of our clients sit on medium term dev assets.
• 7:05
  And, you know, they're subdividable or they're developable in today's dollars. So their assessment value should technically be higher in today's dollars. But if they're assessed as a single lot as of July 1st next year, then they do a subdivision. How is that treated? You know, I think those kinds of distinctions are going to be that next layer of comfort for us generally.
• 7:22
  And it's interesting to talk about that subdivision strategy we spoke about last week on the podcast. And I know you're very proactive strategies when we talk active. It's participating in development or value-add renovations, those sorts of things. That infill development space that you play has probably become even more apparent than it was pre-budget, right? Because you get the tax benefits and you get development upside.
• 7:45
  100%. My philosophy has always been an understanding of where the firepower in markets is going to go. And this undersupply we've been dealing has been chronic over a decade. The reality is they were always having to prop up the bottom end of the market, the first-time buyers and everybody else to give as much firepower for them to get in. I mean, just the reality that you've got a first-time buyer grant that's up to 1.5 million in Sydney is a really clear indication of what they're playing at, right? So if you're playing in that segment, and then now if you're going to deliver assets into that segment that are new,
• 8:15
  that's where all the money is going to go. That's where the players are going to get involved. And for our guys, it's always been focused on not just the next guy being willing to pay you more, not just the next guy being able to borrow more and give you more. It's my asset can offer something to the market that it needs.
• 8:31
  reward me for it. Just an extra bedroom, extra bathroom is one thing, but hey, my site's three blocks of land. I can inject three blocks of land into the market when it needs it. There's tax effectiveness on how you deliver that across financial years. There's lots of functionality around that. So yes, ultimately our clients who sit on those assets will do well because the feasibility of those sites will go up with these market changes.
• 8:52
  Off the back of the budget, Josh, you know, you've said there that, you know, this still has to get passed. There could be some movement in terms of what they've positioned. But let's just say everything gets approved. And we predicted from a negative gearing capital gains tax perspective for property, I don't think anything will change. What do you see happening?
• 9:10
  the biggest concerns in, I guess, from a property perspective, investing with the new conditions, where do you see the biggest concerns for a potential investor to get stuck or sprute? I'd say is something that we talk on the podcast quite frequently. Ultimately, the philosophy here is the same. Post-budget, pre-budget, my view on this is the same. If you're following everybody else...
• 9:29
  First of all, first risk factor. You know, if you're one of the poor few who got piled into these crazy regional markets that have got no economic balance, 70% of transactions are investors in some cases, and also the resales often were investor to investor, there's going to be pain in those spaces. You know, if the owner-occupied segment of the market can't pay what your asset's worth...
• 9:50
  as at the 12th of May, you're in trouble. That's where things get really hairy. And then the next part is just where supply is coming from. You know, like it's getting that understanding from people that, you know, just because you can buy an off the plan unit and get some tax incentives doesn't make it a good idea. You know, the reality.
• 10:05
  of what we're seeing is that there's pretty much in most of our capital cities where infrastructure is lacking, which let's be clear, is pretty much all of them. The inner city, you know, Todd transit-oriented development type model is about that or the only firepower they've got to produce meaningful supply over time, which is where a lot of the spruikers are going to end up pushing people, you know, into this beautiful two-bedroom amongst the supply pipeline of 2000 over three years. That's not a game you want to play.
• 10:31
  You know, like buying some nice infill, you know, with an above median lot size, you know, not the minimum, lowest common denominator lot size, happy days. You know, I think that's going to be the core. If you need those tax incentives, that's where you want to go. But I would also caution people on that to say that I think a lot of the taxation loss you'll get from the new rules, you'll often pay in the extra cost of buying the asset in the first place because we're already seeing that pump to some extent that like,
• 10:57
  Maybe you could have bought it with a delta of 5%, new versus old, let's say, or 10%. I think that delta will double pretty quickly. You're cramming 30% of total buyers into what's historically 4% to 8% of them are.
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• 12:10
  That's really interesting in that there's going to affect that there's probably going to be a flight to quality. We talked about that before where one thing that the government's done, Josh, has just made this far more complicated, right? So all these, you know, back in the day, a mum and dad could buy an investment property or live in a home and say, look, we're going to upgrade. Instead of selling our prime place of residence, let's keep it and rent it out. And, you know, the accidental landlord, so to speak, sort of come about.
• 12:35
  It's not as simple as that anymore. And so the government's just made it much harder. So you're looking at different areas of the market. It's just probably the divide between the rich and the poor arguably just gets greater because now before where you probably didn't need advice, you do need advice around things like development. It's not...
• 12:53
  easy. Not everyone can just walk up and do an infill trip or duplex or quad development, right? Because there's planning risk, there's building risk, there's development risk. But the upside in terms of the returns could disproportionately more by taking that risk, but you're going to need advice. You're going to have to pay consultants to do it. 100%. And also on top of that, you need the income to do it and you need the capital base to do it. It's the idea of, I'm just going to borrow 90%.
• 13:17
  My capital is secure because let's just say that's the way that property has always been. You can't lose money on property. That confidence factor has been eroded through this process. So you're kind of only going to have players now who understand that they probably will weather a storm at some point. Do they have the capital adequacy and the income to do that? And I think that's going to be the biggest shift generally. Yeah.
• 13:37
  And then just back on your regional, because it might have passed the viewers or listeners a little bit, why the regional markets now are going to get smacked, in my opinion, and just regurgitating what you said, Josh, is the fact that pre-budget, 70% of the transactions are investor-based. Post-budget, there is now no incentive to invest in regionals because you're not going to get the negative gearing benefit to offset it, and you're not going to get the capital gain benefit. Yeah.
• 14:04
  There is no buyer pool arguably for these areas because the owner-occupier markets in these regionals can't afford it. And now there's no real drivers for investors to go into these regionals. So do you see them falling off a cliff in terms of price prices? Yeah.
• 14:19
  Yeah, some of them absolutely. I mean, it's probably an exaggerated example where the mining towns of old. You know, investors who piled into these mining towns, I'm getting a 6% yield, you beauty, the mine closes. Oh no, come here is that the mine didn't close, but the acquisition base did. You know, the people that were ultimately going to buy. And I think ultimately a lot of these assets and these markets have relied on greater fuel theory.
• 14:41
  You know, I'm going to buy this thing for 800 grand at 6% and the next bloke's going to buy it off me at 5.5 for 900. Just that idea of, you know, yield compression being acceptable, driving those markets, despite the fact that occupiers weren't playing anymore. You know, like my rule of thumb always is, you know, you want 75% under-occupied engagement at a minimum. You know, if you've got a really good reason, maybe 70, so 30% investors.
• 15:03
  because if that's not your core, then it makes it transient. It makes it cyclical. It moves with rates more. There's all those types of changes that affect that everyday investor more. And that'll be exaggerated by the loss of negative gearing because people don't have as much of a buffer. In theory, it might've cost them 15 grand per million pre-budget. It's more likely going to cost them 30 grand per million post-budget, which is significant.
• 15:27
  And it's almost like a pyramid scheme, right? That's the founders of these institutes go in there, buy the property, create a story around it, sell it to their clients, create another story so they can sell it to the next batch of clients, and so on to the point where if you're left with that asset, paying in some of these areas close to a million dollars on a 4% year where you get no benefit now, the buck stops and then they start going the opposite. And we've seen places like Gladstone Fall
• 15:53
  50, 60, 70, up to 80% post a boom. Do you see places, and let's use real life examples, Gladstone, Townsville, is there any others that come to mind that you think will come off a cliff? Townsville probably not. I mean, it will definitely soften. There's no question about that. But I mean, at least Townsville's got more of an economy.
• 16:12
  It's more significant. There's a lot more defense spending up there than there was previous. There's a lot of changes happening there. And also as well, it's kind of one of those places people have moved to to some extent as well. But the sort of just pure pump and dump stuff, you know, where there is no real domestic economy. Mackay's closer to the money, I would say, and Gladstone as well. Yeah, I definitely think.
• 16:31
  I think there'll be a significant change in that space and worse still by the fact that people bought new product there too. If you bought new Strata in those places, the next people that buy it are going to get no incentives and there'll be more new supply that even if they wanted to buy into that market, they'll buy the new supply to get the tax incentives instead of your 12-month-old asset.
• 16:49
  Yeah, and that's where the house and land package space in general is going to be a myth and also very dangerous because those that buy now won't have the ability to sell it to another investor because who's going to buy something that's now three, four years old, had rubbish tenants in there that have caused a lot of damage and you don't get the tax benefits? These places will likely become ghettos.
• 17:10
  Yeah, I would also say as well, even in the house and land space, it's not as acute as in the sort of mid-rise, high-rise unit space. But I think the mandate to deliver large swaths of greenfield assets quickly under the current government's policy will be aggressive. So the likelihood of, you know, let's say a 10-stage development getting rolled out over a decade, I think there's a pretty decent chance they might roll out over five.
• 17:33
  you know, and the Stocklands and the land leases of the world can do that. You know, ultimately what they would historically do is sell down a lot, wait for demand to come back up to an equilibrium level, sell the next day age and go from there. But what we've seen in the past is if you buy in stage one, stage two is not going so well, but they want to move it, they discount it, which then discounts everybody else's asset in stage one as well. So not only do they have an older asset, but their underlying land values come down by 10%.
• 17:57
  Looking at some of the, on the established stocking in regional Queensland, Josh, where, and when we hear about a lot of these investor areas, like Wachlan talks about Gladstone quite a bit on the podcast, Mackay, what are some of the areas in Queensland where they've been flooded with investor activity over the last couple of years where you've got the biggest concerns going to have a significant drop?
• 18:18
  in 26. It's probably Gladstone as well. I'm probably with Lockie on that. I think Gladstone's the one, probably second to Mackay. Those core markets haven't made a ton of sense. Rocky and Tony? In the honest reality, they did. I mean, Rocky too, but as far as I understand, and you've probably got better data on that, I don't think it got anywhere near as much of a pump as Mackay and Gladstone did. I could be wrong about that. But yeah, I mean, I think any of those markets, they didn't really make fundamental sense to begin with. There was no reason why those markets were going to be exploding in the future.
• 18:44
  And this is a really interesting thing. So like some of these areas have grown significantly in their population and everything else. But the core answer is, is it sustainable? Will those people stay? You know, and like one, that's, we can move on to Sunshine Coast from there too, and even Gold Coast to some extent. You know, like I've got numerous anecdotes of people going from Sydney or Melbourne or anywhere else, going for the Queensland dream by the beach, and I'm going to work from home forever.
• 19:08
  Sorry, that really hasn't played out for a lot of people. You know, and if you want to stay in the sunny coast with your banking job of $300,000 a year from Sydney, you're not replacing it there. You know, the Sunshine Coast doesn't have that economy. It just doesn't. Like, it has an economy, but it doesn't have that kind of economy.
• 19:25
  So the idea that this sort of transient idea of work from home forever, I think will change and already is changing some of these markets, certainly in that occupier or interstate relocation space. Gold Coast. And then we'll talk a little bit more about Sunshine Coast. Gold Coast has always been a pretty volatile boom and bust market, right? Yeah. You know,
• 19:45
  Before COVID, the boom and bust was probably driven by the lifestyle, right? It's like a holiday destination. COVID brought it on as this idea, like you said, a lot of city money saying, I'm going to move up there, I'm going to work from home. And the reality is, and the data shows with migration data that everyone's moving home. Those that left Melbourne because COVID was brutal still have family and obligations there. They go, okay, Gold Coast was fantastic. I'd stayed there for 12 months, 18 months, but...
• 20:10
  I've got places to be and I go back and see the family. Do you have concerns for a market like Gold Coast that it is because you see some really big prices, particularly the off-the-plan space at the moment? And I think if you speak off the plan, I just think of Gold Coast. When things are on, you go back to the mid-2000s in the lead-up to the GFC, it's like that's when all the penthouses and all the marketing and all the spruikers...
• 20:33
  They seem to come, a lot of them come from the Gold Coast. And it's like, it's a salesman dream. And I'm starting to sense that. And a lot of the buyers, agent institutes are all coming out of the Gold Coast, spruiking up prices. I'm concerned. I think that market could get smashed harder than any. But you're on the ground there, Josh. What's your sort of take?
• 20:51
  Yeah, I couldn't agree more. You know, Gold Coast has always been that supply hype market. And, I mean, inner city Brisbane to a similar extent, but to a lesser extent, you know, that yo-yo of supply is brutal. You know, they swing from 0.5% vacancies to 9%, you know, through a whole cycle. You know, I'm getting that understanding of, you know, like... That's crazy. There's no supply behind you. That's crazy.
• 21:15
  That's insane what you just said, but that's so true. You know, 0% vacancy to 9% in a swing of, you know, often like five years. It's crazy. Yeah. Yeah. I mean, Brisbane did it as well in Hamilton. So Hamilton is an inner city, blue chip, right?
• 21:30
  inner city location swung to up to nine and a half percent. They were 30 units at a time getting leased in tranches from developers because they couldn't sell them. There was incentives that were coming through. I mean, Hamilton's four Ks east of the city. It was purely, it had nothing wrong with the location. It was the reality was there was too much all at once. And that's what the Gold Coast and these things do because what people forget a lot of the time is if you're going to buy a unit in these markets off the plan, you're ultimately buying something three years in the future.
• 21:55
  In most cases, people go, happy days. I don't have to pay for it. I get three years capital growth and then I get to settle it for less and I've got some equity. True in some markets. The opposite is true in others. You know, like that's the core thing. You can be 20% down the day that you've got to settle that thing. Go valuation risk, deposit loss, everything else that comes with it. But the understanding of, and this is why we've told clients that, you know, if you ever want to buy, like, oh, I love that building. It's in a beautiful location. It's available off the plan now. There are always acute resales.
• 22:22
  Always. Because people's circumstances change in the three years between the decision and the settlement. Buy one of them.
• 22:28
  Because at least you know where you stand. You know what the market's doing at the time you're buying it and you know what you're paying for it in real terms. And that's the advice we give people and that sort of asset. Like if that's what you want to buy, Occupy is almost exclusively in my world. That's what you do. So obviously, Gold Coast, we agree. Sunshine Coast, give us a lay of the land there. And how is that different from the Gold Coast in terms of the appetite or the buy pool for those type of properties?
• 22:54
  Yeah, so Sunny Coast is more supply restrained. So Sunny Coast doesn't have the super high-rise, you know, surface paradise, south to Kiro type delivery. You're not delivering 200 apartments at a time. And also, for the most part, the sort of multi-res, medium high-rise delivery is waterfront.
• 23:12
  It's pretty much down a pretty narrow strip. You don't have big swaths of them. The rest of it's generally house and land for the most part. I think there's core markets to the sunny coast that I would... The analogy I like using is if you lived on the sunny coast before, it's the places you still aspire to live in today. A really clean way of thinking about it. Because a lot of people go, sunny coast, you beauty, I'm going to buy in Perigian because I can buy a house and land.
• 23:35
  But not knowing the sunny coast, not being from the sunny coast, not having grown up in the sunny coast, they go, oh, that's where the housing estates are or whatever. And like Prudyans changed a lot over the last 10 years, but like it's an example. Whereas like in a bud room sort of east of the mountain.
• 23:51
  which is very heavily occupied. It's desired by those people. The schooling district's good. You've got sticky owners and tenants close to the changes that happened in the Maroochie Door CBD. They make sense. I still struggle to stack Sunshine Coast as what I classify as an investment market. I think it still lacks the economy, the infrastructure investment, and the connection to Brisbane to really justify it being what we classify as full investor grade. Then mostly because the fact that the Delta isn't there either.
• 24:19
  If you could buy detached housing in the sunny coast at a 30% deficit to what you could buy the equivalent in Brisbane, then maybe you could stack it and say, hey, there's some growth in here. There's some future change coming through in this. But if you can buy a sub-div in Brisbane for the same money that you buy a sub-div in outer sunshiny coast, I know what I'd be choosing.
• 24:39
  So those listening, subdividable properties. Sorry. Yeah, yeah. And I know that's a strategy you love and it's certainly one we do. That's interesting because I think listeners will fail to understand. So one, Gold Coast, very much a speculative market built on hype and really good salespeople, right? It's just been that boom-bust economy where you think Sunjur and Coast, if it was to fall, it's probably got a pillow to land on in the sense that it hasn't had the same run-up in pricing as Gold Coast because of the speculation. Yeah.
• 25:07
  And I would also say it's probably just disparate between price guides as well. And I think the bottom end of the market where people actually moved and I'm now a Sunshine Coast person, I think they'll be more robust. I think people who bought a rural property for $1.8 million, bought a beautiful office pod that I'm going to work from forever with Sydney money type budgets or Melbourne money type budgets, I think that's where the pain will come from.
• 25:30
  People who can't be replaced and then the local upsizer or the local who's got a job in the area won't be able to pay you what you have it worth today. I think that's where the core concern will come from on the sunny coast. Yeah. And then obviously looking at Brisbane now, obviously it's marked within markets. You've got off the plan space, you've got really blue chip owner occupiers place. Yeah.
• 25:52
  Sort of explain the lay of the land in Brisbane now and where you're seeing, obviously, there's a lot of hype around the Olympics and the infrastructure boom that's happening there. Where do you see the Brisbane market going and where is it currently at post-budget? Yeah. So, I think we're in for a slower year. I think that's probably obvious. I think that's more so just based around uncertainty and people sort of resetting their expectations and getting a slightly different understanding of what the Brisbane market is. But I think that the underlying conditions remain the same.
• 26:19
  I know you've said that about Perth as well. We're enormously undersupplied, particularly for detached housing, with no real horizon inside. Brisbane, unlike Melbourne, for example, was not designed for any form of public transport. It's a drive city. That's the way the city was designed at its inception. It was designed to be a driven city. We didn't have trams, although, well, sorry, we had trams very short-term in the inner city, and then they're gone and they're not coming back.
• 26:46
  We don't have the infrastructure to provide detached housing at scale. The only detached housing they can really provide is north, so caboultshire and areas like that, collecting into Caloundra west of the base of Sunshine Coast, and then west through Upswich. And the irony here is that's always been the case. That land has always been available to be developed, but the feasibility requirements haven't been met. That will probably change. But I think my focus on Brisbane is always on where is landlocked.
• 27:10
  Where can't you provide supply quickly? And even if you can provide supply of three, four, five infill lots, that's not what we're talking about. We're talking about five, 10 stage master plan community type stuff. So for mine, that's the east. So the eastern suburbs, bayside area, you're landlocked between the bay, Logan River to the south, and then more or less broadened by that, the M1 motorway.
• 27:33
  Um, what's there is mostly there unless you're sort of 55 minutes out with no train, the likelihood of that becoming short term desirable is highly unlikely. And also again, the Delta isn't there. You know, if you do like a great example would be say Redland Bay, you know, to buy something in Redland Bay, you'll pay a million bucks for a three bed, one bath. You buy something in Cleveland or Alexandria Hills or Birkdale, you'll pay one, one.
• 27:57
  for the same thing. There's not enough reason for people to go out there to pump those markets to sort of get into where that supply needs to come from. But that Eastern pocket, Manly, Wenham, Tingalpa, Belmont, through Thornside, Berkta, Wellington Point, I think is still really, really good. And it's also a core occupier market, mostly trade-driven. Tradies are making good money. They're good tenants. Their families are in schools locally, and they don't care what happens in the city.
• 28:24
  three rate rises in the last seven or eight months. Looking at the historical data on Brisbane, on the affordability index that we track here at FOLO, we speak about it a lot on the podcast, but for those that are just tuning in for the first time, the medium household income consumed by the
• 28:43
  Looking at Brisbane, it's heading towards its peak, and it might already be that this data is a little bit lagged, but its peak back in 2008 was around 48% of the household income was going on the mortgage. It's probably already there, or it's very close looking at our data at the moment. Are we going to see a slowdown, do you think, Josh, or are we going to push beyond that boundary? Because it's the market that just doesn't slow down.
• 29:05
  We look at the data every month and besides, you know, Perth and Brisbane's in on a longer run, every month there's still some incremental growth. So is it softening at all from your perspective? And do you think we'll start to slow down once we hit that peak? Yeah. So I think it's what Lucky said before. There's markets and markets. You know, I think the core understanding of, like a great example in Brisbane, it's probably pretty similar to Perth. If you're buying a tiny 80 square meter workers cottage on 400 square meters in Perth,
• 29:34
  Camp Hill, Cooparoo, you know, 7K south from the city, prestige location, and you're paying $1.6 million for it, that's going to get painful. You know, so like I break up all my markets into profiles. Who are those people? You know, who is the person that will buy this thing from you? And that has been investors to some extent, which I think was always a bad idea. It was always a very heavy speculative, the next person's just going to pay me more, big, heavy, negative gear outcome. And I think that's getting really toppy. You know, I think incomes of that sort of upper
• 30:04
  Queensland, buying that type of asset, you know, couple first home buyer type thing, professional, that's getting pretty rough. But then you can still buy a four bed, two bath inside 20 Ks on an 800 block for 1.2. I think that's going to be a remat is and will continue to remain very, very healthy. That middle phase has just got a lot of challenges between the affordability is one thing, but also the convertibility. You know, the next stage of that workers cottage is renovation.
• 30:29
  Once upon a time, to build a family home from that cottage, it was going to cost you 600 grand. It's going to cost you a million, two now to meet that market. And they're stretching to get in and then they can't do that next phase. That's what's that real challenge. Whereas then you go one step further and you go to the established family market. People who are on their third or fourth home, parents are late 40s, early 50s at the apex of their earnings. They got teenage kids and they're spending two and a half to three and a half.
• 30:57
  sweet. You know, I think generally that market's going to remain really robust. And then luxury north of five for Brisbane, there's two speeds. There's the cookie cutter. I mean, I don't want to say I have no taste segment, but, you know, project home or spec build type asset. I want this turnkey versus the never available on the market, super rare land holding, super rare street. I think one will struggle because people think I'll just delay
• 31:26
  We've spoken about a lot on the prestige market in Melbourne and Sydney with some examples where assets are selling 15%, 20% below what they were purchased for as little as 12, 18 months ago. I know you specialize in a lot of that prestige market in Brisbane as well, Josh. Is there some extreme examples you're seeing there or the cracks aren't appearing like they are in some of those other East Coast cities? Yeah, probably not enough yet.
• 31:51
  I think the only places I've seen some cracks are there was a phase probably over the last three years where people were buying an 800, splitting it into two 400s, then buying, building two identical Hamptons side by side. You know, that quintessential just get them pumping, get our template and fly. Because I think the choice is coming into it. I think people's sophistication is increasing and the people who are still spending are going, well, I don't want that.
• 32:14
  I want the unique one. I want the one that's for me. I want the only one of this type. I think that's what's really changing. I think that understanding of moving from what everybody has, this is true of luxury markets for goods as well, right? People don't want the bag that everybody else has. They want the one that no one has, the watch that no one has. I think that's what we see. The added sophistication produces, you want something that is no longer homogenous. You want unique and different. So I think, yes, there will be two speed, but no real cracks yet.
• 32:43
  And just on the investor front as well, Josh, so we're probably seeing this in Perth and maybe have the last six months or even 12 where East Coast investment is leaving. And now, you know, the investors in the market are all locals. In our business, particularly, majority of the people on our books for acquisitions in Perth, it's an ulterior reason. It's not necessarily about the best investment growth. It's to get their kids a house that's local to them in 10, 15 years' time, and they're
• 33:11
  We do get a lot of regional people that maybe work on FIFO and work up north, and it's for a house for them to eventually move back into. So we're seeing East Coast investment in Perth disappear. And actually, even on the locals, there's not a lot that are probably investing for capital growth. There's ulterior motives. What's the verdict in Brisbane? Are you seeing similar? Is it, are we, are you still getting, you know, outside Queensland investing inside Brisbane at the moment? Or is it, are you starting to see locals only at the moment?
• 33:37
  Yeah, so we definitely still are, definitely to a lesser extent. And I'd probably say that's not acute from the last two months. I'd probably say that's been drip feeding out over the last couple of years. And I actually think a big part of that's exactly what you said. You know, it's parents and boomers, equity heavy, changing their choices of going, I'm not investing for myself anymore. You know, they're providing guarantees to kids, which drains their equity base. You know, I've had two...
• 33:59
  two clients probably in the last six months who've come to me saying, hey, I want to, what you said, Brice, I want to buy two houses near me for my kids. But the outcome is, and the conversation I have with these people is, are your kids really going to live there? Like, is that actually what you expect? And the answer ends up usually no. What they want to do is anchor capital. They want to pin capital to the market today, so they're secured for their kids in the future. So whether the kid moves into it or not, it's not relevant. They're just tying their capital base to a market, so they're secure over time. I think we're going to see more and more of that.
• 34:27
  On the regional aspect, what are the, I guess, places to avoid and what are the places where you still see value? For now, I'd be out of every regional market in Queensland. And I would actually extend that to say I'd be out of every regional market in the country. For the primary reason being that we don't know the stability of the people who played.
• 34:44
  Put it that way. The idea of weathering the storm. And when I say the idea, I mean it. You know, the idea of just going, what could happen over the next 12 months to my market? And it's actually become strategic for us where I look for on-market assets now for a lot of our clients instead of pre-market. And I look for investors that are selling. Because if you're an investor and you're selling now, you're under pressure because it makes no sense to be selling now for any other reason.
• 35:05
  That's where you can really squeeze. But no, I would personally, if it's a regional, and I wouldn't say, like, I wouldn't say Toowoomba's a regional market. You know, Toowoomba's a small city. That's probably the cleanest way to do it. It's a metropolitan regional, I like to call them. It's like a Geelong tour, Melbourne. You know, it's going to benefit off what's happening in Brisbane because of proximity.
• 35:24
  Absolutely. And having their own diversified economies. You know, I think that's a really important thing. Quintessential regionals usually anchored to something being, you know, mining or agri or, you know, something along those lines, military in some cases. You'd be thinking twice in a lot of those cases.
• 35:39
  And then just on Brisbane, I know you mentioned a few suburbs there, some difference between the two-speed economy. From an investor standpoint, what's the biggest opportunity, whether that's a particular suburb, particular area, or actually asset type? If I was an investor, I wouldn't touch anything inside 10Ks. And that probably sounds really funny. The core reason being that those tenants are under pressure. They're also the tenants that want to buy in shortest order. So I think there'll be some changes in that space. And I also think that's where supply is going to go.
• 36:07
  You know, and the worst cottage tenant, as I said, in a story that are 80 square meter, you know, if there's a build to rent product that comes up in the next two years that they can live for five years, it's the same size, bougie, ticks all the boxes for the same money, they're gone. Beautiful.
• 36:22
  Lastly, Josh, just to wrap it up there on some of those lifestyle locations, it sounds like the theme you were mentioning with both Gold Coast and Sunshine Coast was employment and a lot of people move into those locations for that flexibility, but you raise a great point there in terms of where's that next job coming from when people are starting to send everyone back. Or the next buyer, as you say, these people have gone up there and taken a lot of stock off the plan.
• 36:48
  COVID's gone. No one's really relocating out of the major cities. If anything, they're retracting back to the major cities. So who's the next buyer? Yeah, and I think that's the perfect summary. You know, if you don't have a clear idea of who your next buyer is, and if the first thing that comes to your mind is an investor...
• 37:04
  That's alarm bells. That's the core change. If you're buying assets that were always going to be for an occupier, that are always going to be for somebody who doesn't have a connection to the city and who would not live in a unit, that's the only places you want to be in. Because the supply shifts, particularly for the Gold Coast. And the understanding is the supply isn't coming from detached housing. Supply is coming from high rise. And that's where your tenant competition is going to come from. That's where that core friction point is going to be in that market through supply.
• 37:33
  Josh, thanks for coming on today. This is, you know, like Lachlan said at the start of the podcast, this is something we're keen to sort of kickstart and have regular market updates. So please, audience, leave comments in YouTube, leave it on Spotify. What you'd want to hear more from Josh on the next installment when we reach out to him and give us some feedback on how the episode's gone. But Josh, from our perspective, mate, thanks for joining the Follow Property Podcast.