Welcome to the Finance Show with Joe . He's Joe . I'm just some schmo and we have a very special guest today , Damien .
So I've got to bring out a little bit of my Western Sydney cuss right now , because we've got a very , very special guest on here . What's ?
up , cuss how you doing Good .
Cuss yourself . Longest tenured member of it's Simple . Currently . Welcome to the show . Pleasure to be here , boys . How are we going Waiting to have you on here for a long time ? Just tell the audience of our 15 listeners just exactly how you came around to becoming a member of it's Simple . It's a pretty funny story .
So it all happened last year , in about , I want to say , june , when it was good old Michael Mankin's wedding . I met Joey that night and the first thing he said to me is nice to meet you . When are you joining ? It's Simple , and I was like , oh , okay , and I was like , oh okay , look man , I'm going to Europe .
But when I get back , like let's have a serious conversation about it , came back , spoke to Joey and Michael again and I was off to the races in October . And here we are a year later .
So what made you so interested in becoming a broker ? I ?
always wanted to find a job where , at the forefront of everything , it's helping people . So I did dive into a couple other industries . I looked at recruitment and things like that . Didn't really work out but I found myself in the bank .
So I was at Westpac Corporate Lending for about two years , saw the ins and outs of the industry , how it all worked for about two years . Saw the ins and outs of the industry , how it all worked , how us as people in the bank can actually benefit people .
But then I was introduced to the idea of brokering and loans and mortgages and it kind of infused both of the two into one . So obviously , making good money obviously is always a forefront , because making good money means more possibilities in life and your opportunities open up and secondly , being able to help people .
Giving that phone call to a customer when you tell them the loan has settled is one of the best feelings in the world . So I just want to keep cranking that and see how many more we can settle and where we can take it .
So take us through the brokering process . Take us through getting somebody conditionally approved , getting somebody formally approved , getting somebody to actually settle . There's an attraction to that . I want to say there's a dopamine effect when each level is surpassed . Would you agree with me ?
It's a long journey . So , like , obviously , a lot of brokers like to say it's a customer journey . Right , you get them through the front door first .
These are people that you might not ever have spoken to before , they might not be friends or family , right , they're just an individual that has come to you because they have a goal in mind and they want to get something done . And then that's when the real process starts . You start getting the docs . The docs might take a while .
You start massaging that deal a bit . You've got to let them know that , look , you can be comfortable with me , we're going to get this done for you . There's a lot of hurdles across the way . Sometimes it might not be the client , it's actually the lender asking for specific things .
There's a lot of back and forth , sometimes depending on who we're going to and submitting the deal with . Sometimes there's frustrations and stuff . But at the end of it , just at that tunnel , you can see the glimmer of a little bit of light and you know you're almost there . So now you're at a conditional . So now you're going back to the customer again .
Hey , I need this , that , et cetera . Why do you need this ? Why do you need that ? We need it for the lender . We're almost there . Then you get the unconditional and it's like , okay , cool , we're waiting on a valuation . Now Valuation comes in strong .
That's when you get a bit excited , because now all you're waiting for is that settlement date and then from there it's just a green light Through your experience , you've been exposed to a lot of debt .
And when I say you've been exposed to a lot of debt , when you're at Westpac Corporate specifically , you were dealing with clients like Amazon , coles , woolworths Group . What levels of debt were you seeing with those groups ?
We're seeing facilities of over 100 mil , usually minimum per customer . Coles will draw down a loan for a facility 300 mil one day . It's paid out the next day . So they're only leasing it for a day , right ? Amazon had rotating facilities per month where we're lending out this amount , x amount of money .
The amounts of interest you were seeing on the loan were insane , right ? So the same amount of interest that a customer is paying over the lifetime of 30 years , these major corporations are paying within days . The playing field is so different . Right , by coming into the home loan industry , people are dealing with loans over the course of 30 years , right ?
So it's like figuring out how to how to manage that debt and with saying debt , this is good debt , right ? Yeah , so when you get a home home loan , you're creating a long-term future for yourself and you also . You can use that debt to leverage , cash out equity , build your portfolio . Right ?
Everyone wants freedom at the end of the day , and if you do it correctly , you leverage the debt correctly and you're making enough money to service a loan , there's chances that you might end up with five to 10 properties within a very short span .
The property market in Australia . We've talked about this at length , but it always seems to be growing , regardless of the small lulls that Victoria is currently going through . Even New South Wales . New South Wales is dipping at the moment in quite a few areas , but what I've noticed is debt is necessary . You could do everything on your own .
You're not going to grow at the rate that you want to , but when you can utilize debt and you can utilize it effectively , that is when you can truly start to see possibility in your life . So I want to go back to what you said about Kohl's and Amazon .
You know they would get $100 million facility , $300 million facility , and pay it off in a couple of days , and then you're also able to see how businesses are able to grow and maintain their staff , their bonuses , their you know , the high corporate structure . Am I correct in saying ?
that , yeah , correct . So sometimes you look at the numbers , right . For example , I want to bring up calls , and this is all public information .
Um , they had a statistic put out there that , on average , per australian calls were making about $56 profit per Australian , and I think it was 2022 , they had a reported revenue of about $40.7 billion Jesus In revenue in a year .
So you can imagine how much money they're making right and how much is in circulation , even at the corporate level , you could see how debts are good in order to be able to grow .
That kind of leads us to our topic of the day . You know the areas with the highest amount of debt in Australia , and this is household debt . I'm not talking about corporate debt corporates , all that kind of stuff . These are specifically the suburbs .
So in the eastern suburbs we have Double Bay coming in first with 3.7 mil , bellevue Hill coming in second with 3.6 mil , darling Point with 3.5 , dover Heights with 3.3 mil and then Rose Bay with 2.5 mil . Now what do we notice about all of those areas Wealthy as suburbs ? They are the highest net worth areas in Australia . Yeah , you know , per capita .
It's just known . That's where all the doctors live , that's where all the judges live , okay .
We talk about this . I've said it time and time again you drive through Double .
Bay . It's where all the judges live . Okay , we talk about this . I've said it time and time again . You drive through Double Bay , bellevue Hill , all those areas , there's not a single speed camera in sight . And the specific reason for that , you know , there's certain people that are sitting in certain places that just kind of make sure you know what .
We're not going to put a speed camera or a safety camera here , we're going to make sure it's over an edge cliff . And if you drive through edge cliff , there's actually two . I don't know if you guys know that , but there's two safety cameras , one after the other .
But the second you get to that I think it's called Mages Bay Road , yep correct as soon as you get there .
there's nothing there . They do a credit check when you get in .
Then we got the northern parts of Sydneyney , so palm beach 3.4 mil , mossman 3.2 mil , kiribilli 2.7 mil , c4 2.1 mil , and then manly is 2.1 manly shocks me , not like shocks me , shocks me , I'm just shocked it's in the top five .
I know manly is expensive , but damn manly almost feels like a different country .
But right so far away I think you can get to melbourne quicker than you can get to manly right .
Alison and I did a staycation in Manly and I could see Centrepoint from the hotel . I could see it but I did not feel like I was in Sydney .
I didn't see a single person I knew okay , that is a weird feeling for a guy that's got so many cousins , so many friends you know , so many clients Not one person I knew I saw over the four days I was in Manly . It was the strangest feel and it feels very European .
Manly . Yeah , it does , yeah , definitely it does .
Then we've got the Western suburbs Hunters Hill , 2.4 mil , enfield , 1.9 mil , marsfield , marsfield , marsfield , marsfield , 1.2 mil , dromoyne is 1.2 mil . And then Haberfield is $1 million . And lastly , let's round out with South Sydney . South Sydney , san Susie , $1 million , cronulla , $900k . Oatley , $880,000 . Kyle Bay $850,000 . And then Caring Bar $820,000 .
I'm surprised the South has far less debt than the rest of Sydney .
Basically , the South is disconnected to the rest of Sydney , so you don't have motorways to get in and out of the south like you do with western Sydney . Western Sydney , you've got the M4 , you've got the M8 , you've got so many different ways you can get anywhere from western Sydney in . Sydney yeah , to Sydney CBD , but the southern part of Sydney .
Like I live in the southern part of Sydney , I live in Illawarra . Thankfully I live closer to Patstow way to get to the CBD . But people that live in Cronulla if you live in Cronulla , getting out of Cronulla takes 25 minutes . They're um nasty suburbs . Once you live there you don't essentially leave there .
Yeah , I always thought the eastern suburbs were similar to the south and like it was a little island . I know it's like literally geographically closer , but I it's so like there's no public transport or anything and when you're in the city it just feels like you want public transport at at least for me , because I hate driving but the eastern suburbs you can .
at night you can get an Uber 15 minutes during the CBD .
That's true .
During the day you can't . But like you know my in-laws , they love Coogee . They always ask beg me and Alison , let's go to Coogee , let's go to Coogee . Yeah , getting there during the is hell on earth . But at night , you know , when I want to leave Coogee , it actually takes me five minutes to get out of Coogee .
Cronulla is different Cronulla no matter what , just to get out of the suburb Cronulla . It might be 20 minutes during the day because there's so much traffic , but even at night it's still 10 minutes , 10 , 15 minutes . There's so many lights before you even hit carrying bar .
Is there only like in two ways out , or something it's ?
essentially like that . One thing I want to dial back to is out of these 20 suburbs , what have we noticed most ? They are affluent . They are the most affluent suburbs in Sydney .
Maybe we're missing Castle Hill here , or one of those Like the hills and stuff .
Yeah , but there's 20 suburbs right here that you look at it and you think to yourself this is where the wealthiest actually live , this is where you have all your doctors , this is where you have physicians Cronulla right now , 400 square meter block . Okay , Knockdown , rebuild two mil .
I'm not even talking about a brand new house , I'm talking about a knockdown rebuild For 400 square meters . You're not able to do a development site at 400 square meters . You can't put a duplex on it . This is just for somebody to knock down , build their dream home and go play golf at the private golf course down there . And that's what these suburbs bring .
And it brings me to my point . The most amount of debt exists in the most affluent suburbs , and that's because they have good debt . Previously , Damien , we were talking about using good debt . What have these individuals done ? They've paired up with an accountant to be able to create structures . Would you agree or disagree ?
with me . They're the ones that have access to your financials , right , so they're always able to see how you can reduce the amount of tax you're paying . Usually , an accountant will tell you hey , you're paying X amount of tax . Let's get you an investment property because you have the income there to source it .
I have a mortgage broker that can help you with getting finance . Let's build your portfolio a little bit , as we can see , like a third of the market , it's 800K minimum mortgage in Australia . Now , right , and with that also coming is obviously there were rates rising for a long time , I believe I truly believe in about February March they should be going down .
There's a lot of people that maxed out , and what we're seeing as well in terms of statistics is that one in seven people that have a mortgage will actually look to sell their property by February March if the rates don't go down , because they actually can't afford to live anymore .
Yeah , I saw that . It's like they need repayments reduced by like 500 bucks , or that's it they're selling it's crazy .
Definitely they're selling . It's crazy . It's crazy to me that the US has just had two rate drops and we held , we held , so they dropped 0.5 and then another 0.25 . That's correct . They're trying to re-stimulate their market .
Doesn't America's property market work completely different to ours , though ?
It's very different over there . So they've got the population , yeah , but they've got a lot of flyover states . So , yeah , but they've got a lot of flyover states . So a city like Chicago , that's expensive , right , it's expensive in the CBD , like all CBDs , yeah , okay .
But when you go to the outer suburbs , everything stays flat I'm not saying stays flat , you know , for a year and then spikes . It's consistently staying flat . And they invest in property for the rental return . So I had a cousin turn to me and he goes to me oh so , like you've got an investment property ? I go yeah , yeah , I do . This is back in 2018 .
And he goes oh so , what are your repayments ? I told him my repayments and then he goes oh , what's what's your rental ? And he goes how are you making money ? And I go what do you mean ? And he goes and I'm like cool , like that's $3,600 a year . And he's like but like , how do you guys make money ?
I don't understand it and I go well , the way that we make money is on the capital gain . We don't make money on the rental . What's the rental yield in Sydney ? 2% , 3? , 2% , 3 , yeah , 3% if we're lucky . But over there their yield is anywhere between 8 to 10 .
And that's just because property , like in general , is cheaper there , like on average .
I think the average house price back in 2020 was $415,000 .
That's insane . I know what was that like $800-ish in Aussie dollars .
No , $415,000 would be $670,000 Australian dollars . Okay , where are you going to get $600,000 ? What are you going to buy in Sydney for $670,000 ?
No , you're not , Unless it's an apartment in some random suburb that's not close to the CBD at all , or right away . No , Oran Park is even more valued than that you want to talk about Oran Park , all right , the apartments there go for a minimum of 900K .
Really Damn the properties there go for about 1.3 mil .
It's the fastest growing LGA in Australia , I'm pretty sure .
Well done in that Camden way yeah .
Orrin .
Park specifically , and then I think we're talking . What's the one that starts with G ? Right next to it , Gregory Hills .
Gregory Hills as well . My cousin bought a place there .
Yeah , so that area there is all growing and it's all booming because of the new airport . But then you've got areas like Westmead where I've got clients that bought an apartment for 900K and now it's valued at 800 . Yeah , so there's certain parts of Sydney that perform well in the apartment market and then there's certain parts that don't .
But even those apartments , the expectation is because we have a low supply of development approval . They're going to expect to go up after the interest rates drop and the reason is more people are going to have borrowing capacity Right now everyone . Why is Perth growing like crazy ? Because that's all people in Australia can afford .
Exactly , house and land package over there last year was 500K , now you're lucky to go 800 . Yeah , very , very different market . It's spiked up like crazy , but it doesn't always perform like that . The only reason why people are still buying there is because it's like oh okay , I could still make my money work for me over there In Sydney , in Victoria .
Victoria brought in all those investor laws . It's very , very different . Once the borrowing capacity comes back , those properties are going to spike in value . And to go back to our original point when it comes to America and stuff , they've got New York , san Francisco and parts of Los Angeles .
I'm not going to say all of Los Angeles , parts of Los Angeles that perform that well . The rest of Los Angeles , nobody's buying a place in Compton for a million dollars . Nobody's going to South Central LA and expecting to pay that much . No , like there are certain parts of Los Angeles that don't perform well .
San Fran looks like Melbourne , genuinely same climate as Melbourne . Parts of Seattle because Seattle has a good climate as well 5% of the time , but it's got a good city and a good infrastructure that performs really well . Chicago , same thing , where there's major city hubs , they perform well , but it doesn't perform well like Sydney does .
Even New York doesn't climb as fast as Sydney does . Go try and buy a place in Barangaroo . I could guarantee you per square foot I'm not saying per square metre per square foot it is worth more than the best places in Manhattan . I know we segued massively , massively from that that's fascinating Okay . We segued massively from our original point .
You know of the debt levels in America and why they've dropped their interest rates they need to re-stimulate the market and we need to re-stimulate the market in Australia . So I do want to ask you , damien , do you think they're going to drop the interest rates in February ? Yeah , I think they will , and why do you ?
think they didn't drop it in November . So my honest opinion around that is we're heading into the festive period of the year , people already know how much they need in terms of expenditure . To drop that now in the eyes of the RBA would be a bad thing , because then people can't really adjust to their spendings right .
They don't know how much they need to put aside for something like that . Also , heading into the new year australia day there's a lot of different holidays coming up for australia .
Yeah , february is where we start to see nothing really and it's just before easter , right so everyone gets back into the groove of things people coming back to sydney or wherever they live , they might go on holidays over the shutdown period and things like that .
That's why I believe that RBA will hold it till February , but before Easter comes they need to drop it , because that way more people will enter the market , and this is a positive and negative thing , depending on what side of the scale you're on . If you're a first home buyer and you have the funds ready to go , I'd definitely recommend trying to buy now .
Yeah , general advice , general advice for sure . Sure , but the problem is when all these um existing investors get their borrowing capacity up again , they're going to want to pull the trigger and buy another property , yeah , which again prices out the young generation in australia from buying a property , right .
So again they get delayed on how they go about getting an investment property because prices will climb . As rates go go down , property prices go up . That's the trade-off and people need to understand that too .
More people enter the market , more people want to buy . You remember 2020 , 2021 ? The boom that was then because interest rates were up 2% . We were seeing apartments , not houses apartments . One day they'll go for $450 . A week later they'll go for $500 . A week after that they'll go for $520 . I still remember .
I still remember these one-bedroom apartments in Cogger . That was the trend . Now try and get one for under 600 . You can't , but it's extremely interesting . On that note , damien , what do you want to ?
finish with Pretty open-ended question , the way I look at it , to any Australians out there who are struggling with rates at the moment . But to any Australians out there who are struggling with rates at the moment , keep in mind that they are going to go down .
Although as villainous as they may seem , the RBA something needs to give and I honestly believe it will go down in February and March . This country is one of the greatest places on earth in terms of investing in property and it's almost a guarantee that you're going to get a return on whatever you put in .
I also think that they won't . Why they didn't drop interest rates recently is because the whole reason is to tackle inflation . If you ease the rates right before Christmas , that's consumer spending going right up , that's inflation jumping right up .
I'm going to disagree .
You're the economist , not me .
I always feel like Sydney , oh no , sydney . I've always feel like Australia's late to the party . They're so cautious and they're so just inefficient with their decision-making . You know when the rates were climbing and you know even that extra 0.10, . I still remember when the rates like just they put them up 0.10 and it was unnecessary .
The inflation rates we're seeing now are from the effect of three months ago . Okay , like people are used to it , and I have a feeling that come February the inflation rate is going to be so low that it's not going to be . Oh , should we drop interest rates ? It's going to be .
We need to because the following people are employed over Christmas casual employees , retail . We're going to lose so much this Christmas because people just don't have the money to spend . I'm pretty sure the average savings in Australia dipped from like $10,000 to a few hundred dollars .
Yeah , no , people are burning through all their savings . That's why they're saying they're going to sell up in February if rates don't drop , because they've been using their savings to keep the house .
I think their rates should have dropped in November . People are used to not spending . I know that for a fact . I see it every day . We have to ask clients their expenses . We know , we know , we see it , we see it on their bank statements , we see it all . Are you spending money ? No , absolutely not .
When was the last ?
time you went out for a drink , Mark .
It was a birthday so two weeks ago , okay before that Before that ? No , it was ages ago , yeah .
It was a wedding .
Again , it was only like large events .
It's not just because Damien , when was the last time you went out for a drink and don't include the work dinner the other night . Mate , I can't even remember so you're going to have hospitality not operating at the level that they should be . They employ a lot of people you're going to have retailers not operating at the level that they should be .
You're going to see pain this December and come February if they don't drop the interest rates . Oh my god , I'm going to riot .
I'm just going to be a one man riot at the front of the at the front of the .
RBA down here in Martin Place . And , on that note , this has been the Finance Show with Joe . That's Sam Schmo , that's Damien , I'm Joseph Dalwood , and if you need any help with your finance , whether you're looking to refinance or purchase a home , you can contact us at wwwitsimplecomau .