The rich are getting richer: What experienced investors are buying
Phil Tarrant and Liam Garman unpack a 25 basis point cash rate rise to a 14-year high, a 19.3 per cent year-on-year jump in national listings to more than 301,000, and a 42.3 per cent lift in distressed listings. They also cover the risks sitting inside bridging and guarantor loans, possible concessions on negative gearing and SMSF borrowing, and why rising offset balances suggest buyers are saving rather than panicking.
Distressed listings are up 42.3 per cent and national listings have climbed 19.3 per cent year on year to more than 301,000 as at October, and none of that yet reflects Tuesday's 25 basis point rate rise, which takes the cash rate to its highest in 14 years. Phil Tarrant and Liam Garman read the build-up as stock lingering unsold rather than a flood of new vendors, which hands negotiating power to buyers heading into summer. Garman expects pre-approvals to shrink and offers to be revised down by five or ten thousand within the week. Tarrant calls it the best buyer's market in some time.
That pressure shows up most clearly in bridging finance, where submissions have jumped 168 per cent. Tarrant says brokers are telling him the same thing: people have bought before selling and now need to bridge the gap. Garman's warning is blunt. Bridging loans carry higher rates because they are meant to be short-term, and in markets where monthly declines are running at four to six per cent, waiting a month can cost you real money. Sydney and Melbourne have flattened to roughly zero to one per cent a month, but some smaller capitals have not.
The pair extend the same logic to guarantor loans and commercial lending. Garman points to data suggesting a substantial share of parents who went guarantor are now more than $50,000 in the red, and asks whether a lender can issue a margin call on a guarantee. Tarrant's view is that a parental guarantee is sound when structured properly, but it ties up the parents' home and complicates any later sale, creating a new trap for older Australians. On commercial, Garman cites Victor Kumar's point that granting a tenant rent relief can compromise a valuation and trigger a margin call on a lease doc loan.
Tarrant's bigger concern is volume, not price. Real estate businesses, tax depreciation firms and state stamp duty receipts all depend on transactions occurring, and a one or two per cent price fall matters far less than deals simply not happening. He argues the smartest available policy lever is encouraging older Australians out of five and six bedroom homes, except stamp duty on the buy and agent fees on the sell make it financially pointless. Garman adds the 5 per cent deposit scheme and the SMSF lending deadline both pulled demand forward artificially, then left September looking worse than it was.
On the SMSF ban, Tarrant notes the government costed it at about 4,000 affected buyers while an industry body put residential SMSF transactions closer to 16,000, and he expects a wind-back, possibly a carve-out preserving limited recourse borrowing for new builds. Garman and Tarrant split on what gets conceded first: Tarrant backs negative gearing, Garman argues the CGT discount is the easier give because nobody is making capital gains anyway. A listener asks about the 18.6-year property cycle. Both treat it as cherry-picked hindsight, with Garman pointing out COVID-era capital changed everything the theory cannot account for.
The counterweight is cash. Westpac's offset balances have grown from $71 billion to $81 billion in 12 months, a 12 per cent lift, with NAB reporting an 11 per cent increase alongside a $6.1 billion profit. Tarrant's advice, with HSBC putting recession odds at 50-50, is to operate as though one has already arrived: simplify, know your exposure, avoid extreme moves. Listener questions cover debt recycling and serviceability, whether the tax changes will raise less revenue than doing nothing, and ATO figures showing net rental profits of $12.5 billion against losses of $15.2 billion.
Speaker 1: This is a Momentum Media production.
Speaker 2: G'day, how you going Phil Tarrant, Property Buzz, Friday morning, how you going? The date is the 6th of November in the middle of the spring racing season. Everyone's mad for it at the moment. We obviously had the Melbourne Cup over the weekend, sorry, over the week. And what we also saw on Tuesday was a spike in the official cash rate, 25 basis points to the highest official cash rate in 18. 14 years, that's the environment we'll operate within right now. We'll probably have a chat about that today. Amongst what else is going on in property, it's called Property Buzz for a reason. We get a buzz of what's going on every single week and give some opinions on that. Sometimes informed, sometimes ill-informed. It depends how we feel at any point in time. Sometimes frosty, sometimes heated. But that's what everyone seems like. It's interesting. I think some of the commentary that we've had over the last period of time is really hitting a nerve with a lot of people. Obviously, you know, across all the social media channels, there's clips of us talking about stuff and it's getting a huge amount of engagement. But last night I was at the PMX Awards, the Property Management Excellence Awards, and it was obviously the Property Management Excellence Conference during the day and I was top. caught by a whole bunch of people that said keep it up and they also said the same thing to my colleague and co-host of Property Buzz, Leon Garman. Hey, Garman, good to see you. Good, good, good. Phil,
Speaker 3: Good to
Speaker 2: back
Speaker 3: see you.
Speaker 2: to back to back to back to back events.
Speaker 3: Yeah,
Speaker 2: Yeah,
Speaker 3: it never ends.
Speaker 2: the Friday
Speaker 3: It
Speaker 2: before was...
Speaker 3: never ends.
Speaker 2: We haven't
Speaker 4: The
Speaker 2: yet recorded
Speaker 4: AI awards,
Speaker 2: on the Australian AI Awards,
Speaker 4: yeah,
Speaker 2: which we're at.
Speaker 4: the,
Speaker 2: We
Speaker 4: was
Speaker 2: saw Arjun Pallywell out there. He secured an award for innovation in AI, which
Speaker 4: it Park
Speaker 2: was great.
Speaker 4: Hyatt, Park Hyatt, Park Park
Speaker 2: Hyatt, Our agency,
Speaker 4: I don't
Speaker 2: yeah,
Speaker 4: know what
Speaker 2: big
Speaker 4: Steve knows,
Speaker 2: day.
Speaker 4: one of them,
Speaker 2: It was AI Fest.
Speaker 4: AI fest,
Speaker 2: We're at AI
Speaker 4: yeah.
Speaker 2: Fest, which is a festival of AI. There was a whole bunch of different things happen simultaneously. There was legal people there. There was finance technology people there. There was the big awards on. on on last night pmx awards
Speaker 4: Yeah.
Speaker 2: how uh did you did you make it to the end i snuck away i snuck away at halftime okay
Speaker 4: I stood in the middle like yourself and then I allowed people kiss the ring a little bit and then I went because then something to my seat. So clearly they don't respect me that much. So then I went to the green room and I had my beautiful surf and turf. What was like a prawn which is quite nice and then a steak which is actually quite good.
Speaker 2: Did you eat that in the green room?
Speaker 4: I did.
Speaker 2: Must be fancy.
Speaker 4: Someone took my seat.
Speaker 2: That's
Speaker 4: So, okay,
Speaker 2: okay. That's probably good. Yeah.
Speaker 4: now it was, look, it was pretty fantastic. You know, the property management industry and of course, landlords across Australia, it's the point of contact, their asset managers.
Speaker 2: Yeah.
Speaker 4: And I know you've been a very big champion right across the property sector to see them like that, to see them as asset managers, not just someone at the end of an email chain that's doing your admin that you don't want to do. Well, it's actually a bit more sophisticated for that. And they are the point person that is looking after your financial future. And we've seen so many times we don't need to relive all the fingers in the till where some property managers can be a bit dodgy and have their fingers in. and deal and take money but there have been plenty of times you would have seen it where less than optimal property managers they just don't action what they're meant to action and it can cause massive massive damage to your property you know I've seen it before where and it was only a after almost 12 months of it when a family member of mine went to their accountant and realized that they'd been substantially under collecting rent for 12 months.
Speaker 2: Yeah.
Speaker 4: And it became a very weird situation of, well, how do you actually go to a tenant and say, hey, for 12 months you've been underpaying because then they wouldn't have necessarily realized and it becomes a bit of a who holds the buck at the end of the day, but that's why you need good property managers, you need good people in your corner. So we hosted these awards, this conference to make sure that the industry is firing on all six, eight cylinders, let's say 12 cylinders. uh doing good job
Speaker 2: Sounds right. So the type of folk at the PMX conference yesterday were probably the good sort of property managers.
Speaker 4: 100 100 i mean that's always the case you know when you go to a professional educator like even people listening to this you know you're taking time out of your day to listen to you know property finance economics you know politics chat you probably are at the end of the day a little bit more informed you have your the thing on the pulse you're seeking out education or you're seeking out other opinions yeah that's going to lead itself to probably quite good so yeah go online if you're looking for a new property manager if you want to vet them um the awards winners are up online the finalists there and the finalists are all really fantastic to be clear um there are a lot of a lot of categories where and we've got judges that go through it all it comes down to like a fraction of a point or a fraction of a percent between two
Speaker 2: that's
Speaker 4: people yeah
Speaker 2: good angie um you had a lot of people there like you know the room was packed was at the star um yeah it's good good Good, good. Yeah, there's more than that. So
Speaker 4: yeah
Speaker 2: it does say 550 at least, maybe even more. Yeah, good vibe, good energy. I don't think probably managed to get out a lot.
Speaker 4: no
Speaker 2: So they're in good form. And when I rocked up, there was people getting out of limousines all dressed up and all that good stuff. So yeah, good on you property management industry. Well done to you and your team, Liam, getting that event together.
Speaker 4: i'm going to take a quick plug while we're here as well just because i'm watching
Speaker 2: Oh
Speaker 4: watching it i'm watching we have six people online in our general chat we get notifications through on the on the actual
Speaker 2: Yeah
Speaker 4: on the on the actual thing now i think a lot of people that will be watching live are probably already in our whatsapp chat but um quick plug if you're listening to this over the weekend if you download it from spotify in the show notes we will have a link to our ongoing whatsapp chat Hosting it.
Speaker 2: Yeah.
Speaker 4: You know, have a chat. Meet like-minded people. Have a bit of a debate in
Speaker 2: Yeah.
Speaker 4: civil.
Speaker 2: Well, we do this live on a Friday morning around 10, but we're getting thousands, thousands, thousands and thousands of people tuning into every single episode like on YouTube and on the podcast channels. And then there's hundreds of thousands of people looking at the clips and stuff on social. So if you're not listening to it live, that's cool. You can pick it up elsewhere.
Speaker 4: We can still chat with us. Come with us. Tune
Speaker 2: in live and you aren't going to come with us.
Speaker 4: Come with us. Even if you just want to join the WhatsApp chat, ask people their thoughts, their opinions, where you're buying next, which property manager you should choose. I'm sure people will be down for a chat.
Speaker 2: She's a good one.
Speaker 4: Yeah,
Speaker 2: She's
Speaker 4: she's a a good
Speaker 2: good
Speaker 4: one.
Speaker 2: one. A couple of headlines I've seen. Liam Eskew in research shows national property listings jumped. This listing jumped 19.3% year on year to more than 301,000. as in october the build-up is driven by properties lingering unsold rather than a wave of new sellers here the market distress listings climb 42.3 making vendor pricing conversations tough for agents rising
Speaker 4: Yep.
Speaker 2: stock industry and distressed supply uh shifting negotiation power towards buyers heading into summer putting pressure on vendors and agents price realistically so it's certainly a buyer's market absolutely a buyer's market it's probably the best buyer's market you're going to see for some time yeah
Speaker 4: I don't think it's probably going to get worse,
Speaker 2: worse
Speaker 4: worse, worse.
Speaker 2: yeah yeah
Speaker 4: Obviously, this wouldn't factor in the rate decision on Tuesday. barring a power even if you got pre-approvals probably dropped even since you got pre-approval i would hope um you know there's going to be a lot of people that are going to have to by necessity revise down their offers five ten grand this week so
Speaker 2: Potentially, that's it. So let's see what happens to auction results over. uh the period um you know that story here house prices plunges borrowing capacity cut these are all from an hour ago um melbourne's vertical boom visualized uh ages published first time 3d visualization showing how melbourne suburbs could rise under labor's activity center planning program whether or not they're going to get a chance to do that Yeah. you know when's the election on
Speaker 4: Is it 28 November?
Speaker 2: 28th November it's not far off it's an interesting
Speaker 4: who's
Speaker 2: one it's
Speaker 4: counting um yeah 28
Speaker 2: it's
Speaker 4: November yeah yeah
Speaker 2: bridging loan bridging loan submissions jump 168 percent and my conversations with with brokers are all saying this there's so many bridging loans in markets at the moment so
Speaker 4: you know it's
Speaker 2: these
Speaker 4: true
Speaker 2: these are people who are sort of you know bought something new haven't sold their last joint and they've got to bridge the gap right
Speaker 4: man it's a worrying thing we um we had a a story that went out on SPI and REB exactly on this and bridging lines of course have come with higher interest rates they come with higher interest rates because it's meant to be a kind of a short-term fix while you sell your current property but there is a latent risk here and there is a latent risk that if we take the the pre and post rate rise announcement for example you might end up over the course of seven days For no other reason than people's borrowing capacity dropping, having to take a 10, 20 grand pay cut or haircut on the price of the property. And as days of market increase and as distressed listings increase, I think, and this isn't financial advice, obviously speak to your financial advisor and make sure that when you're taking these instruments out, it's done for the right reason. But I think there is a latent risk there if the market does keep dropping and in some of these cities. pieces will keep in mind it looks that sydney melbourne have kind of petered out a little bit and i mean petered out in terms of their monthly price declines are zero to one percent you know it's pretty marginal it's within a margin of error it kind of means that if you have the average house you'll accept a tiny little bit of a haircut in the next month but i'm sure that that means actually markets out there that are performing very well if it's only dropped by one percent but there are markets on the flip side With some of the smaller capitals that some of the smaller capitals are and I'm not going to name them You can look them up, but they are dipping four to six said month for month so it does kind of mean that if you do wait that month and you're relying on bridging like you might actually take a little bit of a haircut yeah
Speaker 2: And it's going to be the point, you know, if you could offer to take if you hold into properties at once is if is tough for a lot of people
Speaker 4: if it's too good to be true but it probably it's like maybe settle um and then with that as well We did a piece on SPL and REB. Similar risk, guarantor loans, guarantor loans. So spoke to Jeremy Yannitselli from Paradigm Partners, accountant. Looking at what's the risk of this, because there was data coming out that if you do dip into negative equity, and a lot of people that would have used, say, the 5% deposit scheme or people that predated that and used the guarantor loans that I think there is a very decent chunk, and I don't have the exact figures on me, but a very large percentage of parents that use guarantor loans are now 50% above $50,000 in the red.
Speaker 2: Well, you know, when lenders start doing margin calls.
Speaker 4: Yeah.
Speaker 2: on people
Speaker 4: Mm
Speaker 2: you
Speaker 4: -hmm.
Speaker 2: know particularly like guaranteed loans right like
Speaker 4: Yeah.
Speaker 2: if someone if someone's put a parental guarantee and maxed up their own principal place of residence to help their kids out to 80 you know assumed 80
Speaker 4: Can we do a margin call on a guarantee alone?
Speaker 2: imagine you could
Speaker 4: yeah
Speaker 2: do well
Speaker 4: well and it's funny you should mention that because i actually did again third plug for another story i wrote this week or the team right i wrote actually this one
Speaker 2: wrote
Speaker 4: the team
Speaker 2: something yeah
Speaker 4: yeah on margin calls for commercial properties where you can do a margin call you can do a margin call especially when you get um your lvr reassessed very frequently so yearly you get a recess yearly it
Speaker 2: it depends um
Speaker 4: depends
Speaker 2: well the bank will have covenants around their lending and they're all going to be different depending on them who the bank who what the bank is they may want a an annual valuation they
Speaker 4: Yeah.
Speaker 2: may want a valuation every two years three years that depends on what the LBR is like lease stock stuff probably going to you know get there'll be sort of more significant covenants around that
Speaker 4: Yeah.
Speaker 2: in terms of ensuring the value of that property and if they're not satisfied there's enough equity in there they'll call it in take
Speaker 4: And on this note, I'm going to also do another quick plug for your special series post-budget guide to commercial property investing. And so you guys with Victor Kumar from Right Property Group had a great chat about that. In particular, I think it was Victor. He said, you know, there's actually a massive risk, especially with the lease. lease docs, right? There is a risk of if you're a nice guy and you're like, hey, you know, tenant, I get that in today's economy, you're struggling. I will give you some level of rent relief because I'm just a really nice guy. That will
Speaker 2: a compromise evaluation yeah
Speaker 4: It will.
Speaker 2: yeah
Speaker 4: It will. And then you will be at risk of a margin call.
Speaker 2: it's the last thing you want right and look you know i think i think things are going to be get pretty bad for the bank starts sort of calling in um doing margin calls on on um on loans but stranger things
Speaker 4: Well,
Speaker 2: have happened
Speaker 4: it's a risk
Speaker 2: yeah
Speaker 4: that you have to prepare for at very least.
Speaker 2: yeah so that's the state of play at the moment i want to get this sort of doom it's easy i've made a decision person personally just not going to get stuck in the malaise of negativity that's out there at the moment.
Speaker 4: Yeah, it's hard. And I got that feedback a lot last night because people like, oh, you know, every day I read REB or SPI and it's all negative. And it is, that's very reasonable way of looking at it because the way that I look at it is, you know, again, this is professional education for me, especially for SPI with investors, it's professional investment education. If I'm saying that, hey, you're at risk of a margin call, it's not to say that the property market's collapsing. It's to say, you know, don't over leverage yourself, have buffers.
Speaker 2: Yeah.
Speaker 4: You know, it's very, it's for that education point because there's going to be a lot of people out there and you and I have spoken about it at length that are going to be sucked in by some real from some buyer's agent and they've bought this, they've bought a commercial property without realizing that these are risks because they're used to residential investing. The guarantor loans. Yeah, okay, it does sound a bit doom and gloom, but how many hardworking parents out there are going into their retirement age and may have their home on the line?
Speaker 2: potentially you
Speaker 4: That's an important
Speaker 2: know well
Speaker 4: thing to be aware of at very least.
Speaker 2: what you got to think also is is um if and you would need to speak to a mortgage broker around this if you've got a loan connected with a property that you own it probably makes it more difficult to transact on that property so if you have a a guaranteed loan connected with it so essentially there's a new prison there for for for for older Australians who, and I think parental guarantees are a really good idea done the right way with the right parameters around it. But if you've helped your kids get into the market with the property that you. own there's going to be covenants around what happens if you choose to sell that or if you need to sell that for whatever reasons right there's a lot of these things need untangling
Speaker 4: Yeah.
Speaker 2: and that can be quite challenging and difficult to do it could broke will be able to help you out sort you out with that but i was only chatting the other day i was on the um The Pure Property podcast with the guys,
Speaker 4: Oh, yeah.
Speaker 2: yeah, you know, Aaron and Paul there and we're talking about how to sort of talking about how to solve the housing crisis, if you want to call it that, right? And one of the biggest and this is connected with this point around, you know, family pledges and all this sort of stuff, right? The easiest way to provide more housing stock would be to have older Australians who don't have kids at home. home anymore in large houses transitioning to smaller houses but they're unfortunately locked inside of another prison which is well if i sell it i need to replace it so there's cost to sell there's cost to buy there's obviously stamp duty on on the buy side and there's agents fees on the sell side which is going to erode it's going to erode any activity around it you know some of the smartest policy decisioning should be applied to actually how do you encourage older people to downsize
Speaker 4: Yeah.
Speaker 2: you're going to open up there is you know there's been reports done on this but this houses all over the joint with two people living in it five six bedroom houses they very even rarely go to the other rooms they're just big behemoth and they've got to upkeep but they're stuck doing it because you know they can't find something to move into and or it's not financially viable for them so i'd be directing a lot of attention to that issue is though is that the state governments are coming up short by you know 20 year on year on on on on you know their the tax receipts because of transactions and volumes you know at the paymex event yesterday some horrible stories out there of just how tough some of these real estate businesses are doing it it's not because markets are coming down it's sort of irrelevant in some ways the fact that prices are softening the issue is that everyone is connected with transactions and volume it's all about volume you know tax depreciation for example that's all volume related you know every single agent is volume related prices might come back one or two percent five percent you know yes it means that the the commission that the real estate agent is going to get is going to be slightly smaller than what it would have been but if there's no deals happening at all Mm. it's all volume contingent and i think that's going to be the reality for and this is going to be one of those fourth and fifth order impacts that the government in their wise wisdom when they put these changes in there didn't really think about is that most real estate businesses are connected with the number of transactions rather than the size of the transaction is the primary thing but again i'm sure treasury modeling didn't know i've been enjoying our center estimates over
Speaker 4: that
Speaker 2: the
Speaker 4: was
Speaker 2: last
Speaker 4: how
Speaker 2: period
Speaker 4: long have
Speaker 2: of
Speaker 4: we been
Speaker 2: time on yeah
Speaker 4: we've been on 15 minutes and now we're talking about treasury that's actually that's a record
Speaker 2: it's a record yeah treasury modeling but but you know again senate estimates whether it's the actual responsible ministers or the people in the public service you know and i know you only get the information on social medias when they don't know what they're doing
Speaker 4: Yeah.
Speaker 2: but geez that happens a lot it's pretty often it's
Speaker 4: Yeah.
Speaker 2: really good just i'll take it all notice i'll get back to you like and i just go you haven't even thought about this you know yeah i saw someone getting beaten up today on it was all the advertising around the five percent deposit schemes i think it was eight or nine million dollars were spent on advertising and i think the question was or how many different languages did you did you advertise it in they couldn't tell you you
Speaker 4: you know
Speaker 2: know
Speaker 4: it's so funny like with the five percent deposit scheme and how many government ministers are doubling down on this and they're still going to instagram i'm pulling up katie gallagher's instagram just to see what she's talking about but um uh nothing about nothing about finance uh medicare a dog a dog that's
Speaker 2: Who is the minister
Speaker 4: about it yeah
Speaker 2: who tried to explain the economy by using ushies?
Speaker 4: that was um was that annika wells isn't she the one that keeps it keeps using flights and flying around everywhere that whooshies um there is actually and this is crazy you know i'm i'm scrolling down and i'm not seeing anything about finance on the finance minister's page and oh it's still talking about from today credit card surcharge and these guys are really doubling down on this stuff but That's what we talk about every week, Phil. The second, third, fourth order impacts, we're kind of just scratching the surface and we're just scratching the surface because, you know, when we were having a chat to Jeremy about the guarantor, you know, at this rate, it could take, you know, up to 11 years for people to get out of the trap of the guarantor loan because if you've, say, used it to prop up. up to 20% of a deposit and your house has gone down 10%. I'm not going to do the maths on the fly. I'm not that smart,
Speaker 2: yeah
Speaker 4: but it's going to take a long time.
Speaker 2: it's going to take a huge amount of time a huge amount of time and and i remember when they extended this um five percent positive was october of about this time last year um and and on the day it happened like i think i was talking about i saw it come through and i went this is what's going to happen and it's all translated to that you know to to a tee um whatever
Speaker 4: And it
Speaker 2: it's
Speaker 4: also added artificial demand in the exact same way that the SMSF deadline added demand. It added demand because you and I speak to... conversations literally every day and the conversations I'm sure you had the conversations that I had was oh yeah i'm getting such a big influx of people because they want to beat the five percent deposits game
Speaker 2: Yeah.
Speaker 4: So you had an artificial, and this is, these are, this happens when there's a market, right? It's the same with the share market. When there's an artificial point in time, people trade around that point in time. So point in time five percent deposit scheme, well, I'm going to jump into the market before billions of dollars of artificial liquidity is going to enter the market, buy up. Now, same with SMSFs. And you and I were talking earlier in the year, when you give people two to three months to buy with the IRBAs, there was an artificial over-demand. And again, speaking to every BA, so many of them said the exact same thing to me. Oh, this is actually our busiest month ever. It's our busiest month ever because everyone's rushing to buy through their SMSFs. And so you, you know, I'm kind of musing of like, well, if that happens in August, then what the hell's going to happen in September? Because we already knew that the government overcooked, or undercooked rather, the amount of people buying residential property through their SMSFs. And they, what was it, when they banned, they said it's only going to impact about 4 000 people, and then one of the, um... There was like a broking or finance industry group that came out and said, well, we can't exactly tell how much is being transactioned. But from our members, our members have reported that there are 16,000 SMSF transaction residential property. The federal government says 4,000. There's a very big discrepancy here. And with that 16,000, I reckon, you know, if I were to do voices to make an assumption with. The amount of BAs that were just flooded with work for the SMSFs, you would have had several thousand buyers in the market all at the one time artificially trying to beat this deadline, which would have artificially driven up is probably not the right word, but created a natural floor on house prices, which then bottomed out in September. So you know, as well as I do, this is all about headlines. You know, you go on the Daily Mail and it's like. Like, you know, some economists that no one's ever heard of, and you actually look at their credentials and it's like they graduated from the Polytechnic of East London with a PhD in some random stuff that's got nothing to do with anything, and they're predicting a 60 price drop. Well, okay, firstly... don't listen to the experts all the time because that dude's not an expert but people get sucked into these headlines so when September rolls around and the amount of buyers recede and then you have all these talking heads and these commentators out there saying well that's the worst buying month ever because all the buyers evaporated it's because we artificially pushed them all to August it was all it was
Speaker 2: It's always going to happen. And I remember exactly when they said they're going to do this. I telegraphed it back in March before the election. I said they're going to have a crack at this. You, everyone's sitting on... What? No one took any interest in what I said. They don't, why would you? And I said this is going to happen. You can find me talking about this. I said, you know, they're going to have a cracker, this is part of the budget. And they didn't. It didn't come out in the budget,
Speaker 4: until
Speaker 2: until
Speaker 4: The Greens, yeah.
Speaker 2: they had to start negotiating,
Speaker 4: yeah
Speaker 2: right, to actually get a pass through. And I went, well, I told you so. And then I said, pretty soon after that, they're going to have to wind it back. They're going to have to change it. They're going to have to change it. Just like I said a couple of weeks ago, the government is going to need to bring some sort of conciliatory policy up until in the 2028 election.
Speaker 4: Do you reckon, they reckon they'll reverse any of it?
Speaker 2: They're going to have to, but...
Speaker 4: Yeah. they would you know
Speaker 2: they're
Speaker 4: what?
Speaker 2: Going to have to, they're going to have to be, they're going to have to concede something when it comes to negative gearing. I don't know what they're going to do with CGT. I think the CGT stuff will just be absorbed and normalised.
Speaker 4: But I actually,
Speaker 2: but they're
Speaker 4: no,
Speaker 2: Going to have to cut, they're going to have to...
Speaker 4: I disagree.
Speaker 2: say no
Speaker 4: I reckon CGSU discount before negative gearing because it's what we spoke about last week, which is you can't give a CGD discount when no one's getting any capital gains. And this is even in the share market. The share market's not going to fare very well over the next few years.
Speaker 2: What you saw you saw the US stocks
Speaker 4: $2.5 trillion lost in a day? Well, I mean, okay, and that's at an artificial point in time. It's because it
Speaker 2: wasn't That's why I don't think they need to worry about it. No one's there's not going to be much capital
Speaker 4: going to be, yeah.
Speaker 2: If you're buying now if you bought You know, 10 years ago you're going to have CGT.
Speaker 4: yeah
Speaker 2: issues
Speaker 4: I mean, it's all been realized from the future percentage, but...
Speaker 2: but but
Speaker 4: To that point, you actually need...
Speaker 2: but
Speaker 4: to in
Speaker 2: His grandfather anyway, up until a point. So you still get your discount up until whatever.
Speaker 4: until basically
Speaker 2: And then it's the up gap.
Speaker 4: Until July next year, at which point there's not going to be any capital gains anyway, so yeah.
Speaker 2: Yeah, so I think there's gonna be negative gearing because it's about a supply issue. So they're going to have to take some sort of policy. It might be you can negative give one or you can negative year two. They're going to have to do, they're going to have to match. They're going to have to match what the Coalition and One Nation are putting...
Speaker 4: Yeah.
Speaker 2: ...out there, at least in some, some view. But, but this is a story and I'm not up to date with this, maybe you, and this connected with SMSF. So there's a piece by Phil Curry, he's, he's a smart bloke, the AFR. Um, he wrote this last week: the government has been urged to wind back its ban on super funds with the housing sector, and Coalition want the policy to wipe out about 12 000 new home builds a year, right? Which we've said... Um, the remaining budget bill scheduled to pass the House Representatives on Thursday. Did it get through? I don't know, but it's got to go to the Senate, right, in three weeks anyway. So there's going to be some dealing, wheeling and dealing done, right? The opposition moved and amended preserved limited recourse borrowing arrangements, so being able to borrow inside your self-managed super fund to newly build properties.
Speaker 4: Hmm.
Speaker 2: So this might be the concession.
Speaker 4: Yeah.
Speaker 2: This is politics, this negotiation, right? You put a whole bunch of stuff and you bring stuff back, you get it to where everyone's happy. So, you know, if the government, this is a supply issue, right? So developers don't want to develop. because it's very hard for them to make the economics work, number one. Number two, capital is pretty tough to get and private credit these days is a bit sort of on the nose, right? So it's risky for developers to develop. That's been compounded so much by the fact that there's so many less buyers in the market because of these changes outside of super, but these changes inside of super around borrowing. 30, 40% of pre-sales were self-managed super fund. Um, purchases. Now a lot of pre-sales for some developments, if, depending where you get your money, then there may, there may be no need for pre-sales.
Speaker 4: Mm
Speaker 2: you
Speaker 4: -hmm.
Speaker 2: ...know, depending on the lender. Um, and, and so the further you go down the food chain in terms of where you get your money from, the, the less sort of connected they probably are with the need of pre-sales. The better the lender, the more they're going to want, right? So it's just completely wiped out development. So this here, right, to actually... ...pigeon pair the concept of you still get your negative, you can still negatively gear property if it's brand new. Once these things take place, why wouldn't the same thing apply theoretically to carve out new builds for superannuation super fund? And I tell you what's going to happen should that happen, should that happen, they're buying new build properties, you... ...outside of super has not taken off as a result of...
Speaker 4: No.
Speaker 2: ...as a result of these tax changes, despite people who build brand new properties saying that, yeah, sales are through the roof. It's not right. People aren't buying new properties outside of super because typically doesn't stack up. You're paying a huge premium. It's like driving a car off a parking lot, loses value straight away, right? People aren't buying that. However... ...frustrated people with their superannuation will be more likely to, to deploy money into new build property in their super. And traditionally that's where a lot of people have actually put their super dough, is in new build properties, right? So should this get a carve out, I think that will trigger, I think mortgage brokers will be happy number one, but then people got to get their heads around this idea of going, well, new build properties don't make sense outside of super because I'm not... For all these different reasons. However, I'm happy to do it inside of. ...my superannuation, because it's a limited recourse borrowing arrangement. Everything's connected with that. It's, it's, it's, you sort of buttress a little bit more risk if it goes, if it goes south, it's stuck within it. Yes, you're going to have a non-performing super fund. So I'd be surprised that there's some wheeling and dealing here, some wheeling and dealing here, um, which would be interesting to see. We've got some questions, Liam.
Speaker 4: We
Speaker 2: let's
Speaker 4: do.
Speaker 2: Go through these.
Speaker 4: We
Speaker 2: guys some
Speaker 4: do.
Speaker 2: questions
Speaker 4: From the team on the WhatsApp, we're probably going to have Katie Gallagher's Instagram. Okay, cool. So from Mick, I'd be interested to hear Phil, I'm just going to give these questions to you. I'm going to drop myself out
Speaker 2: of Okay.
Speaker 4: it. I'd be interested to hear Phil's take on the 18-year property cycle theory. There was a lot of chat around it at the beginning of the year and it has now played out. Is it actually a thing or pure coincidence?
Speaker 2: Let me just quickly remind myself of what the 18 year
Speaker 4: Well,
Speaker 2: property cycle
Speaker 4: it's that.
Speaker 2: is.
Speaker 4: The well it's legal, right
Speaker 2: Yeah, yeah.
Speaker 4: Not my opinion,
Speaker 2: So
Speaker 4: it is. Yeah.
Speaker 2: this is what the AI tells me. So the 18.6 year property cycles and economic theory suggesting that real estate and land markets go through repeating pattern of growth, a peak, a market correction roughly every 18 to 18.6 years, how the cycle works. The theory typically breaks down timelines three main stages. Recovery takes seven years, prices recover slowly, then grow after a previous downturn. Next one, boom. Boom. Boom expansion phase, seven years, rapid growth and heavy investor speculation plus prices are high peak. Correction, reassessment phase, approximately four years, overinflated prices, high debt, rising costs trigger market slowdown. What this means for Australia. Recent forecasts are CapNG's housing market report outlines a cool-down trajectory with a projected correction in 2026, such as the expected 4.4% prices in Sydney. There's a lot more of that. Is it real? Many mainstream economists and property analysts treat the 18-year cycle with skepticism, viewing it as a historical story telling a loose pattern rather than a reliable tool for financial forecasting. I'll probably land more towards
Speaker 4: Yeah
Speaker 2: that. I think there is some method to the madness, economic cycles, you know, but it's a general concept.
Speaker 4: So,
Speaker 2: But most
Speaker 4: yeah.
Speaker 2: things do go, it's a bit dodgy, it's a bit sort of okay for a while, then it spikes. And the sparks of margin, it comes down to reset. So, but you've got to go back and look.
Speaker 4: so
Speaker 2: at at
Speaker 4: What a lot of...
Speaker 2: 40
Speaker 4: buyers
Speaker 2: year
Speaker 4: agents
Speaker 2: average prices
Speaker 4: yeah
Speaker 2: And it's just a sawtooth, like this.
Speaker 4: You see a lot of buyers agents talk about it, a lot of buyers agents talk about it, and I think they give half the story, because they will say, okay, it's 2026 minus 18 years from that field. Where were we? 2008, GFC. Then you're minus 18 years from that, you have the 1990s recession. Then you're minus 18 years from that, then you're in the 19... ...the 1970s and all the economic turmoil there. I, I think it is, and my feeling is that it's always been a coincidence. Now, it's not to say that coincidences, it's not to say that the data can't rhyme, you know. It's not unlikely that... exactly like what you said that there's a consolidation then investors realize that they get you know potentially really good yields and then the money starts piling and then becomes a little bit of a FOMO and then people realize they're over leveraged and something happens in the economy and then everyone starts freaking out that's probably just more behavioral finance it's probably more behavioral economics than anything but I think when people look at the 18.6 year cycle and people ...kind of justify it. And I know a lot of, there's been a lot of people out there on Instagram and, and that talking about it. I think it is also cherry picking data, because if you're just going to minus 18 years and you land on a recession, yeah sure, like you can do that if you minus 18 years all the way back to the 70s. But most of the 70s recessions caused by geopolitics and OPEC, so you can kind of rule that out. That's kind of, that's coincidental, right? ...the, you miss a massive, massive, massive downturn in the economy with the dot-com bubble in the 2000s, because you're kind of arbitrarily picking numbers. The minus 18 year land cycle, that doesn't take into account in particular the era of the cheapest capital we've ever seen, which was COVID. If COVID never happened... And the origins may be debated if that person ever ate the bat or whatever it might be, if the lab never got leaked, whatever the theory is, and interest rates weren't essentially 2% for borrowers. And the thing on top of the interest rates being that everyone stayed at home, discretionary spending went through the roof.
Speaker 2: Yeah
Speaker 4: It went plummeted, rather, not through the roof. In that two years, I saved up for a wedding. ...letting end my first home deposit, you...
Speaker 2: There you go.
Speaker 4: ...know, like I, I and and and a ring and this and that, because I sat at home, my now wife sat at home, we did nothing except maybe go for a walk and get a five dollar coffee. And that was, that was your discretionary spending for the week, right? It was great.
Speaker 2: and i remember everyone's sitting there and this is and 18.6 year property cycle is probably the same as you know this cycle of Life and business. I'm talking about the Western, Western life, Australian life. You know, everyone's sort of the initial shock of COVID and was like, oh, this is really disruptive, and then actually everyone slowed down and lived a simpler life.
Speaker 4: Yeah.
Speaker 2: And despite there being a lot of... ...challenges out there, a lot of people now lament those days and they look back at them, also fight...
Speaker 4: Fondly.
Speaker 2: for fight
Speaker 4: It
Speaker 2: quite fondly
Speaker 4: was fondly, yeah.
Speaker 2: And they go, remember how easy and simple it was? You know, me, my wife and, and our kids, like we really enjoyed the time because we were connected and we're together, which we always are, but just a little simple thing like walking the dogs to go up and go to Piazzos there on Blues Point Road and stand out the front. ...out the front, drink a couple of Greek beers. What's...
Speaker 4: Mythos
Speaker 2: ...a Greek, it's a Mythos. A couple...
Speaker 4: Mythos,
Speaker 2: of mythos
Speaker 4: yeah
Speaker 2: ...and some of those hot chips they used to have, standing outside. Brilliant.
Speaker 4: Because they had the little food van there yeah and that
Speaker 2: still
Speaker 4: was cool
Speaker 2: A bit sort of everyone's sort of, you know, a bit, bit this and the other and like...
Speaker 4: people were
Speaker 2: people people
Speaker 4: ...connected with the police.
Speaker 2: slowed
Speaker 4: hated that
Speaker 2: ...down, people slowed down and enjoyed themselves, right? And yeah, we still, we still go, how do we structurally get back to that time when, when, and you say no to a lot. It's hard to say no. Yeah, so the 18 year cycle.
Speaker 4: My point with that is it was a simple life. You weren't going out and dropping money.
Speaker 2: no it
Speaker 4: You were enjoying smaller
Speaker 2: was hard
Speaker 4: things.
Speaker 2: To spend money.
Speaker 4: It's
Speaker 2: yeah
Speaker 4: hard to spend money. So your weekly enjoyment was sitting out with the chips and a mythos, right?
Speaker 2: yeah
Speaker 4: Like 10 bucks, 15 bucks, whatever it might be. But what it meant was throughout that period, people saved a lot and you had access to very cheap capital.
Speaker 2: So much so that, but right now a lot of those are the... are the buffers that's going to help a lot of Australians get through this next period of time because
Speaker 4: The saving buffers.
Speaker 2: Yeah, yeah, a lot of money went in offsets, yeah.
Speaker 4: So actually, I've got some data on this that I did want to bring up. But to close off on the 18-year landscape, I think that anyone can cherry pick data to prove that point. However, my point is that the property market that we're looking at now would probably be extremely different had COVID not happened. Had COVID not happened. So the fact that we've arbitrarily landed 18 years from 2008 to 2026. Had COVID never happened and had we not had, it wasn't quantitative easing, but just this hyper low interest rate that allowed. I guess it was quantitative easing in a sense of the government giving money with furloughed staff.
Speaker 2: Mm-hmm.
Speaker 4: So there was a lot of liquidity. Essentially, you could make the argument with JobSeeker and JobFinder, which would have been at a rate higher than Centrelink that you had full employment arguably, right?
Speaker 2: Yeah.
Speaker 4: Because the transfer payments from government was higher. But notwithstanding all of that, had that not happened, house prices probably would be nowhere near as high as they are now.
Speaker 2: No.
Speaker 4: And a lot of those,
Speaker 2: I think
Speaker 4: otherwise,
Speaker 2: what we're seeing is a natural recalibration of what the property markets should have been otherwise.
Speaker 4: yeah.
Speaker 2: And whether you want to use the correction, whether you want to use the word crash, I'd probably use a word like recalibration.
Speaker 4: Yes.
Speaker 2: It's recalibrating, you know, and there are markets in Australia which continue to grow. You know, this is what a lot of people sort of. Forgetting right now.
Speaker 4: Yep.
Speaker 2: It's, it's not like you're probably price crashing all over the place. There is, there is... place in Australia which which are growing where those natural market dynamics continue
Speaker 4: Oh,
Speaker 2: you're
Speaker 4: 100%. Yeah.
Speaker 2: just getting um it's getting recalibration at certain price points and and where those areas are growing is still this cluster of yes you've had a a diminishing pressure or tension placed by SMSF buyers but you've still got those property investors which choose to invest and those first-time buyers or those home buyers which choose to buy are typically all buying in the same areas you know so it's putting tension into those to those markets Yeah. it's just more premium locations where we're going to see more come off so i really want to see how this smsf thing lands there's going to have to be i said it before there's going to have to be something common sense somewhere will have to prevail whether or not it's a carve out of new build properties for residential borrowing i i suspect that may happen and
Speaker 4: Yeah.
Speaker 2: And also on the record, the, the government's going to have to take and some sort of negative, you know. The treasurer is, his hero is, um, he's...
Speaker 4: Paul Keating.
Speaker 2: ...is Paul Keating, right? We've got to remember also Keating and Hawke were on the, the right side of Labor, correct? Whereas the current government, however, are more on the... The,
Speaker 4: It's not technically in the left,
Speaker 2: yeah,
Speaker 4: but yeah.
Speaker 2: yeah, it's technically in the left. So, you know, he had to swallow his pride and that government had to overturn their
Speaker 4: Yep.
Speaker 2: decisioning around it. So maybe this is just history repeating. That was an 18.6 years ago. But, you know, you can go back in time in history and this is why history is cool and you could find reasons to affirm opinions all the time. And yeah, probably every 18 things someone happens like. And stuff like that, and then goes again, yeah. Anyway...
Speaker 4: yeah
Speaker 2: other questions
Speaker 4: Um, actually before that, I do want to make a note, because you said that, that...
Speaker 2: yes
Speaker 4: time
Speaker 2: A data, yeah.
Speaker 4: of, you know, savings. Um, but there's been data come out, and this is why don't buy into the doom and gloom necessarily. And you and I can, because we like throwing haymakers at, you know, the treasure and all of that, figuratively speaking. Um, And we talk about some of the challenges of negative equity and where the economy is going. It's not all bad. It's not all bad, but people are waiting on the sidelines is the best way to put it. So offset balances, Westpac came out this week saying that the number of the amount of money saved in offset mortgage balances in the last 12 months has gone from $71 billion to $81 billion. It's 12% increase.
Speaker 2: Yeah.
Speaker 4: So that's a lot of people that are putting money in savings. That was also observed by NAB this week with their profit falling to $6.1 billion.
Speaker 2: Yeah.
Speaker 4: But they also reported, so Westpac 12% NAB recorded an 11% increase in the amount of money in offsets. So yes, okay, the house market is correcting south, but people are saving. And that's a lot of people. It's a lot of people that are going to be listening to that show, or our show rather. They're going to be saving and waiting.
Speaker 2: Yeah.
Speaker 4: saving and waiting for
Speaker 2: That's
Speaker 4: next year okay. and that's okay oh
Speaker 2: Save and wait and that's smart counsel. You see HSBCs come out and said there's a 50-50 chance of recession. There's a lot of discussion around that. Some would argue that we're already in a recession or at least a per capita recession. The government is still telling us there's going to be growth next year.
Speaker 4: yeah
Speaker 2: It's going to be anemic, but it's going to be growth 1% or somewhere else. And a lot of that will be driven through other factors. So my advice. And the way I'm framing my orientation about most things is that act and operate as though we're in a recession.
Speaker 4: Yeah.
Speaker 2: Act and operate as though we're in a recession. And that doesn't mean you need to hide under the covers and don't do anything. It just means be considered and be informed about how you go about your decision making. You know, don't do extreme things in recessions. Keep it simple. Simplify during recessions. you know, ensure that you are fully aware of your exposure and understand where you need to be applying any of your capital or any of your, you know, safeguards around it. So act and operates though we're in a session, so if that does arrive, guess
Speaker 4: you're
Speaker 2: what
Speaker 4: ready
Speaker 2: you're ready. That's
Speaker 4: well
Speaker 2: just sensible
Speaker 4: We, buddy, you and I were having a chat completely offline. Um, the, the British Prime Minister coming out talking about stop piling food.
Speaker 2: yeah beans
Speaker 4: And you know what? Like, I think it's a wise thing to do. To be clear. I think it's a wise thing to do to have a stockpile because You know, we saw how much people turned on each other over bloody toilet paper. Like it's just wild what people do, but also maybe a little bit unwise from a leader of a government to be a bit pointed with that. I don't know if that's the wisest thing you did. I think there might be better ways of doing it. But anyway,
Speaker 2: So
Speaker 4: are
Speaker 2: Just before we
Speaker 4: you
Speaker 2: go to some more questions, be remiss of us.
Speaker 4: going to talk about my abseil hoarding?
Speaker 2: No, okay now midterms this
Speaker 4: Oh, yeah.
Speaker 2: week
Speaker 4: Yeah.
Speaker 2: obviously that's been a lot of buzz.
Speaker 4: I've got opinions.
Speaker 2: well just in summary for those of you who don't really take too much notice of what's going on American politics there's been a real sentiment shift towards the Republican Party specifically its leadership you've had sort of a number of states and at least in the Senate sort of changing their allegiances to who they think should be controlling decisioning. Uh, Republic has had a pretty strong majority to be able to push through pretty much anything it wanted through the Senate. That's
Speaker 4: Yep.
Speaker 2: now going to be very, very different moving forward, because the Democrats are really going to start holding the balance of power there. Uh, and most Americans, from what I understand and my readable, and I'd like to simplify this, because I, you know, I sort of get American politics, but it's a lot more complicated. Okay, you're in Australia. I think most Americans have probably voiced their opinions in relation to the ongoing war in the Middle
Speaker 4: East. Yep.
Speaker 2: And that's been a huge frustration, even amongst a lot of Republicans. And I think the message is clear to the president there. Hey, you've got to stop this war. That's one issue. Another issue is the ongoing cost of living crisis. I think a lot of people are frustrated with that in America. That was something that I picked up. Also, in summary, why we've had this huge swing or vote of confidence in Democrats that want America to be positioned first.
Speaker 4: Yeah.
Speaker 2: There's a lot more of that. And also, I think a lot of Americans are very frustrated with America's relationship with Israel. And that's also another point of frustration. So that's how I would summarise what's happened there. If you want to know why there's been a sense check. around the realities of how most Americans feel and how that's going to telegraph. You see the vice president has come out and he's now openly challenging the president there. I think he's got his frustrations there and whether or not he's preparing to have a crack in
Speaker 4: Yeah.
Speaker 2: two years time. I think that's what's going on. So that's my summary of it all, Liam,
Speaker 4: Yeah.
Speaker 2: for those of you who don't take a lot of interest. But yeah, Americans are frustrated, much like Australians are frustrated. A lot of frustration with the political classes. process
Speaker 4: Yeah, and look, I would say there's this notion at the moment that there was this blue wave, blue wave, and everyone's talking about this blue tsunami. Yeah, like this is
Speaker 2: okay, but let's explain. So blue being the color of the Democrats, yeah.
Speaker 4: the Democrats. Um, the, the progressive left, right? But, um, everyone's talking, and they, this is, this is mind-blowing. You know, Kansas is a great example, where this is like the first time in 90 years that they voted for the Democrats, are the first time in 90 years. Like, this is real. Um, earth-shattering stuff
Speaker 2: Yeah.
Speaker 4: for a lot of these seats. But I, I think that there's a little bit of nuance and a little bit of subtlety that I recommend everyone takes with this, because It's not that overnight the Texas and Kansas and North and South Carolina woke up and decided to be left wing. That is not what happened. Look at the data. Now, yes, it's the equivalent of Queensland. Well, no, we can't really make equivalents over here because we are a little bit more, we go with the flow in terms of elections. It is a very, very anomalous thing that these states have elected a left wing senator. But I encourage everyone to dive into the data a little bit. or a little bit more because when you look at the 2026 US Senate election results in Texas, the Democratic nominee James Calderico 5.4 million votes came on. This is a state bigger than Australia,
Speaker 2: Yeah.
Speaker 4: right? So James Calderico 5.4 million votes, Ken Paxton 4.2 million votes. But if we go back to the last US Senate election in Texas in 2024, two years ago, because keep in mind they've got that. they
Speaker 2: without the, um, the
Speaker 4: staggered
Speaker 2: toggle
Speaker 4: they toggle ted cruz the republican got 5.9 million votes so ted cruz got 5.9 million votes and he last he won the last election the democrat james halarica got 5.4 so we're not talking about a huge
Speaker 2: it's
Speaker 4: water
Speaker 2: like no
Speaker 4: mark here. No, no, no, we're not talking about a huge swing here.
Speaker 2: How big is Texas? It's like 28 million people or something. Yeah.
Speaker 4: It's a lot. Um, well, maybe it's even more than that, but anyway. But he's the clinch, he's a clinch. The Republican vote, so Ted Cruz's vote for the Republicans in 2024 was higher than the Dems, right?
Speaker 2: Mm
Speaker 4: So it's
Speaker 2: -hmm.
Speaker 4: not that everyone woke up and started voting for the Democrats. Ted Cruz still got more votes in the last Senate election than the Democrats did for this election, but here's the number that really matters. The Republican vote went from $5.9 million to $4.2. $5.9 to $4.2. They lost, roughly, 1.7 million voters. Now, the Dems went up by a few hundred thousand. They went up by like 400,000. But the Republicans lost 1.7 million. So, okay, let's say that 400,000 of those voters jumped ship. That is 1.3 million right-wingers that sat at home and chose not to vote instead of voting for the Democrats.
Speaker 2: There you go.
Speaker 4: So when people talk about this blue wave and everyone's woken up to their senses and they're now voting left-wing, the data does not support that. And you can see the same thing in Kansas. Kansas too. The same thing in Kansas too. The Democrats got 559, Republicans got 504,000, last election, the Republicans got 727. The Democrats got fewer votes in Kansas for this Senate election than they did last time. They got fewer votes than they did last time. Last time they got 571,000, this time they got 559,000. They got fewer votes. But it's because 200 and. 20,000 fewer Republicans turned up. It's that simple. The Republicans didn't vote. So anyway, rant over, just to taper everyone's expectations. It's not like this country woke up and decided to be progressive overnight, but all I hope feel is, I mean, I don't necessarily agree, I think a lot of people don't necessarily agree with the direction in multiple ways of the administration, of course, but. And it's not it's not this wave. And I hope that with this newfound super majority that the Democrats have that. I hope that they run a nice moderate line. I think this is a good opportunity to have some kind of health care. It's a great opportunity to do basic middle of the road stuff that would make everyone happy. You know, Ted Cruz yesterday when he acknowledged that Texas was Democrat for the first time, you know, in decades, he came out and he said like 30 percent of people in the U.S. have used Afterpay for groceries. Oh man, really?
Speaker 2: That's so
Speaker 4: and
Speaker 2: good.
Speaker 4: he gave other indications you're talking about recession spending um like the the demand for spams the highest it's been since world war ii you know these are indicators of people doing it really hard so i hope with this newfound super majority hey let's take a middle of the road approach let's do good things like health care stuff like that because the u.s does need it but it does worry me that um well so
Speaker 2: In theory, President Trump's influence has just been. um eroded
Speaker 4: i can't
Speaker 2: considerably
Speaker 4: yeah
Speaker 2: You know, you can still do his executive orders, but but anything he puts, anything that gets put to the Senate now is just going to end up in courts.
Speaker 4: for
Speaker 2: and it's
Speaker 4: sure
Speaker 2: Just, just going to stifle. It's
Speaker 4: for sure. I
Speaker 2: going to stifle everything.
Speaker 4: Just hope they run a middle of the road back. And it looks like the, um, the the two, uh, at least in the Kansas and and, um, Texas elections, it seems like the both the Democratic candidates seem, seem pretty reasonable. I'd hope they play
Speaker 2: probably more amenable to Two
Speaker 4: So
Speaker 2: days
Speaker 4: those
Speaker 2: of
Speaker 4: populations,
Speaker 2: all and
Speaker 4: yeah,
Speaker 2: back to Andy
Speaker 4: is
Speaker 2: Burnham He launches be ready campaign it's
Speaker 4: that what it was stuck.
Speaker 2: called Be Ready
Speaker 4: up on your beans.
Speaker 2: Nine liters of water three days of non-perishable food torch batteries portable radio essential medicines and some cash if electronics power and the reason why It's not about extreme weather, it reflects ongoing concerns about Russia's cyber warfare and vulnerability
Speaker 4: Hey,
Speaker 2: of critical
Speaker 4: probably true.
Speaker 2: infrastructure.
Speaker 4: But we saw this week all the fridges get turned off in Europe. You
Speaker 2: Well,
Speaker 4: see that?
Speaker 2: no, I didn't, Yeah? but it's probably connected to this. So what's driving the warning? We're right about Russian aggression and sabotage. So the bridge to concern about, increasingly concerned about hostile states could target infrastructure such as electricity networks,
Speaker 4: Yeah.
Speaker 2: telecommunications, cyber attacks on critical infrastructure, you know, again erupt electricity, banking, electronic payments, possibly wider military conflict. Government wants population better prepared for consequences of conflict involving NATO.
Speaker 4: Yeah.
Speaker 2: and extreme weather and natural disasters, which which seems to be. So, you know, this is not that Britain is necessarily preparing for war, and there's been no indication that's the case, but it's about more national resilience.
Speaker 4: Yeah
Speaker 2: So, you know, whether or not you're going to get that sort of stuff, uh, here, uh, resilience is, um, Absolutely critical. I run a podcast, as you know, called Contessa Graham, where we talk about this quite a lot. You know, it's whether or not any of these themes are being heated. Any more questions,
Speaker 4: Yeah.
Speaker 2: Liam?
Speaker 4: So from Vinite, this is going to be a bit more of a complex one, so I'll pass it across to you. I feel with borrowing capacity becoming increasingly constrained, particularly for property investors, is debt recycling using substantial equity built up in a PPR? becoming a more effective strategy to fund further investments or does it simply shift debt into a more tax efficient structure without actually improving serviceability?
Speaker 2: So serviceability is a – this is a question for your mortgage broker, but what I would say serviceability is going to be – a product over how much debt you want to take on. So if you've got more cash to put into a purchase, it means that you need less money, which means that the bank might be more agreeable to lend that to you. What normally happens is that people maximize their service ability. So this is, it's quite It's complicated and I'm not going to be able to give a justification on this discussion. You speak to mortgage broker, you also need to speak to your accountant. If you aren't refinancing investment properties, and this isn't advice by any way, so this is a very general comment. If you're not refinancing investment property because you don't have the equity in them and or it's tapped out and or there's no serviceability there, extracting money from your principal place of residence for the purpose of investing in property, yes, it is tax effective because it. Because that money taken out of your principal place of residence in equity, the debt connected with it becomes tax deductible. And that's nice from a tax deductible point of view, but it's whether or not you've actually got the servicing on the other side to leverage that. So if you can pull all that money out of your principal place of residence and buy with cash, okay, well, that's a different scenario because then you don't need borrowing against the new investment property. But if you're also borrowing against the new investment property. And you're increasing the debt on your principal place of residence, you're going to have quite some serviceability considerations there. So it comes to your strategy, why are you doing it, why you need to do it now, you need really good advice around that and sort of time bandwidth and also the authority to actually provide that. So speak to your accountant, speak to your broker, ask the same question,
Speaker 4: but that's a very general response. Yeah, that is a general response.
Speaker 2: Yeah.
Speaker 4: Right.
Speaker 2: Yes
Speaker 4: That's right. Next question. I don't have this person's name, unfortunately, just came through as a number, but I'm assuming the budget tax changes would increase tax revenue. Claude tells me that if the budget changes cause a 15% property price reduction and a 30% reduction in sales turnover, then the government will actually generate less revenue than had they done nothing. Was it all for nothing? Discuss. Yeah. Yeah, I reckon that.
Speaker 2: Which government we're talking about?
Speaker 4: state and federal.
Speaker 2: Well, there's two very different things, right, because the consequences for the state government and again, my earlier point in this conversation was. most of the real estate ecosystem is, yes, price fluctuations will, will move the needle, but
Speaker 4: Hmm.
Speaker 2: what really moves the needle for the real estate sector is the number of transactions. You know, so if prices drop a little bit in the value of residential real estate, but there's lots of transactions, the state governments will probably make more money because there's more transactions, because
Speaker 4: Yes.
Speaker 2: there's more stamp duty.
Speaker 4: Yep.
Speaker 2: Right. And if there's more properties being transacted, the stamp duty, and if they're becoming investment properties, maybe there's more land tax attack from that, right? So they get the upside benefit from that. Even though it might be slightly smaller in numbers, at the aggregate level it's going to be higher. So is it all worthwhile? Well, if you want to compensate how much more savings the federal government is getting by not having to give, or inverted commas, all those tax breaks to property investors by way of negative gearing, is the compensation of the loss of revenue at the state government side? Are they in the red as a result of it? I need to run a ruler over that, but I'd say that net net it's probably all about the same. Someone wins, someone loses, and the state governments are probably on the front line of the federal government changes more so than anyone else.
Speaker 4: Well, I think I would be.
Speaker 2: That's general response.
Speaker 4: Yeah,
Speaker 2: I don't
Speaker 4: I think
Speaker 2: have the numbers in front of
Speaker 4: I would be
Speaker 2: me.
Speaker 4: more definitive and I would say yes, you'd lose more.
Speaker 2: Yeah.
Speaker 4: Yes, because I mean we know days on market have doubled and a lot of markets have doubled.
Speaker 2: Well, we saw the numbers there. There's more listings
Speaker 4: There's
Speaker 2: than ever before.
Speaker 4: more listings.
Speaker 2: Yeah.
Speaker 4: So days on market have doubled. There's more listings. And again, not necessarily driven by more people. over a course of time putting their properties up, but more this is because they're just not, they're not being sold.
Speaker 2: Yeah,
Speaker 4: They're, they're just accumulating. Um, so to your point, like, if the price goes down but the quantity of transactions increases, where you can, you can even it out, be zero sum
Speaker 2: yeah
Speaker 4: game. But we're getting fewer transactions and prices going down, so yeah, stamp is gone, as in lower. So it would be lower. And then to the capital gains point, We said this last week, you know, the average house price in Sydney is the same as it was five years ago.
Speaker 2: Yeah.
Speaker 4: So basically any capital gains from an investment point of view over five years on average has been eroded.
Speaker 2: Yeah. So the federal government is not going
Speaker 4: So
Speaker 2: to pay
Speaker 4: the federal government
Speaker 2: a CGT.
Speaker 4: will lose that.
Speaker 2: Yeah.
Speaker 4: I think Melbourne is at pre-COVID levels. So any investment gains over seven years on average. zero um
Speaker 2: assuming, assuming you bought at that time of
Speaker 4: assuming
Speaker 2: sale
Speaker 4: you bought that time, and there's obviously all, like, you know, on average, cetera's paribus. But, um, and then Brisbane and Perth, I mean, they're, they're dropping at a pretty quick rate, you know, going about four or five percent month a month, so they're going to catch up as well.
Speaker 2: What never gets thrown into the mix here, and I spoke about this at length when when all this stuff was coming through, is that the government very rarely recognizes the positive tax receipts paid by property investors as a result of positively geared property.
Speaker 4: Yep.
Speaker 2: It's so swept under the rug. It's like, you know, this, this concept is that, and and what they would have Australia believe, who maybe aren't as informed, is that all property investors are gouging the system and getting tax breaks. Some property investors had negatively geared property. A lot of property investors had positively geared property. But they never tell you the positive contribution of property investment to the Australian economy by way of... tax receipts they always talk about the breaks people are getting as a result of it and there lies a huge frustration I can't remember the numbers right but if you look at what they contribute what property investors contribute versus what they take away that's the number that we should be looking at with a view towards if you're trying to encourage the development of housing to house more people you're stifling that as a result of these very one loaded levers that they're pulling on relations, so I need a familiarized myself with
Speaker 4: So
Speaker 2: the numbers
Speaker 4: I've got the, well, I asked Mr.
Speaker 2: yeah
Speaker 4: GPT, but I pay for a nice version of chat GPT. So I more or less trust it. Apparently, according to the ATA, 1.2 mil negative geared Australians and one positive, one mil positive geared. So, I mean,
Speaker 2: what is that? What about in numbers? So what they give away
Speaker 4: with this number of investors, I don't know. and not be at the exact
Speaker 2: Yeah, but
Speaker 4: i
Speaker 2: I give away in tax breaks.
Speaker 4: mean, I would hazard, I would hazard a guess that given, you know, for negative gearing, it's, it's only on the interest rate, rather than what the interest paid rather than principal. Um, and given that you're spending two to get one back, essentially, I would hazard a guess that if it's more or less 50-50 with the numbers showing sort of negatively geared and positively geared and these numbers from 2023 so there would be a lot of people that have bumped over into the positively geared side of the ledger given the rental increases since then yeah you'd probably make more money I think it's probably fair to ascertain from this As in the
Speaker 2: Yeah.
Speaker 4: nation, that's more money.
Speaker 2: Yeah. Let me just ask the word
Speaker 4: Ask the word machine.
Speaker 2: machine what's going on. And it's trying to work it all out. Yeah. So this is really the offset, right, between it all. Yeah, based on latest ATO data, the answer why I asked, does the federal government receive more from Australian taxpaying, probably investors, through positive geared property and does it outweigh that negative geared, right? Based on latest ATO data, the answer is probably no, at least when comparing income tax generated by positively geared residential property investors against tax deduction claim by loss-making investors. But there is a significant, oh, hang on. The broader question of whether Australian property investors are net contributors to federal government revenue is more complicated. So what the numbers show, net rental profits, $12.5 billion. Profit break-even investors, net rental losses, $15.2 billion. So on the balance of things, it's based on this is $3 billion, right? So that's a $3 billion contribution from the federal government to ensure that we have a vibrant property economy and it makes sense for developers to be building properties and doing all this sort of stuff. So I would say $3 billion, to be fair things for the federal budget, isn't a lot of money.
Speaker 4: Yeah.
Speaker 2: Don't start me on how much money we gave to end
Speaker 4: And are you our fraudsters?
Speaker 2: do I as fraudsters or to help young Australians pay off hex debt, right?
Speaker 4: I won't get you started on that because I might
Speaker 2: Rental losses exceed rental profits by $2.7 billion this in that financial year. It's not a lot of money to be seismically shifting Australian property markets and the property economy connected with that. if that's what it is. So there's more of a philosophical, I think, for the government to, to do this to win votes, because the champion this idea is that probably investments for the rich, and it's class warfare, is what that is, Liam. But, um, anyway,
Speaker 4: Oh,
Speaker 2: we're
Speaker 4: yeah.
Speaker 2: gonna have to start winding up soon. Um,
Speaker 4: Trent, we got one more question from Trent. Trent, man, I can't answer that. Legally speaking, when your equity is gone, at what point do you stop burning cash and savings to hold on to the properties but not financial advisors? Which hurts because Trent's one of the guys in the chat.
Speaker 2: Yeah,
Speaker 4: He's always giving some good thoughts,
Speaker 2: yeah, yeah,
Speaker 4: always
Speaker 2: yeah.
Speaker 4: leading the conversations. Can't answer it legally. Well, financial advice, right?
Speaker 2: Yeah, you gotta speak to
Speaker 4: I'm
Speaker 2: someone.
Speaker 4: going to speak to the experts.
Speaker 2: Yeah, it's you're
Speaker 4: Yeah.
Speaker 2: going to have to every situation is different. You have to look at it not within a single form.
Speaker 4: Yeah.
Speaker 2: You can look at it holistically with your own sort of economic situation.
Speaker 4: Yeah, 100%. Yeah. Yeah. 100%.
Speaker 2: But, you know, what most people say is most property investors only sell when they need to sell. After they can't hold on any longer and that's that's one of the ways in which Australian real estate particularly the family home people hold on for as long as they can
Speaker 4: Yeah.
Speaker 2: before they give that up.
Speaker 4: Well, I think to sit down with your broker, see what the art of the possible is, see what the art of the possible is and look, I'm not a broker. You know way more about this than me, but looking at, you know, if they've all been bought recently, if they've all been bought recently or bottom quartile will have grown 6 to 20% the year prior yields for. 12, you know, there might be something that a broker can do, looking at them all holistically, looking
Speaker 2: Yeah.
Speaker 4: at it as a whole portfolio i know a lot of brokers and we're not going to argue about this again but there are a lot of brokers out there that do just look at one property at a time they look at Not no
Speaker 2: all brokers are created equal.
Speaker 4: not all brokers are created equal. Um, you know, a lot of them will just look at one at a time and not look at the portfolio as a whole. Um,
Speaker 2: I spoke to someone yesterday that the PMX, I can believe it is, that said. something like 6 000 brokers or something entered the market the last year or so, and
Speaker 4: Rumble.
Speaker 2: and if you think not all brokers are created equal, there's a really good indicator around it. You know, I'll knock around broking a fair bit. There is some exceptional investment focused mortgage brokers, but you don't want your mortgage broker to be learning How
Speaker 4: The
Speaker 2: to do
Speaker 4: mortgage
Speaker 2: this stuff,
Speaker 4: rate on
Speaker 2: though, on
Speaker 4: your
Speaker 2: your time.
Speaker 4: yeah,
Speaker 2: And that sounds horrible for younger brokers starting out. But, you know, probably investors are going to want the best brokers there is. And I think you guys are doing a report or you're doing some work around this right now alongside investment
Speaker 4: the top 10 investment brokers.
Speaker 2: brokers alongside with Pepper on this. Yeah. Liberty Liberty, sorry. Liberty. There you go. That's cool. All
Speaker 4: Yeah.
Speaker 2: Right, uh, we're gonna have to sign off. Uh, thanks everyone. This is Property Buzz, uh...
Speaker 4: We're not going to do a reaction video.
Speaker 2: I've got a, got a meeting,
Speaker 4: You've
Speaker 2: got
Speaker 4: got a thing.
Speaker 2: a thing I gotta go to, unfortunately. Um, uh, you know, we've done questions today. Q&A's good, but let's, more questions please. We like questions. Uh, and if you want to join the property chat,
Speaker 4: It's in the links in the bio.
Speaker 2: it's in the bio, yeah.
Speaker 4: It's in there? Cool, yeah, that's in there.
Speaker 2: Yeah, join it. There's some good fun,
Speaker 4: Yeah
Speaker 2: lots of coverage, a bit of banter, and that's building up quite nicely. So get involved, get engaged. If you're tuning into this driving to properties on the weekend, I hope it is a successful and fruitful time for you. It's actually not a bad time to buy real estate just in general. I always find some of the best buying I've done is in that December period when there's change in the air in relation to. People want to get things done before the end of the year and stuff. I've got some really good bargains during that period of time. So, um, keep aware. What we didn't talk about also was The Block. Um, maybe we can pick that up next week, but um, didn't have the fanfare that it used to, used to have.
Speaker 4: You know what? It's very lucky. Oh, I was saying this last night, actually.
Speaker 2: Someone
Speaker 4: I was like...
Speaker 2: killed it. I think it was a record,
Speaker 4: there's
Speaker 2: but you
Speaker 4: a one
Speaker 2: know, yeah
Speaker 4: and a half million 1.2 mil i'm always saying it would be very i would be very happy if i was a selling agent in melbourne at the moment because after it was a last year where like two of them failed to sell like it's a it was all a bit of a chaos but the fact that you're like smashing those prices i i think it's a I would be very happy if I was a local selling agent.
Speaker 2: Yeah, there you go.
Speaker 4: Yeah.
Speaker 2: Happy days. Propertybuzz.com.au. Go and check it out. Follow us on all the social medias. We'll see you again next week for more Property Buzz. Until then, bye-bye.
Speaker 5: The information featured in this podcast is general in nature and does not take into consideration your financial situation or individual needs and should not be relied upon. Before making any investment, insurance, tax, property or financial planning decision, you should consult a licensed professional who can advise whether your decision is appropriate for you. Guests appearing on this podcast may have a commercial relationship with the companies mentioned.
