The analysis offers a textbook application of supply and demand that conveniently ignores the deeper, systemic policy failures behind Australia's housing crisis. It is a classic expert move to blame a single external variable for a mess that has been decades in the making.
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Australia's housing correction steepens and deepens
Added:Uh good afternoon, Leath, and welcome to another edition of the macro and the mortgage with Leaf Van Oneland from Macro Business and myself, Katherine Kashmore from Land Cycle Investor, and we've had another uh information-packed full week where we've seen uh changes actually to the government budget.
They've made some concessions for small business um which I think was expected uh and uh anything to to put a little bit of a silver lining to the terrible news that they delivered during the budget. And um I think this week also we saw Pauline Hansen's address to the National Press Club. She is having her day in the sun, isn't she? Very polarizing figure. Um people are comparing her to Trump. So it's going to be a really interesting um time that we've got coming ahead. But you sent me before we before I hit record, you sent me your chart pack and you said it's going to be a big week this week. So what have you been seeing, Leaf?
>> Oh yeah. So, so yeah, um once again, you know, quite a big week, but yeah, there's quite a bit of data that's come out this week, um both in Australia and abroad. So, I figured I'd you know, just just give a quick run through of that and then we can just, you know, shoot the I don't the the proverbial afterwards like we always do and just who knows where it's going to go, right?
It go over here. We'll start talking about kombucha again or I don't know, whatever. But we'll get through the property stuff first. So, let me just bring it up. Yeah, we we we'll dig into the we'll dig into the comments. So, um we'll have a look what people have been saying which has uh been interesting.
We've had heaps and heaps of comments and a lot of questions and a lot of so we'll we'll go through some of that as well. But yeah, talk us through what's what's been happening.
>> All right. So, as I usually start off, I'll just go through the the latest uh daily house price index from Kotality.
So, it's it continues to trend lower. Um you can see it there again driven by Sydney and Melbourne, but all the markets are slowing still. Uh and so Sydney's now falling at nearly 1% per month. Uh sorry over 28 days. Um Melbourne a bit less than that like 7% and the national well the five city aggregate is now falling by.3% over 28 days. So yeah it's accelerated a little bit like obviously nothing too alarming right but it's um yeah obviously it's you know the the market's softening obviously. Um the auction market still stinks. So I remember last week I I presented the first week of June's option numbers. Now I've got the second week of June, which was last weekend, and I've averaged that out. So basically the last data point in each of these charts is for two weeks of June, and then next week we have three weeks of June, and then four weeks of June, etc. Um, and all the other data points before that are all the monthly averages. You can see that the auction clearance rates have tanked across the the capital city aggregate and then Sydney and Melbourne.
I don't do Brisbane or Adelaide or any of the other ones because they're not really big auction markets, but the clearances there in those markets is also incredibly weak as well. But you can see the the National Capital City final auction clearance rates are tracking in the 40s. Uh Sydney's tracking in the 40s. Melbourne is basically 50% now, but they're all very weak. And you can see that historically and I've plotted the auction clearance rates, the monthly averages against the um quarterly house price growth as measured by prop track. The reason why I use prop track rather than I got data going back to 2010. I don't have that for totality, so I just use prop track, but they all track each other pretty closely. You can see um the auction market is a really good leading indicator for home prices. You know, very strong correlations for, you know, 15 years. And if if the data was available, I'd be able to show it probably further back as well. So, it's it's probably the number one leading indicator for for home prices because it's readily available and um obviously it comes through every week. So, you get a real-time read on how the how the markets are tracking in Sydney and Melbourne and then by that the proxy for the capital cities. Obviously, not very good for Brisbane, Perth, Adelaide, etc. the smaller markets.
And Kotality's also released their latest chart pack. So they every month they release the monthly chart pack. Um they've done it which covers the month of May. It just came out this week and you can see that uh monthly sales volumes have have trended lower. They actually bounced a little bit this month. That's seasonal but the six-month moving moving average in uh sales is actually tracking below the 5-year average now. So obviously we got less transactions happening. At the same time on the right hand side, this is from their weekly indicators report. You can see that listings now are higher across um every market uh other than Hobart and Darwin. So total listings have risen everywhere. Um particularly strongly in Brisbane. So Brisbane's listings are up 13.6% yearonear and across the combined capital cities total listings are up by 74 7.4%. So we've got basically more homes coming on the market few or and and fewer of them selling because the sales turnover's fallen. So now the supply demand balance is shifting towards buyers across most markets. And I mentioned this last week I the these charts were presented last week but in case you missed that um the latest Westpak Melbourne Institute consumer sentiment survey showed that uh that house price expectations this came out a week ago um have fallen quite heavily.
So consumers are now expecting less house price growth and also the wisest place for savings and this is this comes out every quarter by Westpak that in their surveys only releases quarterly but we got the latest quarterly data uh shows that real that real estate is now um has absolutely collapsed in terms of people's perceptions of it being a wise place for sa for savings. It's fallen to a record low. Only 4.5% of respondents in the survey believe that real estate's the wisest place to put your money. Uh which again historical low and that's down from a long run average 24%.
Um the the rental market's still tightening. So the chart on the left is to the end of end of May. I presented that last week. Uh that's data.
Basically the rental vacancy rates fallen to uh you know basically back down to its historical low. advertised rents are rising by 5.9% nationally and across the combined capital cities uh growing at nearly double wage growth again. And on the right hand side, this is the latest um weekly indicators which came out this week. So what what Fatality does every single week they they do a market indicators report where they basically give you a snapshot of this week versus the same time last year. And you can see that rental listings across uh across pretty much every well every capital city market other than Hobart um are down significantly from the same time last year. So that means just the rental market's tightening. And also uh just under that on the bottom right they've got the combined capital cities. You can see the total listings there is tracking at uh historically low levels for this time of year. So the real market's tightening. The reason why that's interesting is that this week we got net overseas migration data uh from the Australian Bureau of Statistics for the December quarter of last year. So this data comes with a six-month lag. Um but what I showed is that immigration slowed. So, we had 301,000 net overseas migrants in Australia um last calendar year, which is just to put that into perspective, that's down from the recent peak of 550,000 2 years ago, but that would still be higher than any time before the pandemic other than 2007208.
That's shown on the left hand chart. The lefth hand chart I've basically done it under Labor governments in red and blue for coalition. Um and the highest single year under a coalition government in history was about 264,000 um in 2017 or about 265,000. So it's tracking of 301,000 now. Still higher than any any time in history under a coalition government. So still very high. And in the middle uh chart I've actually plotted the number of migr migrants that have landed per day in office under the recent governments.
Well, the government's going back the last 30 years or 40 years. And you can see that under the Albanese government, just over 1,100 net overseas migrants have landed per day in office. So that's captures their first three and a half years in office. And that's well above the 610 per day under the former coalition government. Now that excludes the pandemic lockdowns. I've excluded those because that would bring the number way down. Um Rod Gillard, that was the big Australia RD Gillard government. they had 617 migrants per day. So again, very much lower. And the Howard government only 407 net migrants a day. And under the hawking government, we only had 256 net overseas migrants land per day. So these numbers are still incredibly high. And on the right hand side, the the the far right chart, I've actually plotted the net the the the increase in net overseas migration versus the prepandemic trend. And it turns out that this whole notion that we've got quote unquote catch-up migration, which has been used by, you know, a whole bunch of people who support high immigration, say, "Oh, no, no, we're just catching up for the losses during the pandemic." That is complete BS. Um, had had we maintained the pre pandemic trend in net overseas migration, we'd have 295,000 fewer net overseas mig migrants in Australia right now. Right. So, we've actually had um 300 295,000 more net overseas migrants land in Australia than the than the preandemic trend. And that's obviously 295,000 people who need rental housing, right?
So, this whole notion this migration boom that we've just gone through has more than caught up for the losses during the pandemic. We've overshot that by nearly 300,000. And that is the fundamental reason why we have a rental crisis in this country because that's nearly 300,000 more people that need rental accommodation because let's be honest, pretty much all migrants that come to Australia, they need rental accommodation. And so that that is the fundamental reason why we've had this collapse in the rental vacancy rate because suddenly we got 300,000 more people roughly who need need homes.
Right? It it's basic supply demand, right? This is none of this is rocket science. Now in the same time we've got this we've got an interesting counterpoint from Canada. So, so can Canada uh experienced a massive migration boom post pandemic. So, in 2023 and 2024, they had record numbers of net overseas migrants land. They had record population growth. This week, they released their net overseas migr migrant numbers and population data for the March quarter of this year. So, they're actually run three three months ahead of us when they release their data. And it turns out that um Canada's population continues to fall. Um so, In the year to March uh 2026, Canada's [snorts] population declined by nearly 200,000 people, right? Because in 2024, it made the conscious decision to cut net overseas migration. They wanted to stabilize the population. They basically tightened up a whole bunch of visa categories. They have cut the permanent migrant intake.
They have slashed the temporary migrant intake, which they call non-permanent residents. and they've actually sent a whole bunch of net net um non-permanent residents home. And you can see that in the bottom left chart, the share of the Canadian population from net non-permanent residents, which is basically temporary migrants. We call them just different things, has gone down from a peak of 7.6% in 2024 down to 6.2%. So they've lost about half a million um temporary migrants in Canada.
And that's the fundamental reason why their population growth has shrunk, their population shrunk. And it's actually the first population decline.
This this this latest period which is shown here in the chart where we've had two consecutive annual declines in population uh two two quarters of annual decline in population. That's the first decline in Canada's population since the Second World War. Right? And the impact on the rental market is pretty obvious.
You can see it on the right. I've charted the So I've done quarterly data on the top and you can see when when Canada's population boomed, advertised rents rocketed. And then when Canada's population growth fell and now it's turned negative, their advert their asking rents have fallen. None of this is rocket science, right? Supply demand, basic supply demand. And the bottom chart comes from um rentals.ca, which measures the uh asking rents. You can see that they've fallen for 20 consecutive months, right? Asking rents have fallen in annual terms for 20 consecutive months in Canada. They're actually down about 8% from their peak now. All because Canada cut immigration, right? It's actually got negative net overseas migration now. So, it's slashed immig immigration. It's got it's population declined by about just under 200,000. I think it's 185 189,000 by memory. And their rental crisis is rapidly solving.
Right? This is a lesson for Australia.
We keep we continue to run high migration and we've got a rental crisis that keeps getting worse. Canada has done the opposite. I can also point to New Zealand. So, New Zealand released data. A whole bunch of data has come out in the last week or so. And New Zealand rents have been falling. So, you can see that got advertised rents on the left.
This is from just far anybody and macro.
Um, so this is from real estate.com.co.
New Zealand. You can see advertised rents have been falling since uh the last couple years. Their rents as measured in the CPI have been falling.
That's the middle chart. And New Zealand's net overseas migration has absolutely tanked. So it was 130, it peaked at about 130,000 uh annually after the pandemic and it's been running at just over 10,000 since.
So it's had this historically low migration and guess what it's done? It's it's alleviated the rental crisis in New Zealand. This is just basic supply demand economics here, right? And the reason why it works is the supply demand works in the rental market and not so much like population supply demand doesn't have as big impact on prices because prices are determined also by borrowing capacity, interest rates, tax settings and all these other things. But none of that stuff applies to the rental market. The rental market is basically the number of people who need rentals, the number of rentals available and how much than the supply balance between the two, right? So Canada, way fewer people looking for rentals. An over supply of rentals leads to falling rents. And the interesting thing I didn't mention, I should mention about Canada is that um a report came this week about how Canadian landlords are now offering all these non-monetary incentives. So they they're sorry, I should say non- rent incentives to fill their properties. So they're offering gift cards and rent free periods and all this other stuff to entice people to rent their property because there's so much extra supply versus demand that they've had to offer all these incentives to bring renters to to to try and entice renters to rent their property over someone else's property. So that's been happening as well. That's been widely reported in the press. So, Canadian rents have fallen, but they're also if you're a tenant in Canada, okay, you can also get all these other perks like, you know, rent free periods and discounted rent periods and gift cards and all this other stuff and, you know, dinner vouchers and this sort of stuff that landlords are offering so that you rent your their property rather than someone else's property because there's an over supply, right? And that's all being brought about because Canada's got negative population growth and slashed immigration because they've restored there's now an over supply of rent rents, rental properties in Canada because the population's fallen.
>> This basic stuff and New Zealand house prices also continue to fall. So we got the real estate institute of New Zealand's um house price series and that that's the premier house price series in New Zealand which was used by the Reserve Bank etc. Again these charts come from Justin Farbo. they continue it it's not falling by much anymore but it's just gradually you know by 0.1% whatever every month it's it's falling but on the right hand side you can see the real real house prices so that's house prices adjusted for inflation they they continue to fall to 2019 levels so um about 6 months ago they sort of fell to like December 2019 levels now they're sort of tracking it I don't know what the exact figure is um but they're probably tracking like September 2019 levels So re real house prices continue to fall in New Zealand because they basically got effectively zero house price growth nominal or it's you know one month it's up by 0.1 the next month it falls by 02 it's basically going nowhere. Um they experienced a big fall earlier as you can see very clearly in that left chart across every market. Um New Zealand nominal house prices are down by about I think it's 17% or something. Um, I could be wrong, maybe it's 18, but it's, you know, close to 20-ish, but real real house prices are down by more than 30%. And obviously that is the complete polar opposite of what we've what we've got in Australia.
And a lot of this the the house price impacts not just from obviously small, you know, fewer migrants. Um, Canada's also had a quite a big house price decline as well, similar to New Zealand.
But certainly when it comes to the rental market, you know, again, this is New Zealand, falling rents, very weak migration. Canada, negative population growth, negative net migration, plunging rents. This should be a lesson for anybody. Uh, you know, anybody's listening to this and you, if you ever talk to someone, oh no, no, no.
Immigration's got nothing to do with Australia's rental crisis.
showing these charts. I pull up this video, bookmark this, show them this because there is just no way you can argue that Australia's turbocharged immigration, again, nearly 300,000 more people in Australia today than there would have been had the pandemic not happened using the pre- pandemic trend. Obviously, that's going to have a severe impact on the rental market, right? Obviously, we've got a very rental vacancy rates have collapsed. The number of homes for rent has collapsed and rental inflation, whether you use the CPI or you use the advertised rents from Kotality or SQM Research, they've all rocketed. They rocketed because we got demand through immigration running so much harder than the number of homes being built and the number of rental properties in the market. And as a result, we got a rental crisis. None of this is rocket science.
Um I actually as you were talking about that I remembered that I'd had an email come through uh cuz my email address is out there. So sometimes I get emails um and this is from Bill and I can't read the the whole email bill but Bill is arguing the zero net effect argument for about rents because you know how we always say okay you know um we remove investors from the market because that's what's happening. you're you're arguing, okay, you know, high immigration is going to continue to put pressure on rents and, you know, we've got to reduce immigration. But because the other thing is is that um there's this argument that the government policies are pulling investors out of the market and that's going to cause in increase the pressure on rents because it's going to remove rental properties and that means rents are going to go up. And we've had this sort of ongoing argument throughout our our um podcast each week, you know, about well, you know, how is that actually going to affect the market? Um, I can't read your entire email, Bill, because it's it's too long and we're just going to be here for the next 10 minutes. But in summary, [laughter] what Bill's saying is that this net zero effect effect theory, it's flawed because it assumes that when an investor sells to a renter, rental supply and rental demand will fall equally. And he says that and and I think this is a good point. He says it ignores, it ignores reality because not every rental sold is bought by a renter. We know that some properties leave the rental market altogether and high taxes discourage future investment and we know that. So he's he's sort of saying okay you know rental property can leave the market and and just stay vacant or you know become a speculative property or whatever.
>> But why would it do that?
>> Um well some do. I mean we know from the speculative vacancies report that we did at Prosper you know that there's a I mean I wrote that report twice. So just for listeners the speculative vacancies report is a report that comes out every year from a organization called Prosper Australia. I used to be president of that organization and um the report looks at how many properties are vacant in Melbourne based on water data usage and uh so we'd get it like via postcode and be able to tell okay you know there's so many houses in this post code that are using so little water per day that a dripping tap would be using more and so by that you know you would count calculate that they're vacant or maybe only occupied for so you know a very few days per year and there's tens of thousands of them I mean like the the latest report was like a h 100,000. I mean the ones that I wrote when I wrote that report were like 80,000. But um I think that this is this is a interesting one because he's arguing that rentals often house more people than owner occupied homes. So for example, you get like rooming houses that are rentals or rentals where you know you've got a lot of people that are sharing when they're renters, you know, because they can't afford the rent. And once they get taken off the market, there's less people that effectively move into them as an owner occupier or perhaps buy and live there as a single or live there as a couple.
Um, so they could also zero net effect, you know, >> they could also live as a multigenerational family which are becoming more more common as well. So >> I mean it's it's almost an impossible I think I think the argument is it's not one for one. It's always >> you know you know what's going to happen? we're never going to be able to resolve this because rent's going to keep rising because we're running high migration and then I'll I'll point to the high migration and well we I think we'll both point to the high migration but you can also say oh it's also because of this and I go no it's not because that but we're never going to be able to resolve this right um you know my my my counterpoint is um look at Melbourne right we we've literally lost heaps of rental homes in Melbourne like thousands in the last couple years because the land taxes um that have gone on and I know heaps of people have sold out of the sold out of you know Melbourne's rental market and you know and they typically sell to own occupiers cuz the first home buyers have been strong in Melbourne. Um and Melbourne's rents haven't grown as fast as everywhere else. They're still grown, don't get me wrong, they've grown.
They've accelerated, but Melbourne's rental growth has been less than the other capital cities. So, um, that to me doesn't make sense because if this was a major impact, you think Melbourne's rents would have grown abnormally strongly compared to the other markets, actually been weaker. So, anyway, look, it's all it's all academic. We're not going to be able to determine it because um, you know, cuz we've got this absurdly high immigration and we've got a supply constricted market. we're not building many homes and that's likely to get worse because of the headwinds and now with higher interest rates and construction costs rocket in uh because of the you know global energy shock and all this sort of stuff. Um if anything it's going to get harder to build homes and as a result we're going to probably build less of them going forward and uh we're still running super high migration into that. So I think either way rents are going to go up, but I'd argue it's because of the high immigration that that that's I think that I think I totally agree with you. I mean we wouldn't be having the near zero net effect argument if we didn't have a rental crisis and we wouldn't have a rental crisis if we didn't keep pumping people into markets. Yeah. Because the high immigration comes in, it goes into primarily into capital city markets which and there's only so many good seats in town in the capital city markets. And so there's constant demand for you know the welllocated rentals and and the welllocated properties that are on the market for sale big >> but you know what will happen Katherine the capital g or the negative gearing capital gain tax um changes will get blamed >> but I'll just go I mean you know I don't really care if they blame it or not but they'll they'll use a scapegoat for sure right because it's convenient but >> the people using as a scapegoat will won't mention the fact that advertised rents have already increased by over 50% before these changes according to Kotality. So, you know, I'm like, well, okay, so if they go up another 10%, you go, oh, that's terrible. Like, what about the 50% that happened before they these these tax changes? I mean, ultimately, I want our policy makers to be held accountable for running this mass migration. And New Zealand and Canada are the perfect counterpoints to what happens when you don't do that.
Especially Canada. Like Canada's rental crisis was absolutely obscene before they cut migration. Like it just rocketed. And they didn't even include the chart in here, but there's another chart from the National Bank of Canada, which I took from uh early 2024, which basically charted rental rents against population growth, and they just both had shot it up at 45° angle. And I think they said um and the rental vac collapsed to a record low in Canada.
This is in 2024 before they cut immigration. So they they had an absolute rental crisis like they never seen before in Canada. And now that they've cut immigration, they've they're unwinding it rapidly. So that should be like why isn't the Well, we know why they're not doing it because you know who they are. But you'd think a sensible Albanese government would look at the same center-left party in Canada.
Yeah, they call the Liberal Party, but they're they're Canada's Labor Party and go, "Oh, that worked. We should do that."
if they gave a damn about rental.
>> Well, what well I think what's interesting because I think the you know the other news that I I mentioned at the beginning of this was Pauline Hansen you know she did a speech at the National Press Club and it it caused a news um tsunami really around it because I mean it's she's she's such a um you know it's a polarizing figure and we you know we can argue one way or the other about pawning but at least she's completely diametrically opposite to the government that we've got >> and she's consistent.
>> She is consistent. Yeah. But her main I think I think where she's gaining popularity is on the immigration argument and straight talking. People don't really understand you know people very rarely very rarely do people actually go into government policies and really understand what those government policies are advocating and and the consequence of them which is why your platform is so powerful because you really do explain to people outside of the political. You put down the the fundamentals the charts and everything.
You explain what this is about and what the consequences are going to be. But she but the the not many people are generally looking into the policies. I think they're just grasping hold of the immigration argument. They're tired and she's the only one that's really coming out and that's got a ch that is that is very vocal against it.
>> And she's also believable because she's held that same position for a long time, right? So for decades, but as have I.
Like I've been against the mass I've been riding against mass migration since 2013. Um I've been arguing that this is just crazy policy. Uh I've been I've written probably 500 articles in macro business about it over since 2013 I reckon maybe 2012 like since we started pretty much I've been hammering this and I've been one of the the main you know um main people arguing the opposite view and I was laughed at for years about it and now it's like no one's laughing now.
Uh you know it's hilarious because I I could see that this was just a stupid policy that Australia was doing like it made no sense. We've been running this for 20 years and it's just gotten more extreme recently. But these same problems have been around for for years.
Uh you know, more on the infrastructure side and that sort of stuff cuz at least we had the in the between 2015 2020 we had that massive high-rise apartment boom. Now I'd argue that most of those properties that were built were terrible. Uh shoe box apartments, but for the rental market, they did help to constrain rents. um you know because 60% of high-rise dwellings are owned by tenants or sorry not owned by they're they're they're rental properties and only about 20% of detached homes are rental properties. So most most people when they rent they rent apartments. So if you have a big flood of supply of apartments even if they're crap um that's going to put downward pressure on the rental market and that's exactly what it did for that 5year period. But now we got a situation where we can't build many high-rise apartments. You got to and you also got to wonder was that really good thing? Like were were those thousands of apartments that we built between 2015 and 2020, flam cladding, we had the you know opal towers, mascot towers, lots of defects, leaky homes, all this sort of stuff. They were very poor quality.
>> Um is that really a good way to do like is it a good idea to run to import hundreds of thousands of people every year and just slap up very poor quality apartments that were all also expensive, let's be honest. um just be just so we can keep up with the mass population growth. I'd argue that it'd be better to bring in fewer people and have much better quality homes being built rather than just cuz cuz the thing about it is it's like, you know, if you try and get a trades or something, do something on your house. If you want it done quick, right, it's going to be done cheap. I mean, I don't mean cheap in cost. It's going to be done poor quality, right?
Anything that gets done quickly is going to be lower quality. Anything that's done more slowly is going to be higher quality. And we just went down for the low quality approach just volume over quality and build up thousands of these apartments end up a lot of end up being faulty that end up you know with with a lot of problems. the New South Wales strata um strata council or the strata agency I think they're called uh they they put out a report three or four years ago and I think it's in 2023 actually and and they did a survey of the homes that have been built and they reckoned that the apartments that had been put up in the last 5 years so something like half of them had serious defects and that was a government agency came out with that just tells you that they're like building bringing in so many people and then trying to rush to build heaps of apartments to cater for those people is a stupid approach. You end up with just poor quality and lower living standards ultimately.
>> So, you know, I've been arguing against this stuff for years and I think people are now after the Bondi massacre and I think that might have been the straw that broke the camel's back. Wasn't the only thing, but it's also Australians have had six years of falling living standards, right? So real wages have been falling for since not 6 years. They peaked in uh 2020.
So it's yeah basically 6 years mid 2020.
So 6 years and our wages once you adjust for inflation have fallen significantly down by about 6%. From then and the and the Reserve Bank of Australia forecasts that real wages aren't going to recover in the next 3 years. And I think people are going well hang on my living standards are worse. I'm paying more tax than ever even though my income's gone worse. I think people are just angry and and then we got a rental crisis and people ask themselves, well, why the hell are we importing so many people into a market where we don't have enough homes for them? This makes no sense. And then obviously the Bondi thing happened.
And I think it's just one thing after another which is why people have had it gutful and they think um made two main parties plus I'd argue the Greens even they haven't been parliament but they've supported a lot of this crap have basically sold us out >> and they feel like they've been sold out and Australia is not the same place as it was 20 years ago >> and as a result they're now going to one going to Pauline Hansen one nation so and because she's been consistent the whole time and they're like oh you were right after all is what a lot of them are thinking The interesting thing about apartments is and I I wanted to talk about this on um this week. It was because scrolling through Instagram coming across the numerous videos where people are talking about what great investment Melbourne Melbourne unit market is at the moment because the prices have reduced in Melbourne so much. You know, our medium price is below Adelaide's. We've never had it comparatively so cheap in Melbourne. And you bought that up last week from showing those comparative value charts which were which were gold. And so, you know, Melbourne looks like a really good buy. It doesn't just look like a really good buy. It means that if we do have a downturn that Melbourne is arguably not going to suffer as much in that downturn as Brisbane and Perth because they haven't been it hasn't been run up as high, though Perth, you know, probably still has a little way little way to go.
The thing is is that the unit market, first of all, there's a few a few components to the unit market. You've got um villa units which are like your single level uh little um units that sit around a common driveway which were built mostly post war. And then you've got your town houses which are also unit it's basically anything on a subdivided plot. And town houses you know usually like the two or three bedrooms. And again they're put up quite quickly. Any townhouse that was built in the last few years um for investment purposes you know or to just to sell to the market would have been done in exactly the same way as apartments have been. I mean, I've walked through once the um builder's warranty period ends in in Melbourne, you know, which is about a seven-year period, the quality of the um those town houses is really poor. In fact, you never go and buy anything new.
Give it a few years and then go and have a look and inspect it and then buy it.
But the idea that Melbourne apartments are a good buy right now, even the old walk up walk down apartments, just don't go for it because I have looked at so much repeat sales data on apartment blocks. Um, and I'm not necessarily talking like a an apartment overlooking the park or overlooking the bay or a, you know, like like the art deco, you know, the big art deco apartments that can attract a bit of a buyer market and therefore can, you know, get capital growth. Those ones are already highly priced. So, they're not your$500,000 apartments. We're talking about the 200, 300, 400,000 apartments. Just don't go and buy them because they don't go up in price. Not over >> they're cookie cutters. they well you know the thing is the the the truth is your property is only worth what you can sell it for and there's such a small demographic that actually live in apartments you know apartments if you look at ABS data I think the age group that live in apartments mostly it's renters so seven out of 10 investors will buy apartments so it's not like you're buying something that will appeal to an owner occupied market and investors are in and out of the market on a whip so they're in the market when times look good policy change they disappear so your main bulk of your buyer market goes if you've got an apartment and you're trying to sell it in a down market. Secondly, that the age of people that live in apartments, I think it peaks around the age of 27 years and then it's only 14% of 27 year olds that live in apartments. This was when I last checked the data. I don't know if the data has been updated, but this was last check and and it it wouldn't be massively different. In other words, they're where you start off. They're not they're not where you finish. And the age of a first home buyer, when a first home buyer usually buys because so few people can buy on a single wage, you know, they need a double wage. usually when they've coupled up and they want, you know, they're thinking about having a family in 5 years, an apartment doesn't always cut it. The banks don't like lending against apartments, certainly the smaller apartments. So, you know, you if you're out there in the market and you're looking to buy an apartment, you always have to work closer with your mortgage broker because they want standard sizes. thing is is is this concept that just because a medium price shows that it's dropped that it means that you've got to go in and buy it is just completely divorced from what's actually happening to that individual property and whether that individual property is going to um do marketly well. We did have a a comment on um medium prices that came through and I think you answered it. I can't don't know whether I can find it now but um oh yeah here we go. Hi Katherine Leaf. I sold an investment property last month in Brisbane for sorry this is uh Scott Henderson. Scott Henderson but not is there isn't there. [clears throat] Hi Katherine and Le. I sold an investment property last month in Brisbane for 10% less than the market appraisal a few months prior and doing research I learned it was due to the twospeed data sets we are all using. The suburb medium price is being artificially inflated by lots of modern high-spec houses being constructed while the older existing stock flat lines or drops. The submedium value growth meant nothing when it came time to sell. Something I would like you to discuss is this concept of mix shift, i.e. compositional bias. A lot of these data looks at mean and median values, but it's hiding this mixhift concept and investors need to follow the other metrics and not just mean or median prices. And I'll let you chime in on this in a moment, but this is so true of the apartment market. Whenever you look in, and this this happens in Melbourne, you know, so I mean I've seen buyer advocates do it. They look in Melbourne and they suddenly see like a massive jump in the median. And it's often because some new stock or a highpriced penthouse has sold and it's distorted the medium upwards, but the actual prices of individual apartments haven't followed where the medium price has gone.
>> Yep. Well, this is true. Should I come clean, Katherine?
>> Yeah. Oh, please do. Okay.
>> All right. So, I've been keeping this myself cuz I didn't really want to I don't know. I don't like having my affairs too public, but I actually sold a Brisbane investment property start of May and I was very lucky. Uh I purchased it at in 2020 during co and I got out of it in the nick of time. I reckon I sold it on the last day before the market tanked and I put on the market as soon as I heard that these there was rumors of this capital gains tax and negative period um months ago and it takes two months to sell a place, right? when you start the process and then when you sell it, it takes about 2 months. And so I was like sweating, hoping just hoping I could get rid of this thing before the budget and actually sold it the weekend before the budget happened, right? And um luckily I got a very good price. I was very lucky.
Uh wouldn't get that would even a week later wouldn't have got what I got. Um but to this person's point, I experienced exactly the same thing. So, I owned a it was a fully detached house in a in a in a south suburb um called Holland Park, which is next to Green Slopes and um one in from Mount Gravat.
So, it's a pretty good area, >> but um yeah, the same thing. So, it was an old postwar house um brick house and you know, it didn't sell for what. So when when when you put a place on the market, there's like real estate.com and um on the house and all that. They give you like a they they they said it was a high probability or sorry was it um >> estimated value?
>> Yes, estimated value, but it said high high probability or whatever, you know, like basically high confidence I think is what you call it. And it gave me a figure of this and it sold for that. But I I never believed it was going to get what it got, right? So, it sold for a fair bit less than that, but I was happy. I was super happy what I got, right? I'm not I'm not complaining. I was just relieved to be out of the market now. Um, very relieved. Actually settled this week. So, I'm pretty happy to be out. Um, and to this person's point, I know exactly what they're talking about cuz I experienced the same thing. There was there was there was homes that have been basically uh turned into um you know those those uh New York style um Hampton's type houses. They put those up around Holland Park. Those things go for millions, like way more than what my one was worth, even though it's on the same block. Um, and that does put up push up the sub the suburb medium. There's there's a fair view, you know, fair fair few of those Hampton style homes that have been put up, you know, or they do a knockdown and rebuild. They build something looks looks fantastic. Those go for millions more than the one I the one I sold. And as a result, the the suburb medium looks a lot better than what it really is, especially for the type of home that I had. Um, but that being said, I'm very lucky. I bought at the bottom obviously uh on that cycles chart. I bought right at the bottom and I sold at the top, right? So very very I fluked it basically. Um, but I'm just super glad to be out and it was an absolute money drain. So apart from the fact that obviously I made a very good capital gain. I was very lucky >> but cash flow wise a terrible investment >> because every month I was losing even though I bought it at a really cheap price even at the end after rents had gone up like 40%. like the rent, you know, the rental crisis is real in Queensland, right? The rent rent and I wasn't aggressive with the rental increases. I was pretty I was one of those good landlords who wasn't aggressive, but um you know it even with the rental increases, I think I'd rent maybe gone up 30% over from 2020 cuz I hadn't put it up to the same as the market, but it was losing about $1,000 cash a month. That's after your tax benefits and your negative gearing, all that crap. Um so it was just an absolute cash drain. and whoever bought it. Now, the person who bought it is going to live in it, right? So, it's an own occupier.
>> Um, they're going to have a family and that sort of stuff. So, great for them and they can renovate it. So, it's one of those houses that was good enough, but it needs needs work, but you could live in it for a few years before needing to do work.
>> Um, you know, original kitchen, that sort of stuff. But, it decent. It was okay. Um, and but the the rent, the money that I the the amount that I was renting out for versus and I know what the outgoings are and always maintenance and all this other crap you got to pay and all this sort of stuff. The price that I sold it for, I reckon I was getting a one and a half% net rental yield.
>> That just doesn't make sense financially. So, if I was an investor, there's no way I'd buy in Brisbane. Um, I would at the moment because you're at the top of that cycle. It's gone, you know, prices have rocketed obviously over 5 years >> and then you get an absolutely terrible rental yield >> if you were to buy now.
>> Own occupy obviously different, right?
If someone starting a family and whatever and you need somewhere to live, fine, have at it. Good area, you know, really good street, blah blah blah. Um, but that being said, I was very happy to be out out of it because it was just an absolute cash drain. And now I don't have to worry about, you know, having to basically work to pay the mortgage on this place that was draining money out of my pocket every single month and just putting more financial stress. So, um, anyway, I' come clean. I I I was a property specu fester, but not anymore.
>> Yeah. I mean, the the thing is that's interesting about that is that, um, I mean, that's a speculation index. We haven't covered any an index like that, but it's basically, you know, the the earnings compared to to what you're buying and and the yields just get so squashed. It's all speculation. The only >> to buy and we we've said this for year, the only years, the only reason to buy in Australia is for capital growth.
That's why property is so expensive.
It's years of accumulated capital growth. And so as your yields get squashed, the only way that you can hold on to properties like that is if interest rates remain at a level that enables you to refinance the debt because your wage doesn't keep pace with the uh you know the the increases in property prices. I mean it just doesn't work like that. So you know someone's always going to come along and pay more for you is dependent on how much they can borrow. And there's always a point in the cycle where interest rates start to rise, which is where we are now.
>> And inflation is a problem. I mean, I know people are talking about the banks reducing interest rates next year. It's not my for it's not my forecast. Well, my forecast isn't for inflation to the inflation problem to go. I think we're looking too much like we did in the leadup to the 1970s. And interestingly enough, I interviewed Michael How last night. I don't know whether anyone um that listens is familiar with him, but he's definitely worth looking up. He is an expert on global liquidity markets and um he he basically looks at liquidity and and the ability to refinance debt because he knows that when the crisis comes it the problem is that people can't roll over the debts and you know I mean we know that from from 2007 you know in terms of the housing market the way that you would put it is the crisis comes when people stop being able to pay their mortgages and that's always at the margins of the market and once the margins start going you know that's where the it feeds into everything else in the system, you know, because supply comes up, you get an increase in the number of foreclosures and, you know, that's actually what we're seeing happening in the US at the moment. So, um, I mean, it there's only so far a cycle can go before it has to start collapsing on the other side of it. And that's really where where we're heading now. I don't know that they would, um, slash interest rates unless we enter a crisis. We did discuss that a little bit last week because we did cover the um idea that banks are now uh cutting their fixed rates and a couple of them have cut in variable I think as well.
>> Yeah. Um >> well I mean I guess we don't know um you know this so-called peace deal with Iran seems like it's very very flimsy. Um, I don't know if that's going to last, but it was interesting. A a former Treasury colleague of mine, Sean Fenner, I worked with her back in 2003, I think, or 2004.
um she she's now at Westpak and she did a podcast with um Lucy Ellis who's like the chief economist at Westpak >> and and you know they they warned that well she warned that you know petrol prices at the end of the year could be $3 um a leader because you know she she thinks the there's a decent chance like it's not I don't think it was a base case but it was a it was a good chance that the the war in the Middle East just kicks off again uh because you know it's very fragile the peace deal seems like a bit of a load of BS if you ask me, but um no, no, I mean the the peace deal, not not the analysis. Um so, you know, who knows if if that kicks off again and we get another energy price spike and blah blah blah, you know, it could be it could get pretty nasty. Can I just say one one other thing? If anyone's listening to this and you you're thinking about selling a home in the south side of Brisbane, my real estate agent was who sold it was an absolute legend. Like I couldn't recommend this guy highly enough. Um >> go to real estate agent.
>> Oh, he he was the best. Like I could not ask for a better sales agent than than this guy, Ben Austin. His name's Ben Austin from Place um Place Balumbumber I think it's called or something. But, you know, if if if you're in Brisbane and you're looking to sell and you want a recommendation, just leave it in the comments and I'll I'll give you this guy's details cuz he was phenomenal from every step of the process. Like, he's the sort of bloke who I think we just hit it off, right? And I still call him now. We we just chat. So, he's been basically feeding me info on the market for ages in Brisbane. I've been talking to him for over a year. Um, but from from every stage of the process, absolute legend, legend to the end. Um, honest, like just champion real estate agent. So, if so, if you need someone to sell your place, uh, or you need a recommendation, let me know cuz I couldn't recommend this guy highly enough.
>> You see, there's there's the the truth, folks. Not all real estate agents are bad people.
>> No. Legend. [clears throat] >> I myself am a real estate.
>> Honest honest as well. Like like honest as all. Um, like just never BS me once.
like during the whole process like you know you often hear these stories about oh they try and condition you and whatever no he was a he was I couldn't I couldn't speak more highly of this bloke >> um what I thought was interesting about your Brisbane story is that you bought such a great property for investment because you were saying you know it was an original home you know hadn't had too much done to it so really we're maximizing the land value and that brings me to another comment such a a great segue there um I must say uh Pab Pabl's is says in in caps in all caps is all land prices. Says land has risen in price at twice the rate of house construction over the last 30 years and that is down to state governments not maintaining infrastructure spending.
They've cut back on capital investment in infrastructure while increasing immigration. Um absolutely right. Um, I I think you know that a large proportion of real estate value is land value, which is why so many of us uh good real estate agents will say invest in something that has a land component.
Land is worth its zoning if you can invest in an older house on a block of subdividable land over the longer term.
You will do far better than unit investment even in Melbourne. Um, but uh yes, and it was it was primarily property that had a a higher degree of the land component compared to the property component.
Yeah, 100%. And actually the the Australian Bureau of Statistics um data which I don't have on me here obviously but I can you know produce it in the future uh when it actually shows that the growth in in Australia's dwellings dwelling value has been overwhelmingly land values in the last you know since the 80s. Now, now that doesn't mean that the cost of construction has increased a lot recently, and that's obviously making it more expensive to build new homes, but the ultimately the the the cost inflation that we've experienced in in dwelling values over the last 30 years plus has been in the land component predominantly.
>> Yeah. Um, a comment here from um, uh, Fraser Samuel. He says, "I'm fearful that investors have have had a gut full of investing in Victoria." That is, that is right. Um, for me this in my business, certainly for I deal with investors investing in Victoria all the time. There are too many rules and taxes. You lose control of your property. A landlord who was homeless living in his van was denied occupancy of his own property. He was viewed more likely to find a rental as he had an income and rents. Even if you sell, VCAC has ruled that tenants can stay and the new owners had to rent elsewhere. Um, there there's a there's a lot of um truth in that comment. I mean, I know working in the real estate market in Victoria, the atmosphere has been diabolical here with the higher land taxation and um there's very little relief on the other side as we've spoken about with the budget, you know, it's all right. Um discouraging investment into property and uh trying to to um do that. But unless you do it as a tax switch, you know, people start to get battered on all sides. And it's not all that's happening at the moment is investors are just moving to other states and increasing the [clears throat] competition in real estate in other states. But um the other thing that's quite interesting about Victoria is that they're now coming out and trying to change real estate legislation. So they're saying in Victoria now that that you have to and this is due to come in I think in October, but that you have to publish the reserve 7 days before the auction.
Um that's probably the that's one thing.
There's there's nothing to say, you know, I mean, it's all right sort of saying, okay, publish the reserve a week before the auction, but there is nothing to say that a vendor can't change that reserve price on the day of auction. So, it still doesn't really get around, you know.
>> Oh, so so you so you can change it.
>> Well, I the thing is is the government makes legislation like this and they don't talk to the people that are on the ground, right? There's a reason that really I mean there's a the thing is is that I always say you can't try and force sales agents to work on behalf of the buyer, right? Sales agents work on the on behalf of the house seller and they are designed to get the highest price possible for that house. And the way that they do it is a very well-worn technique when it comes to an auction of trying to get as many people through the property as possible and then the market set the price on the other side. And if the market exceeds that reserve price by 100,000, you know, arguably the property was always worth more than 100,000 than the reserve because you've got a competitive market at an auction. Right now, selling a property at an auction isn't great, but you could you've always had the ability to change the price quote. And it's always had the ability for a vendor to change the reserve. And you can't insist that if a vendor sets reserve at say 770 a week before the auction that when it gets to the auction, they must sell their property property at $770,000.
They can they can do whatever they want because nothing is set in stone until the contract is signed. So, it doesn't really get around anything other than just looking like a crowd-pleaser. And that's what it looks like because there's so many people that hate real estate agents and think that think that they should really be working on behalf of the buyer rather than the seller, you know, that they just sort of fire shots.
I'm not saying that there's no nothing knoweth ethical practice out there.
There is, but um there's also a lot that that sort of do play by the by the rules. The the other couple of things that they've got is in we we have a certain thing in Victoria where you can have early release of deposit. So, in other words, if you sell your property and you've got a long settlement and you want access to that deposit in order to put down a deposit for another home, you can uh you can um ask for an early release of the deposit and minus the commission and all the selling costs, you know, um the the you know, you'll get that deposit released to you and then you can put it down for a deposit.
Well, they're taking away that. Um, and the other one which is just really, really crazy, and I have no idea why they've done this, but what they're also saying now is that you must have the contract available, 14 days prior to the auction or prior to a buyer signing. So, in other words, if you put your property on the market today and you have the contract ready to go with that property, you can't have secure a deal until 14 days.
>> That's ridiculous.
>> Which is utterly stupid because you'll probably lose the buyer. I mean, I don't know why the thing is is Victoria is such a we just morons.
>> Got to have a gut full of what Victoria's government because you just think like all every step of the way they're just making no wonder Victoria's got a stigma about it.
>> It's also why I hate it's also why I've started like this sounds terrible because I was one for a couple years.
I've started to hate bureaucrats >> because I'm just like we got all these thousands of people working in these departments and stuff and this is the best that we can come up with is garbage. I really, you know, this whole publishing the reserve thing like, okay, if it's not binding, that that changes it a bit. But if it was binding, who's going to do an auction then?
>> Like the auction market is going to disappear.
>> Like there's no there is no point having an auction anymore. The auction system just doesn't work. And now whether you love it or hate it, it is a >> way to sort of get a quick sale on the day and to create price discovery, right? Like you do it a condensed period, at least it's transparent. Uh, and you don't always get the highest price in auction because you you just get whatever the like I know when I bought my place, actually it was the highest price could have paid, but um I I I bought this place with a $1,000 bid.
And I remember when I bought it um I I'd set a max price of 1.2 million and I'm buying it for one two 1.201.
So 1,000. I remember telling my wife going just one more. And you know, I was about to tap out and thank God I did cuz otherwise I wouldn't be living here and I end up, you know, it was it's been a great place and I, you know, I got it for a relatively good price compared to the other places in the area even though it's ridiculously expensive for 2013.
But the um, you know, but say my say I was willing to pay up to 1.25, right?
>> And I got it for 1.21.
So 1 1,000 above 1.2 2 million and I could have paid another 49,000.
Well, you don't get that because you only bid just above what the under bidder was going to do. So, auction doesn't always give you the highest price, but it does at least force a sale. It's transparent. Um, it's I love it because you get auction clearance rates which then are good pre uh good lead indicator for prices as we saw before. So, if you get rid of them, you're going to lose that lead indicator. Um, but you know, just all these bloody rules and everything and they try and do and they just create more problems and just think we're we're we're spending through our taxes. We're paying all these taxes to for all these thousands of bureaucrats to work in all these different departments and what they end up coming up with is crap.
>> It's absolute garbage across the federal government, across the state governments and everything. Like we we I think we better off with bloody half as many bureaucrats everywhere. We probably like it's not like the policy we're getting nationally or at the state government or anything's good in a lot of areas. It tends to be very poorly thought out very poorly executed and often makes things worse rather than better.
>> Pathetic.
>> Well, yeah. I I mean it it it is. And we do have an election in Victoria later.
>> Please get rid of them.
>> No, I just just I know I've got a friend that keeps telling me it's Labor forever. [sighs] the polls are. So, I I think this all the time, but we're stuck. We're stuck in in Melbourne.
Leath um uh comment here um from Honest Pat who says, "With these 5% deposit purchases, how many of them are actually from Australian citizens? And for the purchases that are from non-citizens, is there any truth to the claims that the government has effectively gone guarantor scary prospect if that is the truth?" Well, I mean, um, I if you're a permanent resident, um, you can, uh, buy Australian real estate and you have been able to for a long time. And bear in mind that permanent residents can become citizens once they've been here for a period of time anyway. So, even if there was a law that said you had to be a citizen, yet you know, they they will probably um go ahead and become citizens anyway. But the the government has gone guarantor, hasn't it, Le because we've got equity scheme and and the 5% deposit. I mean, you it's the government backing the lender's mortgage insurance.
>> Yeah. It's basically government being lenders mortgage insurance. So if the person defaults, they got the taxpayer has to um so say say the price >> goes down 20%, right? Say they bought at the peak in one of the markets, we have a big housing correction like in New Zealand and then they end up, you know, selling down the track >> and they make a loss >> um and they they're in negative equity or whatever. Well, the taxpayers on the hook for 15% uh of you know, whatever. But realistically, not many homes are going to lose anywhere near that because you'd have to have a 20% price fall for starters, which is pretty extreme. I mean, actually, it could happen. As we mentioned last time, >> the median price going down 20% seems very unlikely.
>> Yeah.
>> But you can get individual markets where am I? Like we talked about, you know, if a first home buyer bought in the Morningington Peninsula.
>> Yeah. um you know a couple years ago and that this scheme was in effect a couple years ago and prices have crashed in some areas there like certain properties have have collapsed or whatever. Well, yeah, you could you could get on certain properties for sure but I don't think you know like it'd be you know a few edge cases.
>> Yeah, absolutely. I mean I have seen properties dip more than 20%. Um in in down markets because if you have to sell this is why you know again you know it's like one of the investment rules is you have to time the market when you buy.
Sure. You know and you have to buy at a good price but you you also make money when you sell by timing the market as you yourself have have discovered >> I got so lucky.
>> Yeah. I mean, we say that all the time, how lucky you were to get out at at at that point. Um, in the morning, >> I was sweating, Katherine. Like, I'll be honest. I was like, the weeks leading up to I was like, man, I wish this was selling, this auction was this weekend.
>> Yeah.
>> Um, I was just like, cuz every week I was watching the number of homes listed for sale in Brisbane Creek, higher. So, I've been watching, obviously, I'm very Brisbentric when I do these podcasts.
Well, now I'm explaining why I've been so Brisbentric because I've been watching that market like a hawk >> uh more than I watch Melbourne, whatever, cuz I actually had skin in the game. And you know, at the start of the year, Brisbane had way fewer listings than the same time last year. And then in the period I came to selling my place, it went from being, you know, having a big shortage of listings versus last year to start to flip. And by the weekend I sold it, I reckon it had like 1% fewer listings than the same time last year. And then as soon as I sold, it's flipped the other way. And now um Brisbane's got like 12% more listings than the same time last year. So the whole supply demand balance there has flipped. and and my real estate agent said, "Mate, I've got loads of listings coming in Holland Park after you sell."
Like the two weeks after you sell, there's heaps coming. Um cuz you know, obviously people they pre-arrange it and then you got to get your vendor statement done and all this other stuff.
So by the time you put on the market or or you you say you got to go on the market, it takes a few weeks to actually list it.
>> There's a whole bunch bunch of stuff.
And like in the week leading up to my auction, he goes, "Man, I got heaps of stock coming in Holland Park um the next few weeks, so you're selling at the right time." And then and it and it's true. Like I've been watching it going, "Oh my god, like all these bang bang bang bang listing listing listing." And I think when the when the federal government announced the changes to the taxes, the tax changes, obviously there there's a whole bunch of, you know, cowboys like me who Mexicans from down south, whether it be Sydney or or Melbourne, who saw Brisbane as cheap, got in there, and then now we've, you know, we're trying to get out while the going's good sort of thing.
>> Um cuz obviously it's been a very strongly rising market. But my my experience owning property was if it wasn't for the good capital growth. It's like man I wouldn't do it cuz it's just it's a hassle. Like doing your tax returns a hassle for me personally.
>> Uh watching the the maintenance in older places always bloody dishwasher goes.
>> Had to get a new stove. Had to >> electrical thing went. Had to get a new this done. Like thousands of dollars every year in maintenance on this place cuz it was old.
um you know, it's just a it's like a a cash flow drain >> and it was only worth it because of the capital growth, but now we're in a flattish market or you know, probably falling. Uh well, definitely that area it's falling for those houses. Um absolute financial money sink >> and and it's it's um it's kind of interesting hearing you talk about it because it it goes down to what I keep saying. Um, first of all, the only point of investing in Australia's market for most people is the capital growth because of what you've outlined is the cost. We're not a market like um, you know, America's West where the rental yield >> yields are high. Yeah.
>> 14 15% and you buy a property for 100,000, you know. So, >> yeah. And you're doing it for cash flow.
>> That's right. It's completely different market. Completely different from here.
I've done some um purchasing in in America and and yeah, tenant laws and everything how it works over there is completely different. Um but the other thing is and and I've come across this numerous times and I argued it last week and that is that it doesn't matter politically where you sit. You know, I I like all all the time like that there'll be an article there's an article that came out this morning in news.com and it was the first thing that I saw on Facebook um this morning when I opened Facebook. That's all I do. Facebook, Instagram, look at all these comments.
And uh it was about Airbnbs, the increase in legislation on on Airbnbs and all these Airbnbs were saying they were they were talking about, you know, theund how however many thousand Airbnb investors that were saying it's not much point owning Airbnb. And then you get these comments that chime underneath, you know, this one woman saying, "Well, that's great because now they'll all go on the market and it can be used for the homeless, you know, and like just like a throw out comment as if all you get to give your property up the homeless are going to move into the Airbnb." I mean, I the thing is about about these comments is and and the first thing I thought about her is well, I hope you never use an Airbnb. So, you know, I hope that your protest goes as far that you never go out you never go on holiday and use an Airbnb that could be used for the homeless in that area and that you only ever use hotel rooms, you know, to to holiday in. But it it's this concept that people people are out there saying, "Yeah, okay." I mean, there's a whole heap of comments on our from our uh recording last week because I think I opened by saying it's dismal news.
Property prices have gone backwards and everyone's saying, "Oh, dismal news."
It's not really dismal news. That's great news. Yeah, but property prices the foundation of the economy. And I keep explaining that that it's not that I'm not saying that affordable property is good. I have spent decades of [laughter] my life arguing for policies that would would make property affordable and would stimulate the productive sectors of the economy.
So I'm not saying that. But all I'm saying is that when you have this, it's self-interest that leads. And I have noted, I have worked with, you know, numerous people who have been absolute foundational property affordability advocates that when it comes to selling their properties are uniquely invested in wanting the highest price that they can get for that property. will do absolutely anything to time the market to the point where um I have written report that land cycle report that I uh spooked a couple of weeks ago um one of the people that were commissioning that report wanted me to hold off publishing it because I'm calling a downturn which is not very great for my business at all. I'm not doing, you know, I'm shooting myself in the foot, but you know, calling a downturn in the property market and they're saying, "Oh, no, no, don't do that yet because I don't want to discourage people and my property's on the market." [laughter] Exactly.
>> You know, can we shift the can we shift the release date? And I'm like, well, what are you talking about shift the release date? That's the you know, there's and that that's the thing, you know, I mean, we can argue you can argue this every day of the week, but I guarantee anybody in this in these comment sections that is talking about, oh, dismal, it's dismal news, isn't a property investor in the market at the moment selling a property. If they were, it would be totally different. So, as soon as a first home buyer becomes a property owner, they're in that mythological property ladder and they want the price to go up. They want it to double. They want to win the lottery, have the lottery win at the end.
>> Yeah. It's it's really only when you're sort of like in my situation with this house, right? Cuz I lived here forever and paid it off and everything. So, I'm sort of like and I got kids, so I honestly couldn't give a toss um if it falls in value and whatever. In fact, again, I've said it, I like what's happened in Melbourne um with the deflation because I'm not I'm not an investor here. This is just I'll be living in this house for the next 20 20 odd years at least. Uh hopefully if I'm still alive. Um >> yeah. Yeah. Well, I should be alive, but you know, it's just something you never know what happens, right? Um you know, if I'm still around, I'll still be living here. And >> but you know, I've got teenage kids, so I'm worried about them and banking mom and dad and all that sort of stuff. So, a rising property market for me is not good. Um, and I know people who recently have sold uh a home near me and bought another one, they've upgraded, and a fall-in market's actually great for them as well because, you know, they didn't get the price they wanted on the one they sold, but they got the when they upgrade to the better property, that property, the gap between them shrunk.
>> Yeah. Yeah.
>> And they pay less stamp duty and they got the one above them for a much cheaper price than what they were expecting. like it sold for the same price it was 10 years ago, >> but then the house they sold, they got basically the same as what they purchased it for 5 years ago despite putting money into it. So, they actually, you know, lost money after stamp duty and everything. So, but because they're upgrading, it's like the difference shrunk. They pay less stamp duty. They got the next home for a great for much cheaper than they expected, but they sold theirs for cheaper than they expected. But net net, they're better off because you you always want to upgrade in a falling market. Um >> because the gap between your cheaper property and the more expensive property narrows.
>> Yeah.
>> So, you know, it's all like there's winners and losers, right? It's a zero sum game. Um you know, you can there's upside to falling prices. Obviously, good for people who haven't entered the market. I tend to care more about them because I got kids in that stage. And I think just from a society perspective, it makes sense. And that's why, look, I've never been against >> it. sense because you're now in the position where you can you can look at it from a completely neutral >> yeah but but but even you can still detach yourself though like like like um but before I sold Brisbane I wasn't arguing against capital gains tax and negative gearing >> against it because you still go well logically that makes sense >> um but at the same time I'm very glad to have been out before [laughter] I came in right so um so so now I don't have any skin in the game and I'm not impacted by it negatively >> um you know so I can even be even more but Even before that happened, I was like I was writing articles on macro macro and that saying, you know, I can't argue against it even before I'd sold cuz it it's something I've argued for for years. But at the same time, I'm more concerned about the rental market.
I'm more concerned about the mass migration because I think that is a bigger much bigger impact. And I think it has more impact on first home buyers because if you curb negative gearing capital gains tax, it'll have a downward pressure on prices, right? So, it makes it cheaper to buy, >> but that's only one impact. With cutting migration, you you lower rents as we're seeing with Canada and New Zealand. And if you're a first home buyer, you typically rent before you buy.
>> So, if you can save on rents, it means you can save a deposit quicker.
>> And then you also put some downward pressure on prices. So, for a first home buyer, it's a double whammy. You get cheaper rents and you get slightly cheaper prices from cutting immigration.
If you do negative gear in capital gains tax, you just get cheaper prices. So, I think immigration is actually a better deal for first home buyers because you get the you can save a deposit quicker because you're not paying as much in rent. Um, and then you get, you know, a bit of downward pressure on prices as well. So, um, that's why I argue that a lot more. And plus also, if you're a tenant, you don't care if prices going up. Now, if you're never going to buy a property because you don't think you'll ever afford it, but you got to pay rent the rest of your life, well, you probably don't care if you know about prices coming down 10% because of changes to the tax. You care about what you're paying in rent and immigration impacts that directly whereas the capital gains tax negative gearing, I don't think it will have an impact on rents, but it could have a negative impact on rents. Right? I could be wrong and you could be right and Louis Christopher could be right. M.
>> So if you're a tenant, you probably might be slightly negative towards that if you fear it'll push up rents, >> but it's certainly not going to help you, >> whereas cutting immigration will help you.
>> Yeah, I totally agree with you. Um, interestingly talking talking about inflation. Um, I wanted to point this comment out. Giovani says, um, oil force rates up regardless regardless a recession happening or not.
Oil rates up. Obviously, a recession will slow the rise for for a time. But we're seeing a change that will last at least for a decade. Thinks money printing in a supply constrained world.
That's an inflationary hurac. This monetary system is relied on constant inflation. Deflationary events are extremely rare and do not last for long.
Um I I actually having interviewed Michael How last night, uh that's pretty much his forecast. Actually, his forecast is that oil could could reach $200 a barrel. um and he's got some really good um uh research to sort of back that up. But I think that is the problem that we're looking at because if we do get a a downturn, there's only so much that the RBA can do or, you know, not even only the RBA, but any you know, quantitative easing event um that we have or any stimulus event that we have before you really risk an inflationary um problem.
>> Yeah. Yeah. Yeah, 100%. And um I mean it be look we don't know what's going to happen with the oil price and energy prices and all that stuff cuz we don't know if this Middle East stuff's going to hold but um yeah look certainly yeah that's a big risk and we we could get cuz cuz one of one of the concerns is although oil prices, petrol prices, everything hold up better, a lot of countries have run down the stock piles.
M >> um so like the US strategic reserves down at levels it hasn't been at decades because it's been running down its oil stockpile >> uh and a lot of countries have been doing that and the problem with it is if we get a then we get a resurgence in say the straight of her home shuts again or never reopens or doesn't reopen again um even though everyone's expected to now because they've signed this peace deal but say that goes ary and um you know it all kicks off again well then countries going to have less stockpile and then eventually it's going to have a you know so they've been sort artificially suppressing prices in um oil and fuel and all that sort of stuff by running down the stock piles. Once the stock piles are run down, you can't do it again and then that's where the rubber could hit the road. But all this we don't know like it's it remains to be seen.
>> The this even if it does reopen, we've got a supply problem that's going to linger on.
>> Yeah. It takes six months at least, maybe a year to get it back to normal.
>> Yeah. Uh um I'm going to throw this comment in here. Um any chance you can become an economic adviser? economic adviser to One Nation to help them implement around economic policies. Your ideas seem pretty common sense and finally you might get a chance to get them implemented. Um reply comment to that was yes do it le and get to build a dam.
>> Uh yeah I would if they I mean if they met Pauline though haven't you >> I have yes um yeah just briefly she was very nice to me she knew who I was which was amazing. Yeah just bumped into her and she's just like yeah she goes oh le you know so she knew who I was.
Obviously, >> I've seen you just got >> Yeah, that's it. They're familiar. But >> I saw you on background on the mortgage with that crazy.
>> He was very friendly. Clive Clive Palmer was very friendly. Um there was no sense of like there was no like get away from me pled or any of that sort of thing. I I didn't I didn't get that feeling. But look look yeah um I mean I think I'm broadly on a similar page on a lot of things policy wise but I would smooth it out a lot. Right. So, you know, a close example in a press club speech, I must mean I only saw the highlights, but um there was a few things she said which I would have framed it completely differently, right? So, and I think she needs better speech writers in this and I'm probably going to I don't I don't mean to burn anyone, but for example, there there was something she said. It was something like we don't want a multicultural country. you want to sorry multi-racial but monocultural is what she said >> yes >> that that's to me wasn't a great framing better thing would be if you come here we need to have shared values >> right so if you don't meet those shared values well then that's a problem like I think that would have been better a less clumsy way of saying it um there was I think she I just I read this I didn't I didn't watch the whole speech I watched bits and pieces but or highlights but there was something about you know trans whatever whatever, you know, and and I'm like, look, I'm I'm not I'm not a fan of all that all this woke stuff I got to say from the starters. Like, I'm pretty old school, but a better thing would have would be to say something like, you know, the woke narrative in this country's gone gone out of control. We got policies now that don't make sense.
So, for example, there was that one where that Liberal senator was interviewing someone from the uh the Equality Commissioner or something. I think this happens in parliament about a month ago and there was this ridiculous exchange whereby a biological male >> who identifies as a female can go in >> and and they can say I'm planning to have a child >> and you know which is not physically possible like that's not possible and and there was all this stuff about in the act that that person can then claim this and that and whatever it just makes no sense. Yes.
>> So, like Pauline Hansen could have said that those sorts of rules, we're going to get rid of them all >> and this this woke agenda is basically dividing us as a country and we need to basically clamp down. Like I think that would have been better than going after say trans.
>> You know, there's a few things you could frame better. Um because you know there are a lot of you know Muslim people in in in Australia who are excellent citizens >> and that's that goes for any any race and I don't think so so yeah she also went um went against Islamic people or whatever which I don't particularly like but it should have been more framed as um rather than trying to be we got to be monocultural but multi-racial it should been Australia has to have shared values and if you don't conform with shared values, you shouldn't come here.
>> Yeah.
>> And you and I agree with that. You should leave all your crap on the door before you come here.
>> And I think most Australians agree with that, but there just simple framing stuff. And a few of the policies are a bit wacko. Like income splitting is a ridiculous idea.
>> Um, as much as I would love it personally because I could income split my income with my wife who works part-time, um, and that would save me tax, it doesn't make sense. It's not fair on people who are single. And Paul, instead of doing that should be because that would cost tens of billions of dollars a year to the budget and it's not not affordable to allow income splitting as much as I would like it personally a better thing would be we're going to cut marginal tax rates >> cuz that way that's just a better way of doing it. um you know just a few framing things. But yeah, I' I'd um yeah, I'd advise them if they wanted to pay me to do it and uh yeah, give them some advice. Or alternatively, if they want to put me on the top of the Victorian Senate ticket, the federal election, >> I'll give it a crack. Why not?
>> Yeah.
>> I mean, I just one thing, I would love nothing more >> than to be able to skewer federal bureaucrats at Senate estimates. Like I would I would put them on toast. Well, you you've got some good ideas, particularly about the income splitting.
You were talking to me um yesterday about that.
>> Makes no sense. Like that that that that's a that's a it sounds nice in theory, but the cost like the parliamentary budget office, I think, estimated like $50 billion or something if we did that. It's just not it's not realistic. And the argument should be that we pay too our income taxes are too high which I wholeheartedly agree and we need to lower them as part of reducing federal spending on you know get rid of the waste cut the bureaucracy or that sort of stuff that would allow us to lower personal income taxes as well as doing broad-based tax reform which is what she should be trying to argue as well like you know she should be pushing the Henry tax review >> like we've already done the review we know what the sort of things that needs to be done let's rekindle that.
>> Yeah. um you know that that that's the sort of thing you could get behind rather than just >> that review was very readable as well.
It was very it was a review that was written in a way that people could understand it. That was another thing about >> and really really all we need to do is dust it off and and and update it right like the template's been written but it's obviously from 2010 so it's it's out of date >> but they could basically >> the the concept was sound though in that >> it was yeah it was by and large. So, so I'd like to see, you know, Balling uh and One Nation instead of doing income splitting.
>> Yeah.
>> Go lower personal income taxes, smaller government, like less um fewer bureaucrats, a more efficient, leaner public service, smaller government.
>> Yeah.
>> And a more efficient tax system. Modeled along the lines of the Henry Tax Review.
Like, let's rekindle that.
>> Yeah. Yeah. Yeah. Um uh thank you so much Glenda Taylor for saying Katherine deserves a ton of respect for her incredible depth of knowledge on the 18.6 year property cycle uh and she also knows what's happening on the ground in real estate. I love listening to what she has to say. The more Katherine talks the more I listen. Thank you so much. I get because I get the reason I read that I get so many wacky comments here. I've got a whole heap of comments about um me talking about astrology um from people saying uh Le is grounded in and Katherine Katherine talks about astrology. actually don't think I've spoken about astrology on your >> ignore them. I I I actually love it.
>> I mean, to be fair, Australia, there's there's many esoteric cycles behind behind there's many esoteric trends behind cycles. So, I do cover a little bit of that in land cycle investor, but um uh yes, thank you for that comment. Um a fan had to point that out. Um and I was going to say this, too. So, this is Doug that says, "You're 100% right about Perth. My mate bought in 2010 for 510,000 in the Baldes. Um, sold in 2020 for 405,000. I bought in the um Bold Baldes Baldivas. I hope I'm pronouncing that properly. I'm probably pronouncing that really badly. Um, Bold Divas uh 400K in 2019 and sold in 2025 and November for 850,000.
When iron ore takes a massive hit, the whole state suffers. It's a boom and bust state. That's fact. It absolutely is. If you look at Perth's long-term data, it booms and bust pace on investment into the mining sector.
>> So, when that mining when when we're at the end of of this cycle, which I think will be, you know, around 2030 for for commodities, um it'll be interesting to see what happens for Perth. Um great video. Love from Perth. Katherine, you're not a wacko. Thank you. Um Leath, you're a bloody legend, mate. get into politics if not already. Country would benefit from you so much. Look forward to listening next week. Cheers, Tom.
Thanks for all these. I I appreciate the people that that spread the love. Spread the love. Um here's the thing. I was looking to buy early this year and I saw the insane spikes month on month and didn't see it as stable. As much as it would suck for a young couple to go into negative equity, it's their own fault.
All of my fellow first home buyers taking up the 5% deposit scheme LMI waiver chose to do it in capitals. They knew the market was overpriced and they decided to continue bidding up the market. I won't feel bad about investors and those who bidded the market going into negative equity for a few years until the market corrects. That's very nice of you, Ben. What do you think of that?
>> No, no, it's self-interest, right? Like it's zero sum game and um you know some people benefit, some people will lose.
Um yeah, I mean it's a market, right?
And and unfortunately we've had so much interference in the market for so long that it's pushed prices up for everyone and it's created the problem that we've got. So um no, I fully get that sentiment. At the same time, you know, um those who were sort of enticed into the market by the federal government through stupid policy with this 5% deposit scheme, well, I think they'll be they'll have a right to be angry because they got suckered in. Obviously, the RBA then hiked rates three times, which that's not the government's fault, but they got sucked in with the policy and then the government's now going to going to going to put the, you know, boot on the neck of house prices through the negative guarant capital gains tax exchanges. So, >> yeah, >> I I can understand if you you'd be pretty annoyed if you bought it the start of this year or the end of last year and suddenly the market's taking a dump because of all these forces and the government's just going to exacerbate downside with their changes to, you know, negative guarant capital gains tax. She might be a bit annoyed.
>> Yeah. Yeah. Um uh comment here from um MM Ray. It was not a black swan. So obviously talking about economic crisis here. Firstly, Trump had clearly been anti-Iran for the longest time. Second secondly, if you follow commodities, we're clearly in the commodity cycle at the tail end of the 18.6 year real estate cycle. However, I believe COVID extended the cycle. It's not always 18.6 years on the dot. It's an average. I believe wave three of the 135 Elliot wave upswing in commodities is happening now as oil needs to clear 120 and go towards 200 plus for the big inflationary move to be upon us.
Deflation may be here in Australia for now but we are not there yet in the US.
Housing is looking strong in the US at the moment with regional banks and housing stocks Lenor um um looking strong um to some extent I agree with some of that. Um I um and this is for the cyclists that are watching me because some of my subscribers do watch even though you've got many many more subscribers than I have. Um but uh we are at the tail end of the of the 18 year estate cycle. It's not exactly 18.6 year years. You're absolutely right.
It's an average and has always been seen to be an average. Um and I do believe that we're going into um much higher inflation ahead. But housing looking strong in the US? No, not really. the the peak in the housing market in the US has already passed based on the medium prices. So it may still be strong in some markets but not all. And I would say that um the the real leading indicator actually are development stocks. They um have been proven in many studies to be to peak and start to fall prior to you seeing economic activity start to fall. and um you know GJ H DJ Horton and um some of the other big uh US development stocks have already started um quite a significant downturn.
So yeah, but good comment. Thank you for that. Um >> hey, I I've got to I've got five minutes. I got to go and pick up from the bus.
>> Well, let's let's wind it up there. Um because I could sit here listening and and reading these comments all day long, but let's wind it up. And uh we will be back next week with more exciting news. Is there any exciting coming out this week? What's what's >> I don't know. I've lost track of time, but look, it's always exciting. Let's be honest. You know, >> even if there's no data, we can we can wax lyrical about kombucha and energy and EVs. I haven't done an EV rant for a while. Um, you know, >> somebody this week said that you should get a mullet. So, I thought that >> I wish I could, but look, I look at this hair. I used to have [laughter] I used to have when my wife met me back in the late 90s, I had the beautiful hair. I was like, you know, and then um yeah, soon as got the rock on her finger, it's [clears throat] like, you know, disappeared. [laughter] And it's like it's like that Simpsons episode where suddenly it's like luckily my gut didn't go out. I've still I'm still lean. But >> yeah, >> the um yeah, unfortunately look to who I am, which is great. That's all that matters. But um >> yeah, like there's no mullet here. It' be like a Frasier Garrick mullet if I did, which actually wouldn't be too bad.
Like that dude was a beast. I'd have like just hair at the back, but nothing at the top. It look pretty bad.
>> Yeah. Well, on that note, we will uh we'll leave it on the >> macro and the mullet podcast.
>> The macro and the mullet podcast. And please everyone leave your comments and um yeah have a go have a bit of a rant and we will address them next week. And uh we will see you then. All good.
>> Yeah. All good. Speak to you next time everyone. Beat you next time.
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