590 | Property Shock: War, Rates & Tax Reforms, Reshapes Everything! - Chat with Nerida Conisbee

Politically, it's unsalable.

You can actually see overbody on that.

Where is the overbody on the road?

You can see it in text polls.

Manitri Palsy can't stop being believed.

You're tuning in to the Property Couch,

Australia's number one property, finance and money podcast,

featuring the Titans of the industry since 2015,

where trusted by tens of thousands of investors

on their journey to financial peaks.

This show is powered by more.

Thanks, Opti and yes,

welcome to the number one property podcast

in Australia, the Property Couch,

where we do get the Titans of industry on the show

and today is no exception.

We have some enormous talent on our show

as our Couch Crew today.

I'd like to introduce you to the Nerida Conner's Bee,

the Chief Economist of Ray White.

Great to have you back.

Thanks for having me.

And we've got Evan Lucas,

who is also our more ambassador mate.

Welcome to the couch.

Thank you, thank you for your involvement.

This is going to be a lot of fun.

I know we've got some diverse views.

And what a time to be talking about diverse views.

We do.

And just before we kick into it,

because we've got a lot to cover off on today's show,

economically, property outlooks the whole bit.

Just a bit of housekeeping.

The masterclass, the $3,000 a week masterclass,

we have this great webinar that Bryce and I did.

So if you want to check it out,

it's at thepropitycouch.com.au forward slash masterclass.

Check it out and you'll learn how you can build

a $3,000 a week property investment portfolio.

Okay, here we go, guys.

And how I want to frame this up is,

at the end of February,

I did a property market outlook.

And in that outlook,

I had a base case scenario,

which didn't have an attack on Iran,

and basically the escalations involved.

I mentioned them,

but I didn't have that as the base case.

And I said,

everything gets thrown out of the window,

depending on the conflict in the Middle East.

And here we are,

only really torn out,

maybe three weeks later.

And everything is out the window.

So Nero, I want to come to you first.

I want to talk about what you did start to see

at the start of the open.

Let's call it February is the open of the new selling season

in Australia.

What was the confidence,

what was happening in the market?

And then I want to talk to you about what's happening now.

Sure.

So last year was a very strong year.

So we had three rate cuts, obviously.

And it did lead to a reacceleration of the market.

So markets like Perth,

which we thought would slow down last year,

hit 20% by the end of February.

Incredible.

Which is quite incredible.

We saw Southeast Queensland very strong,

even Melbourne, which has been very, very weak for quite some time

was starting to see a bit of a recovery.

We were seeing a lot of strengths

at the bottom of the market, the cheaper end.

So that was definitely outperforming compared to the top end.

So particularly in Sydney,

where we're seeing the luxury market quite weak,

for quite some time compared to the lower end.

But the interest rate hike in February

was starting to lead to a bit of a slowdown.

So to give you an idea of the slowdown,

I've been in Perth recently.

So it took the growth from 20% and your growth to 19% and your growth.

So it didn't really knock the,

it knocked a bit of heat out,

but it certainly didn't knock everything out of the market.

So end of February,

a pretty strong market.

The interest rate rise was causing a bit of concern,

but not much.

And that was really where we hit at that point.

And then we obviously have the escalation in the Middle East.

It starts to impact on oil prices.

So inflation comes back into the conversation.

So what are we seeing now in terms of the data that we're seeing

rolling through over the last, say, seven to ten days?

Yeah, so really it started not last weekend, the weekend before.

And we track open for inspection rate.

So we look at every single person that comes through our open home.

And we can track it daily.

So at that point, not last weekend,

it was very, it was very jittery.

The market seemed very jittery.

And primarily because not only were we starting to see a lot of challenges

come out of the Middle East conflict, but also inflation.

And then we also had the rate rise potential for March.

And so people were starting to feel,

you know, you could tell people were anxious when we had a look at the number of people coming

through.

It was particularly apparent in Sydney.

So in Sydney, you know, we'll typically sort of see on average three to four people

per open home, sometimes high, you know, just depending on where you were.

But say on average three to four that half.

So we saw about two people per open home in Perth, very different.

So Perth is still averaging sort of six, seven,

quite Brisbane, quite similar.

So that was the week, not last weekend before.

Then last weekend, the rate rise came through.

And then we started to see people calm down a little bit.

So it didn't recover fully, but we started to see a bit of a stabilization.

So that's where we are at the moment.

It does look like people are watching and waiting.

We do expect it to take a hit on growth.

We don't expect year and year growth to fall.

But primarily we'll probably talk about all the other issues later.

But we do expect it to knock a bit of heat out of the market,

which isn't necessarily a bad thing because I think again coming back to markets

like South East Queensland, Adelaide Perth, when they're running at 15 to 20% growth.

And it's alarming for people.

You know, I think it's sort of at one point it's quite exciting.

And then suddenly you're like, well, this is really too hot.

Can I ask a question before we go any further?

Last year we saw inflation starting to move.

For me, I actually think that's when it was interesting.

But the demand policies that came in in September of October is the first homeowners changes.

The five percent.

You talked about a lower end of the market.

Is that still there considering that, you know, that support is there.

And then there's also that FOMO slash fear of the pausing market getting quite, you know,

unruly with what's going on.

Does that also coming through in your data?

Yeah, look at seems to.

I mean, there's no doubt that that first home buyer incentive has been fueling that cheaper in them.

When we look at the price points that which they cap out in every state,

it does seem to be extremely strong.

Last year we had a lot of investor activity as well.

So, you know, we had those three cuts come through, so that was holding out.

I think that what is also supporting it is particularly in Sydney is, you know,

we talk about affordability and the challenges of that.

But it doesn't seem to be impacting the cheaper end.

It's definitely impacting the top end of the market.

So, you know, when people talk about top end, they think of, you know, 20 mil 30 mil.

But realistically, the top 25 percent is sort of about 2.6 mil plus.

And that that's weak at the moment.

Like people are really struggling to afford to buy those price points.

And if you think about it, it's the buying pool, the demand pool that lives down in that bottom courtyard.

So, it's also to your point, it's where the buyers agents and the animal spirits

from these investor buyers agents are playing the heaviest.

And that's not also in our capital cities, that's also in some of our larger regional towns

where they're coming in and they're coming in with 100 buyers or 200 buyers.

And that's an interesting market.

They could do a whole nother show on that.

Yeah, well, we wanted to come back because I've been pretty vocal.

I've been pretty vocal about what's going to happen.

Like places like Rock Hampton and Townsville.

Like we can definitely see that impact happening.

Yeah.

Even have happened as they've moved on to the next place.

That's right.

And we can also see in the number of rental stocks.

You can see the spike in the number of rental stocks.

So you actually know that it's been investor led and it hasn't had fundamental own rocket-powered demand led.

So that's for me, because when I look at Rock Hampton and I look at what's going in Townsville,

you look at the economics behind it and it's clear the push around the underlying fundamentals

of the economics of the future of Rock Hampton, the future of Townsville.

My question I've been asking about it though, are we facing a new port headland in terms of the way that it sort of structures itself?

No, that was so.

But so that's what it means.

So if you look at Glaston's example, right?

Yeah.

So everybody bought into Glaston off the idea that the two trains coming from Central Australia on gas

from Santos and Co was going to turn Glaston into these incredible cars.

Billions of dollars of investment through the port.

And away we go.

Rock Hampton has very similar fundamentals in the way that it's been invested.

That gives me Glaston vibes.

Yep.

And that is what I am certainly worried about.

Well, because I remember it was like this, this surge and it's got some of the baddest port headland.

No, I don't think it's bad enough.

But it's the same principle, right?

Yep.

In the fact that you've got big underlying commodity-led investment and commodity-led economics

that is driving the attraction to the property investor cycle.

We now haven't discussed yet about, okay, we've had two rate rises.

But the markets factory in three more.

That's 125 bips by the end of this year.

I've been really vocal on this around the other reason is it's not a big, huge swave of new investors.

It's a concentration of a small swave of new investors coming in.

But they were getting access to trust lending.

So they were basically moving around.

There was a loophole and that's what was happening.

So it was a concentration of around 10 or 15 buyers agency groups who were moving markets.

And they were getting not one property for a client,

but getting two, three, four properties for a client in a year using these trust lending.

And so we have seen, and that's why I wrote that white paper and sent it out to all of the associations.

Because it was going to be a major, and now let's say two more rate increases.

They were just level in terms of their servicing on those trusts.

So they're going to be under water in terms of potentially even with their so-called, you know,

letter from the accountant or their own self declaration.

So that to me is a problem.

And I reckon I want to come back to that because when I think about capital gains and negative gearing impacts as well,

they could be four sellers.

And they're going to be four sellers into this is what I always said was the risk in terms of going into those regional markets.

If you don't have fundamental owner occupied demand, that's my underpinning it.

If it's not, that's my problem.

Yep.

That's why I report headlands on the low example, but that's my risk.

Is that?

Headland lies.

Yeah.

But it's such a stereotypical behavioural economy.

It is more man, I'm coming to you now.

Yeah.

So let's talk about, we've got an event that's happening on the other side of the world,

but it's having a massive impact in terms of the supply shock that's coming through.

So talk to me about your interpretation of where this supply shock is going to lead inflation.

And then where is that going to lead interest rates?

And then I'll get your opinion there it up as well.

Let's look at the only way I can explain it at the moment is that it has pretty much all the hallmarks of the first part of 2020.

COVID.

Like you need to put it into the same context.

You've gone from around about seven to 800 ships through the Strait of Humours to maybe five per day.

And three of them are Chinese.

Correct.

And none of that, as we've just discussed, there is signs that China is one of the harder hits nations by what's happening with the Strait of Humours considering that about 60% of their oil comes from that part of the world.

They're going to have to start stockpile and they've already had been anyway, but they're going to stockpile goods.

I think you also need to understand the flow down and why I say it's to COVID.

So if you look at somewhere like Qatar, it supplies 99% of Pakistan's entire gas.

It provides around about 80% of India's total gas.

You then also look at further than that, you look at things like synthetic apparel materials comes out of there.

80% of that goes to Bangladesh and Vietnam.

So it's as simple as going down the chain that the manufacturing of those apparel goods that would come here.

They're going to disappear in June July.

It normally takes about four to five months from leaving port as a base product to final products on shelf.

It's about that period of time.

Now, what about I'm hearing stories of ships being held at port or turned around as a means to store the diesel,

to obviously for self-interest and reserves.

Gas fuel as well.

And so that's obviously having an impact on the delivery of goods and services and raw materials that are potentially coming into us.

So we have 38 days of diesel supply, at least that's what the official data tells us about.

Again, if you look at the data coming from Singapore, particularly from tapas,

is the supply into Australia has yet to be fully interrupted, but is interrupted.

The catch for us is transportation, majority of our transportation is long haul.

And again, you look at agricultural products during COVID, they were the bigger inflation story.

And so already you are starting to see that flow in effect.

Because don't forget tractors, diesel, not just the trucks, diesel, but the running of all farming material comes from diesel.

Can I give you an anecdote lens?

Yeah.

And I don't want to stress people out too much because obviously, but it is a sentiment shift.

My wife, her side of family, a farmer's wheat and sheep down in the wheat belt in Western Australia.

And she was talking to a girlfriend who still lives in that part of the world.

And they've got that cyclone that's now coming around the top of WA.

And it's going to be fantastic for them in terms of wetting the ground so they can soak.

Right. And so we're talking, these are large farmers, right.

In some cases, they've got 30,000 acres.

And they do broad, obviously grain farming.

Now, one particular farmer down there, he needs 150,000 liters of diesel to soak.

Right.

And he got 38,000.

And they cannot get.

And so in timing of sowing when the moisture is in the ground can be important.

Really important in terms of that.

Now that's again, that's just one little example.

Let's take that further.

The other issue with what's going out of the Middle East is fertilizer.

Yes, right.

So the fertilizers, the other part of that answer is that it's not just here in Australia.

If you're looking into particularly North Africa, Middle East, Middle subcontinent Asia,

planning seasons April, April May for a summer period through June, July.

Again, over 50% of their fertilizers come from the Middle East, come through the Strait of Vermilose.

You've also then got all of what we're saying here.

It's not just the supply of gas.

It's not just the supply of diesel.

It's not just the energy flow of the flow of other materials.

And that's why it's COVID.

It's not the same, obviously, but this is the flow on effects.

And if the war was to stop tomorrow, the time required to fix it isn't days.

It's not weeks.

It's actually months before supply comes up.

So are we going to have a period of higher inflation?

Yes.

It's a lot of modeling is showing you, because again, simple economics.

101, supply and demand.

We've got a COVID style supply shock that will take months to filter through,

even if the war was to stop tomorrow.

And it's not.

No.

Narita, in terms of building supplies and materials, are you hearing any anecdotal stories

or are you seeing anything coming up in your data?

Hey folks, Ben here.

I hope you're enjoying the podcast.

Now, if you want to take your property, finance and money knowledge,

even further, check out the new mind knowledge in more.

We've packed mind knowledge with over 120 plus free resources from free reports

to educational video series to fact sheets on demand courses and heaps more.

Get started today at the propertycouch.com.au forward slash mind knowledge.

Yeah, so construction costs did calm down sort of start of last year.

So we had that incredible spike during the pandemic,

where they sort of hit 20, 30% per annum growth, they did come back.

They were starting to re-accelerate again.

So showed up clearly in CPI.

So when we have a look at the CPI figures, it was very clear that building,

the cost of building a new home was starting to re-accelerate.

So already, you know, we've started the year with challenges around construction

and obviously with what's happening now in the Middle East is just going to create more problems.

So not only will we have the labour supply problems,

which are very, very apparent at the moment, particularly again in smaller cities,

we are now going to have both supply chain blockages again.

And it's an interesting one for housing, which we may discuss later.

But on one hand, you know, we do have rising rates and the slowing of price growth.

And then the other hand, we're going to have rising construction costs.

So it does mean that replacement costs will continue to rise.

And it really does flow through to affordability that we can't build affordably at the moment

because of what's happening with construction.

Yeah, and we saw earlier in the week reports in the mainstream media through the ABC

around suppliers putting our surcharge on their materials,

because it's just costing them more to, you know, like the sand,

there was the story of the sand quarry.

Obviously, the sand mixes in with the cement to make the mortar.

And ultimately, they're saying, well, you know, what was it?

We were 5,000 litres of diesel a day.

And their diesel costs have gone up 35%, 40%, you know, a dollar.

So that's material in terms of that.

So they're basically putting a surcharge on those materials.

And of course, the builders who are building a homes, they've got to cop it.

Like ultimately, you know, if you're halfway built and you've got a timeframe to build,

that's straight off your bottom line, or you, or ultimately you're passing on to customer

which is how we'll see it, show up in inflation,

in terms of those new construction material costs.

So it's, so just on that, the other thing you just hired there is

what was the problem during 21-22, which is sticky inflation.

So most, it was most construction workers, most transport companies will try and absorb it

for as long as they possibly can.

So again, that's a four-month problem.

So this show up of that inflation is not just on the headline right now

with volatile items being food and fuel.

The sticky inflation, the core inflation problem will come in June, July, August,

where it just cannot be, you know, absorbed any longer, and it will appear.

And that's the rate issue.

The other one is inflation expectations.

And that is really blowing out.

I think it's sitting at about five.

Well, five percent last week is probably high now.

I think that then starts to roll through in terms of people's pricing decisions,

particularly on the supply side.

Well, wasn't it last week that Treasury informed the Treasurer, Jim Charmers,

that they're modeling an expectation of inflation eating five percent now?

Now, if we think about, they were trying to play down just under.

Yeah, well, just under five percent.

They're saying between high fours.

I think that's heroic now.

In terms of what I, I mean, if we saw, if we're saying we've got a supply shop

we have before, and what, we saw headline inflation made about eight point five.

Was it 8.4?

At the top of it, it got to snow.

Yeah, just under.

headline.

Yeah, back in COVID.

So, so why is this going to be a three percent better?

Because it, because well, I suppose it's, it's a rolling story, right?

Because if the Middle East world doesn't get resolved,

and oil prices do stay at $100 barrel and gas prices continue to stay high,

all of that flow on in terms of the, you know, the, the, the other part of that story

was around the, the plastics, you know, for the plumbing,

all of the, you know, that was now costing more in terms of the,

because oil is an input cost into it.

And gas is another whole story.

Oh, yes.

When we got to to 7.1, 7.2,

there is an argument that the RBA is partly going for that,

because they weren't fast enough on it.

Yeah, rates were 0.1 of one percent during that start.

Yeah.

We're putting a different cycle.

Yeah, yeah, yeah.

I've got a question that because I, I look at New Zealand a lot.

So, New Zealand, they moved hard and fast,

and it made no difference.

Like, they still had to stop and all.

And credit all of New Zealand.

So, I mean, you know, and I think this is one of the challenges at the moment that.

It's huge challenge.

Monetary policy can't stop the war in the Middle East.

And so, you know, I think it's, I think, you know,

does make people question like, why are they raising rates when it's probably

not going to make much difference?

And I think it comes back to the fact, you know,

that's 80 percent of what we're seeing is from the Middle East.

20 percent is not.

Yeah.

Maybe they can control that 20 percent.

I mean, that's all monetary policy is going to be able to do.

Yeah.

But they have to do something.

And I think this is the, the challenges that they're facing,

that they have to do something.

It possibly will force us into recession.

We don't know.

Yeah.

But if they sit back and do nothing and let inflation take over,

it becomes particularly alarming.

At the very least, they need to stop domestic demand.

And that's what they're doing.

Well, that's what they're doing.

That's the mechanism that they have.

It's blunt.

But they've got to do it.

Stop that's traveling.

That's it.

I would argue.

I would argue that's what I've let go.

So at the end of last year, that was coming.

Yeah.

Right.

So, I, I, we knew the first one when February was coming.

They had four, four wonders back in December.

Yeah.

But that was coming because inflation took off in October.

Yeah.

Like, it's very quick.

It was, and it was, it was so clearly waiting to happen.

Yeah.

That it was there.

So inflation took off.

And then it shows that domestic demand is there.

You can see that in the data.

Yeah.

You can see it.

You can talk all about, you know, supply chain shocks and all that stuff.

The majority of last year's inflation story was domestic.

It was domestic.

It was domestic.

I don't know.

It was, a lot of us housing.

Yeah.

And so that's rents.

Yeah.

And I was also the cook.

Yeah.

House is being built.

So that wasn't, that wasn't really demand.

I mean, maybe demand a bit.

And then electricity.

So that was also that.

And I think, I mean, it's definitely travel.

So if you look at, you look at domestic demand.

If you look at the movement that happened in retail spending.

If you look at the numbers that happened in particularly.

Travel.

Yeah.

Well, I would call discretionary spending.

So travel, cafes, all that material went through the roof in September of October.

So that third rate card just basically was the tipping point.

People actually.

It just goes to show you how tougher job it is.

Because to your point.

You can crash in economy.

You can crash in economy in terms of doing it the New Zealand way.

Yeah.

Or you can have a look at it doing the Australian way.

But it was like an elastic band, wasn't it?

Because we still had full employment.

Off, off we went to the races.

Yes.

So once, you know, we thought we'd, you know, got the June.

I get it.

The inflation journey back in the bottle.

Oh, you know, we're spending like drunken sailors.

Yeah.

Both publicly and privately.

Well, yeah, the public spending.

Yeah, it's been too much.

Yeah.

It has been too much.

And construction.

Oh, my God.

Don't start me.

All right.

So I'm going to summarize this because we can start.

Okay.

So let's go.

The impact on demand is going to be obviously downward pressure.

That's really simple to see.

And of course, from a supply point of view.

You would like to think that if inflation is going to push interest rates higher.

And the cost to build.

And also the cost to transact is going to get so much higher.

Borrowing power is going to come down.

So there's not an ability to actually.

All of those things lead to lower activity in terms of the market.

I would suspect is what we're saying.

So now combine that with the other big story that's about to roll out in our

May budget, which is capital gains tax.

And also potentially reforms to negative gearing as well.

So I want to start because this is where it gets really interesting.

Or I mean, if we're talking about the challenges to the residential property market.

This could magnify those challenges.

So at this stage, all we've got is this muted change that we've been told.

Treasury is modeling a 33% reduction in the discount of capital gains.

But if it was just that, we need to know something around that.

So the first one is around grandfathering.

So are they going to grandfather it?

So if you bought the property, you'll still get the 50%.

Or is it going to be effective from a certain date time?

And then finally, the big question here is on, is it going to be only on property?

Because how I want to look through the lens.

I want to look, I want us to get both of your opinions around the existing property owner,

the existing landlord, what are they going to do?

And then ultimately, then what's the behavior of that prospective investor?

Where are they going to take their money in the future?

So in terms of, if I would say to you that there's no grandfathering,

which is the intel that we're getting.

So effective potentially from the night of the budget.

No longer will you get a 50% discount after 12 months.

You're only going to get 33.

What are you going to do as an existing landlord and an existing owner?

Are you going to sell or are you going to basically hold onto your property?

So it's come in.

Yeah, okay.

So it will hold, obviously.

So again, we can talk about this for a long time,

but there's a lot of concerns we have about it.

On its own, we don't think it will make a huge difference to the property market.

But if it does start to lead to particularly negative gearing changes,

we're very concerned about a few things.

One of them is rents.

We know what happens to rents.

It's in Victoria when you start to see a wholesale reduction in investor activity.

We're also worried about transaction volumes,

because if we look at the lead up to the 2019 election,

we actually saw a crash in transaction volume.

So for the wider economy, that's in terms of the property industry,

that's what it does rely on.

Absolutely.

And then looking at the way we've seen wholesale reduction in smaller investors,

which is the US, private equity steps in,

and particularly Blackstone.

So you know, like I think this is the thing that people don't understand

that if a void is created,

someone's going to have to step in.

And people kind of think,

oh yeah, well, everyone will become homeowners.

That's not how it works.

No.

That when we look at what's happening in the US,

there was a lot of anger towards institutional ownership of properties.

And again, you look at a first home buy at the moment,

competing against an investor.

It feels very unfair, because they do have more money.

But you go up against Blackstone ad noxion,

you are not going to win as a first home buy.

No.

And I think this is, and also I think the other,

even more, I mean again, I could talk for ages,

but even more broadly,

there's a feeling that, you know,

I will live in institutions own rental properties,

and rents will be cheaper.

Like they have seriously wanting a return.

And when we look at build to rent in particular,

they are trying to get over market

because they need to make these things stack up from a yield perspective.

Okay.

Corporate property is the way I look at what happens

when you get private equity involved.

It's a nervous point exactly.

If you look at institutional investing in corporate property,

the rent increases are without fair or favor.

They are always looking for a certain yield return.

On-going maintenance of properties,

all those types of things.

So you look at the ones that I,

you look at some of the big listed REITs

and the rents that they chase,

and where that's ended up putting it.

I mean, you can see even the Australian listed ones

that they have a certain yield, they have a certain,

so you now have occupancy rates,

because again, the corporate market's different

to the residential one I get.

But if you want to just see what it would be,

that you can see that the way that they run the corporate structure

would just move into the retail residential structure.

They need a risk of adjusted return.

And if they're not going to get that in capital appreciation,

they're going to get it in yield and rent.

And the frustrating bit from the sort of everyday investor

is that the governments are also giving them 40-year

land tax exemptions and all these things

to actually get them out of the ground.

Yes, I mean, the tax incentives go somewhere.

And I think the other thing too,

is I still struggle to understand why people

seem to have a problem with an investor

owning 10 rental properties,

but an institution owning tens of thousands is okay.

So, you know, it's funny things I could say,

they don't want their neighbours getting a tax rate.

They're okay if you don't have your big company though.

That's right. All Meriton having hotels around the world,

which are short term rental accommodations.

But so I agree with that statement there.

Now, wouldn't it be interesting if they had

a window, let's say their policy setting says,

and it's effective from the 30th of September?

So, you know, so now you can get your 50%,

what's going to be the behaviour then?

I reckon it's going to be a lot of that.

I think they're going to talk about it for years.

So you think...

Tyric, can you think of Fathering?

Yes, I'm hearing on the ground.

This grandfather can't work, right?

So I need to put my hand up and prepare myself.

Your grandfathering does not work.

It is, again, a knock distortion.

We've just talked about the way that

I always argue with tax.

Taxes are behaviour mover, right?

Of course, of course.

You are going to find avenues to do what you need to do

to get around the tax policy.

That's just been the way it has been for millennia.

My biggest issue is, as I've spoken offline,

income tax policy in this country is part of the reason why,

you know, proper investing is so attractive.

If you can offset your personal preference.

Correct.

So that's...

When I answer this question,

I need to look at it from my view,

which is that the lever you're pulling

is to pull another behaviour over here.

So it has been an attraction to do this

for the income reduction that comes with personal income data.

There's got a revenue problem.

Of course, they can't wait until two years

to actually start getting an increase in revenue.

No, no.

But that's why the revenues are that it's effective immediately.

Politically, it's unsalable.

Right.

Okay.

So that would be...

It's going to be...

And only on property.

Othering is a massive problem.

You cannot do it.

But they're going to have to give some...

They can't do it immediately.

I'm sorry, indefinitely.

I think it's correct.

Correct.

So, and only that again,

the flip side is that you asked the question before,

about a new property investor.

Yeah.

They're going to get the new system that all ones don't.

Again, that's the distribution issues with...

What's going on, Father?

Greatens proposal was it was going to be staged.

So to bring it back down to 25%,

they were saying it was 10 each year.

But so the reason...

It gave you a little bit of time

and it didn't distort the market for a period of time.

I don't know.

We just said it.

No, it's really...

Because the other thing that is being discussed

is instead of the 33%,

which you've just discussed,

is going back to the Hort Keeney era

on inflation linked only

with a two-year-grandfather.

Okay.

What they were going to say to you is that

if you bought, let's say, 2010,

because the bet is that I can give to you,

you are technically 50% on the old system.

Yeah.

Because the accumulation of an average...

It's 2.6% is the average inflation rate,

which means your accumulation has got you to 50%,

if you bought in 2010.

It's about six to eight years.

It takes you to get to half.

Okay.

So that's the next example is that

they grandfather the existing scenario for two years,

but they will take it back

to the old system that it's inflation linked.

So if you...

This is the other thing we saw at the start of the podcast,

which is...

Can you imagine those investors

that have bought into Rocky,

that have bought into Townsville,

that then also have a scenario

where the capital gains tax discount is...

But I've been warning them...

I've been warning them that it's going up.

Yeah.

That they're buyers, agents,

aren't telling them the full story about the risk.

Because they're...

They're instead of a fall though, right?

And I want to actually sort of

really hit this hard.

The industry that we are in is a transactional industry.

Yeah.

Right?

It's incentivized for the transactions.

Oh, of course they are.

And all of us are.

That is the caveat with this

and where I come back to the behaviour of it

is that the government knows that it's on a winner politically

because the...

The change of the narrative.

The change of the narrative.

Yep.

It's unfair.

Yep.

And your transactional problem is not our problem.

Yes, but I mean, there's a...

There's a better way of doing this.

And that is...

Yeah.

Take the speculators out

who have been taught this...

That means regulation.

Well, no.

And where you have to...

Where is the other body on that?

Where is the other body on the...

We can set it in tax policy

because the reality is if...

If you have a staged...

You know, like what the picker policy is

where you say basically over five years

you get back to the 50%.

So all of a sudden...

You know, because these buyers agents are saying

we're going to take you into a regional town

and we're going to go in there with hundreds of buyers

and we're going to pop the market up

and they call it a trading mechanism.

Right?

And so there...

It's game stock period.

It's speculation.

You don't want speculation.

So take the speculators out.

But to your point around behaviour,

if I know that I'm a long-term investor,

I'm looking for that passive income

and I'm looking for...

To hold these properties over the decades.

Correct.

And so...

This change shouldn't hurt you.

Reward me.

Yes.

Reward me over the long period of time.

Do you think that...

I don't know.

I don't know if they're thinking that deeply.

Like, I think that...

I think they're challenged up.

We obviously think about it quite incredibly deeply.

Because we're subject to that.

It's better to hear it.

You know, I was on the economist round table a few weeks ago

and, you know, I tried to bring up CGT.

I didn't bring up CGT.

But there's so many other things going on.

And, you know, there's so many other things that they're considering

and that was a few weeks ago

before the Middle East conflict really accelerated.

And if you think about now,

there are so many other things for them to think about

and, you know, I don't think they're thinking that...

Well, these are the interesting things.

And the impact on...

There's certainly not thinking about the impact on the rental market

to the degree that I think a lot of other things.

But that's not their problem.

No, but then you're right on that area.

I did not think about it,

because my point is the tax mix problem.

They need to...

Yeah, that's true.

That's the thing of the taxes.

They need to...

So we are getting very granular for good reason

because we're in a certain industry.

They are thinking the macro at all.

They need revenue.

They need revenue.

They're broke.

But if the revenue impact is quite minimal.

Like, I think this is the other thing too,

which we're worried about that, again, they're testing the waters.

They'll see what happens.

They make changes to this.

There's not a huge outro...

Just before we look at that.

Can we also point out,

this isn't been plagued into corpus yet.

Right?

So all of what we're developing is completely hypothetical.

Yes.

We do need to point out also we have a very conservative decision-making prime minister.

And it's very probable that he just goes,

no, we can't afford to do that.

Timing is too great.

Oh, I feel like we can summarize that.

All right.

What about only on property?

Like, ultimately, the government has had a narrative of 1.2 million properties built by X time.

It's not a demand problem.

It's a supply problem.

They've said it multiple times.

I mean, every one of their leadership team there,

and the federal front bench has basically said it's a supply problem.

We've all agreed in the industry.

It's a supply problem as well.

If you turn it off,

and you say that it's 33%, or 25%, or whatever they settle on,

but you get 50% on shares or other investments.

What does that mean for a prospective investor?

Where are they going to allocate their investment capital?

It's behavior again, right?

Just something else.

It's the incentive to choose the incentive.

Again, the industry on the other side,

it's going to, and I can put my head on on that one.

It's going to turn around.

So the love that particularly business likes to put on property is that,

yeah, but we're a productive asset.

And which is fair?

No, it's not.

Yes, it is.

It is.

They are a productive asset in the fact that there's actually output to it.

But there's also the other way of looking at what property does is it is a wealth creator.

It is an income generator.

The output of it as a business, though, is technically under theory.

Can I make a case?

Go for it.

Let me see if I can make a case, because I was asked by a journalist on the fin review

about this particular thing earlier in the week.

What people don't understand is that if I'm in a town or a city,

and I want to set up a business, and I want to employ people,

those people who might be coming to that area don't buy outright straight away.

And so this whole concept that it's unproductive when human capital movement

is essential for economic activity and economic growth.

I need to get, I need to roof over their head.

I can't, let's say I'm thinking about setting up a factory,

or opening up from Asia into Australia, or whatever it might look like.

And I can't house my people in Aubrey, Wadonga, because there's no accommodation.

So let's say I'm doing a transfer hub there, I'm competing with Izzy,

or whatever it might look like.

So all of a sudden, I can't rely on new supply coming in in the next 12 to 18 months,

to almost 36 months.

So if it's Greenfield, it's going to take three to four years before I had that stock.

So whilst I appreciate that it's not productive in the economic sense,

in that short term, you've actually got to understand the reason why rents get

to $2,000 a week in broom and Newman and all these areas,

is because there is literally no accommodation.

Yeah, that.

And so the point I'm making is you're not judging productive use of just that.

You've got to judge it in the sense that it brings the workers to make that production.

And if you don't have the accommodation, you can't have the workers.

It's as simple as that.

I think then it comes back to the fact that we know it deeply,

and we understand that.

That's right.

You look at it at a macroeconomist.

They're looking at input output.

They're looking at very overbroad.

And they're like, well, this stuff is not an hour.

The other flip side I put to you is that don't forget 65,

68% of our population during the capital cities,

and that the requirement of the housing you're talking about,

they will discount that straight out.

You're talking about regional town.

No discount, I shouldn't.

But the discount is out of me.

I look totally agree about agglomeration in terms of the power

of that from an economic point of view.

But if you put it on equity,

it's the other difference here that we're not talking about is gearing.

Oh, look, agree.

So this is the flip side also, is that?

I'm not saying that you can't get on the side of the room.

But I'm not saying you can't get higher productive use.

No, no, no, I'm coming back to the 50%.

Yeah, yeah, yeah.

So the reason property is also so easy to take off

and what the concern is if you take it off other asset classes,

most other asset classes, in fact,

pretty much all of them don't use gearing.

Yeah.

So you are going away with gearing your hundreds of thousands

of dollars profit will be a fraction of that in equity,

because nobody gives.

Yeah, but maybe they'll start to gear.

I mean, this is the other thing too.

Yeah.

We'll do that back.

Yeah.

Well, who knows?

Because again, the risk.

But if you look at the risk profile.

But if you look at the risk profile.

But if you look at the negative gear property,

and you can negative gear equities, like,

oh, yeah, maybe I'll have a look at that.

I mean, people don't at the moment.

But who's to say they won't?

And I'm loving this moment.

And then again, I'm going to do the other flip side,

is ASIC, AFCA, don't allow.

So this is the regulation side.

So coming from my world,

having seen the Banky Royal Commission,

having seen the GFC leverage and gearing

has been part of the reason why it is almost impossible

to use gearing in other ASIC classes,

because it's created financial bubble.

It does, and it is a danger.

I agree.

But I can tell you in running a financial planning business,

if someone comes in with a high risk appetite,

and they're accumulators,

and they are clearly stating that they want an aggressive strategy,

then you will potentially.

You can do it.

I don't agree with it either.

I mean, I'm saying you do not gear equities,

unless you want to lose your paints.

Because ultimately, that's the risk of Black Swan events

and so forth, where you magnify that.

And same with property, everyone.

If you want to gear into property,

you want to make sure that you gear into a much more liquid market.

Yeah.

And a less volatile market in terms of what you're doing,

where the bigger cities are traditionally

being lower volatility as opposed to,

obviously, the most extreme volatile markets in property

are mining towns.

Our boom bus cyclical type of towns.

I'm loading this debate.

Well, as one's back to its 2004 peak, so there you go.

There we go.

There we go.

It took us 22 years for its back.

Very good.

Now, I'm going to pivot.

We're going to talk about negative gearing now,

because I want to round out this tax debate,

because I'm loving it.

So thanks, Evan.

For being the devil's advocate.

Yeah.

Applying.

And it's sort of still maddening.

It's good.

All right.

So again, the mood changes,

and we don't have a lot of data on this one,

in terms of intelligence around what is,

but it's mooted as two properties at any one time

that you can negative gear.

Right?

So let's go through the detail.

So that wouldn't mean that in each tax year,

you would only be able to choose,

if you've got a multiple portfolio,

which two properties that you would choose to negatively gear.

I'm fascinated by this concept in terms of

what it would mean to existing investors.

Do you have an opinion on that evidence?

I can't even further back.

Again, this is the same with what we're hearing about,

with the idea that they're going to put in a land user tax

for cars.

How do you, like, the monitoring of this,

it's going to be so expensive to do,

well, we monitor it now for each of our problems.

Yeah, but there's just so many.

You're just going to have to get your accountant to work out.

You're going to have to have your own money.

To work out this one.

But that answer is exactly the problem.

Right?

And that's exactly why, at the moment,

for me, if there's one that isn't going to happen,

it's the negative gearing tax.

I think that's the one that's potentially,

because it's just been, it was literally thrown out

into the public sphere two or three weeks ago,

again, as Nereda said before,

testing waters,

and it got really muted response.

Like, it just,

and it isn't going to move the dial in terms of the,

I mean, you're talking about

there's 800,000 individuals that have two investment properties or more.

And realistically, you can boil it down

into several thousand that this is really moving the dial

in terms of a tax take.

Yeah.

And they will find other ways.

I mean, Nereda has just highlighted it straight out.

For me, the negative gearing tax talk is the one

that won't get through caucus.

Yeah.

It's part of what they have done with their own, you know,

flex back from 2019.

That this was probably the biggest problem.

Yeah.

So I, for me at the moment, this isn't my concern.

It's a talk, it's a discussion.

Yeah.

CGT is a bigger one.

All right.

I don't think that.

I don't think it's going to happen.

I don't think it's going to happen.

Okay.

But let's run the hypothetical.

Okay.

This is the one we've got.

This is the one we've got.

Because remember, he's been very clear,

because he's also had a lot of pressure on terms of doing tax reform

with the mandate that they've got.

Right.

So he's under a lot of, you know, media scrutiny and pressure

to actually introduce reforms that's going to lift productivity

and get money moving in the right direction in terms of into areas

of investment that are more productive use.

And that's the angle that he's going to use.

I promise you, he's going to do that.

So in terms of the existing landlords,

if I've got four or five properties and,

and four of them are negatively geared,

how does this hurt me from a cash flow point of view?

Well, it's a problem.

It's a big problem, right?

So how am I going to be able to hold on to that?

Well, particularly new investors rely on it.

We do rely on it to bring a constant stream of rental properties

to market.

Yes.

So this will change it.

Yeah.

And it extends to, we know a lot of young people

are using rent besting as a means to get into the market.

Yes.

This will, you know, I mean, not that, you know,

if it's grandfather, I mean, look,

it's so hypothetical at the moment.

Yes.

But we don't know.

You think that would engage in the industry, wouldn't you?

Like you'd think, Jim, Thomas, Treasurer,

engage with us again.

What is the macro problem though?

No, you know what I reckon it is.

I think you look at industries like oil and gas.

You look at mining more broadly.

You look at banking.

They're very good at lobbying together.

Yes.

And they're very combined.

And they will get together and make sure

that what they say gets through.

I think the property industry is too disjointed.

And we've noticed it with this CGT issue.

Like everyone's kind of coming in from different angles.

And like finally yesterday we saw RIA,

public council, UDA, come out together with a joint statement.

Yes.

But it's quite late, you know, like it took a while.

And I think it wasn't that point.

It wasn't that really striking.

No.

And this is a thing like they weren't in the year.

Like they shouldn't have even had to get to that point

to make this statement.

They should have been talking to government.

The back channels.

Yeah, the men in dark suit.

I'm sure gas industry has been talking to the politicians.

They have hands on mainstream television about how important

the gas industry is.

And they still say they don't want to talk.

They still do.

To this day.

That's right.

So again, my argument is 2019.

It was very clear that change to these two policies

in the next decade or so.

Yeah.

Is more than a live event.

It's going to happen.

Yeah.

So it also comes back as he said to the industry in an era

that the coordination is poor.

The gas industry is known.

This has been a problem since 2010.

The increase of the petroleum resource rentaxes.

You know, if you really simply want to say it.

2010 under the Henry review.

All of these points that we're discussing right day,

which is 16 years ago.

Yeah.

We're all put in there.

Yeah.

All of them were there.

Well, Federal Labor took it to the 16 and 19 elections.

You know, in terms of reforms and settings around new

slivers as existing and all those types of things.

And the other problem that we're fighting is that there's a

goth Whitlam issue here, which is it's that time.

Yeah.

Right.

There is.

I don't know.

But the election is there.

Oh.

Yeah.

The election has got to the.

So that's what I mean.

Yeah.

So it's that time.

That has been building.

That is the difference.

Yeah.

But you know, I think you take it back to 2019 though.

The media were like, this is negative gearing is going to change.

Yeah.

You know, you need to vote Labor.

This is a key.

And then of course, Labor pretty much lost off the back of that.

And this is some of the, you know, a lot of the commentary coming out

in media at the moment is very pro-changed to CGT.

We should do needing investors at evil.

You know, like there's this.

This very, this messaging is coming out.

And you kind of like.

And, you know, I was thinking back to, it was the same messaging.

It wasn't.

But the other one that got the old of vote was the actual dividend tax.

Mm-hmm.

So when that, so if they.

In 2019.

Yeah.

If they stripped out the dividend tax and just went with the property tax,

they believe that they would have got it over.

Interesting.

So, you know, and I even remember my dad who basically doesn't vote.

He just basically don't give votes every year.

But he just said that that one.

And, you know, the golf club and everywhere around all the town of Erong.

They were like, that's it.

That's the one that triggered them to say not voting Labor.

So I think that was the one that we're missing.

So we do know that the narrative is getting stronger for change in this space.

And Kim Charmer is even two weeks ago at his economic speech that he delivered

where he did talk about, you know, Treasury's forecast around productivity,

which was, you know, glimmer to say the least in terms of what that was going to look like.

He actually said, it's even more important that we do it now.

Yeah.

And so I don't think so.

So if we're sitting here saying, it's not the right time.

And it isn't the right time.

But I don't think that's kind of changing.

But it's never the right time.

It's never the right time.

So we're thinking.

Change is hard.

And nobody likes.

So again, I just want to finish up on my point.

Yes.

You've got to go back to what this is about.

Right.

So this is about.

We've got 27%.

Yeah.

But it's 27% of GDP.

We've got a structural issue with government spending.

Yep.

They know that.

They're going to have to make hard decisions.

And you can hear they're going to do that.

Yeah.

But they're also going to have to live spending.

Yeah.

They also need to diversify their mix.

62%.

Yep.

Comes from personal income tax.

Yep.

We've had too many ways of diversifying their tax mix.

Yep.

That they're going to close the polls.

The each time is there.

Don't forget.

If you look at in this is 2021 sensors, the average age for a first homeowner

went from 28 to 34.

Right.

That is now becoming a massive headache problem.

Yeah.

Six years difference between first home ownership is making it even harder to think.

Correct.

Gen Z's are absolutely now driving the problem, which is they are missing out.

And they've got to write this.

I think they.

It frustrates me though that they see that it's either me or an investor on a property.

It's not that.

It's politically palatable.

It's politically palatable.

I think that's the point.

And also on the productivity problem.

We know the sector with the biggest productivity problem is construction.

Yep.

And if you go up to South East Queensland, it's absolutely a labour issue.

And they cannot get housing for that labour.

Yeah.

And so you need to fix housing.

You need rental housing.

You need accommodation for all these people.

But negative, a change to negative gearing will actually make that worse.

Which is why.

And how we think, you know, we're thinking of it very, very deeply.

But I don't think treasuries.

Okay.

So three things you're going to hear in terms of the budget.

Spending reform.

Yep.

Then you're going to hear about productivity.

Yep.

And potentially some changes to the business tax rules or corporate tax.

And that might be offset by a gas.

You know, super profits tax.

Yeah.

That's on the agenda.

And finally, the intergenerational inequality.

Yep.

That's what you're going to hear about.

And that's where the property story comes in.

And that last one.

And that last one.

That last one.

It's going to sit at top.

Well, yes.

You know what?

Because the biggest political pool of voters is now Gen Z Millennials.

Of course.

So that's it.

So that's the story.

So, you know, as the baby boom is unfortunately a dying off.

Sorry, baby boom.

But as they die off, they're obviously the biggest voting pool.

And that's where Labour are going after.

So strategically, at the end of the day, politicians just want to be realised.

That's the question for you.

Where's the biggest concentration of wealth, though, on a per capita basis?

Oh, it has to be with where the conversation is.

Gen X is.

Yeah.

Right.

So if you actually even out the population to be even Gen X's, are the ones.

Well, they're also going to inherit the.

Correct.

But if you look at the ones that are most affected by the change that we've just discussed, they're Gen X's.

Good point.

Good point.

All right.

So here we are.

It's a supply challenge.

So we're hoping neither gearing doesn't get touched.

And if you are going to touch capital gains tax, we've got a better policy setting.

You should look at it.

All right.

Then, and now that you mentioned this earlier, property turnover.

So transactions is what you were talking about before.

How important are transactions to state government revenue in terms of stamp duty revenue?

Yeah.

I mean, it's incredibly important.

I think two.

I mean, I think people, you know, people talk a lot about price growth and how price growth.

It's obviously damaging for affordability.

But, you know, people kind of like a government center, not be too fussed by it.

But the problem is incentivized by it.

Totally.

Totally.

Let's not boot it up.

Yeah.

We know when prices rise.

You transaction volume's increased.

Yeah.

So, you know, then that leads to a flow on effect of the economy.

And you start to see greater employment for real estate agents.

You see it for movers, architects.

People tend to buy a new car when they move house.

Weirdly, you know, there's, there's a lot of end state government revenues.

So, it is a big issue.

If it does start to grind down, that is a challenge.

Because you see what are they going to do?

They're going to go hand in cup to go to the federal government.

So, you've killed off all of our revenue.

You need to now give us more than just the GST receipts.

Or, we're going to have to tax the, you know, tax the constituents of our state.

Higher taxes because we're not getting the revenues that we used to get through stamp duty.

So, it's a, that's why this is a fascinating story.

In terms of...

We quickly talk about GST.

Sure.

I'm loving the debate.

So, let's go.

The hair we're going for time.

We're all right.

Okay, we've got time.

We've got time.

Yeah, we're good.

So, the GST is the fascinating one.

Because the other thing we've been speaking about is the blending of politics and policy.

The blending of real action versus macro theory, right?

So, the GST is the fascinating one.

Because the political argument against it is that it's a regressive tax.

It's blanket.

It's on consumption.

And it disproportionately hits the lower end of town.

This is again where my argument comes is that when you're doing tax reform,

you have to do it holistically.

You can't do it piecemeal, and you can't do it one for one.

Yeah.

But the GST is clearly the most efficient way.

Most efficient way.

You actually change most efficient.

The caveat, unfortunately, in this country,

we just, the reason I brought up with state taxes is that under the original setup

with the Howard deal to get rid of retail tax, wholesale tax, et cetera,

all those horrible mismatch of all these 33 and 10 and 15

and was to have this one consumption tax.

And Stemdjudy was meant to be in there as well.

Yeah, and you're going to carve out.

Which is not, I mean, to her narrative point, Victoria,

48% of state revenue comes from transactional property taxation.

It's like, well, 53% of total tax take is property related to it.

Again, what drives out the wall is that, again, nearest point,

if you're an asset manager,

let's put the Treasury Department to the one side,

but that's what they are.

They're an asset manager.

If you're exposed to 50% income from one stream,

we all sit here and advocate that that said diversification risk

you need to get away from.

GST is the exact example, right?

But what needs to happen is that it needs to stay at the Fed level.

And that's the catch with the legislature.

Is that under the current legislation,

all GSTs then carved out back to the States.

But if you were to raise the GST by 5%,

on last year's numbers, it had raised $43 billion.

That would cover, and a little bit more, the entire NDIS.

So the five biggest impact is on the federal government

is interest.

Let's put that to one side.

That's important.

Don't put that to one side.

Did you just hear what Evan said?

The biggest cost of the government is,

the biggest cost of interest on our debt.

And it's only getting worse.

It's going to get worse.

So all of this money that we're paying in taxes

is actually going to interest cost because we spend too much.

Age care, health care, NDIS.

And they're the three that have what we just probably cover

off at a discussion point with regards to demographics.

Then yeah, you've got the health side,

and you've also got defense.

So defense is the other part of the problem.

Right.

And that's causing housing challenges to this.

As an aside.

So here, do you have an opinion on raising the GST?

Not particularly.

I think what Evan's saying is it's spot on.

It is clean.

And it does solve a big problem.

It takes us to finish it.

Because what I should have finished on again,

because I said the point and then didn't even argue it,

which is if you do that, the flip side

is that you can actually probably scrap

the lowest tax bracket.

So you can get rid of the 50% tax bracket,

bring it up to 60 grand.

And therefore you've got a flat tax to people of 50%.

That's what it is.

Because it'd be through consumption rather than through personal income tax.

I mean, again, talking about incentive and what I have a massive problem

with at the moment, next year the tax cut

to bring the lowest social economic group down to 14%.

Watch superannuation tax.

15%.

Yeah.

Where there's the incentive then to stay for your future

if you're on the lowest social economic group.

Putting money into super is actually more tax inefficient.

Correct.

So this is what I mean.

The piecemeal problem cannot keep going the way it is.

Make you got my vote on GST?

I don't know.

I mean a strong advocate like you have to.

Probably coming on maybe eight or nine years, right?

But this is the political problem is that the flip side

tommet is income tax is the scope is progressive tax.

Yeah.

It's not progressive at all.

It's just the infiltration of political talk and language

and lexicon into the economic and tax side

is distorting the view as well.

A broad base tax on consumption is a damn good idea

as well.

Scan an avian country has been doing it for decades.

Correct.

Very well.

And as long as you have that critical safety net

and we're not talking about middle class welfare.

No.

We're talking about a safety net for our most vulnerable

and most need in our community.

You probably overdo it, but that's a good thing as well.

It's not a bad thing at all.

Yeah.

It's not a bad thing at all.

Okay.

Let's bring this home.

So we've gone through the whole story.

I want to conclude.

So is it a good time narrator to be considering

a major tax reform in the property space,

given everything that we've just discussed in terms of

what's going to happen over the next 12 to 18 months?

It's probably a better time three weeks ago.

You know, I think now I do think.

I could have dropped the budget three weeks ago.

It would have been quite a different time.

I've got no doubt that things are given

how much things have escalated.

I'd say that they're having to consider things quite

a bit differently than they were then.

And now you've got,

so we've got a situation in terms of that.

We've got to, we've got supply challenges.

We do have intergenerational challenges around housing.

I don't, we're not disputing that.

In terms of leveling the playing field around

and invest our verses and owner occupy trying to buy,

or at first I'm by trying to buy.

In terms of their service in calculator,

they get a bit more access because they can add the rent

in terms of how much borrowing capacity they can get.

So there's potentially some settings.

You could do around that as opposed to a, you know,

this sort of hard setting that you're looking at in terms

of tax policy.

I also think that we've got to take into consideration

what the owner of property owner occupies think about it.

They're two thirds of the market, right?

So either owning or trying to buy a property through a mortgage,

those people are two thirds of the market, right?

And then you've got a third of the market is roughly renters

or first owned buyers are coming in.

Now I wonder how they feel about the risk to their price

of property.

And I know Grappin have done some modeling

and I know there's been some other modeling done.

And a lot of that modeling looks between sort of two

and eight percent in terms of where values might decrease

off the back of these settings.

Now of course, we don't know the details

so we can't do the precise modeling

and treasuries probably had a go at it.

But I wonder whether, you know, households that are owner occupies

and they'd be happy to sign up to policy that might reduce

their value of their home by two percent.

And if they do, that's around round numbers $20,000.

Five percent is around $50,000.

The value of the house will depreciate

or if it does drop by 10% with these settings,

considering the timing, because that's what we, you know,

we take a long-term view, it'll even itself out.

But in terms of the direct hit that we might experience

and I know Nareda, you were saying that you still think

we might scrape out growth in the next 12 months,

but just certainly subdued.

So single digit.

And in some markets like Melbourne and Sydney,

we now might be challenged with a flat market

in terms of what that looks like.

So it is going to be interesting.

But I think that is a point that everyone needs to say

that you can't look at property and isolation

just for investment because at the end of the day,

investors should be price takers,

not price makers in the property market.

But as I said, that has changed over the last five or so years

with this next generation of, you know, social media

and what's been happening with, you know,

then pouring on this idea that you can make quick riches

in property and that's been really damaging

in terms of the industry perception,

as well as the consumer perception on property,

these greedy property investors as well.

So it is an important story.

Government, if you are listening to this or Treasury,

we'd love to be involved in the consultation

around what you're doing from a policy setting point of view

because these policy settings do matter.

We absolutely need to get the speculators out of the market.

But you desperately need long-term investment

from everyday Australians to supply

the critical rental accommodation that we need in the market.

And if you get the settings wrong,

you will not get that outcome

and you will impact the most vulnerable through higher rents

and potentially through those higher rents

you're also limiting the ability

of first home buyers coming into the market.

So it's going to be interesting to see how this plays out.

I love the debate.

Thanks for coming in and talking that.

And I think, you know, you've had a fly on the wall experience

in today's podcast because it has been, you know,

two titans of the industry,

understanding the mechanics of, you know,

the economic movements associated with that.

And that is what we get to discuss in debate, you know,

in terms of the thought leadership that you're seeing here as well.

So thank you both for coming me.

That's awesome.

And until next week,

oh, just before I go,

couple of bonuses.

There's two breaking news episodes if you want to learn more

about the capital gains tax and negative gearing reforms

and the policy settings that pick up,

which is the property investment,

property investors' Council of Australia.

So we represent the landlords

and on the chair of that association.

So I've done two breaking news episodes

that you can see one in February and one in early March.

Check those out if you want to learn more

and get more educated to be in this debate.

And we are what's going to happen to couple gains

and negative gearing.

But until next week,

remember, knowledge is empowering,

but only if you act on it.

I can.

Hey folks, opt to hear your smart money sidekick

inside more.

Just one quick thing before we sign off.

If you're new to the property catch community,

welcome.

One quick tip to help you get the most value from the show.

Our first 20 episodes cover the foundations

we build on every week.

And yes, listening on one and a half speed

is totally acceptable.

If you're short on time,

download our free binge guide.

It distills those episodes into one easy read

with heaps of visual diagrams.

Alongside free tools inside more,

you're all in one financial home

to help you organize your money

and plan your next best move.

Check out all the links in our show description

and just a quick reminder before you go.

Anything we cover on this podcast

is general in nature.

It's not considered to be financial advice

and we certainly recommend that you seek out

professional advice before making any financial decisions.

Once again, everything mentioned is linked in the show description.

Ready when you are.

Catch you next week.