Fuel prices are surging and Australia's property market is entering a harder phase

So good, so good, so good.

Spring styles are at Nordstrom Rack stores now, and they're up to 60% off.

Stock up and save on Ragnbonne made well.

Vince, all scenes and more of your favorites.

How did I let no rack as a deedus?

Why do we rack for the hottest still?

There's so many good brands.

Join the Nordie Club to unlock exclusive discounts, shop new arrivals first and more.

Plus, buy online and pick up at your favorite rack store for free.

Great brands?

Great prices.

That's why you rack.

It's crunch time at work and you need to bring wings to your work day.

Visit redbull.com slash getting it done and answer a couple questions about your work style

to get a Spotify customized playlist tuned to your productivity.

Plus, score a can of red bull on us while you go from to do to done.

And remember, red bull gives you wings.

Supplies are limited, terms apply, visit the website for more information.

This is a podcast by the Rask group.

It's for educational purposes only.

So please do not make a financial, legal, investment or taxation decision based on solely what

you hear in this show.

Welcome to the Australian Property Podcast.

We're on a mission to be Australia's most trusted property podcast.

I'm Owen Rask, founder of the Rask group.

I'm Pete Worgent, author and buyer's agent.

I'm Amulina Di and I am a buyer's agent.

I'm Chris Bates, ex-financial planner and mortgage broker.

Together, we'll take you through every step of your property journey from first home

buyer to decades of property investing.

A lot of people are going to get burnt over the next five years in property because they

are a bit fearful and they are uncertain.

And the property market isn't just based on investment returns.

You've got humans, you've got families, you've got households in this market.

And in these situations, people just sit on their hands.

Good day.

Welcome to the Australian Property Podcast.

I'm Pete Worgent from Alan Worgent, property buyers.

I'm here with Chris Bates from the Alcove Group mortgage specialist.

Good day.

Chris, how's your week?

Going well, Pete.

It's crazy.

Easter is a week away.

It's absolutely looking forward to a bit of a break, but what a crazy time we're in

at the start of this year, obviously anxiety, you know, coming in with inflation and

AI, then obviously the stuff that's going around and the greater and now the fuel, etc.

So yeah, it's a really interesting time and scary time for pretty much the whole world.

So yeah, just trying to, I guess, talk our clients through it and sort of see how and

speak to a lot of not any existing clients, but clients going through the process and how

are they feeling about it?

And it's different, different people are feeling different ways, I guess.

Yeah.

So it was down at the Chris Williams and live shows from the modern wisdom podcast,

which was brilliant.

Also went down to the Gold Coast last weekend, and the roads are super quiet.

It's really unusual to be able to just coast into Brisbane without getting stuck in traffic

at all.

So obviously when you're driving down the motorway, you can see the price of diesel at

Cabulture was 317.9 cents.

I wouldn't be wanting to fill up a U to the moment.

So you can see what's driving it.

It looks like all around the country, actually, the price of diesel is up to about $3 a

liter.

Unledded, it's probably depends where you are, I suppose, 250.

And I think the thing is Australia is particularly vulnerable to fuel price increases.

If you look around the world, obviously places like France and Italy have seen sort of modest

price increases.

And then other European countries, US fuel prices up maybe 15, 16%, Australia is like

40.

So it hits Australia and New Zealand very quickly when you get this kind of supply shock.

And I guess when you think about what that impacts, it's going to impact transport, air

affairs, freight, it very quickly flows into things like food costs, already seeing people

in the services sector lifting their prices to cover those increases.

And I think when you look at all the products that are actually made using oil and gas,

there's thousands and thousands of them and it just flows through to everything else

in the economy.

I've already seen this week, the AFR reported cost of luxury apartments is up 125,000.

So yeah, it's been a very interesting week.

I think there was inflation figures out this week for February, which are actually a bit

lower than expected, 3.7%, 3.3% core.

But all of that was going to pre-pre the Middle East conflict and we've got some massive

impacts to come.

Yeah, and I think is fuel prices and the fear and consumer sentiment, I think what is

the lowest?

It's 1973 or something ridiculous, right?

And so that's not the same, we're pretty, we're pretty not optimistic over the coming

years.

You know, the uncertainty index was going off the Richter scale last week, et cetera.

And so, you know, obviously rates have been going up, but that has only been targeting

a certain portion of mortgage holders that particularly mortgage holders, you've got big

mortgages, like even if you've got a small mortgage, like you're not that concerned,

it doesn't really impact you that much really.

And so it was only a subset of the market that were getting smashed.

And there's a lot of diminishing values, I feel, on this stuff, is there already getting

smashed?

Can you smash them any further?

Probably not.

And if you give interest rates high, like you just give him more cash to the people who

aren't, sort of suffering right now.

And I think that, you know, that was the trick that been using.

I mean, I wonder if this fuel price sort of increases the sort of the shock to really

stop the broader economy to spend, right?

And stop travel.

And is, you know, is that going to be more deflationary in some sense than actually the

interest rates, Pete, what's your sort of take on that?

I mean, there is an argument for that as well.

Yeah, I mean, that those consumer sentiment figures are always interesting because if

you, I saw Ben Phillips from the ANU, who's always worth reading, showing a chart of

the consumer sentiment over the years, and as you said, it's the lowest in our lifetimes

this week.

But if you actually look at the chart over time, yes, consumer sentiment is up and down,

but does it impact spending all that much?

Yeah, it has an impact, but sometimes not, not in the way you might expect.

I think you're right, though, if you've got an interruption to the fuel supply, let's

get an impact, all kinds of things, trades, agriculture, production.

So, yeah, then in a self will crimp activity.

And just the fact that the roads are empty, you can see that activity is way down.

Who knows?

We might already be in a recession or at least recessionary conditions.

I think as, well, when you think about what it means for the housing market, well, I've

got a couple of, I don't know loads of people, but I know two people have canceled property

developments in the last few weeks.

So we're thinking about doing a development costs quoted have gone through the roof, and

it's just not worth it.

But they would be making a loss to build.

So definitely, they'll be an impact on the construction sector for residential.

Alex Joyner from IFM investors put together a little graphic of the construction inputs

that go into producer prices.

And since 2019, you've got things like copper pipes, up 82%, tiles 82%

windows 71%, there's a list of like 40 products.

And yeah, I mean, how can you get a house built when you've got those kind of price increases?

It's very, very difficult.

I suppose the challenge for the reserve bank is that when you get price increases, it tends

to, the risk is it gets embedded across the economy and everyone starts increasing their

prices.

So obviously, they need to tackle that risk.

I think, I mean, it's a very fast moving environment, and I guess whatever I say now will

probably be out of date by the time this goes to air.

But on Monday morning, it was kind of the peak fear.

There was the three year bond deal was at 4.9%.

People were talking about the cash rate going to five.

It's by Wednesday morning, three year bond deal, 4.6.

Market pricing, two more interest rate hikes and peaking in December before coming down

the other side.

But as I say, this is moving very quickly.

I guess that's the nature of void.

I really know how these things pattern out history shows, sometimes wars go on much longer

than people expect.

But at the moments, anyway, things are a little bit more placid and calm than they were a

few days ago.

Yeah.

I mean, we've been talking about it's the rate expectations, week in, week out.

And you've got to just see how big the flip has been.

But just because it flipped one way doesn't mean it can't also flip the other way.

I feel like getting too certain about what's going to play out is sort of dangerous.

I think when I talk about our sort of clients and the property market's price on participation

is listings.

How many people are actually selling and how many people actually want to buy?

And if I think about our first home buyer clients, I think we've had six buy over the

last week.

And so that's quite a lot.

And so they're willing to push on.

They're willing to secure, not just because, and then they're going beyond sort of worrying

about interest rates.

They're going, yeah, absolutely.

We need to be able to afford it if rates go up.

But we also don't want to rent anymore.

We also want to take advantage of this 5% deposit scheme.

We also, you know, are fearful if we don't act now and we act in six to 12 months, you

know, prices could go up further.

And so, which is greater than the impact of a higher interest rate.

And so I think first time buyers, just due to just how attractive the 5% deposit scheme

is, together with momentum at the bottom end of the market and the cost of build is that

gets factored into the bottom end of the market, right?

You just see this undersupply of new dwellings get built.

And so, you know, if that was going the other way, right, then people would say, yeah,

there's going to be more supply coming.

I don't need to be, you know, as sort of nervous, you know, investors are going to build

a lot of new stocks.

So first, I'm going to continue investors, though, like I do feel that a lot of investment

growth has been over the last few years.

And I do think that, you know, that the markets that they were investing in, particularly

the regions are starting to go up a lot over the past few years.

The bottom end's moved a lot.

So I feel like there's just going to be a natural cooling of that market and maybe just

this extra impact on borrowing capacity, the higher rates, you could see that and you

could see some investors bail.

I think that's the, you know, the ones that were hanging on over the last few years that

would much prefer to have that money in the bank or to put it into their super or to

palp their home loan or do other type of investing and go into commercial.

So I feel like we could see the, you know, 2026 could see a rise of X investors rentals

actually leaving the market.

But for the operators, like they are absolutely do not like any uncertainty.

And because they've got a place to live, they've got security, they've got stability,

like it's, it's March now, like if this goes on for another few weeks into April, post

Easter, like they're going to just potentially pause their plans for the second half of

the year and say, well, I'm just going to sit it out because you either want to sell

in spring or autumn.

And if you're not getting, you know, in June, July, August getting ready for spring, you

sort of leave it too late.

So I wonder if we're also going to see a lot of operators just want to sit out to 2027.

And so this total listing of houses is just going to stay if not even tighter.

I mean, that's my take on the next six months, Pete.

What are you thinking?

I think you're right.

It's definitely a complicated picture.

We missed out on an auction this week in a 4 million price point.

And there was plenty of action there.

But I just anecdotally, anyway, interesting what you say, we've bought a number of townhouses

over the past week.

And it's all investors that are selling.

And I think part of that was actually already baked in.

I think people are selling ahead of potential CGT changes in May.

There's maybe four instances where we bought something where it was an investor selling.

So also just anecdotally, if your agents are coming to us with more off market properties,

with people maybe looking to sell something pretty quickly.

So yeah, I think it's, it might be fairly marginal at the moment, but it would make sense

borrowing capacities probably going to fall as interest rates go up a couple more times.

I think definitely there'll be some people looking to exit, probably investors.

Yeah, I'm just wondering at the macro level about the supply of new housing,

these kind of supply interruptions and pricing increases are not going to make life easy

for the development sector.

So maybe that entry level stuff is still under pressure.

I think often, Nereda Conn has been pointed out at Ray White.

When you get these big disruptions, the first impact is on the rental market.

Not least because a lot of new arrivals to Australia

are people returning from the Middle East tend to be renters.

And we've not got, we've got a few investors selling out of the market at the same time.

We've already got record low rental vacancies.

So the rental market probably comes under a lot of pressure.

Even if some of the sort of price points are actually cooling off,

I just anecdotally, some people are telling me that in the higher price points,

there's a lot less enthusiasm now and prices coming off incidentally in Melbourne a little bit.

Yeah, I mean, there's a two-speed market, right?

There's the Perth, the Brisbane, Adelaide,

you know, where listings are really tight and people are still pushing on,

particularly, upgrades driving that next level of sort of growth.

People who, you know, the house was worth 500 hours worth of mail.

We'd love to live in something at 1.5.

And so there's this, you know, natural, you know,

once you get growth, you get more growth.

But, you know, the Sydney and Melbourne market, particularly what's driven by

the borrowing capacity and interest rates in the housing market is absolutely on the handbrake on,

until certainty comes back.

But what you're also finding is that this is creating pent-up demand.

These people still have the desire or need to go from the apartment to the house.

And so at some point, though, they enter the market and they enter at a market

when there's very low listings.

And you can only, you can see that if you trace back in time like 2019,

like the market was, everyone was sort of freaking out about borrowing capacity and, you know,

and then all of a sudden, three rate cuts are pre-stepped in.

And all of a sudden, you see a lot of pent-up demand wanting to enter on a small number of listings.

And unfortunately, you know, if you wait till that moment,

then you've sort of missed the opportunity.

If you go into early, it feels nervous, it's scary.

But you get a benefit of the uncertainty, you know,

you actually get a benefit for that.

That's often baked into its price.

Particularly if you find a vendor that, you know, is really motivated

because they're really uncertain.

And you find a property that just hasn't got as much competition on as it should.

And I think that's a hard part because you're kind of being greedy when other people

are being fearful, right?

And that's the sort of leap of faith.

If you wait for certainty, you lose that potential benefit.

But it's not to stay going blind, obviously.

But that, to me, is one of the opportunities in 26 for the upgrade.

America leads the world in medicine development.

It matters.

We get new medicines first, nearly three years faster.

Five million Americans go to work because we make medicines here at home.

And not relying on other countries keeps us safe.

But China is racing to overtake us.

Will we let them?

Or will we choose to stay ahead?

When America leads, America cures.

Let's tell Washington to keep us in the lead.

Learn how at AmericaCures.com, paid for by Farmer.

Well, yeah, completely agree.

So let's go through.

We've got like two big new stories of the week to tackle.

And then stick around because at the end,

we'll have some time for listening to Q&A

to go through some of your listening questions,

which we're always keen to do.

So let's go through this first question, then, Chris.

Will there be a property price crash?

I've just been surfing the interwebs this week.

And not surprisingly, there's some pretty gloomy predictions

out there, 10%, 30%, I've seen 50% crash call.

So I just sort of went back to the stats.

And I took a look at the long run housing prices in Australia.

So I think if you look at nominal housing prices,

they're basically doubled since 2014, near enough,

in nominal terms.

So not accounting for inflation.

It's funny, you know, I read a lot of articles

about housing from time to time.

And they seem to oscillate between prices have risen too

first and it's a bubble.

And then we quickly revert back to,

well, actually, housing to crap investment,

you know, it's done really badly.

There was other articles this week about,

well, actually, if you convert it into US dollars,

it's not done that well.

And I think when you actually sort of zoom right out

and look at what housing has done since, say, 1970,

yeah, there's been some, in nominal terms,

there's been some pullbacks, maybe 5% in the biggest downturn,

if that's maybe about seven or something like that.

Sometimes if you account for inflation, though,

the downturns are actually bigger,

because sometimes they go for 12 or 18 months.

But I think what we've been through even since 2014,

the global, well, if you go back to, let's say, 20 years,

we've had the global financial crisis,

banking Royal Commission,

where lending practically stopped for a period of time.

Well, all the banks worked out what was going on

that we had the pandemic locked down

and the international borders were closed.

Then we went through the first is rate hiking cycle

we've ever seen, really.

We went from basically zero to a cash rate of 4.35,

or the modeling said was supposed to crash the market

and actually none of those things has crashed the market,

even though there were periods where things were very challenging.

So I'm just wondering in this environment,

we've seen construction costs absolutely exploding.

We've got a very bad housing shortage,

however that is defined or measured,

which is only going to get worse,

I guess, over the next few years.

And yes, I do think anecdotally anyway

that in some markets with the enthusiasm

for premium property is cold right off.

But then I think just in suburbia,

the entry level property,

we've not really seen any evidence of price declines

at the lower price points, but at all so far.

So what do you think when you read these sort of predictions

of 10, 30, 50% downturns, what do you reckon?

I mean, with this time and time again,

it's the property bears out there, right?

They built obviously followings

around producing content that creates fear

and then they monetize that content through YouTube advertising

or clicks on media, et cetera.

And so absolutely, you're always going to find this.

And then they're always going to flare up

at times where there's uncertainty, right?

Because it's like, it's happening,

the crash has begun.

And I think that's absolutely what's happening right now.

And people are more interested in that content right

because they are a bit fearful and they are uncertain.

And then you get into this sort of self-fulfilling prophecy.

I don't know if you ever got stuck in a conspiracy loop

on YouTube, right?

And I think unfortunately, the property market

isn't just based on investment returns.

You've got humans, you've got families,

you've got households in this market

and it's how they change their behavior.

And unfortunately, the property market

is highly interconnected to human behavior.

And in these situations, people just sit on their hands.

And yes, interest rates are going up

but areas rates are really low.

A lot of people haven't got mortgages.

A lot of people have got small mortgages.

And so I think once you start digging deeper on these,

you've got to say structurally how is this going to happen?

Even unemployment with AI,

I mean, that's a thing that people are saying.

Require released an AI article on the banking sector,

20% of people in the banking sector

potentially might not be needed.

But it's not going to happen overnight.

It's going to be a retraining.

And it's potentially, you won't just see this mass reduction.

And that's if anything we have right now

our unemployment rate's too tight.

That's one of the reasons why we've got inflation.

So yeah, I sort of find them interesting

because you don't want to get into this confirmation bias loop

and just you want to always be trying to find things

that go against your opinion and find stats.

And I think that's what makes you way more independent

and way more of a sense checking what you're doing.

But I do think there's a lot of people

who are going to get burnt over the next five years

in property.

The last property boom was those off the plan sort of sprookers.

They're the ones who got burnt really hard

over that last decade.

Absolutely underperformed the market

and people even lost money over that period dramatically

in the apartment sector.

And I personally think it's going to be

these regional sort of investors

that have gone and pushed up markets

beyond what the owner-occupied market won or afford

because these markets, they're 50%, 60%

driven by investors and their outskirts

of capital cities or regions.

And you creating this glut of investors

and owner-occupies aren't driving those markets anymore.

And I think they're the ones when you come back

in five years, you're going to go, oh,

they're the ones who've been burnt in this sort of change.

Yeah, in every cycle, there was the mining town properties

but one, the literal gold mine for real estate

and then the tide turned.

And it's often the way things that go up really quickly

can come back down pretty quickly as well

because there's so little liquidity.

I think, well, I'll just sort of thinking

through the Doomsday scenario.

So I was interested to see the Reserve Bank of New Zealand

put out a very clear sort of release

on how they think about inflation expectations

and policy when things like this happen.

So there's basically three types of impacts

when you get shortages like this.

There's the first round impact

where the price of oil and gas goes up.

So the price of fuel or the balesad,

then you get the sort of indirect effects

on other goods and services that use oil and gas.

And then there's a sort of second round of impacts

on the economy where people's inflation expectations

as consumers starts going up.

And that's, I guess that's what Reserve Bank

or Central Bank's are really worried about.

And the IBM said that we try to look through

those first two things because they tend to be temporary.

But the oil supply will start flowing again at some point.

Well, they're worried about these inflation expectations.

Now Roy Morgan put out the inflation expectations

in Australia and they've spiked.

As you'd expect, everyone can see prices

around them have gone up.

So that's what we're going to be focused on.

And that's what the RBA will be focused on Australia

is making sure that those expectations

of inflation don't get embedded.

I think the good news in inverted commerce for them

is that already I think there's big impacts on activity.

As you said, I think people are driving less

they're producing less consumer sentiments

at a 57 year low.

The unemployment rate's probably already rising.

So I guess the, I suppose what the RBA will be hoping

is that maybe if they hike interest rates in May

and maybe once more, then that's enough

to call the economy right off.

And then we don't get the inflation expectations embedded.

I suppose the doomsday scenarios

that prices going to some kind of upward spiral

and then they have to hike again and again and again.

But that's not what markets are pricing in the moment anyway.

But as I say, things can change pretty quickly

in this environment.

Yeah, I think if you look at sort of the futures

on all prices, I don't think that's what people believe

that's going to continue forever.

There's absolutely a issue now,

but they don't expect that to be sort of playing out

over the next four or five years, right?

And I think that is, we've got to sort of,

I guess, think about that that way is that,

we're not like fuel prices on diesel.

We're going to be $3.50 for the next five years.

I think that's not what people are expecting.

I mean, on the CPI stuff, Pete,

I mean, that was pretty sort of,

and housing sort of is a big part of that, right?

And rents, et cetera.

So, and obviously fuel was being a positive

because it's been going down.

You worry that this is actually just going to,

the stats are just going to look really bad

and that's going to fourth the RBA to sort of,

you know, hike again multiple times.

Like there's no real easy way to get around this

because, yeah, it's while consumers

might be slowing their behavior

and the stats are just going to show

that rents are still going up, fuel's going up

and inflation's still going up.

Yeah, so the February figures showed,

well, electricity prices are up 37% on the year,

but that's because the rebates have now washed through.

But yeah, when you look at the components

of inflation up to February,

housing accelerated, 7.2%,

so rents are accelerating,

new build costs, so we're already sort of pretty punchy.

And they're only going to get worse as the year goes on.

So that's really getting embedded.

Yeah, and obviously with the price of fuel,

spiking so dramatically over the past few weeks,

I think the headline rate to be inflation

will probably go to 5% or maybe more.

So it's pretty difficult for a central bank

to look through that.

They'll have to hike a couple of times.

But yeah, I think you're right.

Usually in economics, a shortage is followed by a glut

and I think whether it takes weeks or months,

eventually we'll start getting more oil supply through.

Obviously, that's what the US is really focused on.

So yeah, I think if you look at market pricing interest rates

actually peak out around the end of the year

and start coming back down.

But let's say it's difficult environment

to sort of make confident forecast

because you only have to go back to a few months ago

and nobody was talking about this kind of supply shock.

So yeah, we'll have to see how it plays out.

But housing's definitely a big part of the concern.

And that was even before this all kicked off.

And yeah, I think some of the ASX companies

like Rees Group had their releases out

and just immediate increases in prices, 30%, 40%.

Just things just everyday objects,

piping, plumbing, bathroom supplies.

It's pretty difficult to get housing built

in that kind of when you've got those kind of price increases

happening in real time.

So yeah, we actually say that he's quite neatly

into our second story about whether the building

and development sector is gonna start seeing insolvencies

and builders going bust again.

So I think let's have a look at some stats.

So March the HIA said new home sales fell 20%.

Now that was coming off a strong month in February.

But then obviously there's a month's gone on

with the massive increases in materials costs

and all of those things previously mentioned.

Already said, I know a couple of people

who are planning to do developments

over the next year or two.

And they've just said, it's not worth it.

I'll actually lose money if I was to go ahead and build.

I think we've also got coming up 12th of May.

They've got the federal budget

where there's been a lot of talk

about capital gains tax reform.

Now the AFR reported that CGT reform

would reduce housing supply by a further 12%

and increase rents.

And yeah, I think even just in terms of capacity,

a lot of employers are saying that the employment market

is strangely as tight as it's ever been.

It's really hard to get skilled staff

maybe because there's a lot of infrastructure projects

going on, Brisbane's got the Olympics to build.

So yeah, and the stuff they can get

and not always fully up to scratch.

So it's a very difficult environment again for builders.

It was through COVID and now it looks like a second wave.

Yeah, it's funny.

I was not funny to be honest.

So I was taking the kids to Jitzi yesterday

and sort of mate there, runs a building company on the beaches.

And I sort of talk about, you know,

chatting to him a year ago

couldn't basically keep up with demand.

It was just, you know, it's a very good builder.

You know, a lot of people renovating,

a lot of people doing builds, you know.

You know, saying no to jobs basically.

And we talk about where they are now.

They're in the mid sort of price sort of point.

They're not at the sort of 5 mil builds.

And they're sort of the,

they're just really a lack of demand there.

And a lot of people are getting sort of quotes

but just aren't pushing the button, right?

But if you go that next level up

and chat into another mate at football last night

and, you know, he's just the 5 million dollar builds

and he's like, nah, we've got no problems.

You know, we're beating to a whole other drum, right?

We have no issues at this point.

And so I think, you know, we do need a lot of builders.

And so when every time a builder goes insolvent

and, you know, they have to do what happens to their staff,

what happens to they go and get jobs elsewhere?

Does the builder completely leave the industry

or all that expertise?

Do they retire?

And I do think it's a real issue, right?

Like, I think it was Beachwood homes went down.

They were 40 years residential builder.

I think they've got 15,000 homes around sort of

ilawara area.

They, I mean, they shut down just this week,

I think, or last week.

So yeah, I think this is a sort of,

and I think what is it?

20% increase in sort of insolvencies

or something in the last 12 months, if not more.

So yeah, I, that's lost capacity.

At a time when capacity is our major problem,

every time a builder goes under, that's another,

and it's hard to obviously retrain.

And so I think we should be doing everything we can

to protect this and protect our builders

who, you know, have already had major hits over

the last five years from weather to COVID to materials

to, you know, all sorts.

Yeah.

Yeah, a friend of mine was just sort of

musing this morning.

How well, we have this massive push

to send people off to university in a lot of cases

to sort of generic degrees,

but we've got a real shortage of people in the trades.

And of course, now a lot of people are thinking,

well, hang on, you know, I can end in the trades.

I could go and work on one of these big infrastructure

projects and then, you know, big six-figure salaries,

sometimes multiples thereof.

So maybe that comes back into balance over the next few years,

but at the moment anyway, yeah, I mean,

there's nobody working on Aussie building sites

earning a low wage, is there?

So particularly in the skilled trades,

it's a great place to be.

So, yeah, I think it's very difficult.

I wonder about some of these projects

in under construction.

Some of the cost overruns now could be fairly chronic.

So it's going to be quite a lot of pressure on the sector.

And yeah, I think we were just chatting

at the event last night, Andrew and I,

I'm a business partner, Andrew Fried,

and we're just saying, yeah, we've got clients

who've got potential townhouse development

or unit developments, but there's just nothing in it.

There's no profit.

So yes, you could in theory go ahead and build,

but you'd probably end up losing money.

I think the only projects we're seeing

where the feasibility is working is where somebody's got

a penthouse, an ocean view or something,

where you can sell a multi-million dollar unit,

but if you've just got a block in suburbia,

even if the zoning allows for it,

there's very little incentive to build,

potentially even quite risky.

Yeah, absolutely.

So what we're going to see is my mum and dad

sort of smaller time developer, absolutely,

and then the bigger ones, you know,

they're really either doing projects already

and they're getting cost overruns

and it's going to be tied for them.

So they're going to be less, you know,

less appetite to go and take risks.

And I think that markets are just another hit

when they're already feeling the pain.

Should we crack on with these couple of questions, Pete?

Let's do it.

Another time for a couple of listener questions

in the Q&A.

So first question from Contrary Mary and her mum.

I recently bought an apartment with mum.

We're wanting to fix our mortgage

in light of interest rates, rising

and general global factors going on.

What are some of the key things we should consider

when deciding what percentage of our mortgage to fix

and what percentage to leave as variable?

EG, do we do 70, 30, or do we do 60% fix?

Thank you.

It's a good question.

A lot of people wouldn't be aware.

They obviously, a lot of times,

people really grapple with the idea,

should I fix my mortgage rates,

even though I've probably lose out in the long run,

but I get the certainty,

or should I go variable and take the risk?

And, but actually, if you're not sure,

you can actually do take an each way bet and do a split.

So, and I'll say that as somebody who fixed

a mortgage rate in 2006.

And, yeah, as interest rates fell,

continually for the next few years,

or certainly through 2007 to 2009.

I was still paying a sky high mortgage rate.

So, it's easy to get it wrong.

And if you're not sure, you can do a split.

What do you normally advise people at, Chris?

That's a good question.

I mean, you're already sort of part stage one

of the thinking, right?

Do I have to fix it all?

No, like that's the first thing.

And you also stage two,

as you haven't thought I'll fix 10% or 20%

like, what's the point?

Like, really?

Like, you know, if you're gonna fix,

you're gonna have to fix a decent portion.

But, you know, it doesn't mean you need to go 80, 90% fixed.

And so, I think you're sort of numbers

around the right number,

because it's an each way bet.

It's like, you know, you're hedging yourself.

You're saying, well, you know,

if rates do go up higher than expected,

and more I fix the better,

but if I do get it wrong,

and often a lot of people do get it wrong with fixing,

there's times when the chance of getting it wrong

is pretty low.

And even if you do, are you gonna regret it?

If I fly back to 2021,

when you can get two year fixed,

five year fixed rates under 2%.

I mean, we pretty much went through a whole client book

and said, hey, it's pretty enticing.

You do want to go for four or five years.

And they're the ones who really, you know,

really benefited as the rates went from, you know,

2% to 6%, they were stuck on this 2% rate

for 80, 90% of their mortgage.

But there's times when you're already fixing

in a pretty high rate,

and you know, you're already potentially now

as well paying higher fixed rates

on then your variable rate,

and fixed rates compare

are quite different across different banks.

So you do need to make sure you're getting

a really competitive fixed rate in the marketplace

because while variable rates can be quite similar,

fixed rates can be dramatically different bank to bank.

Secondly, if you are gonna fix,

just make sure your variable rates

really get competitive as well,

because once you do locking on a fixed rate,

you can't really often the bank,

you can, but you know,

if the bank won't reprise your variable rate,

because it'll be like, well, I've already got,

I know you're not leaving.

And so make sure you're on a good variable rate,

but also make sure you're getting a really good fixed rate.

And then it's just to, you know,

if you fix 60, 70%,

if you roll, play that out over two, three, four years,

like is it gonna make a huge difference

either way, probably not?

But you just gotta, I guess know that you're making a gamble.

No one knows the right number to fix

because no one knows what's gonna play out

over the next three or four years.

You're pretty close to figuring it out, to be honest.

I mean, the reason a fix is,

often not just the financial decision,

because you want to try to guess where the market's going,

but the reason you're doing it often

is just to protect your family and go,

look, I just know that I can sleep at night

knowing that even if RBA is gonna increase rates,

I don't have to stress 70% of my mortgage is fixed.

And if they cut it, they cut it, I lose,

but I've got that piece of night, you know,

effective to it.

Yeah, good advice.

So, time for one more from what's yours is mine.

Question two, my husband and I have been married

for two years, we're looking to purchase a home.

I have inherited a significant amount of money

from a late parent.

If I'm contributing more to the deposit,

maybe $1 million more,

should this be reflected in the ownership percentage,

all going to plan will still be together in the future.

However, doesn't unequal ownership

have any downsides if we stay together.

So, look, there's a couple of ways

when you buy a property in Australia,

you can either buy as joint tenants

where you effectively own 50, 50 equally.

And if one of you dies,

then the property just passes to the other party.

But if you buy as tenants in common,

you can actually specify the ownership percentage.

And there's no automatic survivorship in that scenario.

So each person, they're a state,

it goes to who they name in the will.

I suppose that, I think,

let's look at it practically,

from a lending perspective,

I don't think it makes a whole lot of difference

because I assume the banks just look at you effectively

as a joint, you know, 50, 50 couple anyway,

and you take into consideration both of your income.

So from a legal perspective,

you know, not that much,

it's still your family home.

I think some of the more practical considerations

and more just emotional,

and some people,

yeah, maybe less keen on the idea of,

well, how come you get this and I get that?

You know, so I think it's,

sometimes it's more of a relationship issue

than a legal one.

Yeah, I think when it comes to your wills,

then the tenants in common,

it gives you more flexibility.

Yeah, but yeah, I think when you're actually looking

at buying the property,

I think you can still agree

how to split the mortgage repayments

or the rates and insurance between you.

So yeah, I mean, it's a tricky one, Chris,

but I would say it's as much a relationship issue

as a legal one.

Yeah, I don't think of a borrowing point of view.

It might make a difference if you're turning it

into an investment property

and you know, the ownership of that could affect

your sort of tax and if you sell one day,

and so yeah, definitely understand through

an accountant sort of,

from a borrowing point of view,

no, it doesn't really matter.

You can go 99, 1 or et cetera.

They'll look at your sort of broad,

total family income to figure out what you can borrow.

It's very common for couples to put one property in one name

or a joint name or one person's other name

and use total serviceability of a family.

I mean, yeah, I mean, the divorce rate is what it is.

People do break up, you know,

if it's a significant amount,

I mean, I'd be getting some sort of legal advice

around that and understanding that in that situation

and sort of jumping ahead of it.

And that would be my only sort of advice.

How that protects you, you know,

that's where a family law sort of specialist can tell

it's not much or a lot or, you know,

that would be my, you know, if you do break up.

But yeah, like ownership,

I wouldn't worry too much about it in terms of a,

you know, a lot of depends what state you're in as well.

The sort of ability to transfer, you know,

properties to different names.

If you'd get break up without stamp duty

and things like that.

So I wouldn't worry too much about that either.

But yeah, I did the company law exams of family laws.

That's more my brother's expertise.

But I guess that nobody wants to talk about separation

in the early stages of a marriage.

But I suppose, you know,

when you do get those situations,

then the court will take into account,

yeah, will take into account your deposit,

but also other contributions

through the life of the relationship.

So yeah, I think good advice from Chris,

if you're not sure, get a family lawyer

just to cast their eyes over it

because I can give you some sort of practical advice on that.

But yeah, nobody wants to go into a marriage

thinking it will end.

But then statistically, yeah, a lot of us do.

Go through some ups and downs along the journey.

So yeah, it's best to sort of think ahead

and be prepared, I guess.

Yeah, absolutely.

And, you know, a bit off doing it now

versus doing it when you get to that point

and the emotions are off the charts.

But yeah, I mean, just generally Peter

means to wrap up the episode.

I think it's extremely a nervy time.

You know, we've got lots of clients who are worried,

you know, just how it's going to play out globally.

But, you know, their personal household finances,

maybe they're okay.

You know, they're in the job that you've got security,

they're on top of their mortgage, they got buffers,

but doesn't mean they're not anxious around the future, right?

But I do think you're going to find

that there is impact in terms of this time

with the time of year it is,

and how long does it go on?

And, you know, I feel like every time you go through a

an uncertain period, it takes a while

for, you know, listings to recover.

Because people take a while to feel confident again.

And if we're already at all time low,

consumer confidence doesn't take a rocket scientist

to sort of figure out that it's going to take a while

for people to want to move around in properties

and make financial decisions.

So a lot of people just sit on their hands

and I think that's what's going to play out

through the end of 2026 is, you know,

particularly those in properties that are good properties,

are just going to say, well, why would I sell?

I'm just happy here, this is my home,

I'm not going to make any moves,

we're just going to sit this one out.

Yeah, I think it's time for a calm head

because things are moving pretty rapidly

and probably by the time we speak next week,

it will all have changed again.

But, yeah, I think the property decisions

tend to be longer term decisions and week to week.

So it's always good to check in

and have a, take a sanguine view of things.

So what have you got planned

for the rest of the week, Chris?

I have no idea what I'm doing this weekend, to be honest.

It's nothing too exciting.

I think just looking forward,

we're going to have Molly Moukin the first week of Easter.

So if we can get fuel, but that's where we're going

to spend some time with my sister and some friends

and yeah, other than that, not much.

What about you?

Very quiet this weekend, there's no football on.

So for Brisbane, so yeah,

just having a bit of a kid's play date

and probably down the beach.

But very quiet.

Like yourself, probably saving fuel for a week or two,

like a lot of Aussies.

So yeah, no point in using it,

yeah, going to Brisbane if we don't have to.

So yeah, thanks for joining.

Everyone, and thanks, Chris, as always, for your insights.

Send in your questions for our listener, Q and A

and look forward to seeing you next time around.

Cheers.

Absolutely, thanks, Pete.

Thanks for tuning in to the Australian Property Podcast.

If you loved the show, why not subscribe

or leave us a review on Apple or Spotify.

And if you want to work with me, Amy, Pete or Chris,

you'll find links in your podcast

player to get in contact with us.

Thank you for listening to this episode

of the Australian Property Podcast.

We're huge advocates of getting the right advice

at the right time from the right people.

That's why it's important to understand

that this podcast episode contained

general financial information only.

It is not designed to be specific or personalized

to your financial, tax or legal situation.

With property, the check sizes are pretty big.

So it's important you get advice from a licensed

and trusted professional before acting on the information

you hear in Rast podcast.

Thanks again for listening.