Hello, and welcome to The Australian's Money Puzzle podcast. I'm James Kirby, the Wealth editor at the Australian. Welcome aboard everybody, It's Tuesday. We're talking property and one of our regular guests on the show with me today, Jared McCabe of Wakelan, will be here in the studio with me. We've got a lot on our plates. We wanted to talk to you, particularly about buying a first home anywhere in the country. If you had a buyer's advocate standing besides you would
not that be nice. Whether you're a first home buyer or any type of buyer, it would be nice. What would they say, especially on first homes, What particular guidance would they give. We had a big response on the shows about land tax, hardly a surprise new tax basically
coming through the system on property around the country. Victoria leading the way on that one, but you noticed in the new Southwest budget last week they came in on land tak as well, and the land tax costs will go up across the state there and also interesting response from a lot of listeners about whether on the basis that the land tax has driven Victoria into something of a slowdown for sure, whether Victoria and Melbourne in particular is a bargain in this market, lots to talk about.
Hello there, Jared James, how you of wake and thank you for coming in I problems?
Thanks for having me again.
Jared, you might know as a buyer's advocate on the street, on the ground and has his own podcast as well and is a very articulate member of the advocate community. You might say so, just on what we've promised. First of all, at the top about if you were buying a first home as opposed to an investment property, there's probably particular things there. First home buyers probably don't use you, do they use advocates very oyd.
No, they do.
Look sometimes they are very cost conscious, which is understandable because budgets are very restrictive and you've got to take into account a lot of things. But we do certainly work with first time by its Sometimes it's with parents wanting to assist and making sure that they're getting guidance to make the right decision. But we do find that
we do work with first times. It's not probably a regular stream, but there are advocates around who that's what they pitch at too, that they will work pretty much solely with first home buyers.
I know they're different than see an investor.
Not necessarily, I mean, well, the buyer is. I mean, the advocate is still looking for the same sorts of things, but the buyer is different and you need to have a different mentality as well. I think from a first home buyers perspective, one of the key things to do is make sure you've got the support mechanisms around you
before you really get too far down the track. And what I mean by that is mortgage brokers or person at the bank, whoever you're dealing with in that space, a solicitor or a conveyancer, to make sure that your contracts can get reviewed in a timely manner. If it's a property that's going to need a building inspection done, make sure you know that they're going so you.
In a position to for the and to be able.
To respond quickly, because depending upon where you are and the type of property that you're looking at auctions, you can quite often have a bit of a timeline that you work can work towards. But with a private sale, things can move very quickly, and if you're not ready to submit an offer, or don't know any terms that you may need to put forward with that offer. Then you can get caught off guard quite quickly.
Does everyone get a building expection these days? It's not no, no, they don't know it's optional. It is.
It's absolutely it's optional.
I mean, and depending on the type of property that you're looking at, we tend to find apartments, some of the oldest style ones. It's worth doing. Sometimes you can find that a building inspection with an apartment can only tell you so much. Yes, and without them being able to take plaster and things off the walls, which not many things are going to allow you to do it. It doesn't it's not necessarily all that beneficial. But if you're looking at a period home, for instance, you'd be mad not to.
Yeah, Or if you knew nothing about building correct, don't like me, But well, buying a house many years ago, we use a building inspectory. He came out to it was one of those old fashioned outside standalone Donnie's the head of timber door, and he came through the roof. He came through the roof and somehow landed on his feet and wasn't turreted, never mentioned anything and complained anything when I think about it, the things that happen when you buy an old police but that's what a lot
of people they used to do. At least a part. We're told that a lot of buyers are shy for a variety of reasons, including the three D shortage of going near period homes. But just so on that issue, then those principles if you like about buying a first holm, if you're an advocate and you are helping someone, are they the same in every stage?
They vary from state to state. I mean, the principles around what.
Will be included and what you should do are the same, but there's different things that will be included at different stages too. So for instance, if you are in Victoria where and you're buying somewhere within the ten to fifteen kilometer rats of the city, there's a good chance that it could well be an auction. Therefore you need to get your building inspection done prior to bidding at that auction.
Whereas if you go to a regional area or you go to perhaps Adelaide, Brisbane, where yes they do auctions, but there's also a larger percentage of private sale, then you may need to you may be able to submit an offer subject to that building and pestings. And there's different things that are included within contracts as well around owners corporation certificates or minutes from previous AGM. So some states require that to be included with the vendor statement.
Others require the buyer to do the research on that side of things themselves.
Okay, favorite discression around it all. Still, that's what you're.
There for, and that's what as you said, that's where you need to do your due diligence so that you know what's required so that when you are ready to go and to start searching seriously, that you're prepared.
We did have, as I mentioned, a lot of people were interested in the shill where we talked about whether Melbourne was a bargain at the moment relative to the other states, and certainly in terms of price increases. It's way behind the piece, isn't it. And you're on the ground here. Is there a sense that there's it's a good time.
To buy in certain Fieler I mean, there's a lot of it depends on who you are as a buyer. There's a lot of negativity around investors at the moment with exactly as you said, the talk of the discussions around land, but there's been a number of other changes. Is also further changes proposed around requirements on landlords as to what they.
Need to do to comply.
Perspective propons, isn't it, And there was an introduction in about two years ago, and they're discussing further around insulation and air conditioning requirements and those.
Sorts of things as well.
So investors in Victoria feel as though it's almost death by a thousand cuts. And then when you look and see that the growth patterns haven't been as strong in the past five to seven years is what they perhaps have been in other states, they're starting to look at well, is this property worth continuing to hold or should I look at alternative investment strategies?
Should I look at investing in other states?
So that's part of the reason why the market hasn't kicked along. But I think that is another reason why when the market does move, Victoria Melbourne particularly is going to look quite good in terms of its value for money.
Yeah. Right, And if you're a first HomeBuyer, obviously you want to buy anyway. Are there just I'm always say of going too little good because you have a nation of models, but quickly either parts of the city you think are rape for the first time buyer.
Well, there's always I mean, first home buyers need to look at what they want to because there'll be lifestyle requirements, and that's I guess where we differentiate between what you're looking for from a personal perspective versus what an investor might look for from the bowth point of view. But the other thing to always keep in mind as a first home buyer is that this is highly unlikely to be a property that will be used as a stepping stone. It's not going most likely not going to be your
forever home. So if you get too caught up in what might and what I might want right now, you may forego other attributes that enable you to take.
Those steps up the ladder.
The problem we are able to going forward, So there's almost sometimes with a first time buyer, it's a good thing to have almost a bit of an investor's mindset, so that you are looking at properties that potentially can build you some equities.
Because the stats would say you're going to live there for five years.
Then something in that sort of range.
Yeah, I mean, ideally from an investor's perspective, you be holding property for ten plus years. But if you can get a property that as a first home buyer, that can build equity because it's got some good growth, but also potentially there's ways that you could add value yourself to build equity too, then that's going to help you to improve your financial position to be able to take steps up that property ladder, which is what first home buyers want to do.
Okay, and either price of talent, I think there's opportunities.
I think the oldest style apartment market's been held back in Melbourne for a long period of time, and that's more than just COVID. That's been an extensive period. So I think there's value to be had in those sorts of areas. I think villa units are a good option too from a first home buyers perspective, some of the middle ring suburbs of Melbourne that have still got really good public transport.
Linkages and you get for the price of an average house, you're getting there is a thing about units enough fashionable right there. You're talking about the single story clinker sixty down the side. Did you get a little garden? You get a garage? You get a home basity.
There's a good link component to those sorts of properties too, as opposed to say apartment where you perhaps don't have that outdoor space, but with the villa unit you've got that little courtyard. Most likely, if you've got the right ones, you've got a lock up garage. You've probably got a nice entry hallway with rooms leading off, so it's got
a small house type field. And then if you're in a good, quiet residential street that's got good access to the local amenities, then if you did choose to upgrade at some point, but you're in a strong enough financial position, then it may well be a good property to retain as an investment and continue to build that way too.
Oh right, yeah, except you could probably can't do much with them.
The developments, there's limitations, but as land values continue to increase, then we're seeing more and more, probably not so much in the middle ring suburbs, more in the inner suburbs where particularly with some of the older style apartments, developers are now coming in because the land value is outstripping
the value of the improvements. So the sum of the parts is actually not as great as the whole, and so the developer comes in and says, well, your unit, your apartment might only be worth five hundred thousand dollars on its own, but if I can get this whole parcel of land apartment to me, if I can get them, what is worth seven to fifty.
Yeah, and so we are.
We've been expecting this. If you speak to my mentor, Richard Wakelan, he's been saying this for thirty plus years, that this is going to happen, and now he's starting to it.
Yeah, and it's coming through.
Tell me that did all the cities have those? It seems to me they do. Do all the cities have those? As Biller units you call them. They were built in the what seventies through eighties.
Sixties, sixties, seventies, nineties.
I mean there's even some that are nineteen thirties down bayside Ellwood sort of way.
You can see some of the.
Binger story six six, as you said, drive it down the middle.
Mostly it's sixties and seventies, some in the fifties, but mostly sixties and seventies.
Okay, yeah, so's.
They can be as small as two or three to as big as eighteen to twenty, depending upon the size of the parcel of plane.
It's really interesting you say that, and I've always thought the same teen but they are.
Not cool, they're enough.
It's hard to move from here. Yeah, it's hard to move from you know, you're a fashionable part of town. You might be in in the middle of Sydney or Melbourne in some fashionable suburb and then you should tell your friends we've bought a villa units. But I think you're onto something there. Okay, we want to take a short break and we'll be back in a moment. Hello, Welcome back to the Money Puzzle podcast. I'm James Kirby talking to Jared McCabe, regular.
On the show.
We're talking property around the nation, investment first home buyers, guidance from a buyer's advocate. There for you, the greatly underestimated appeal financially of the villa unit. Yes that's six units with with the six bins outside you pass on Monday morning. Not fashionable. But but we're talking land value smack in the middle of the major cities and definitely undervalued. And you get a lot for you, as you're saying getting bank for your book, you actually get this, get
a lot. Yeah, very interesting. Now I wanted to ask you one other thing before we go to this. We've got some great questions, but just a quick one. Mortgage broker has become very powerful. Yes, they actually the majority of mortgages in Australia are now sold through mortgage brokers, though though the bank's process and the bank's mortgages, the majority are so by mortgage brokers. They grew from nothing once upon a time John Simon's AUSSI home runs and
they took over the market. Basically, it's suit of the banks. Something big happening this year. Come my Bank, the biggest bank in the market, the nation's biggest lender, has a plan to pull it back in house and kind of cut the brokers out. What difference would it make if the brokers started to thin out?
Look, I think from a boyer's perspective, or if you're doing refinancing that sort of thing, people will always be financially conscious.
So if there's a wise and means to.
Be able to save money, there are going to be that's going to be a big consideration. But I think the other thing that probably hasn't necessarily been discussed quite as much is that the personal contact that you can
get from mortgage broker, I think is really important. And the personal attention, whereas you can and you will more often than not be dealing with the same person every time be able to sit down with you and so you know you'll as a personal connection, they know your circumstances, whereas quite often with the bank, you'll pick up the phone and it'll be a different person that you'll speak to every time. So it depends on what you're prioritizing to as a client as to whether or not that
financial side of things is absolutely key. And perhaps for a first time buy that might be really important, but for others where the personal contact the understanding is vital, and I'd probably put myself into that category. I would rather have that connection then have to deal with a different person to explain my circumstances every time.
Yeah, and if anyone dould enough to remember, that's what it used to be like to ring every bank. You want to find out what three banks mortgagris were? Are you to ring the three of them? And as Jared says, that different person every time. Ohky, I just thought i'd bring up with you or I have some really good questions I wanted to try and di buye them up.
So what I'm gonna do is the first two are on land tax because just to cover offer listeners in case you've missed this, in Victoria, they pulled the threshold for paying land tax down to fifty from three hundred. So everyone is in the net. Everyone's actually getting their bills these few weeks, and they are aghast, of course, because they've never got this bill before out of the blue.
But it's been a way for the Victoria state government, which is in deep debt, to find money in the market, and there is in parallel with that they have then catch up on social housing, which they have to do, but in this case, unfortunately, they seem to have mapped the sort of price of it straight onto property industry alone. Controversial move. Victorian prices have been the softest in the
nation since they did it. Victorian investors as a percentage of buyers in Victoria are only thirty forty percent in other states. But interestingly, last week in the new South Wales budget they copied Victoria and they have not increased the land taxter or whatever, but they've changed just like Victoria did. They They've moved. They're playing games with the thresholds where they won't index them, so more people will
be caught every year. People are aware of this now that there's basically whether it's coordinated or not doesn't matter. The states are driving more taxes and revenues out of the property sector to the two big ones already unleashed, and we'd see what Queensland has to do. So here's the first question from Sally. I'm a long time listening to the show. Thank you for the podcast on New South Wales tax changes. There was a fair bit of
discussion how this would effect investors. I'd like to hear your view on how it might affect other groups, such as first home buyers. The land tax threshold, by the way, in Sydney is a million dollars in Victoria's fifty thousands. I mean that's extraordinary, isn't it. Anyway, she says, given the threasholders a million dollars one point seven five to I would think this would drive up people's interest choice
properties with low land values. Well, yes, Sally, I know this is advice of course, any information, yes, but in reality.
For investors too.
So for first it's not going to be payable for those that are using the properties their principal place of residents.
Yeah.
Yeah, but what it may do is that you may find that investors start to look at properties where the land component is worth below that get to avoid this. So what it may do and what may be worth considering if you're in a fortunate enough position to be able to afford that bracket, is that as an unoccupier, you may be getting good value for money by looking at properties that have got land values in excess of the threshold because there's less competition in.
That run, because people are just trying to steer under it.
So we saw that in reverse a number of years ago in around the first home buyas grant when it was focused on around six hundred thousand dollars and at one stage there it was a flat. Anything in excess of six hundred thousand dollars, the grant was void. Yeah, below six hundred thousand there was discounts.
So there was great competition and that up to six under.
As soon as the price went over six hundred thousand, they would just drop out. And I remember going to an auction a number of years ago for an apartment in North Carlton, and I had an investor client looking at that property and we had a budget of six hundred and ten thousand as a limit, and I paid six hundred and one and it was I watched all of these first time buys fight as soon as it hit the six hundred.
They all just stopped still. I put six o one in an that was it.
And so there's elements of similarity with that, obviously for differing reasons, and it's not a hard and fast limit, particularly with the indexation, but that's something that you may start to see in New South Wales. That could be something that plays out given that the low threshold in Victoria.
Everyone it doesn't matter, but you could play around the Sydney one, which is one million and tventy five thousand dollars for what it's worth before an investor has to pay antax on the property. It's interesting. It just shows you that if you pick up on these changes in the market, if you know that, you can really have an advantage that you were talking about. If you're at an auction and you know that nobody wants to pay more than six hundred thousands, you get it for six
hundred and one. Really good story. It really kind of captures what we're talking about. Okay, Pete. Having listened to your podcast on NANTAX, I am struck by how complex and inefficient the system is. Apart from sporting competitions. Can you think of a single good reason why we still have state governments? Ah, that's one for another show, Piete.
I was amazed. It was only in the COVID crisis that I realized the extent and the depth of potential power of the states really and how they did everything differently and really ignoring each other. It was just extraordinary. So I suppose that was it at its worst in some ways. But then there are other very strong reasons four states. It's a big country after all. All I can say on property investment is that you should know your state and know how things work. We're talking about
land tax today. There's no land tax in the Northern Territory.
So I think the important thing from Pea's perspective is if you're looking at other taxes and other other states, Like you said, James, that you probably need to have a good financial planner in your corner there so that they know and your accountant who knows your tax circumstances
and knows your financial position. So that they can say to you, well, look you've already got one property in this state, and this is if we buy another one, this is what's going to happen to your land tax because it'll go from single holding the multiple holding and how will that impact. So perhaps rather than going there, we could go to this state and look at an option that way as well. So I think the financial planner comes really much into play.
Assuming that they know all that. Yeah, one other thing that struck me there was Queensland in a crazy breeve stunt about two years ago. The same government, mind you that's there now try to tax even in other states. If you recall, yes, I do remember that that was extraordinary. They tried to bring in a tax whereby if you were in Melbourne and see Queensland and you had a property in Melbourne a property in Queensland, they were accounting
the Melbourne property in it. They were literally raiding another state to get money. They didn't get going. It got shot down. But there is an election in Queensland and in a few weeks and we'll see what they plan to do, because they'll do something and we knew that way is it's done something. Victoria's done something. So keep your eyes open folks on that one. And that's the land tax issue. I hope we've covered that properly for you. It really is an issue. Everyone thought that negative gearing
would change, or capit against that would change. Nothing happened and then sort of like ambush from another corner, ifture come from a different direction, come from the States. Okay, we'd be back in a moment with some really good questions. Hello, welcome back to The Australian's Money Puzzle podcast. I'm James Kirby, Well, editor at The Australian, talking to Jared McKay, a buyer's advocate from the Wakeland Group. Okay, Matthew says, is the
Gold Coast included in Brisbane property market? Everyone talks Sidney, Melbourne and Brisbane, just like we were there, Jared, they never mentioned the Gold Coast. All my colleagues in Sydney, they've two hours away and still live in Sydney. Is Brisbane actually Southeast Queensland? Well, I know when I talk to the researchers, they always talk about Southeast Queensland as a separate unit, not Brisbane. When they say things are really happening or whatever, in Southeast Queensland.
They mean ex Brisbane and Brisbane. I mean my understanding too.
With Gold Coasters, the population growth theories as big as and there was talk at once they job believed that it was going to become one of the biggest cities in the history outside of the three that we've just mentioned. It's in terms of grouping together, it's definitely its own entity.
It is. Yeah, Southeast Queensland, absolutely, and a lot of action there from property market after Perth. It's probably the hottest zone in the country right now and maybe even a bit more realistic by that, I mean there is great price action in Perth, but stocks very tightly held. Yes, while you have a.
Much deeper diverse market around Southeast write a supply increasing support.
Yeah exactly. Yeah, you have that complexity of the market and probably not as volatile in the long period of time because you've got the Perth market is invariably linked with the success or otherwise of the mining and resources group. Okay, Charles says, longtime listener, second time questioner. Okay, I'm fifty four. I will paraphrase this with a mortgage on a property I'm hoping to downsize and pay off the mortgage and
retire at sixty. Would you suggest not advice with an inherited lonsum I reduced the mortgage immediately or pay down the amount into my superree Again Okay, here's the question put universally, should you pay down the mortgage or add to your Super. I have a colleague Cleono doubt who did a peace one in the Weekend Australian just last weekend. And it's funny. We can do this piece every year and it not only does it always get great readership, but it often has a different answer depending on how
things are going. And just now it's amazing. But technically, mathematically really no matter what way you cut it, because of the tax advantages of Super, if you had a choice between in most cases most of the time, if you're the choice between putting a dollar into Super or a dollar against your mortgage, even at these rates, the dollar into Super is more beneficial mathematically than the dollar
into the mortgage. But I don't know. I know that's the answer, but personally I'm not convinced by it because I find it really hard to put a proper value on their home and owning the home. The whole system is tilted towards you owning the home. The whole tax system is tilted towards the home owner, not just a CGT, but pension access and everything. With an investor, I'm not it might be slightly different. And in this case, I'm thinking that Charles is an investor. It doesn't actually spell
that out. But if you were an investor, then I suppose it would you would be weighing it up slightly differently.
Depends on your tax position and things then too.
It does.
So yeah, I think that one's a it's very much a personal circumstance talk question. I think it probably needs a little bit more of an intimate understanding.
Yes, sorry, Charles, we are ducking that one. And that's fair enough because it's two. I'm sorry, but it's it's you know, it really is a highly personalized situation. So I tried to make it broader because we can't. I give advice, of course, but take a look at Cleono Daud's piece last Saturday in the Weekend Australian where she measured the two things against each other to see the figures, which are of course invariably put together forest Place superannuation groups.
I guess what they find that you're better off putting your money into super The thing we don't know is how much is the property really worth long term, and it can be very hard to beat that in our tax system. Yes. Yeah, so just before we go, tell us about the mood on the ground for investors and for us tom buyers. People thought interest rates we're going to come down.
They haven't come down.
Is that method? Is that cool things a bit?
Probably hasn't changed things too much at this stage. It's the market from a Victorian perspective, is pretty well just ticking along at present. It tends to go into a bit of a hibernation through the school holiday July period. There's typically not as much activity around, and then once we move into August and September things will start to build.
So that'll be a really interesting time just to see whether or not how the supply levels go, because typically if you see that supply lift, if the demand isn't there to meet it, then we can see the clearance rates start to come off and prices can come back a little bit. Yes, and the expectation probably at the start of this year, when all the talk that we're going to say some interest right cuts in the back half of the year that that's where we might start
to see a little bit of improvement. Yeah, I think that's probably still twelve rolling months off. Okay, as in from a market movement perspective, because the interest right cuts when I do eventually come won't necessarily lead to a market jump straight a Whid'll take.
It to percolate through, just like on the other side when you raise interest chates it takes a long time to Yeah, does it actually come through? Yeah, yeah, it builds. Okay, terrific, Well, thank you very much. Great to have you in the studio again.
Thanks for having me.
That was Jared McCabe of the Weightlan Group is a buyer's advocate and the terrific as usual friend of the show. You can catch him here regularly on the Money Puzzle. Thank you for all the emails, Keep them coming. I'd love to see some more on all subjects the Money Puzzle at the Australian dot com dot au. Talk to you soon. Four