# Property Expert: Why Australian House Prices Are Falling Faster Than Expected

An episode of [Straight Talk with Mark Bouris](https://invisiblenetwork.ai/podcast/1572546872), 8 Jul 2026, 57 min.

Audio: https://p.podderapp.com/2544644999/traffic.omny.fm/d/clips/2fb3740d-3436-44af-8cc0-a91900716aa5/1c4759f0-81fc-4f35-85d1-b305004fc1e8/3f70fa17-a42c-4cde-b176-b48100598663/audio.mp3?utm_source=Podcast&in_playlist=573776d2-4dbd-4f2f-a825-b305004fc1ef

Tim Lawless is Australia's most closely watched property data analyst and right now, the market is moving faster than anyone predicted. As Head of Research at Cotality (formerly CoreLogic), Lawless sits at the centre of every major shift in Australian housing. In this conversation, he and Mark Bouris go deep on what the federal budget has done to investor confidence, why the numbers are deteriorating faster than the data can capture, and what the property market realistically looks like from here. Lawless also walks through the economics of holding an investment property in 2026, city by city, with unusual candour about where the opportunities may eventually re-emerge. Subscribe to the Mentored newsletter here: https://the-mentored-platform-pty-ltd.myklpages.com/l/WWJGc5 Join my exclusive Mentored+ community: https://mentored.com.au/become-a-member/ See omnystudio.com/listener for privacy information.

## Transcript

[0:00] Speaker 1: Tim Lawless, Mate, what a time crazy.
[0:03] Speaker 2: I think things are moving very quickly and a lot
[0:05] Speaker 2: of water under the bridge since we spoke a month
[0:07] Speaker 2: or or two ago.
[0:08] Speaker 1: Well do we speak after the budget before the budget?
[0:10] Speaker 2: I think time is moving so quick, ma, I think
[0:13] Speaker 2: it's before the budget. For me, I think I think
[0:15] Speaker 2: it's just before the budget, before the budget.
[0:17] Speaker 1: And so obviously lots happened to the budget. But we
[0:20] Speaker 1: had another you know, three months of higher interest rates
[0:23] Speaker 1: since san or a couple months of higher interest rates
[0:25] Speaker 1: since sand looking at about another one perhaps in August.
[0:28] Speaker 1: But let me just go back to let's talk about
[0:31] Speaker 1: the budget. You know, we've had a lot of interesting
[0:34] Speaker 1: discussions of various people about the budget in terms of
[0:38] Speaker 1: data as head of research at Totality formerly known as
[0:43] Speaker 1: core Logic, one of Australias like you know, leading analytical
[0:48] Speaker 1: organizations when it comes to the property market and other things.
[0:51] Speaker 1: But let's just talk about the proborty market. Say, what
[0:55] Speaker 1: is the data telling you about the state of the market.
[0:58] Speaker 1: Let's say right now post budget? Yeah, so post budget
[1:03] Speaker 1: the market's clearly weakened. It was weakening pre budget, I
[1:06] Speaker 1: think is important for the context.
[1:08] Speaker 3: Yeah, as you.
[1:08] Speaker 2: Say, higher rates, affordability, serviceability challenges are really low levels
[1:12] Speaker 2: of consumer confidence, and then the budget. So I think
[1:16] Speaker 2: the budget really did to amplify the downturn. We're already
[1:19] Speaker 2: in the fact that the market was already slowing, but
[1:22] Speaker 2: since we've seen the budget handed down, there's a lot
[1:25] Speaker 2: of anecdotes. There's very little hard evidence of say, investors
[1:29] Speaker 2: pulling back and first home buyers on the sidelines, but
[1:32] Speaker 2: you can speak to anybody in the market and they're
[1:34] Speaker 2: seeing it. So I think, well, since since the budget
[1:37] Speaker 2: we've seen housing values the downturn nationally has gathered some momentum.
[1:43] Speaker 2: We've seen Sydney and Melbourne already moving backwards and values
[1:46] Speaker 2: Adelaides now falling over a rolling four weekly basis. Brisbane's
[1:51] Speaker 2: absolutely flat, Perth is seeing about half a percent growth
[1:54] Speaker 2: month on month. Go back a couple of months ago,
[1:56] Speaker 2: Perth was rising in value by nearly two percent month
[1:59] Speaker 2: on months, So everywhere is either slowing down sharply or
[2:03] Speaker 2: now going backwards in value.
[2:05] Speaker 1: That's maybe we could unpack it a little bit more
[2:09] Speaker 1: to teim if you don't mind them. So the point
[2:12] Speaker 1: you made was an interesting one, a good one that
[2:15] Speaker 1: pre the budget we'd had three rate rises, but you know,
[2:20] Speaker 1: we've got interest rates up quite high, relatively speaking, put
[2:25] Speaker 1: us up to where we were before the rate reductions,
[2:29] Speaker 1: which was at that point considered to be restrictive interest
[2:32] Speaker 1: rate environment. You mentioned that we were already starting to
[2:38] Speaker 1: see a little bit of an effect from those three
[2:40] Speaker 1: rate rise increases, and I think that's when you and
[2:43] Speaker 1: I last spoke and you were sort of predicting house
[2:49] Speaker 1: price changes. In other words, it's always difficult to talk
[2:54] Speaker 1: about Australia because it covers a lot of territory, but
[2:57] Speaker 1: you were sort of predicting pretty much a lightning and
[3:02] Speaker 1: we were saying that then. But what is it that
[3:06] Speaker 1: the budget This is only hypothetical at this stage, but
[3:11] Speaker 1: you probably don't have data to back it up. But
[3:12] Speaker 1: what do you think it is that the budget did
[3:15] Speaker 1: to make it go faster or have a great effect?
[3:19] Speaker 3: What is it?
[3:20] Speaker 2: Yeah, I think that's probably two really important outcomes from
[3:22] Speaker 2: the budget. The first wine is very direct towards investment.
[3:25] Speaker 2: Of course, so if you're an investor in Australian housing markets,
[3:29] Speaker 2: you've generally been attracted to the opportunities for capital gain.
[3:32] Speaker 2: So that was already because the tax on capital game.
[3:35] Speaker 3: No, No, just just.
[3:36] Speaker 1: You were going to make it gain on the body.
[3:38] Speaker 2: So the point I'm trying to make is yield didn't
[3:42] Speaker 2: really factor into your decision as an investor.
[3:45] Speaker 1: Was the rents?
[3:45] Speaker 2: Yeah, your the balance between your rental payments and or
[3:49] Speaker 2: your rental income, and you're holding costs getting mortgage, your payments,
[3:53] Speaker 2: maintenance whatever, strata, insurance, etc. All that sort of stuff.
[3:57] Speaker 2: So yield was always well for most investors aside thought
[4:01] Speaker 2: or a secondary or tertiary part of the decision making,
[4:04] Speaker 2: most investors will be buy for a couple gain. But
[4:07] Speaker 2: now that we've seen the negative gearing component being removed
[4:11] Speaker 2: for established homes in the budget, even though it's not
[4:13] Speaker 2: legislated yet, I think it's virtually the same as I
[4:17] Speaker 2: think most people accept this is going to get through Parliament,
[4:20] Speaker 2: it'll be the new rules. Even if it doesn't, it's
[4:22] Speaker 2: already disrupted confidence. So I think for most investors now,
[4:25] Speaker 2: if you can't negaly gear an established home, the math
[4:28] Speaker 2: just doesn't stack up. The holding costs become prohibitive, and
[4:32] Speaker 2: your serviceability assessments become very hard if you can't include
[4:36] Speaker 2: a negative gearing rebate. The second part of the budget.
[4:39] Speaker 2: I think that's been really impactful simply on sentiment on confidence.
[4:43] Speaker 2: Confidence was already low due to higher inflation due to
[4:46] Speaker 2: what's happening ran and then the budget was handed down,
[4:49] Speaker 2: and now there's just increased, almost palpable levels of uncertainty,
[4:53] Speaker 2: especially with all the backpedaling and the carve outs we're
[4:55] Speaker 2: starting to see in the federal budget as well. And
[4:58] Speaker 2: we know that confidence, for how is critical. When confidence
[5:02] Speaker 2: is low, you generally see less housing turnover. When confidence
[5:05] Speaker 2: is high, you have a much more, much better ability
[5:08] Speaker 2: to make high commitment financial decisions. So we're not seeing
[5:12] Speaker 2: that at the moment.
[5:13] Speaker 1: So if the budget and the capital gains tax changes
[5:21] Speaker 1: are geared towards investors in terms of both negative gearing,
[5:27] Speaker 1: the ability to do negative gearing, and or the attractive
[5:31] Speaker 1: tax rates you pay on again, the marketplace is assuming
[5:34] Speaker 1: that there's going to be gained. There's an assumption built
[5:38] Speaker 1: into buying property buy investors that they'll make a capital gain,
[5:42] Speaker 1: and that is based on the fact that we don't
[5:44] Speaker 1: have enough supply relative to the demand, which will actually
[5:48] Speaker 1: therefore by definition, push prices up. And if those two
[5:53] Speaker 1: things are directed at investors, what did it in terms
[5:58] Speaker 1: of impact. What would you normally see in the data
[6:04] Speaker 1: as maybe contribution in turnover by investors at any at
[6:11] Speaker 1: any one particular time. So if the market's one hundred,
[6:14] Speaker 1: is there forty investors for every sixty home unoccupied?
[6:19] Speaker 3: Is that it works?
[6:20] Speaker 2: Yeah, so it's pretty much leading into the budget. That's
[6:22] Speaker 2: exactly the number. It was about forty one percent of
[6:24] Speaker 2: demand was being driven by investment, which was elevated. Long term,
[6:28] Speaker 2: you'd expect investors to be about a third of demand,
[6:30] Speaker 2: about thirty three percent.
[6:31] Speaker 1: That's the normal long term run rate of investors buying
[6:35] Speaker 1: property at auctions and private treaty and whatever it is
[6:38] Speaker 1: cross the market. Yeah, across Australia, Yeah, exactly. Is a
[6:41] Speaker 1: bigger or bigger or smaller in other state states where
[6:44] Speaker 1: they were all pretty much the same.
[6:45] Speaker 2: I know, there's definitely some variability. So national, at least
[6:48] Speaker 2: the March quarter, that's the most recent numbers, forty one
[6:51] Speaker 2: percent of demand's coming from investment. If you've got somewhere
[6:54] Speaker 2: like Victoria that had one of the lowest profiles for investors,
[6:57] Speaker 2: but it was still thirty seven percent. That's still quite
[7:00] Speaker 2: but nowhere near as high as New South Wales, which
[7:02] Speaker 2: was about forty four percent of demand being driven by investment.
[7:06] Speaker 2: So if you go back to periods where investors have
[7:08] Speaker 2: pulled back sharply in the market, and the most recent
[7:11] Speaker 2: evidence of that, the most recent example would be back
[7:14] Speaker 2: in twenty eighteen twenty nineteen, when we had the Royal
[7:17] Speaker 2: Commission and APRA had put in a couple of macrovidential
[7:20] Speaker 2: policies that really restricted investment lending. We saw investors pull
[7:24] Speaker 2: back to about twenty four percent of demand.
[7:27] Speaker 1: My guess, APRA being the regulator, told the banks, we
[7:30] Speaker 1: don't want to lend as much money to investors. Yeah.
[7:32] Speaker 2: Well, they had firm limits on interest on any lending yep.
[7:36] Speaker 2: And they had firm limits on investment credit growth ten
[7:38] Speaker 2: percent and a thirty percent limit on interest on you.
[7:41] Speaker 1: So the regulator was turning the banks, we don't want
[7:44] Speaker 1: you to grow your percentage of borrowers who are investors.
[7:52] Speaker 1: We don't want you to grow above ten percent pronum.
[7:54] Speaker 2: That's right, right, Yeah, So we saw investors drop back
[7:58] Speaker 2: to about from about forty six center demand, So that
[8:00] Speaker 2: was a record high, back to our twenty four percent.
[8:03] Speaker 2: My guess is post budget, we're going to be seeing
[8:05] Speaker 2: something similar, maybe even more dramatic. I just think for
[8:09] Speaker 2: investors investing in Australian real estate, yields are very low.
[8:12] Speaker 2: So if you're an investor, unless you have a really
[8:14] Speaker 2: large deposit, chances are you're going to be negatively geared.
[8:17] Speaker 2: You're going to you're going to be seeing a negative
[8:19] Speaker 2: cash flow in your property. That's going to make holding
[8:21] Speaker 2: that that property harder. Without negative gearing.
[8:23] Speaker 1: Which they used to mind because they could get they
[8:25] Speaker 1: would get some money back.
[8:26] Speaker 2: That's right exactly, So that crutch, if you will, is
[8:30] Speaker 2: no longer going to be available for established homes, and
[8:33] Speaker 2: you know about eighty percent of investors are buying established homes.
[8:36] Speaker 2: I don't think there's going to be a huge diversion
[8:40] Speaker 2: of investment appetite to buy new simply because new housing
[8:44] Speaker 2: has a price premium, so it's more expensive. The resale
[8:47] Speaker 2: market could be quite risky because you're going to be
[8:49] Speaker 2: selling that investment property to another investor that doesn't get
[8:52] Speaker 2: the same tax treatment as you did buying the new home.
[8:55] Speaker 2: Plus there's also just probably some risk around supply. New
[8:59] Speaker 2: house areas like inner city apartments and out of greenfield
[9:03] Speaker 2: detached housing doesn't have the same scarcity of supply that
[9:06] Speaker 2: investors tend to love. Really, yeah, there's more of it. Yeah,
[9:10] Speaker 2: I mean it could be quite bulky levels of supply,
[9:12] Speaker 2: especially inner city apartments that you know, one new development
[9:15] Speaker 2: could add another three hundred apartments, yeah, quite quickly. So
[9:18] Speaker 2: most investors tend to target the established market, which I
[9:21] Speaker 2: think is now going to be prohibitively costly and difficult
[9:25] Speaker 2: to hold because of the non benefit from negative gearing.
[9:28] Speaker 1: So you know, you guys examine data within an inch
[9:32] Speaker 1: of its life. Maybe I asked, could Tim Lawless for
[9:36] Speaker 1: us get inside the head of a residential property investor
[9:42] Speaker 1: from moment?
[9:44] Speaker 3: Sure?
[9:44] Speaker 1: So, And these are the people who are dropping off
[9:46] Speaker 1: thow flies at the moment. Data indicates, you know, from
[9:49] Speaker 1: forty one percent, don't we don't have another a new
[9:52] Speaker 1: number doing it well?
[9:53] Speaker 3: August fourteenth market calendar.
[9:55] Speaker 2: That's why we actually the Dune quarter lending indicators that
[9:57] Speaker 2: I can be the best.
[9:58] Speaker 1: Okay, So I was forty one percent, and I can
[10:01] Speaker 1: tell you as a lender, we were around that those numbers.
[10:05] Speaker 1: Forty percent. Around forty percent of our lending was to
[10:07] Speaker 1: investors and the balances to unoccupiers. I can tell you
[10:11] Speaker 1: that number of investors has dropped off dramatically in terms
[10:15] Speaker 1: of applications. Obviously haven't said all yet, but just that apps.
[10:19] Speaker 1: But put just if I could get asked Tim Laws
[10:21] Speaker 1: just to put his self into the mind of an
[10:25] Speaker 1: investor for property, investor says, I would normally be able
[10:31] Speaker 1: to buy. I would normally go and buy a million
[10:33] Speaker 1: dollar apartment forg mistake it just pick an easy number.
[10:36] Speaker 1: I've got twenty percent deposit, I've got two inn a
[10:39] Speaker 1: grand sitting in the bank. Normally I would go out
[10:41] Speaker 1: and buy one of these properties. What is investor weighing
[10:46] Speaker 1: up now? What is he saying to himself or herself
[10:50] Speaker 1: about whether they should go to the property market or not.
[10:52] Speaker 1: What are the pros and cons?
[10:53] Speaker 2: Well, again, I think the first thing that's going to
[10:56] Speaker 2: be they're going to be thinking about is what's the
[10:57] Speaker 2: opportunity for capital gain on this million dollar apartment or
[11:01] Speaker 2: two million dollars apartment, which I think is going to.
[11:03] Speaker 3: Be uncertain right.
[11:05] Speaker 1: I think we have uncertainty.
[11:06] Speaker 2: I think we have uncertainty around the trajectory of capital gains,
[11:10] Speaker 2: especially in the apartment sector, where you know, there's a
[11:12] Speaker 2: lot of focus on getting more supply into that sector
[11:14] Speaker 2: of the market. As hard as it is and as
[11:16] Speaker 2: difficult it is to get a feasibility to stack up,
[11:19] Speaker 2: eventually there will be a supply response, probably quite focused
[11:23] Speaker 2: on density to some extent, just on that.
[11:26] Speaker 1: Prior to maybe the capital gains tax, there was more certainty.
[11:30] Speaker 1: Are you saying that? Are they less certain today than
[11:34] Speaker 1: they were before the couple of gains tax in the
[11:37] Speaker 1: budget be announced? Yeah?
[11:39] Speaker 2: I think I think there's there's definitely a greater degree
[11:42] Speaker 2: of uncertainty in where capple gains are going to be
[11:46] Speaker 2: going forward, partly because of the uncertainty around what level
[11:49] Speaker 2: of aggregate demand are investors going to be adding. You know,
[11:52] Speaker 2: if we're going from forty percent of demand down to
[11:54] Speaker 2: say twenty percent or less, that's a big drop. That's
[11:57] Speaker 2: a big drop of aggregate demand.
[11:58] Speaker 1: There's a twenty percent drop in the title D demand
[12:00] Speaker 1: and fIF percent drop in the invested demand. Yeah.
[12:03] Speaker 2: Absolutely, And then there's uncertainty around what the overall supply
[12:06] Speaker 2: outcomes are going to be over the medium to long term.
[12:08] Speaker 2: I think short term absolutely, supply is going to remain
[12:11] Speaker 2: very tight. But ultimately Australia will see a supply response, yeah,
[12:15] Speaker 2: probably later rather than sooner, I would say the second
[12:19] Speaker 2: thing is going to be what's a yield on a
[12:21] Speaker 2: two million dollar apartment. It's probably going to be something
[12:24] Speaker 2: like percent, yeah, maybe three if you're likely three and
[12:29] Speaker 2: a half percent gross.
[12:29] Speaker 1: In other words, the beginning like maybe twelve hundred bucks
[12:33] Speaker 1: a week.
[12:33] Speaker 3: Yeah yeah.
[12:34] Speaker 2: So add to that, you've got your your mortgage or
[12:36] Speaker 2: payments probably around the mid sixes from mortgage rates. You've
[12:40] Speaker 2: got strata fees, you've got insurance costs, all of those
[12:42] Speaker 2: are going up quite swiftly. You've got tendancy reform, which
[12:46] Speaker 2: means if you're looking for a tenant, you've got to
[12:48] Speaker 2: probably ensure there's minimum standards, which can be expensive. And
[12:51] Speaker 2: you've got higher maintenance costs as well, because construction costs
[12:53] Speaker 2: have gone up, which implies it's costly or to maintained
[12:56] Speaker 2: strata strata fees. No, this is actually wear and tear.
[13:00] Speaker 2: If you've got to fix the plumbing, fix the sink, whatever,
[13:03] Speaker 2: it's a lot more expensive to do that now than
[13:06] Speaker 2: it was five years ago, simply because the cost of
[13:08] Speaker 2: trades and materials have gone up so substantially. So if
[13:12] Speaker 2: you compare that to what might be compared to say,
[13:15] Speaker 2: a much lower maintenance style of investment like buying into
[13:19] Speaker 2: a shareport for you or an ETF no maintenance costs,
[13:22] Speaker 2: no holding costs really whatsoever, apart from if you're leveraged,
[13:26] Speaker 2: very low transactional fees generally fairly similar long term capital
[13:30] Speaker 2: gain outcomes.
[13:31] Speaker 1: Yeah, they have been. I've seen the sharp ratio has
[13:33] Speaker 1: done for these things, and there's not much difference. The
[13:35] Speaker 1: sharp ratio is pretty equal relative to the risk.
[13:39] Speaker 2: That's right for an asset that gives you a fairly
[13:41] Speaker 2: similar outcome but much lower holding costs, much more liquid,
[13:44] Speaker 2: so you can buy it and out with very low
[13:46] Speaker 2: transactional costs as well. So I think a lot of
[13:49] Speaker 2: investors will.
[13:49] Speaker 3: Be doing that. Maths.
[13:51] Speaker 2: Is property going to give me enough return for the
[13:56] Speaker 2: risk I'm taking.
[13:57] Speaker 1: In that asset, especially during the period before I sell it,
[14:01] Speaker 1: because during that period, I am paying all this costs,
[14:04] Speaker 1: I am paying the interest, I am not getting much
[14:07] Speaker 1: return in terms of my rents, So I'm actually losing money.
[14:14] Speaker 1: Like while I'm holding this asset, I'm losing but this
[14:16] Speaker 1: is one of those few assets when I lose I'm
[14:18] Speaker 1: not allowed to actually claim a tax production notwithstanding I'm
[14:21] Speaker 1: losing money. You can, by the way, what most people
[14:23] Speaker 1: forgotten is you can accumulate that loss so that when
[14:26] Speaker 1: you do eventually sell it, if you make it be profit,
[14:28] Speaker 1: you can offset that loss. Then that's down the track.
[14:31] Speaker 1: So this is going through the mind of a residential
[14:33] Speaker 1: investment property buyer. I don't know if you have any
[14:35] Speaker 1: data on this, but is he or she thinking, Yeah,
[14:38] Speaker 1: for the time being, i might just put the money
[14:39] Speaker 1: in the bank, or maybe I'll buy some CBA shares
[14:42] Speaker 1: and I'll get this return on it. It's pretty simple.
[14:45] Speaker 1: I don't have to do anything, and I'll get again
[14:47] Speaker 1: on the CBA shares potentially whoever, whichever bank, and I'll
[14:52] Speaker 1: get a dividend and they're paying pretty good Frank dividends
[14:55] Speaker 1: at the moment.
[14:56] Speaker 3: Yeah.
[14:56] Speaker 2: So there isn't any data on this that I'm aware
[14:58] Speaker 2: of yet, Mark, So watch this space, though. I think
[15:01] Speaker 2: once we start to see more of the lending indicators
[15:03] Speaker 2: flowing through, Unfortunately, these data sets are pretty lagged, so
[15:07] Speaker 2: you're seeing it on your own books. I'm hearing other
[15:09] Speaker 2: banks talking about twenty twenty five percent drop in investment
[15:12] Speaker 2: inquiries as well, so I think it's already happening. And
[15:16] Speaker 2: once we start to see the data points that'll be
[15:19] Speaker 2: well down the track and the trend will have gathered momentum.
[15:23] Speaker 1: Do you think that people are as sophisticated in that
[15:26] Speaker 1: process as you've just gone through or is it more
[15:30] Speaker 1: Are they more just listening to people like you talk
[15:33] Speaker 1: and just saying, you know, like this is all a
[15:34] Speaker 1: bit high at the moment, just going to take a
[15:36] Speaker 1: step back and watch what happens.
[15:38] Speaker 2: Yeah, I think I'll give them them credit where it's due.
[15:41] Speaker 2: I mean, if you're spending one hundreds of thousand dollars,
[15:43] Speaker 2: if not millions of dollars to buy an asset being property,
[15:47] Speaker 2: I think you would be doing your due diligence. Property
[15:50] Speaker 2: is not a sophisticated investment. I would say, it's not
[15:53] Speaker 2: like buying into a commercial asset or an industrial asset,
[15:57] Speaker 2: where you have much more complex least terms and so forth,
[16:01] Speaker 2: and make goods property is. I don't think you need
[16:05] Speaker 2: to be a rocket scientist investor to be investing in property,
[16:09] Speaker 2: But if you are looking to invest in property, there
[16:12] Speaker 2: are a lot of safeguards around that. And I think
[16:14] Speaker 2: even if you weren't a sophisticated investor, he didn't go
[16:17] Speaker 2: through the mathematics. The bank's going to be doing that
[16:20] Speaker 2: for you.
[16:20] Speaker 3: When you go to.
[16:21] Speaker 1: Apply for a loan, they'll tell you what you can
[16:22] Speaker 1: afford in your can'ty exactly yes. So what seems to
[16:26] Speaker 1: be not being discussed is around the couple of gains
[16:31] Speaker 1: potential of buying into a problem into the problem market.
[16:36] Speaker 1: Is the problems existed here in austraighta for a long
[16:39] Speaker 1: long time. I can definitely get at least twenty years
[16:43] Speaker 1: to twenty five years to the two thousand and one
[16:45] Speaker 1: election of John Howard when he talked about affordability when
[16:48] Speaker 1: he launched his election campaign, it was affordability was a
[16:52] Speaker 1: problem then, as a problem now, and it's never been solved.
[16:55] Speaker 1: In fact, it's been exacerbated over the last few years.
[17:00] Speaker 1: The supply demand issue, I don't mean investor demand. I'm
[17:07] Speaker 1: talking about just population growth. The number of properties are
[17:12] Speaker 1: available for people to live in relative to the number
[17:15] Speaker 1: of properties that are available that are demanded to.
[17:18] Speaker 3: Be lived in.
[17:21] Speaker 1: That generally speaking, there's a mismatch. In other words, we
[17:25] Speaker 1: have a supply demand problem. People still got to live somewhere.
[17:30] Speaker 1: It doesn't matter if I buy propertly as an investor,
[17:31] Speaker 1: I rendered to you because you've got to live somewhere
[17:34] Speaker 1: you're either going to buy or rent it. That hasn't
[17:36] Speaker 1: been solved. So what is the prognosis from someone like
[17:40] Speaker 1: totality for the future, because surely house prices must dwelling
[17:45] Speaker 1: price must still go up because the demand by population
[17:49] Speaker 1: growth is still there.
[17:50] Speaker 2: Yeah, absolutely, this helps to keep a floor under housing prices.
[17:53] Speaker 2: If we didn't have that disconnect between supply and demand,
[17:56] Speaker 2: supply being overwhelmed by demand, we probably would have a
[18:01] Speaker 2: much worse case scenario when it comes to the housing
[18:05] Speaker 2: correction that we're starting to move through now. So I
[18:08] Speaker 2: think most most economists thing will probably see a downturn
[18:11] Speaker 2: at least a macro level around five to ten percent
[18:14] Speaker 2: across Australian housing house prices.
[18:16] Speaker 3: Yeah, exactly. If we didn't have.
[18:17] Speaker 2: An undersupply of homes in Australia almost guarantee they would
[18:21] Speaker 2: be a much larger number. So I think that that
[18:23] Speaker 2: under supply absolutely helps to keep a floor under housing
[18:26] Speaker 2: prices to some extent. But the demand side fundamentals really
[18:30] Speaker 2: need to be considered here. Absolutely, we have very low
[18:32] Speaker 2: levels of supply when you look at immediate supply, so
[18:35] Speaker 2: how many homes actually being advertised or listed for sale
[18:38] Speaker 2: that's now getting to above average levels. So for people
[18:41] Speaker 2: looking to buy a home at the moment, not buy
[18:43] Speaker 2: a new home, but buy an established home in a marketplace,
[18:46] Speaker 2: there's more listings than what we've seen over the past
[18:49] Speaker 2: five years on average, in Sydney, in Melbourne, now in Brisbane,
[18:52] Speaker 2: which is quite different for that market. Perth used to
[18:55] Speaker 2: have listing numbers about fifty percent below average. Now it's
[18:58] Speaker 2: about fifteen percent below average and rising quickly. So there's
[19:01] Speaker 2: more stock to choose.
[19:01] Speaker 1: From, so white people selling though. That's interesting because most
[19:05] Speaker 1: of these would be grandfathered under the couple of gas tax.
[19:08] Speaker 3: Is that right? Absolutely?
[19:10] Speaker 2: This isn't about investors dumping stock on the market or
[19:13] Speaker 2: homeowners suddenly becoming vendors. In fact, new listings coming to
[19:17] Speaker 2: the market are actually quite low, they're below outage. What
[19:20] Speaker 2: I'm talking about here is your total stock levels, not
[19:23] Speaker 2: the flow of new listings coming to market. And because
[19:26] Speaker 2: homes are taking longer to sell, the things that haven't sold, exactly,
[19:28] Speaker 2: there's an accumulation of stock in the market that's building.
[19:32] Speaker 1: Up over the last not desperate by sellers, but just
[19:35] Speaker 1: wanted to sell for some reason.
[19:36] Speaker 3: That's exactly right.
[19:37] Speaker 1: So it's accumulating.
[19:39] Speaker 2: Auction clearance rates are sort of in the low forty
[19:41] Speaker 2: percent range now, time to sell is rising, Discounting rates are,
[19:46] Speaker 2: negotiation levels arising as well. It's now a buyer's market
[19:49] Speaker 2: in quite a few markets now. So definitely we're seeing
[19:52] Speaker 2: supply from an immediate perspective is now becoming higher demand
[19:57] Speaker 2: when you think about people's actually ability to buy so
[20:00] Speaker 2: demonstrated demand. We're now seeing transactional activities a home sales,
[20:04] Speaker 2: which I think is demonstrated demand. Well, it's how many
[20:08] Speaker 2: people actually, it's turnover, it's how many people are how
[20:11] Speaker 2: many people are buying a home. So the number of
[20:13] Speaker 2: home sales month to month, that's tracking about ten percent
[20:16] Speaker 2: lower than a year ago now. So we've gone out
[20:19] Speaker 2: of a market where demand was consistently rising to about
[20:24] Speaker 2: October November last year, it peaked and it started to fall.
[20:27] Speaker 2: And again that probably comes down to affordability, inflation rising,
[20:31] Speaker 2: the RBA becoming a bit more hawkish at the end
[20:33] Speaker 2: of last year, and then more significantly breaks rising and
[20:36] Speaker 2: confidence falling. So we do have clear evidence that demand
[20:41] Speaker 2: is reducing demonstrated demand and supply is rising in terms
[20:45] Speaker 2: of immediate supply that that whole conversation around we're not
[20:49] Speaker 2: building enough homes is still really important, but that has
[20:52] Speaker 2: much more of a medium to long term influence on
[20:55] Speaker 2: the market rather than the immediacy of demonstrated demand and
[20:59] Speaker 2: listing them.
[21:00] Speaker 1: So would you say, then, irrespective what's happening in late today,
[21:05] Speaker 1: that the property market residential property market is still a
[21:09] Speaker 1: good investment, then, I mean, put negative gearing aside. But
[21:13] Speaker 1: it's you know, like it, Let's assume you only borrow
[21:16] Speaker 1: forty percent fray. We say, well, whatever, you can pretty
[21:18] Speaker 1: much break even on it on what your cost of
[21:21] Speaker 1: holding is relative to the rents. Do you think it's
[21:25] Speaker 1: a good capital gain asset class?
[21:27] Speaker 2: Personally, I think there's probably better opportunities for capital gain
[21:31] Speaker 2: outside of property once we start to see yields rising
[21:35] Speaker 2: and getting to a level like rents rising well, rents rising,
[21:40] Speaker 2: and of course values are coming down, which means yields
[21:43] Speaker 2: will will improve. Once that yield dynamic improves enough that
[21:47] Speaker 2: opportunities for cash flow become more common, at least with
[21:51] Speaker 2: a with say a twenty percent deposit, I think that's
[21:54] Speaker 2: where we'll start to see the investment fundamentals starting to
[21:57] Speaker 2: stack up in property but at the moment, if you
[22:00] Speaker 2: if you can't, if you can't buy to the housing
[22:02] Speaker 2: market and offset that cash flow loss through a negative
[22:07] Speaker 2: gearing strategy, it doesn't make as much sense anymore, especially
[22:12] Speaker 2: if over the medium term we're not going to be
[22:14] Speaker 2: seeing capital gains in the marketplace.
[22:16] Speaker 1: So in other words, I might put it into numbers
[22:19] Speaker 1: if I could buy a property in six months ago
[22:21] Speaker 1: from million bucks, and let's say the rent was one
[22:23] Speaker 1: thousand bucks a week, five percent return, but today, because
[22:29] Speaker 1: of the there's so much for me to choose from,
[22:31] Speaker 1: I can go and buy that same property as something
[22:33] Speaker 1: similar for nine hundred thousand dollars for Reagan mistake, But
[22:37] Speaker 1: your assumption is that the rent will still be a
[22:39] Speaker 1: thousand bucks.
[22:40] Speaker 2: I think rent will rise. I mean, vacancy rates are
[22:42] Speaker 2: still extraordinarily tied, so rentals be either what it was
[22:46] Speaker 2: six months ago or higher or higher. So my therefore
[22:49] Speaker 2: why yield is better absolutely yeah, yeah, which gets me
[22:52] Speaker 2: closer to breaking even. Yeah, but there's still a huge
[22:55] Speaker 2: gap between finding a positive cash flow property and where
[22:58] Speaker 2: yields are at the moment now with interest rates around
[23:01] Speaker 2: the mid sixes, for an investor, you'd probably need to
[23:03] Speaker 2: see a gross yield up around seven or eight percent.
[23:07] Speaker 2: That have to be positive cash flow when you account
[23:08] Speaker 2: for your mortgagor payments and all your other holding costs.
[23:12] Speaker 2: The other areas that offer that sort of return in
[23:14] Speaker 2: Australia tend to be extraordinarily higher risk mining towns for example,
[23:19] Speaker 2: or some of the inner city apartment markets around Melbourne.
[23:22] Speaker 2: Carlton is a good example of a very high yielding market,
[23:25] Speaker 2: mostly because unit values and that area are still lower
[23:29] Speaker 2: than they were ten years ago.
[23:31] Speaker 1: Eventually, though, if this continues on, the yields will increase
[23:36] Speaker 1: as prices reduce, but the rent stay high and or
[23:41] Speaker 1: go higher. Eventually, this will become quite an attractive asset
[23:45] Speaker 1: class because invest are going to say, well, I buy
[23:49] Speaker 1: you a dwelling in wherever, and my yield might be
[23:54] Speaker 1: six or seven percent. That's right, So which means the
[23:57] Speaker 1: investors will come back to the market you would expect.
[24:00] Speaker 2: Yeah, I think that's that's sound logic. The question is
[24:04] Speaker 2: how long is that?
[24:04] Speaker 1: I was going to say, I think that's a really
[24:06] Speaker 1: gradual phenomenon and it's going to take some time. And
[24:08] Speaker 1: then also equally, the assumption there is that I'm working
[24:13] Speaker 1: off for a zero increy, so of course of holding
[24:16] Speaker 1: so but if the interest rates go up, therefore you
[24:18] Speaker 1: speak you years ago, you've got to go be more
[24:20] Speaker 1: because I've never got to get a higher rent to
[24:24] Speaker 1: cover a higher cost, and we might be looking at
[24:26] Speaker 1: another interest rate rise coming up. Do you think the
[24:29] Speaker 1: government got it wrong? I mean in terms of timing
[24:31] Speaker 1: for example. I don't want to talk about policy so
[24:33] Speaker 1: much with you, but like, do you think the timing
[24:35] Speaker 1: of the introduction's policy was wrong relative to the property market,
[24:40] Speaker 1: not relative to the government a relative to the property market.
[24:42] Speaker 2: Yeah, absolutely, And I mean if you look at something
[24:45] Speaker 2: really basic, like the government incentivized first home buyers to
[24:49] Speaker 2: come to the market in October.
[24:51] Speaker 1: With the five percent double center posit car and terrible
[24:53] Speaker 1: to it's just so bad.
[24:54] Speaker 2: Brought a lot of first home buyers in with a
[24:56] Speaker 2: very small buffer, and then they smashed the market through
[25:02] Speaker 2: the budget and are almost orchestrating prices to come down
[25:05] Speaker 2: more so than they would have otherwise. So for a
[25:08] Speaker 2: lot of those fresh home buyers that came in, absolutely,
[25:11] Speaker 2: I think a lot of them will be in either
[25:14] Speaker 2: neutral equity, if not negative equity right now, yeah, right now,
[25:17] Speaker 2: which to be honest, I don't think that's that big
[25:20] Speaker 2: a deal unless we had a blowout in labor markets
[25:23] Speaker 2: or interest rates went up.
[25:24] Speaker 1: What do you mean by that is if people started
[25:26] Speaker 1: losing their job, that's right.
[25:28] Speaker 2: So I think for most of it that's predicted there. Well, yeah,
[25:31] Speaker 2: I think leader markets are loosening. But if we saw
[25:34] Speaker 2: unemployment getting up above five percent, I think everybody would
[25:36] Speaker 2: be quite surprised.
[25:37] Speaker 1: But I saw the deloitit access is. Recent predictions for
[25:43] Speaker 1: the labor market is that unemployment could go above five percent.
[25:47] Speaker 1: I think it's five point one percent, which means if
[25:50] Speaker 1: any of those people between four point five and five percent,
[25:53] Speaker 1: which is four point six whatever it is at the
[25:55] Speaker 1: moment where I think it's four point six. If you
[25:58] Speaker 1: fit in that category where you're one of the people
[26:00] Speaker 1: your job and you've got that government guarantee for five
[26:02] Speaker 1: percent to purchase your property, you only put five percent in,
[26:05] Speaker 1: and if the property goes down by ten percent and
[26:08] Speaker 1: you lose your job, you'll give me one of the
[26:11] Speaker 1: ones who's gonna lose completely lose your five percent deposit
[26:15] Speaker 1: and guess what the government has to stump up to
[26:17] Speaker 1: the bank and he lost. Because the government's basically guaranteeing
[26:21] Speaker 1: the banks that if Tim sells his property and he
[26:24] Speaker 1: sells a for lesson he bought it for, well lesson,
[26:27] Speaker 1: you lent him for nine We the government, US taxpayers
[26:33] Speaker 1: will pay that bill.
[26:35] Speaker 3: Is that right? Well, that's right.
[26:37] Speaker 2: A five point one percent unemployment rate is still relatively low. Yeah,
[26:41] Speaker 2: well in a historical sense, yeah, I think that's the
[26:43] Speaker 2: ten year average for unemployments about five and a half percent.
[26:46] Speaker 1: But in their statistical sense, you're right. But if you're
[26:48] Speaker 1: one of the people who are in that five percent,
[26:50] Speaker 1: that doesn't make matter to you. You just think, Wow,
[26:53] Speaker 1: I've lost some money.
[26:54] Speaker 3: Absolutely, I mean that's where the risk is.
[26:56] Speaker 2: And this is something that the IBA is highlighted repeatedly,
[26:59] Speaker 2: is that if you're on a high VR loan, you're
[27:02] Speaker 2: much more vulnerable to changes in your circumstances or changes
[27:07] Speaker 2: in the economic environment. And absolutely, for a first home
[27:10] Speaker 2: buyer with a small deposit, they're in that category. So
[27:14] Speaker 2: fingers crossed they don't lose their jobs or there's no
[27:16] Speaker 2: material fallout in the economy. Negative equity only becomes a
[27:21] Speaker 2: problem if you need to sell the problem. I think
[27:23] Speaker 2: most first home buyers will navigate the storm and they'll
[27:26] Speaker 2: pull back hard on discretionary spending and the day with
[27:29] Speaker 2: their mortgage or payments. That's generally what happens unless there's
[27:31] Speaker 2: some sort of a shock.
[27:33] Speaker 3: I mean.
[27:33] Speaker 1: One of the things that we noticed at our business
[27:37] Speaker 1: is that for those borrowers who are taking advantage of
[27:40] Speaker 1: the governor's five percent the guarantee to the banks and
[27:44] Speaker 1: where you only had to put down five percent deposit,
[27:46] Speaker 1: which is a great thing if you if you've got
[27:48] Speaker 1: no capital and you know you can't you can't buy,
[27:51] Speaker 1: you'll excod for the market because you don't have the
[27:53] Speaker 1: capital to buy the deposit to buy. We notice that
[27:59] Speaker 1: that part of the market between seven fifty and one
[28:01] Speaker 1: point five people were paying overs. It actually made probably
[28:06] Speaker 1: prices in that category grow at a faster rate than
[28:11] Speaker 1: any other category in the marketplace.
[28:13] Speaker 2: Yeah, we've done the same research and since October first,
[28:17] Speaker 2: even the month prior to that, which I think highlights
[28:20] Speaker 2: some of the speculative activity, because the expansion was announced
[28:23] Speaker 2: at the end of August, and then we started to
[28:26] Speaker 2: see some speculative activity pre October first, and absolutely prices
[28:30] Speaker 2: in that category below the price caps have been increasing
[28:33] Speaker 2: a lot faster than prices above the price caps.
[28:35] Speaker 1: Yeah. In other words, the government's initiative, rightly or wrongly actually,
[28:43] Speaker 1: which is always a season, always happened. First home uners
[28:46] Speaker 1: grants did the same thing. I mean during the Howard
[28:49] Speaker 1: government he doubled the first time monogram back in two
[28:52] Speaker 1: thousand and one.
[28:52] Speaker 3: Hindred was.
[28:54] Speaker 1: All it did was restructure the price of the marketplace
[28:58] Speaker 1: for the first home owners. That's right, just went straight
[29:00] Speaker 1: to the price.
[29:01] Speaker 2: It pushes prices up, does nothing for affordability in the
[29:04] Speaker 2: long run.
[29:04] Speaker 1: I thought to myself the other day, let's put myself now,
[29:08] Speaker 1: put can I put you you in the mind of
[29:10] Speaker 1: a property owner investor owns a property as an investor,
[29:16] Speaker 1: in other words, rent it out. He or She's thinking
[29:20] Speaker 1: to himself herself, I've got a good property here, because
[29:24] Speaker 1: attached to it is not only a home, not only
[29:27] Speaker 1: a loan from the bank, which are hard to get
[29:30] Speaker 1: under the current assessment provisions. Because I, you know, I
[29:34] Speaker 1: might have I might be the investor I might have
[29:35] Speaker 1: got assessed three inches strate rises ago. I might not
[29:40] Speaker 1: get that amount of money today one two that property
[29:45] Speaker 1: because I've bought prior to the Caupal Gains tax announcement
[29:48] Speaker 1: that the capra gaan on that will only be taxed
[29:52] Speaker 1: if only fifty percent of that's going to be taxed.
[29:55] Speaker 1: Do you think in the minds of those investors that
[29:58] Speaker 1: they might be saying, well, why would ever sell? Because
[30:01] Speaker 1: if I sell them, I'm just going to replace with
[30:02] Speaker 1: some other asset. The new asset of buy is going
[30:04] Speaker 1: to be taxed at the new couple of games tax
[30:06] Speaker 1: and regime much higher. Do you think people are going
[30:09] Speaker 1: to say, I'm not going to sell.
[30:10] Speaker 3: Of course they will. Yeah.
[30:11] Speaker 2: I think you'll see a lot of existing investors pre
[30:14] Speaker 2: budget are going to hold onto their property.
[30:15] Speaker 1: Because it's valuable. It's much more valuable all of a sudden.
[30:18] Speaker 3: Yeah, is that right?
[30:19] Speaker 1: Omro just making this crap up?
[30:20] Speaker 3: They get no.
[30:21] Speaker 1: I know, well the mentality, but.
[30:22] Speaker 2: The couple of game side of things is really important, right, So,
[30:25] Speaker 2: especially for an investor's been in the market for a while,
[30:27] Speaker 2: obviously gets pro rated. So after July first, it goes
[30:31] Speaker 2: back to twenty twenty seven. Yeah, CPI indexation. But if
[30:35] Speaker 2: most of your capital gain happened prior to that, absolutely
[30:38] Speaker 2: you're definitely sitting in a very good position. And if
[30:41] Speaker 2: you're still negatively gearing a lot of investors that they
[30:43] Speaker 2: don't need a negative gear after probably five.
[30:46] Speaker 1: Yeah, that's right, that's a good point. By way, tim
[30:48] Speaker 1: most negatively geared properties start to positively gear after five years.
[30:52] Speaker 1: They're not these so called billionaires aren't getting needy gearing
[30:56] Speaker 1: for thirty forty years. It's for the first five year
[31:00] Speaker 1: years that the rents are not enough to cover the
[31:04] Speaker 1: interest rate, the interest payments and all the other costs.
[31:06] Speaker 3: That's right.
[31:07] Speaker 2: They might have prayed down some of their principle by then.
[31:08] Speaker 1: Well they're generally speaking, you have because principal amortizers probably
[31:11] Speaker 1: after about year three or four star sermitized after which
[31:14] Speaker 1: means you interest being charged on the principle is lower.
[31:17] Speaker 1: Therefore you're you're not so negative as the year. But yeah,
[31:21] Speaker 1: so have we created a has the government created a
[31:25] Speaker 1: new asset class of property that's more valuable to some
[31:30] Speaker 1: investors than for them to sell that property, which which
[31:33] Speaker 1: is what the government's probably hoping they do. They're hoping
[31:35] Speaker 1: they put things on the market. Do you think we've
[31:38] Speaker 1: they've created this asset class ques special So it's.
[31:41] Speaker 2: Going to be very i think prolific and established. Entering
[31:45] Speaker 2: the middle ring suburbs right where there's been a lot
[31:47] Speaker 2: of investors. That's generally where they've got the best couple
[31:49] Speaker 2: of gains. That's where investor concentration.
[31:50] Speaker 1: What does it mean interering out?
[31:52] Speaker 2: Yeah, okay, so in most of the capital cities, you're
[31:55] Speaker 2: established markets where there's not a lot of land to
[31:57] Speaker 2: be built, for example, so they're real scarce supply levels.
[32:00] Speaker 2: That tends to be within ten kilometers of the CBD
[32:02] Speaker 2: with the major capitals.
[32:04] Speaker 1: And that's where are you saying, Tim, that's who in
[32:07] Speaker 1: more sophisticated, whether or just generally they tend to invest
[32:10] Speaker 1: in those areas.
[32:10] Speaker 2: Absolutely, because that's generally where capital gains have been the strongest.
[32:14] Speaker 2: So you'll find those investors going to be holding on
[32:17] Speaker 2: for longer, which in itself implies those inner city and
[32:21] Speaker 2: sort of middle ring property markets are probably going to
[32:23] Speaker 2: be the ones that suffer the most from a lack
[32:25] Speaker 2: of rental supply as well. If you don't see a
[32:28] Speaker 2: refreshment or an inflow of new investment or new rental
[32:31] Speaker 2: properties becoming available because you can't get the negative gearing benefits,
[32:36] Speaker 2: most investors who are going to be active in property
[32:39] Speaker 2: will probably be going out of fringe or inner city
[32:42] Speaker 2: where new housing supply gets those tax benefits. So we
[32:46] Speaker 2: might be creating a market here where rental markets remain
[32:49] Speaker 2: extremely tight. In those more desirable inner city and established suburbs,
[32:55] Speaker 2: whereas you're out of fringes, might have higher investor concentrations,
[32:58] Speaker 2: delivering more rental supply, but also competing with the markets
[33:02] Speaker 2: that the government's trying to insulate here first home buyers.
[33:06] Speaker 2: So if we see the more competitive friction between investors
[33:09] Speaker 2: and first home buyers in greenfield housing estates so new
[33:13] Speaker 2: where all the new houses are being built on the
[33:14] Speaker 2: outer fringes of Capital City or in the inner city
[33:17] Speaker 2: apartment markets, that kind of flies in the face of
[33:20] Speaker 2: giving first home buyers a leg up anyway, because you
[33:23] Speaker 2: might just be concentrating investor demands into those markets.
[33:27] Speaker 1: So recently I heard the Prime Minister in Parliament I
[33:32] Speaker 1: know it's not that many people listen to this boring stuff,
[33:35] Speaker 1: but I do, and saying that there's been an increase
[33:40] Speaker 1: in first time buyers as a result of the capital
[33:43] Speaker 1: gains tax proposed legislation. Is there data to support that
[33:49] Speaker 1: or is that a little bit cute in that there's
[33:51] Speaker 1: more as a percentage of the title, there's less investors.
[33:55] Speaker 1: Therefore there's more first time buyers or more unoccupied What
[33:58] Speaker 1: is the data showing? There isn't any data on this yet, right,
[34:02] Speaker 1: So where would you have got that of information.
[34:04] Speaker 3: You'll have to ask the Prime Minister Mark, he probably
[34:07] Speaker 3: won't talk to me. But anyway, Yeah, I'm hearing.
[34:09] Speaker 2: Exactly the opposite, that both investors and first home buyers
[34:13] Speaker 2: and subsequent buyers are holding back simply due to the
[34:15] Speaker 2: own first.
[34:16] Speaker 1: Time buyers too, absolutely, yeah, and unoccupies and occupied But
[34:19] Speaker 1: why why why? I understand the mind what you took
[34:23] Speaker 1: me into the mind of the investor. I understand that part.
[34:25] Speaker 1: What about first home buyers or unoccupies? What's going through
[34:29] Speaker 1: their head?
[34:29] Speaker 2: Well, I think partly it's uncertainty, lack of confidence. Nobody
[34:33] Speaker 2: wants to buy into a marketplace and spend your life
[34:36] Speaker 2: savings and suddenly find that assets worth less than what
[34:39] Speaker 2: it was a day ago.
[34:41] Speaker 1: So being clever, they're thinking, I might be able to
[34:43] Speaker 1: maybe the time in the market, I'm timing the market.
[34:45] Speaker 2: Yeah, I might be able to. It might get cheaper, yeah,
[34:48] Speaker 2: But I think, what's this space. I think once we
[34:50] Speaker 2: start to see some confidence coming back to the marketplace,
[34:53] Speaker 2: that inflation has maintained that interest rate cuts or imminent,
[34:57] Speaker 2: probably coming into next year sometime now. I think that's
[35:00] Speaker 2: when we'll start to see a lot more first home
[35:02] Speaker 2: buyers becoming active, taking advantage of the fact that prices
[35:04] Speaker 2: have dropped, the affordability is improved to some extent, there's
[35:08] Speaker 2: more stock to choose from. So yeah, absolutely, I think
[35:11] Speaker 2: there is a turning point here, and it probably comes
[35:14] Speaker 2: back to when we start to see more confidence returning
[35:16] Speaker 2: to the economy of the market. But there is a
[35:19] Speaker 2: silver lighting, I think, and that silver alighting is that
[35:21] Speaker 2: first home buyers probably will be in a much better
[35:24] Speaker 2: position to buy once the dust settles.
[35:27] Speaker 1: What happens if at the same time as these first
[35:31] Speaker 1: home owners and owner occupiers are starting to become more
[35:35] Speaker 1: confident that that now is a time to pounce, which states,
[35:39] Speaker 1: you know, mid next year for example, just by of example,
[35:43] Speaker 1: they and they now think that the interist rates are
[35:46] Speaker 1: pretty much leveled out, So that's one of the reasons
[35:48] Speaker 1: they're thinking it's time to get in. What happens if
[35:51] Speaker 1: around the same time, though, the investors start to think
[35:52] Speaker 1: to themselves, you know what, the yields are much better
[35:56] Speaker 1: because you know, the prices have come down, the rents
[35:59] Speaker 1: are still the same or probably gone up. My return
[36:02] Speaker 1: is now six and a half percent. Like we talked
[36:04] Speaker 1: about before, that hypothesis from before, the investors jump back
[36:08] Speaker 1: in the market and we start to get first home owners,
[36:11] Speaker 1: unoccupier's now competing with investors again. Do you think that
[36:16] Speaker 1: the house prices automatically go up because I've rarely seen
[36:20] Speaker 1: in Australia, and I've been through so many cycles, rarely
[36:24] Speaker 1: seeing Australia house prices stay low for very long. Yeah,
[36:28] Speaker 1: eighty months maybe max exactly.
[36:30] Speaker 2: Yeah, So whether or not it's the same. So typically
[36:34] Speaker 2: we see a pretty much a V shaped recovery in
[36:36] Speaker 2: Australian housing markets.
[36:37] Speaker 1: So it goes down yep, and then it goes up.
[36:39] Speaker 2: Goes up and about the same amount of time.
[36:41] Speaker 3: Right.
[36:42] Speaker 2: Sometimes it's a bit more of a use shape, but
[36:43] Speaker 2: typically it's fairly V shaped recovery. I'm not sure that'll
[36:47] Speaker 2: be the same trajectory this time around, because I don't
[36:51] Speaker 2: think we'll see a significant bounce back in investment demand
[36:54] Speaker 2: coming back into the Australian market unless here's another speculative
[36:58] Speaker 2: one mark if we see a change of them in
[37:00] Speaker 2: two years or twenty twenty eight.
[37:02] Speaker 1: Want to wait there.
[37:04] Speaker 2: Well, for the first half of twenty twenty eight, I
[37:06] Speaker 2: think is probably when we'll see another election, and what
[37:08] Speaker 2: if we see a change of government and some of
[37:10] Speaker 2: these rules get wound back. I mean, that's that's deeply speculative,
[37:14] Speaker 2: and maybe that's not even a good thing because it
[37:15] Speaker 2: just adds to the un I mean, you can't have
[37:17] Speaker 2: a playing field that's swapping and changing.
[37:20] Speaker 1: But they will, You're right to if Liberal and Nationals,
[37:22] Speaker 1: because they're already committed to that, they'll wind this stuff back.
[37:25] Speaker 1: That's not good either. No, it's too many variations, it's
[37:29] Speaker 1: too volatile.
[37:30] Speaker 2: Yeah, so absolutely, I do think when interest rates come down,
[37:34] Speaker 2: or maybe even when interest when inflation is tamed and
[37:37] Speaker 2: it's clear that interest rates are about to come down,
[37:39] Speaker 2: I think that's when we'll see the market at the
[37:41] Speaker 2: very least flattening out, if not moving back into some
[37:43] Speaker 2: level of growth. So that's probably coming into the second
[37:47] Speaker 2: half of twenty twenty seven, right, So that's when most
[37:49] Speaker 2: think we'll probably see interest rates starting to come down,
[37:53] Speaker 2: and that's when we'll probably see the housing markets stabilize,
[37:56] Speaker 2: probably move into some level of growth. But there's a
[37:58] Speaker 2: lot to think that level of growth there's going to
[38:00] Speaker 2: be a lot milder than what we've seen through previous
[38:04] Speaker 2: periods of recovery.
[38:05] Speaker 1: How much has the last five years been way out
[38:08] Speaker 1: of the box in terms of growth.
[38:10] Speaker 2: Yeah, substantially. It's not unprecedented, but it is quite extraordinary.
[38:14] Speaker 2: The last time we saw a five year growth rate
[38:17] Speaker 2: this strong, you'd go back to the early two thousands,
[38:20] Speaker 2: So the two thousand and one to two thousand and
[38:22] Speaker 2: four the market, yes, showing very similar conditions for similar
[38:25] Speaker 2: reasons as well. You know, rates were generally low, not
[38:29] Speaker 2: as low as what they were through the pandemic, but
[38:30] Speaker 2: there was very strong rates of population growth. As you mentioned,
[38:33] Speaker 2: the first home buyer grant had become available. It was
[38:36] Speaker 2: a lot of first home buyers active as well. But
[38:38] Speaker 2: some markets, I mean five years has been extreme in
[38:41] Speaker 2: its diversity as well. Melbourne in five years housing values
[38:46] Speaker 2: are up one percent percent.
[38:49] Speaker 1: Someone said that back to twenty fourteen levels or something.
[38:52] Speaker 3: It's not that something bad.
[38:53] Speaker 2: If we saw a ten percent drop in Melbourne housing
[38:56] Speaker 2: values now, they'd be back to about twenty nineteen levels.
[39:00] Speaker 2: Because vellies did rise pretty decently through twenty twenty before
[39:04] Speaker 2: there was so much disruption from Lockdown to Melbourne. But
[39:06] Speaker 2: then go to the other end of the book. Okay,
[39:08] Speaker 2: so the other book end is Perth. We're in five years,
[39:11] Speaker 2: the market's up about ninety percent. Well, so you've got
[39:13] Speaker 2: Melbourne at one ninety ninety five years. But remember prior
[39:17] Speaker 2: to that five year period, Perth was navigating the post
[39:21] Speaker 2: mining poom downturn. So it's off a very low base.
[39:24] Speaker 2: So there are some extremes that are influencing the numbers here. Nationally,
[39:27] Speaker 2: if you look at a really macro level of growth,
[39:29] Speaker 2: the market's up a bit over thirty percent in five years,
[39:32] Speaker 2: which still is a pretty strong outcome.
[39:34] Speaker 1: Do you think therefore has embedded into our investor brain
[39:38] Speaker 1: that this property increase, these types of increase have been
[39:42] Speaker 1: considered to be the norm and therefore, and whilst we're
[39:47] Speaker 1: not really in for a shock, we're what we're really
[39:49] Speaker 1: going to do is just see things to go back
[39:51] Speaker 1: to more normalize growth pattern relative to property as opposed
[39:55] Speaker 1: to this what we all thought might be normalized. This
[39:58] Speaker 1: ninety percent in Perth, but you know, thirty forty percent
[40:01] Speaker 1: in other places growth I mean, in other words, there
[40:04] Speaker 1: have been extraordinary periods for extraordinary reasons and that we
[40:08] Speaker 1: should not have expectations like that anymore.
[40:11] Speaker 2: Well, absolutely, I think investors need to be realistic. The
[40:13] Speaker 2: last five years has been extraordinary. You know, a typical
[40:17] Speaker 2: average rate of growth over a long period of time,
[40:19] Speaker 2: it's probably more like around five percent to seven percent
[40:22] Speaker 2: per annum, right, sustainable, a sustainable rate of growth, and
[40:25] Speaker 2: it's cyclical, So I mean everyone's already forgotten. Between the
[40:29] Speaker 2: middle of twenty twenty two and early twenty twenty three,
[40:32] Speaker 2: the housing market went through a really short and sharp correction.
[40:35] Speaker 2: Sydney home values fell about twelve percent, Melbourne was down
[40:38] Speaker 2: about nine percent, Briston was down about nine percent in
[40:40] Speaker 2: that really short space of time. So to think we
[40:43] Speaker 2: might be heading into let's say, a ten percent correction
[40:46] Speaker 2: against that context of extreme growth doesn't sound too extraordinary
[40:50] Speaker 2: to me.
[40:50] Speaker 1: I think you probably heard him, but Chris Joy, who
[40:52] Speaker 1: was on the podcast last week, said he thinks, and
[40:55] Speaker 1: you sort of touched on this yourself as well, that
[40:57] Speaker 1: this could be a different downturn to we've experienced in
[41:00] Speaker 1: the past. But he sees our current inflation, which is
[41:05] Speaker 1: he believes causes the downturn and property prices, but our
[41:08] Speaker 1: current inflation period and the taming of that inflation by
[41:11] Speaker 1: a reserve bank with higher interest rates. As currently, this
[41:17] Speaker 1: will be something that we've never seen before, unprecedented. In
[41:21] Speaker 1: other words, it will last a lot longer than we've
[41:23] Speaker 1: ever seen in the past. We talked about eighty months,
[41:26] Speaker 1: but this is going to last a lot longer, and
[41:27] Speaker 1: he talking about twenty eight and maybe even beyond. Does
[41:33] Speaker 1: fatality look at the future of interest rates and what
[41:36] Speaker 1: are you guys thinking about that? Yeah?
[41:38] Speaker 2: So, frankly, no, we don't. We're not macroeconomists. We don't
[41:42] Speaker 2: have a macroeconomic model that forecasts interest rates or inflation.
[41:45] Speaker 2: Will leave it up to the extraordinarily smart people like
[41:48] Speaker 2: Chris Joy. But I do tend to agree with Chris
[41:52] Speaker 2: that we probably are in a period that's going to
[41:54] Speaker 2: be quite different, not necessarily just because inflation might be
[41:57] Speaker 2: higher for longer, interest rates might be higher for longer.
[42:00] Speaker 2: This downturn is multifaceted. Normally, when the market moves through
[42:04] Speaker 2: a downturn, it's through a singularity like interest rates rising,
[42:08] Speaker 2: or a credit tightening period, or a shock like the GFC.
[42:13] Speaker 2: This period we're moving into now has record levels of unaffordability,
[42:18] Speaker 2: high interest rates, deeply pessimistic levels of confidence, which will
[42:22] Speaker 2: gradually change now that the strait of Horme moves is open,
[42:25] Speaker 2: but already seeing a little bit of a lifting confidence
[42:26] Speaker 2: but from very low levels, and a structural change in
[42:30] Speaker 2: taxation policy as well. All these things I think are
[42:33] Speaker 2: adding to the headwinds for housing markets that in many
[42:37] Speaker 2: ways are unprecedented that we'd have this array of this
[42:42] Speaker 2: diversity of negative factors influencing the market. But we still
[42:46] Speaker 2: have some positives in the sense that, as we say
[42:48] Speaker 2: talked about, supply levels are really low, demand from population
[42:52] Speaker 2: growth is still quite strong as well. These are the
[42:56] Speaker 2: factors I think that will probably stave off a more
[42:58] Speaker 2: material correction.
[43:00] Speaker 1: Does toutality currently take the view that there are places
[43:09] Speaker 1: in Australia regions or suburbs or cities that will outperform
[43:17] Speaker 1: the rest of the country.
[43:19] Speaker 2: Yeah, there's always going to be I think a fairly
[43:22] Speaker 2: diverse tapestry of outcomes. For example, I think if I
[43:25] Speaker 2: think around the capital cities, in my mind, Melbourne is
[43:28] Speaker 2: probably the best place market to outperform over the medium
[43:32] Speaker 2: to long term. And the reason I say that, even
[43:34] Speaker 2: though it's probably a little bit counterintuitive because that market's
[43:36] Speaker 2: been extraordinarily weak. That's part of the reason why it
[43:39] Speaker 2: is very affordable. You're took amount into the yields. No, no, well,
[43:44] Speaker 2: yields are higher in Melbourne, but they're they're not stand out.
[43:46] Speaker 2: The sort of still sub four percent grows at least
[43:49] Speaker 2: on average. I'm talking about opportunities for capital game, right,
[43:52] Speaker 2: So if you're buying into the Melbourne marketplace, you know,
[43:55] Speaker 2: we haven't seen Sydney Melbourne part and prices we talked
[43:59] Speaker 2: about last time it chatted since forever.
[44:02] Speaker 3: The gap is the widest we've seen because.
[44:04] Speaker 1: They are aways sort of pretty close. Weren't they in
[44:06] Speaker 1: terms of price.
[44:06] Speaker 2: Simply maybe a fifteen percent difference less than that now
[44:11] Speaker 2: now it's about fifty five no difference. Really Yeah, it's extraordinary.
[44:16] Speaker 3: Wow.
[44:16] Speaker 2: I think that affordability of advantage from Melbourne really stands
[44:20] Speaker 2: out for me. For Austory's second largest city, for an
[44:22] Speaker 2: economic you know, a diverse economics state with arguably strong
[44:29] Speaker 2: fundamentals over the meeting to long term, that market looks
[44:32] Speaker 2: quite affordable.
[44:34] Speaker 1: Can you get tenants down there? Can you get me?
[44:37] Speaker 1: Is a population sort of allow you to get tenants in?
[44:41] Speaker 2: Melbourne's got one of the fastest rates of population growth.
[44:44] Speaker 2: That's mostly driven by overseas migration, which tend to be
[44:47] Speaker 2: mostly short term visas, so it's students and absolutely that
[44:51] Speaker 2: the rental market's very strong. Vacancies are still sub two percent.
[44:55] Speaker 2: The capital gain story, though, has been very weak over
[44:58] Speaker 2: a long time. Let me talked about it for five
[45:00] Speaker 2: is one percent. So I think that's probably the civil
[45:02] Speaker 2: lining of Melbourn's underperformance is it's very cheap, It's probably
[45:06] Speaker 2: going to rise off a very low base, and there
[45:08] Speaker 2: needs to be some equilibrium between Sydney and Melbourne in
[45:10] Speaker 2: terms of their prices. So partly that's going to be
[45:13] Speaker 2: corrected by Sydney values moving through a downturn. Melbourne is
[45:18] Speaker 2: as well, but probably has stronger upside potential regional markets
[45:22] Speaker 2: as well. I still think some of the commutable regional
[45:25] Speaker 2: markets around the country are I wouldn't say undervalued, but
[45:29] Speaker 2: still relatively good value.
[45:30] Speaker 1: So what's that meaning commutable?
[45:32] Speaker 3: How far?
[45:32] Speaker 2: What are we talking about within two hours driving distance driving?
[45:35] Speaker 2: So Gosford, for example, in Sydney other central Coast and
[45:39] Speaker 2: Sydney is a great example of that, or even Newcastle
[45:41] Speaker 2: but further a bit further out for around Melbourne, it's
[45:45] Speaker 2: getting out to Geelong or Ballarat, those sort of markets.
[45:48] Speaker 2: In Queensland it's Toomba, the Gold Coast, the Sunshine Coast.
[45:52] Speaker 3: So those satellite.
[45:53] Speaker 2: Cities which are commutable, they've got a liveability advantage in
[45:56] Speaker 2: some ways.
[45:57] Speaker 3: I think.
[45:58] Speaker 2: Given I think we've seen the structural change in how
[46:00] Speaker 2: people work that we can see remote working going, you know,
[46:04] Speaker 2: it's probably something that's here to stay. Those markets are
[46:07] Speaker 2: suddenly a lot more popular with a broader base of demand.
[46:11] Speaker 1: What about Canberra and Darwin?
[46:14] Speaker 3: Good question.
[46:16] Speaker 2: Darwin is definitely very volatile, fickle market. It tends to
[46:20] Speaker 2: move on the back of big infrastructure projects and any
[46:24] Speaker 2: sort of capital investment that's going in. So yeah, at
[46:27] Speaker 2: the moment it's a market. It's very resilient. We're not
[46:29] Speaker 2: seeing the same sort of weakness in Darwin as we're
[46:32] Speaker 2: seeing in most other markets. But then again it's it's
[46:35] Speaker 2: extraordinarily affordable. It's got the highest yields. We talked about
[46:38] Speaker 2: opportunities for positive cash flow. Darwin's got a gross yield
[46:41] Speaker 2: that's up around six percent, well way higher than any
[46:43] Speaker 2: other capital city.
[46:45] Speaker 1: Is it because of supply problems or is it because
[46:49] Speaker 1: people just pay that because it's you know, it's Darwin.
[46:52] Speaker 2: I think it's mostly because it went through such a
[46:54] Speaker 2: long running downturn. The prices are very low.
[46:56] Speaker 1: So that's again that that's your thesis, like if the
[46:59] Speaker 1: price is low and stay the same, will go up
[47:01] Speaker 1: You're yielding.
[47:02] Speaker 2: Green is looking pretty good, but for a lot of
[47:04] Speaker 2: investors that's not attractive enough because they don't see the
[47:08] Speaker 2: I suppose the certainty of capital gain.
[47:10] Speaker 3: To the market.
[47:10] Speaker 2: Like Darwin, Camera is kind of similar in the sense
[47:13] Speaker 2: that that market has been a fairly consistent performer, but
[47:17] Speaker 2: there's a real difference between the apartment market and Camebra,
[47:20] Speaker 2: which is severely oversupplied versus houses, and houses have been
[47:26] Speaker 2: quite strong buying to the Camera. Unit market has been
[47:29] Speaker 2: a very poor investment. Generally, Uni values have been holding
[47:31] Speaker 2: flat to going backwards for.
[47:33] Speaker 1: Some time now, but it has very low vacancy rate.
[47:36] Speaker 2: Though Camera, well, the vacancy rate is still quite low,
[47:39] Speaker 2: but that doesn't seem to be supporting a strong rate
[47:41] Speaker 2: of capital growth, especially in the apartment sector where there's
[47:43] Speaker 2: still a lot of apartments being built as well. So
[47:46] Speaker 2: it's a great testament to build more supply and you'll
[47:50] Speaker 2: definitely keep a lid on housing prices and ensure some
[47:53] Speaker 2: level of affordability. And that's the other thing with Cambra.
[47:55] Speaker 2: It's a very affordable market given incomes tend to be
[47:57] Speaker 2: quite high as well.
[47:58] Speaker 1: Yeah they do, and there's lots of doubling comes down
[48:01] Speaker 1: there too, and they're got jobs which are usually not
[48:04] Speaker 1: at risk because they're usually government jobs. Basically most of
[48:08] Speaker 1: them are. Let's just look at a place like Sydney,
[48:12] Speaker 1: and I quite like what you said before. It would
[48:15] Speaker 1: seem to be those suburbs within Sydney that are within
[48:21] Speaker 1: the two rings of the CBD. I think you said
[48:25] Speaker 1: how many commuters ten combat.
[48:26] Speaker 2: About ten kilometers, But yeah, the rule of thumb is
[48:29] Speaker 2: is tanklomitters. Sydney being such a large metro, you can
[48:32] Speaker 2: probably go out a bit further than that to describe
[48:34] Speaker 2: that's sort of inter city boundary.
[48:35] Speaker 1: So that seems to have a prognosis wise, it seems
[48:40] Speaker 1: to have a good outlook for the future.
[48:42] Speaker 3: I would assume.
[48:43] Speaker 2: So don't get me wrong, it's it is chronically unaffordable.
[48:47] Speaker 2: So still it's still very very expensive markets. And these
[48:51] Speaker 2: are some of the weakest markets in Sydney as well.
[48:53] Speaker 2: These very expensive markets, but I think that's more cyclical
[48:56] Speaker 2: than the long term.
[48:57] Speaker 1: When you say weakest market, what do you mean, Well.
[48:59] Speaker 2: It's some of those markets that are quite affluent. Eastern
[49:02] Speaker 2: suburbs a great example, or the lower north Shore or
[49:05] Speaker 2: getting into the Northern Beaches. These are markets where values
[49:08] Speaker 2: are falling at the most rapid rate at the moment.
[49:11] Speaker 2: In Sydney, these are blue chip areas, but they do
[49:14] Speaker 2: tend to be a little bit more volatile. So I
[49:16] Speaker 2: think once we start to see the market turning around,
[49:19] Speaker 2: Truak or the eastern suburbs in Melbourne is another really
[49:22] Speaker 2: good example of quite weak markets at the moment.
[49:25] Speaker 1: Are you seeing significant price reductions there?
[49:28] Speaker 2: Some markets around those, these really high high end blue
[49:31] Speaker 2: chip markets are down more than ten percent already.
[49:33] Speaker 1: Absolutely Wow, what does coatalities? So sitting here today because
[49:39] Speaker 1: we know we sat here pre budget, but sitting here
[49:42] Speaker 1: today has totality change its future outlook for Australia. I
[49:47] Speaker 1: think you I think by a regulation you said something
[49:50] Speaker 1: like overall you Sydney, Melbourne, you were looking at a
[49:54] Speaker 1: ten percent downturn by the end of this col under year,
[49:57] Speaker 1: and you were saying place like Brisbane. I think think
[50:00] Speaker 1: my memory serves me correctly six percent of a few
[50:03] Speaker 1: of the others were a little less, but the bigger
[50:06] Speaker 1: markets were ten percent.
[50:07] Speaker 2: Are you still seeing that? Yeah, I think they might
[50:09] Speaker 2: have been piked a trough on those numbers, but yeah,
[50:12] Speaker 2: it's probably worse than a little bit since work since
[50:14] Speaker 2: we've spoken and the budget was handed down, so not significantly.
[50:18] Speaker 2: I still think, you know, overall, you know a macro
[50:20] Speaker 2: view of about a ten percent drop in housing prices,
[50:23] Speaker 2: given the context of the strength of the upswing and
[50:26] Speaker 2: how much equity people hold in their homes. If you've
[50:28] Speaker 2: got a Brisbane and you see housing prices four by
[50:31] Speaker 2: ten percent, you're getting back to levels we've last seen
[50:34] Speaker 2: in September last year. It's not that that larger falls
[50:39] Speaker 2: in the past of the upswing, But if you see
[50:40] Speaker 2: a ten percent fall in Melbourne values from the current level,
[50:43] Speaker 2: you're getting back to twenty nineteen. That's significant, which is significant.
[50:47] Speaker 2: So yeah, I think, you know, if you put a
[50:48] Speaker 2: lending lens on this, or a risk lens, there are
[50:51] Speaker 2: definitely some markets that if they do go through a
[50:53] Speaker 2: more meaningful correction, there is going to be much more
[50:56] Speaker 2: widespread levels of negative equity. The RBA estimates negative equidy
[51:00] Speaker 2: in Australia is less than one percent, but obviously it's
[51:03] Speaker 2: prices fall. Clearly we will see more prevalent of negative
[51:08] Speaker 2: equity and probably pick up in areas numbers as well.
[51:10] Speaker 1: I know you don't do the macro economics in terms
[51:13] Speaker 1: of you know, looking at geo political stuff and all
[51:15] Speaker 1: those other things, but at totality. But have you guys
[51:19] Speaker 1: got a view on what to expect in New Yorgu's
[51:21] Speaker 1: meeting for the RBA. Yeah, mate, it's I mean, compares
[51:25] Speaker 1: to why the numbers come out in the end of July.
[51:27] Speaker 2: But yeah, everyone's watching inflation. Obviously we see another uptick
[51:30] Speaker 2: in the core inflation numbers like we saw through the
[51:33] Speaker 2: main numbers, then yeah, I think it's game one for
[51:35] Speaker 2: another twenty five basis point hike. I'm definitely not in
[51:38] Speaker 2: the camp of two more rate hikes. I think one
[51:41] Speaker 2: more and we're done, hopefully. But that doesn't mean we're
[51:43] Speaker 2: about to see rate cuts.
[51:45] Speaker 3: I think. Yeah.
[51:46] Speaker 2: I think the second half of next year is when
[51:48] Speaker 2: we'll see finally core inflation getting back to where the
[51:51] Speaker 2: RBA wants it to be, and that'll be the trigger
[51:53] Speaker 2: for rates coming down.
[51:54] Speaker 1: There's a lot of stuff being published. I mean you see,
[51:56] Speaker 1: you would have seen the Deroit deloid accesses on economic Update.
[52:01] Speaker 1: You look at you read all the commentaries, you produce
[52:05] Speaker 1: your own commentaries, you produce your own data and analysis.
[52:09] Speaker 1: Has it do at any stage the government ring you up?
[52:12] Speaker 1: The federal government say Tim, could you come down to
[52:14] Speaker 1: Canberra and we'd like to sit down with you and
[52:16] Speaker 1: talk to you about what you guys are seeing.
[52:19] Speaker 2: Yeah, I think to the credit the governments are very
[52:21] Speaker 2: open to speaking with the private sector with the marketplace.
[52:25] Speaker 2: So absolutely we do provide briefings to different departments within
[52:30] Speaker 2: the government.
[52:30] Speaker 1: What about the elected officials like.
[52:35] Speaker 2: I won't go there delve into that, but yeah, I
[52:39] Speaker 2: think with say Treasury, with IBA, with Human Services. I
[52:44] Speaker 2: mean a lot of these government departments are also clients
[52:46] Speaker 2: of toatality as well. And with any of our clients,
[52:48] Speaker 2: absolutely we do try to make sure that they're informed
[52:51] Speaker 2: in the market trends and the sort of insights that
[52:53] Speaker 2: we're producing and how it influences their decision making.
[52:56] Speaker 1: You must be sitting back thinking, well, we're in this
[52:59] Speaker 1: massive to a directory about before Christmas last year, right
[53:04] Speaker 1: up into February. House prices continue on in my case,
[53:08] Speaker 1: loans loan levels being at record levels, lending being at
[53:11] Speaker 1: record levels, house prices continuing on the lack of supply
[53:16] Speaker 1: relatives to demand, population growth going crazy increasing. What do
[53:21] Speaker 1: you think sitting here today, Given like it's only like
[53:26] Speaker 1: six months, not even six months, the change has been dramatic, It's.
[53:31] Speaker 2: Been fast, and I think the complexity in the market
[53:35] Speaker 2: is very different to what we're used to seeing. Like
[53:38] Speaker 2: I said that, there's a lot of headwinds at play
[53:40] Speaker 2: at the moment, but yeah, things are changing very quickly.
[53:43] Speaker 2: And I think the fact that there's been so much
[53:48] Speaker 2: curiosity about the impact of the federal budget at a
[53:51] Speaker 2: time when we're not really seeing firm evidence yet of
[53:55] Speaker 2: how much investors are pulled back, it just highlights how
[53:58] Speaker 2: uncertain people are about changes in policy and how it's
[54:03] Speaker 2: influencing the housing sector. And the reason for that is
[54:06] Speaker 2: we have the vast majority of households have their wealth
[54:10] Speaker 2: in housing. Yeah, it's about fifty five percent of Australian
[54:13] Speaker 2: wealth is in the housing asset class, and it's about
[54:16] Speaker 2: seventy five percent of our household debt is in housing
[54:19] Speaker 2: as well. So that's why we see so much fascination
[54:22] Speaker 2: with housing trends.
[54:23] Speaker 1: I don't even use the words kiddishness, you know, and
[54:27] Speaker 1: you know like I see a bit of I see
[54:30] Speaker 1: a bit of politically insensitivity to what is and actually
[54:36] Speaker 1: what is actually an economic outcome as opposed to just
[54:41] Speaker 1: a political outcome.
[54:42] Speaker 3: I see.
[54:43] Speaker 1: I don't think government's treasury. I'm mean the Treasurer, but
[54:47] Speaker 1: treasury who advised the Treasurer as having made or pulled
[54:52] Speaker 1: the right lever in terms of perhaps timing, I mean
[54:55] Speaker 1: apart factor that my person view TV they should have
[54:57] Speaker 1: gone to an election with it, But just take that
[55:00] Speaker 1: out for a second. If they were going to introduce it,
[55:02] Speaker 1: they should introduce it next to you, and everything settled
[55:04] Speaker 1: down a little bit. I just think the timing of
[55:06] Speaker 1: this whole program, probably also the way they announced it,
[55:10] Speaker 1: because there's been so many changes to it. I can't
[55:13] Speaker 1: keep up on't about you. I'm confused. What's example, what's
[55:16] Speaker 1: not exempt? You know, commercial properties, exampt superinnovation funds have changed.
[55:21] Speaker 1: It's a bit of a nightmare.
[55:23] Speaker 2: Yeah, I think Sidley, the amount of carve outs in
[55:25] Speaker 2: the backpedaling we've seen since the budget was handed down
[55:28] Speaker 2: highlights this wasn't thought out well enough that the decision
[55:32] Speaker 2: makers didn't go through all the scenarios to think, well,
[55:35] Speaker 2: what are the unintended consequences here? Yeah, I think for
[55:39] Speaker 2: your federal budget, we should have seen a lot more
[55:42] Speaker 2: strategic forethought going into it.
[55:44] Speaker 1: Yeah, it seems like it was politically time to do it,
[55:48] Speaker 1: but maybe not economically sensitively, sensitively analyzed.
[55:54] Speaker 3: Yeah, that's right enough.
[55:55] Speaker 1: Well, Tim, things very much as usual, made for your
[55:58] Speaker 1: great insights and the insights of cautality. Appreciate it. I
[56:02] Speaker 1: think that you're the way you've unpicked the brain of
[56:07] Speaker 1: an investor is really important for those people who are
[56:10] Speaker 1: thinking about becoming investor or being an investor or are
[56:12] Speaker 1: an investor. That's really important around the uncertainty, but also
[56:17] Speaker 1: just around the changes and yield and the timing. I
[56:20] Speaker 1: actually I've never really thought it through, but the increase
[56:23] Speaker 1: in yield as a result of the rent staying the
[56:27] Speaker 1: same or going up and the price going down could
[56:30] Speaker 1: well be the catalyst to bring people back into the
[56:34] Speaker 1: marketplace at some stage. But that's going to be but
[56:38] Speaker 1: that relies on a reduction in price, and it's going
[56:41] Speaker 1: to be a gradual phenomenon. It's something happens. Tim Lawyls,
[56:45] Speaker 1: thanks for much any thanks Mat

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