All right , folks , welcome back to the Property Couch podcast , and we've got a very exciting guest for you . Today . We are talking to none other than Narita Konisbee , and she is going to talk about the decision that will stop the nation next week with the rate call , ben . But what else are we going to cover ?
Yes , we'll hang around to the end of the show , Bryce , because in what's making property news , I am going to tell you what people have told us the return on investment . What are they looking to get out of property ? What are the main drivers of that return on investment ? So hang around to the end of the show for that . What are they ?
looking to get out of property . I can't wait to hear let's rip into the show .
Welcome to the Property Couch where , each week , you get to listen to two of Australia's leading property and money experts Bryce Holdaway , co-host of Location Location , location Australia on FoxTel's Lifestyle Channel and co-host of Escape from the City on the ABC .
And Ben Kingsley , chair of Property Investors Council of Australia and a back-to-back winner of the Property Investment Advisor of the Year Award , and both are partners of the multi-award-winning Empower Wealth , co-creators of Moor , the Freelife Style Design App , as well as best-selling authors of the Armchair Guide to Property Investing and Make Money Simple Again .
Stay tuned as they bring you the Insiders Guide to Property Finance and Money Management .
Alright , folks , welcome back to the Property Couch podcast and , ben , welcome back to you . Mate , take a seat on the couch .
It's always great to see you , it's always great to be here , it's always great to wax lyric with my bestie . Wax lyric when it comes to property , money and finance .
It is one of the joys of our life . Let's be honest . We've been doing this now for eight years and today we get to do it with a good friend of ours , a very good friend of the Property Couch , as a very special guest .
Today we are chatting to Narada , so we're going to get to that shortly , but before we do , ben , we probably got to just nod to the fact that there is a few four-legged animals running around a track just near your house on Tuesday , which is a good .
I'm happy to be away because lots of people hang around , so I sort of get out the way . Let them do their thing .
And apparently it's , apparently it stops the nation , ben . I think that's , I think that's the trueness of it . I used to love being over in Perth , ben , when I was in the accounting firm .
I remember I was out of uni , went up to work for a chartered accounting firm in West Perth and I worked for a boss who'd been around for a long time in the game , very well known in West Perth , and he would get a big table at the front of the office there , ben , and there was lobster and there was just crayfish and there was fish and it was amazing .
So me , as a graduate accountant , I thought it was epic . And you know , the beautiful part about it is because the three hour time difference that was lunch for us . We have the television outside , we have the big long table and then not a lot of work we could get done in the afternoon .
Ben , well , you'd be amazed . I mean , obviously I lived in Sydney for 10 years as well , right and so . Same thing Now . I was working in tourism and we're going out for lunch for the Melbourne Cup and that's it . That's sort of you just write the rest of the lunch , left the rest of the day off . It's like a long lunch .
So I know everyone turns it into a corporate event around the world , around Australia . I should say so it's no . It is the race that literally stops the business . It's the commerce that's going on around the country there is no progress happening on that day .
And even then . We want to encourage our staff over in Perth not to type any emails once you finish that long lunch and to type emails under the influence of a couple of a couple of burpees . So there you go , folks . If you love the race , hook in . If you , like some of us who don't love horse racing , enjoy the public holiday in Victoria , ben so .
But let's get on to today's show . We've got a wonderful guest . Can't wait to chat with Nerida . But before we get there , I've been . When I was in my twenties I came across a teacher . His name was Wayne Dyer . Are you familiar with Wayne Dyer ?
Yeah , it does ring a bell yeah .
You wrote a book called erroneous zones , which makes you think that you've got to take it home in a brown paper bag . But it's not a Rogerna zones , it's erroneous zones , and it was this one of my first introductions into personal development and some of the some of the things that we need to unpack in their mind .
And he was a really I love him as a teacher at another book called I'll I'll believe it when I see it . And it's the other way around . You know , I'll see that . What did you used to say ? I'll believe that when I see it ? Well , no , it's . I'll see that when I believe it . So it was the first time I had that reframe .
Well , I came across a little . He's now since , sadly , past been , but I came across a little short . That I love and it was a wonderful metaphor . I'm going to read it out to our audience today just to remind us on a couple of things about , about personal development , and I think this captures it really well .
So you talked about if you take an orange and you squeeze it as hard as you can squeeze it and ask yourself what , what will come out ? And of course , what comes out when you squeeze an orange , it's , it's orange juice . So and you're kind of thinking , okay , fair enough for us , nothing groundbreaking yet .
But no matter how hard or how many times you squeeze it , apple juice will never come out . And the question is why ? And it's when you squeeze an orange as hard as you can squeeze it . So the reason it's orange is when you squeeze it's because that's what's inside , right ?
So now if you extend that metaphor and someone squeezes you , been , that is , someone says something about you that you don't like , or someone behaves towards you in a way that you find offensive , and out of you comes anger , hatred , bitterness , tension , fear , anxiety , stress , and immediately you say the reason that comes out of me is because of how he said
what he said , or it's what she said , or because what they did . But the truth is this the reality is what comes out is what's inside , and if you don't like what's inside , you can change it . Oh , how powerful is that on the old orange Ben , what comes out is orange juice , and then you , then you sort of extend that to us as human beings .
The same thing when we're poked and provoked and whatever , whatever comes out of us as what was inside and we get the chance to change that . I love that . What do you think of that ?
Oh , it's brilliant , I mean it just . You know , an orange can only produce oranges . Guess what humans we can change . We can produce what's inside and move it around , and that's a mindset shift and that's powerful .
So that thought I want to share with that community . I think it's a nice little thought for people as they go into the weekend and as we roll into a conversation that you and I are very excited to have . It was insightful . We covered a fair bit of ground , as we always do with our good friend of the property couch .
Let's cut to the interview you and I recently had with Nerida Connorsby . All right , ben , we've got a very special guest today . I am excited to return in guest . We are chatting with Nerida Connorsby . She is Ray White's chief economist and one of Australia's leading property experts .
She provides market commentary to a wide range of Australian media outlets across digital print , television and radio . She's also the chair of the construction forecasting council and is a member of the Australian Taxation Office foreign investment review foreign investment stakeholder group . She also provides updates on property market conditions to major government bodies .
She's more than 20 years of property research experience throughout Asia Pacific and has held senior positions within commercial agencies and major consulting firms during this time . Her experience covers residential and commercial property from both the investor and owner occupiers perspective . Welcome back to the property couch , nerida .
Thank you for having me . It's so good to be back .
We always love having you . Our audience loves having you too , Nerida , which is why I reached out and said can you come and chat to us ? The last time you spoke to us was episode 358 . That was on the 30th of September last year . It feels like forever . We normally ask you all of our guests their money back story , but we did that in that last episode .
If anyone wants to go to the seven minute and 36 second mark of that episode , they will learn a couple of things . Your dad was a saver and always loved finding ways to save money . You bought property early on and prioritized that . Your parents paid off their home early . The recession wasn't something that affected them as much as most .
Your focus is on creating money and increasing income rather than your dad's saving habits . Folks , go back and check that out . It's a great episode and there's a really good insights into Nerida's backstory . Couldn't help but notice when I went onto your LinkedIn profile , Nerida , that there was a little twig that I hadn't noticed before .
I don't know if it was there before , but that professional experience around the chair of the construction forecasting council and the Australian Taxation Officers Foreign Investment Stakeholder Group I wonder if we could kick it off . You're on a big panel . You chair a big panel of economists and industry leaders on that forecasting council .
What role does that council play in the marketplace ? So I'll listen to this , Can I ?
understand . Yes , the construction forecasting council does report to the construction industry . So the Australian Construction Industry Forum is the group and there are members across Australia that belong to that , so these forecasts inform them . It informs them around what we expect to happen in the construction industry .
Obviously , it has been a very challenging industry over the last couple of years . We have seen costs rise rapidly , we have seen a lot of challenges with labour , there's been a lot of construction companies go under , so it has been more topical . I've been with the group for quite some time about five years now .
I recently became the chair , but it is obviously a very topical issue at the moment and something that we are looking at every six months . We do a really deep dive into what's happening in the industry .
So , nerida , what can you tell us about ? I mean , I suspect , as you say , very topical . I suspect supply is one of the highest solutions for supply into market . Then obviously , the other one , as you were saying , is supply chain shocks and costs and all of those things . Can you give us a little insight in terms of when you are talking about those things ?
What sort of things are you looking for ? Are you looking to then position that to lobby government for easier or less regulation , more rezoning , or is it more really down into the nuts and bolts of actually building construction productivity in that space and the challenges there ?
Yeah , it is a lot to really assist the industry , so a lot around what they can expect , particularly by sector . So we do a lot of sectoral analysis so we tend to think I think the three of us look a lot at residential , so that is obviously a big one . But construction does cut across commercial property and that's been a big component .
It also covers infrastructure . So infrastructure has been another sector of the economy that has taken up a lot of resources . When it comes to construction , the big issue with construction at the moment is , of course , that we did see that surge in pricing and that construction costs increased by an excess of 20% . Last year was the highest increase ever recorded .
Some places , like Brisbane , saw a 30% increase . It is starting to get resolved now . So one of the big challenges was that a lot of the supply chains are blocked . They've become unblocked . Building materials have become a lot cheaper . A lot of projects that were stuck because they couldn't get building materials have started to move on a lot quicker .
But we still have a lot of labour problems and this is an issue really for housing supply , because on one hand we need more labour , but that labour needs housing to build the homes , so it needs housing .
So there's this kind of double we can't cut before the war . Yeah , yeah .
Yeah , there's a double problem here . So , yeah , there's some of the issues . We also look at a lot of the macro influences . Obviously , interest rates is such a big impact , problems between rate rises at the moment and construction . We do have a housing accord that promises 1.2 million new homes over the next five years .
At the same time , high interest rates are preventing construction taking place . So there's a lot of challenges at the moment in the industry , but also more broadly , in the economy .
What about the Australian Taxation Office Investment Stakeholder Group ? I had a look at the list . Our friend here , Ben , is also on the same list . But let's be honest Do you get to actually make any meaningful impact with such a large government organisation ?
I guess Ben , and I hope so , I think so . You know , I don't know I mean it's good . I mean a lot of government bodies do have industry engagement groups and they do regularly call on them to provide feedback and so it does work well . We know that groups like the Reserve Bank do have . They do regularly go out there and interview industry .
It does give them a really good on the ground knowledge of what's happening . The Australian Tax Offices this is their , their , their , I guess , program that they run . They do have a lot of people from across the industry trying to understand what's happening with foreign investment Because , on one hand , they do track it .
They track it in terms of the foreign investment review board that people do need to put in an application if they're looking to buy something . But they also need to understand what impact that's having on the industry and some of the changes , also alerting us of some of the changes that they're planning to put forward .
And it's really important too , because I mean , sometimes you say let's go and talk to your politician and your local government member , but it just gets lost .
I mean these are , you know , the people you really want to be talking to , are the ATO , are Treasury , you know , and and you know sort of those people who really are at the cold face , and it's great that they're reaching out to try and get the voice of the industry . And what's happening ?
I mean , one of the biggest things we've been sort of advocating for and I'm sure Narita , you know , in listening to you know some of the feedback coming from Pica is that if the investor is not interested in investing back to the point like if they can't get access to fine hands , and if they're not interested because the returns aren't there , because now there's
two higher taxes and so forth , then you can make all the tweaks you want , but if you're not getting the investor on the to the dance floor , then ultimately you're not going to have the supply that you need to move things forward .
So I think it's helpful for us to be able to at least share that knowledge and then you just hope that the ATO and the Treasury and the RBA and all that are also talking in their circle of influence as well , trying to get that message there , because in some cases it does get stopped by the political person because unless it's a vote in it , they're not
necessarily interested .
Yeah , that's spot on . I agree with that .
Well , obviously led with a bit of a tongue in cheek reflection , but I think it's good that we've got such clear and pragmatic thinkers like the tools that are actually part of that group , so that then some , I guess , cold face common sense analysis gets to be part of what is , like you know , a large government body and there's a real cross section of people
that are involved in as members of that group . So thank you for your contribution . If we pivot to the economy now , near it up next week , we've got the race that stopped . We're in the shadows of the race that stops the nation , but it's probably the call that stops the nation .
Given that we've just had some pauses on interest rates , what is your thoughts around the inflation uncertainty and the results in September ? And it seems to be that commentators are fluctuating quite wildly around whether they think it will remain on hold or whether there'll be an increase in interest rates .
So a couple of things there for you to digest , but largely around the inflation uncertainty and what that might do for interest rates .
Yeah , you know it is such a hard one to pick . I mean , at the moment , media is saying definitely , you know , 100% an increase . The banks , the bank economists , are saying 100% increase and they're all across it the market split .
So you know , I think that's quite interesting , if you have a look at what's happening there , that it's still sitting at a sort of 50-50 chance . Me personally , I've got a Sydney size mortgage so I'm like no , no right .
I've had enough .
So you know , I guess the optimist in me is like no , keep them on hold . It's also bad for housing , you know . We know what's happening at the moment . Ben mentioned investors before . I mean , it's really . We need more investors . We've got a rental crisis . We need more rental properties , we need more construction .
These rate rises are preventing that , and so it is prolonging a lot of the problems that we're seeing at the moment in terms of rental supply and even housing supply . So for housing , it's a definite , definitely bad news if they increase . And then if you have a look at what is increasing at the moment with inflation , it probably won't really do much anyway .
I mean , if you have a look at fuel prices , they're up because of Saudi Arabia and Russia restricting production . They , neither of those countries , will care if we increase rates . They're not going to change that .
We also know that the Hamas Israel conflict is another one that's increasing fuel prices Again , anything Australia does with interest rates will make no difference . And then fuel price , electricity prices is another one , and there's a lot of things that are driving those up . But again , interest rate rises are going to have a fairly minimal impact .
So I think it does . Personally , I think it is such bad news for housing and will prolong what we're seeing in terms of the problems and , at the same time , might really solve any other issue . So I don't think it's necessary and I think we just have to wait for this high inflation to come down .
But at the same time , you know that we can't sit there and have high inflation over a prolonged period of time and then , if it does start to take off again , that is particularly problematic . So I think that's really what the RBA are grappling with at the moment .
So is the heart saying no , rate rise , but the head is saying maybe , probably .
I think , yeah , definitely . I think I'm kind of with the market keeps hovering kind of 50 , 60 , 40 , both ways . Sometimes it's 50 , 50 . I mean , that's kind of how I feel , but reading a lot of the commentary it suggests that it'll probably be a rate rise .
Yeah , Obviously , Michelle Bullock , in her first public address , talked about , you know , this material increase versus the challenge of . We know that the transmission of interest rate changes takes time . So what does a material increase look like ? Is the $64,000 question in terms of her statement ?
So she really did leave a sketching in terms of you know what she thinks .
Yeah , and that's the thing I mean no one really knows what the decision is because it hasn't been made yet . So it's you know it is up to the board next week as to what they decide to do . So , yeah , I think you know all of us in property we know how sensitive property is to interest rate rises .
So I think you know we'll all be watching really closely .
Your feedback sort of reinforces how blunt an instrument it is , because you've got one end of the spectrum who's really impacted by it ? Who are new to market in the property They've got no surplus cash .
And then at the other end you've got people who have got no mortgages they want you know Ben and I were talking about yesterday that they wanted interest rates to go to 10% , because it means they're getting good returns on their investments and they've got plenty of cash to spend .
So I guess it's and there is that sort of lag and we've had a really massive increase . So it kind of feels like it's affecting the wrong end of the market , because you want to be stimulating that lower end of the market and you want to be trying to taper in some of the spending at the later end of the life cycle market .
So I guess how do we get rid of the nimbyism , if you like , around spending ? Because you've got to stop spending at government level , business level and household level , but everyone's going well not in my backyard , though .
Everyone else needs to stop their spending , but not ours and that becomes that self-fulfilling challenge that gives us all this food for commentary now .
Yeah , it was interesting . But we had a meeting last week with the construction forecasting council and we were talking about monetary policy and even to the extent that it seems to be less effective than it has been in the past , and I think a lot of it comes down to what you're saying .
Is that , yeah , absolutely , if you've got a mortgage at the moment or you're a renter , this is really hurting and really causing a lot of problems . But if you fully own your own home , you maybe you've got a couple of investment properties that you fully own . Rents have gone up , so you know that's making that investment more profitable .
But then also , if you've got just money in a term deposit at the moment , you're doing pretty well . So it does benefit parts of the economy .
I mean , even to the extent when we have a look at businesses at the moment , the banks are super profitable at the moment because they do very well in high interest rate environments because the gap between what they're paying getting paid on a mortgage versus what they pay out on deposits is so large . So their banks are doing really well .
But then if you have a little construction companies , they're doing it really tough . So it's a blunt instrument . It's slow , it may be less effective and also , really , you know they're coming back to what's driving inflation at the moment it will probably have , you know , quite a minimal impact on many aspects of inflation . A really good example is New Zealand .
So New Zealand I'm there next week but they went very hard and very fast on on interest rates and forced the economy into recession and , at the same time , their inflation rate sitting at the same level as ours .
So you know , it's that , I think , shows that you know this is , in some ways , we just have to kind of wait this out , and but you know , at the same time , we can't do nothing . So I guess that's you know , that's the real challenge at the moment is to how to solve the inflation problem .
A narrative in that forecasting group and Commissioner was talking about how much of the conversation led to the . You know , obviously we had over 90 billion dollars worth of stimulus . Now what a lot of people don't realize is when that government money it goes into the system .
It doesn't just disappear , so that's landed in businesses balance sheets and and you know , their cash balances , and also for households . So to your point before about you know that we've gone 400 basis points and it really , you know , like we are seeing slow down but nothing like we would expect when we're so aggressive in that .
How much to that do you put towards ? And was the conversation led around that that we just had record levels of saving and now there was a obviously a lot of revenge spending that was going on , revenge travel that went on .
Is that the reason why that you know this blunt instrument is still , you know , not doing as enough around the spending because people have still got the money ?
yeah , that's what I mean . We have a look at savings rates through the , through the pandemic , that one that was huge . We'd never seen people save so much money and you know something to spend it on and people getting a lot of stimulus .
Yesterday I was at a capital markets forum the property council were running it and they had a speaker from the US talking about about stimulus and what it did to the economy and he said it was like a snake following a goat that , you know it just was this huge amount of money and it's taking a bit of time for that goat to move through the snake .
And and the US , you know the US was even more sorry . I mean , if you have a look at the amount of stimulus they got , you know those cash handouts and it was , you know everyone got some bit of money and it was . It was huge in terms of what the stimulus was .
There , australia , we didn't , we weren't as aggressive in terms of what was provided , but it's a similar problem that people saved a lot .
They spent a lot once they came out and you know , and a lot of what we saw in terms of , you know , really shut rises in travel costs and furniture and all of that was really driven by the fact that we just had a lot of cash and we were spending it quite quickly well you like 4.9% GDP , read in the US for September quarter .
I mean that's crazy . I mean obviously they had a very soft quarter before , but it was like whoa , that's that is . You know they've got record low unemployment and they are . You know , they've had the summer of a lifetime , haven't they over there in terms of that , that Q3 result yeah , absolutely it's .
Yeah , it's booming . I mean it's just a . Even our unemployment rate , you know the fact that it just hasn't really moved much and it's still wet 50 year lows is is really testament to how strong the economy still is . And you know the Reserve Bank has said they're on the on it what they refer to as a narrow path .
They are wanting to keep unemployment low at the same time as taming inflation . But the reality is that if they do want to tame inflation , there has to be pain and there has to be unemployment increases . And you know , I think that's that's a . You know the hard truth that we have to swallow that there's inflation's bad and to fix it .
There are a lot of , you know , negative impacts that happen through the economy .
Hey , you see the size , all of those inputs , all of the discussion points we've had to date around the economy and as you look forward , if you're at the fork in the road and you are the same pessimist or an optimist , what do you ? If you look down the pessimism lane , what ?
What do you think are the key risks or headwinds that we need to be thinking about in the next sort of 12 months as an economy ?
Look , I suppose how . I mean housing is the one that I look very closely at and the housing supply issue is so critical . I mean , you know there's been estimates that we're probably 1.2 million homes that is what they're they're proposing over the next five years . We've never built that many homes .
I think the maximum we've ever built is around 1.05 million and that was in that you know , that boom period between 2015 and 2020 , when all those apartments were built . So you know there's no way we can hit that . And at the same time , you know we need , we need , we need more employees , we need more population . So it's it's a difficult balancing .
I mean , you know , I suppose on one hand , you know you look at the problems Australia is going through and it's pretty much global , that you know . It's a pretty similar problem that we're seeing everywhere and we're doing pretty well .
You know I guess we haven't gone into recession like Germany and New Zealand , as I mentioned earlier , but at the same time , there is a kind of adjustment that's taking place . So the big , the big problem is around housing supply affordability . I mean Australia's that housing supply has , over a long period of time , has led to very unaffordable housing .
So the young people trying to get in . It's . It's really tough . And then I guess also as , as you mentioned before , is is around , you know what ? What part of the market is this hitting and what ? What demographics is this hitting ? And it is young people and it's people that aren't earning a lot of money and that you know . I think that's also concerning .
So I think all of those things do start to lead to unrest and people feeling very unsatisfied about their lives and and in some cases you know we have seen in New Zealand that's been quite interesting that their rental crisis is so much worse than ours and they've gone into a session and you know they people start to move very far to the right politically in
in in those sorts of situations . So you know , there are some kind of implications that that lead to , you know , quite different political situations as a result .
I think it's a really valid point . I mean , you saw , yes , you know , obviously the Labor government lose power in New Zealand in recent national elections , moving towards a liberal nationalist type party over there .
That sort of right setting and , and I think you know , one of the things that we've been blessed with is really , you know , 30 plus years of really strong economic growth , sort of leading into a pandemic , and we actually came through the pandemic pretty well in terms of economically .
And obviously that stimulus that's going through one of the things that Labor will have in their , in their favor , is a huge surplus . You know , with so much employment , they're going to be obviously raking in quite strong sort of tax receipts and so that's going to be the pillar in which they will be saying how well they're managing the economy to reduce debt .
But on the other hand , you know the liberals are going to argue higher interest rates under Labor and they can't run an economy because we're in a GDP per capita recession at the moment .
So it is going to be interesting to your point the narrator in terms of at the flavor of conversation , in terms of who's going to who's going to offer the general public the most incentive to vote for them , and I'm not even sure that's right either . I think we need to make some tough decisions about spending and also make some really important reforms around .
You know being able to release land supply and you know get on with the job of building . You know the big Australia that we know we need .
Yeah , it's correct .
So what if we , if we pivot to the results from the property market , the ? You know , corelogic released their results and that's up 0.9% for October . And so there's there's still that systematic increase in pricing , but listings are increasing . So you've got this underpinning of demand that are that is taking up that increase in listings . But what do you ?
What do you see happening to property prices ? Because it feels like there's this just constant circular reference , if we have lower employment , like it just feels like everything just requires one thing to change , but that one thing isn't changing .
So therefore it just continues to be this momentum building snowball that hopefully isn't running down the mountain , but you know what's gonna break first .
Yeah , so we don't use a company called Navel for our pricing and and they're showing , perth is the strongest market at the moment . So Perth pricing's up nearly 10% over the past 12 months . If you have a look nationally , we are getting close to a $1 million median in by Capital City . A lot of it .
But you know , everywhere is growing and oh , not everywhere . Obviously we , you know , I guess one area of weakness is holiday home markets , that they're not growing .
But you know , we can see that everywhere is growing and and it does reflect that the fact that population is increasing , we haven't got enough homes and even though cost of finance is a lot higher , there's , you know , there's just this strong crash of demand for housing . So so , yeah , at the moment it does look like this price growth will continue . Again .
Coming back to the conference , so as at yesterday , there was an estimate that prices in replacement costs for housing in Australia , australia was estimated . There , you know almost all homes are priced sorry , 95% of homes are priced under replacement cost and and you know that's because construction costs have increased so much .
So in terms of the potential for increases in terms of replacement cost , it does look like that price growth will continue and , and you know , it is good news in many ways because it does make households far more confident . It builds wealth .
You know , we know there's a lot of positives around price growth , but also there's a lot of challenges for younger people that are looking to get into the market and all the geopolitical unrest just makes Australia's superpower get even more of a superpower in the fact that we are an attractive place to to live for a whole host of reasons .
So if there wasn't already enough pressure on our immigration , you know our immigration policy and our housing policy being out of alignment that that that will only get further pressure , given some of the things that people are seeing around .
You know , if you were to , if you were to , just get a , an atlas of the world and just riff off two or three main , you know politically stable , economically stable , great lifestyle , have got their own food bowl . You know there's , the people have sovereignty and have a great quality of life . Australia is is right up there .
So I think that it that only all as bad as that humanitarian challenge is , it only further exacerbates the Australian superpower , which then further feeds into what we've just been , what we've just been talking about .
You've been quoted recently in a couple of blogs that I was reading , narada and you've got some ideas around supply for the medium to longer term , because that's clearly the challenge here . You talk about building up , not out , which makes sense , and you talk about more density in our middle suburbs to sort of solve that missing middle challenge .
But you're up against Nimbus and what is in some of the positions that you hold and the influence that you have and the conversations you're having with the cross-section of people in the property and construction industry . Is there potential for that to happen in the short term or is that more something that we just got to consider ?
That'll take a bit longer and it'll be a medium-term play .
Yeah , I mean density has to happen . I mean if we want to hit 1.2 million homes over a five-year time period , even if we want to hit two , you know , one million homes over the next five years , we have to get density . And density doesn't have to be bad . I think people look at it and think , oh , I don't want to 20-story high-rise next to me .
It can mean townhouses , it can mean smaller blocks of units . There's a lot of challenges with not embracing density . I guess the first one is we are locking out younger generations from suburbs in which they want to live and suburbs that have high amenities .
So if you have a look at a lot of the middle suburbs around Australia , the homes are big , they're on big blocks . Often now we do have a lot of older people living in them . So you do have a lot of four or five bedroom homes with one or two people living in them . So there's kind of efficiency problems .
So that's a you know we are locking out younger generations . But the other problem too and I think anyone with older parents would be fully aware of this is that we do have a lot of older people living in big homes and it's , you know , part of why they're not moving from their big homes are financial reasons .
There's tax reasons , there's , you know , obviously , emotional reasons . You know they've been in the homes for a long time . But the other one is that it's just hard to find suitable housing . So , again , in those middle suburbs , if you're living in a , you know , a really I mean , you know , a suburb like Templestowe is a really good example .
There are a lot of older people living in in Templestowe in massive homes , but at the same time there's just not a lot of good places to downsize in Templestowe and people want to stay in the suburb . They want to , you know , move to something smaller and something as nice as what they're living in .
But , you know , less maintenance , there's just nothing available , so , or not much available . So you know , I think that's the other problem with not embracing density is that across a range of age groups , we're not really providing the type of housing that people want to live in .
The other challenge , too , is that people want to live alone and you know we saw this through COVID , this incredible rise in single person households , and a lot of it had to do with higher wealth and people spread out more and rented their , you know , moved out of share homes and the like , and that's a long-term trend .
That's happening too is that we are seeing an increase in people living alone . It's partly aging , partly choice , and we don't have suitable homes for them either .
So we do need to move beyond density being too bad , too bath , you know , aimed at people on , you know starting out in life or on relatively lower incomes , and start embracing better quality homes that people can live in long-term and , you know , feel really comfortable in that environment over a long period of time .
And Erid do we know that ? You know , I really do think a lot of people think about that aging in place , and I think you gave some excellent examples of what that aging in place looks like , where that challenge of I don't want to move because there's no other suitable accommodation , so I'll stay where we are .
But as a consequence of that , you know you report also around 13 million spare bedrooms that are also available . So now you know I've advocated for , you know , a short-term solution here , and that is around potentially letting out bedrooms . You know , looking at different ways in which we can support people in the community . But the reason why I don't do that ?
Because if you go and talk to your tax account and you'll say , don't do that because it's going to impact your principal place of residence , concession , right .
So what the government needs to do is look at ways in sort of saying , okay , maybe for the next 24 months , anyone who does rent out a bedroom to the value of X or whatever , we won't consider that as income producing and so that won't impact your principal place of residence .
And all of a sudden you do have platforms that do allow for this type of , you know , fulfillment pretty quickly , and then you might see some great you know examples of you know people who may have lost their partner , our old age people who are then , you know , basically have someone to talk to in the home or whatever that looks like .
So there can be some . Obviously , some upside there's always risk of safety and security , but , you know , doing it sensibly .
But it's just another sort of I suppose opportunity for governments to sort of look at to say , well , it's going to take us years to build the number of properties that we need to get equilibrium back in terms of supply and demand across the country . So what are we doing in the short term ?
You know , and these days we've still got still a lot of red tape in terms of rezoning and regulation . So I think you make a really strong point in those blogs around looking at different ways in which you know we need to move quickly in that area .
Yeah , that's a good idea . I mean , I think you're right . Like , taxation is quick , you know , and if people are sitting on spare bedrooms and they've strapped for cash , then or we don't even just want more cash it is a quick way to do it .
I think this is also one of the things that was really missing in the federal budget last year that , you know , it was recognised that there's a rental crisis and not enough rental properties , so they incentivise build to rent and you know , we know , build to rent is growing .
But it's tiny , you know it's tiny in terms of the proportion of what it can provide . If we had provided something like HomeBuilder to investors for new properties , you know I think that would have just taken off super quick . I mean , you know it would have started to see a lot more development taking place .
And really trying to mobilise , you know it's hard to mobilise capital on a large scale because trying to mobilise companies , you know they've got processes they have to go through . But we have seen in the past we saw it with HomeBuilder that give people , you know , a bit of cash or 20 , 30 grand incentive to build a new home .
They'll go and build it , you know , and do that across a large number of people and you can get it done quite quickly . Only , I mean the only state that really I mean I could be wrong here , but my understanding is the only state that has incentivised investors in that way is Western Australia , and you know every other state is almost .
You always feel like they're trying to punish investors , which you know . Why would you do that in a rental shortage environment when this group is providing all the rental properties ?
Or don't get me started , Nerri .
Yeah , it's a very annoying situation . I mean things like rental caps . I'm like , oh , what do you ? You know , in what investment is the government capping your payment ? I mean , it's not like if you earn a . Bhp share return . They're saying , well , we're going to take half of that , because you're not allowed to earn that .
But to your point about mobilising , to your point about mobilising tens of billions of dollars of investment , as you say , it's very hard to do that in small businesses . They've got to go through you know hurdle you're talking about . You know , hundreds of thousands of investors who want to invest , but they want to have a surety of that investment .
So there's tens of billions of dollars sitting on the sidelines here , for two reasons . One is we're not sure about what the governments , both that state and federal level , are going to do about hitting us with new taxes or new legislation or whatever . But on the other side of it , we've also got this challenge around .
You know the APRA story in terms of the throttling on borrowing . Now we sort of know why they're doing that because it is inflationary , and so you know they don't want to be making it . They don't want to stimulate the economy when we're trying to slow it down as well .
So , yeah , it's fascinating in terms of trying to get that balance right , but I can tell you right now that if you continue to disincentivise investors , they're going to put their money somewhere else .
Yeah , they have options , they do that housing efficiency really comes down to a couple of things , though , doesn't it ? In terms of the bedrooms , because you've got what Ben said about the tax regime . So if you were able to fix that .
But then you've just got a culture where people are not as welcoming of bringing people into their space as , like you know , I remember when I went to Paris before kids with my wife and we stayed in a two bedroom apartment with someone , and she was in one bedroom , we were in the other and we shared this really small space and it was so normal , whereas over
here that is definitely not the norm from a cultural basis . So you need to overcome a little bit of that as well . I mean , although demographers and marketers would be excited because they work out who the extraverts are , because the rooms that they allow to get the people who like and the introverts will not do that .
But that's kind of a second part of the challenge , isn't it ? It's a cultural thing where we're so used to having these big , big mansions on our own , whereas it would take a little bit of cultural realignment to get people to actually have people in the house .
Yeah , we certainly love our space , that's for sure .
Hey , what about commercial ? We obviously , you know , we've talked about economy , we've got residential . What's your observations happening in terms of commercial and people trying to go back to work and what the office space is happening ? What are you seeing there ?
Oh , it's tough , you know I , because there's not a . I mean office , you know , is always through . My whole career , office has always been seen as a super safe asset class . You know , yesterday talking to some of the bigger owners , they're concerned . I mean there's valuation changes , there's lack of tenants .
You know there's some office buildings that are doing okay . I mean if you go to Melbourne at 101 Collins or you know , on Martin Place in Sydney , it's okay , but then drift out . You know even 200 , 300 meters from that and you know you start to see a lot of vacancy and and you know people like working from home .
You know we can see it that people like the flexibility . They , you know they like being able to pick up their kids and drop them off . So you know it does seem to be not necessarily a long term change in that people are working 100% from home , but it does seem to be a change that people are in the office less and that's impacting the demand for office .
So office is bad , retail mixed . You know retail did okay through the pandemic . We're still seeing pretty good spending in cafes and restaurants . So you know they seem to be doing okay . But you know then there's always a threat of online and there has been so many changes to the retail sector over a prolonged period of time .
So you know that's quite challenged . Industrial is doing well , but what everyone that the kind of the commercial property industry does seem to be focusing on is what they're calling the living sectors , which is build to rent aged care , retirement , living , a new form .
They're calling it land lease , so basically the company owns the land and they , you know you build your own home on the land but you pay a rent to the , to the owner of that land . That seems to be an emerging type of property . So you know that's they're all focusing on that .
So they're all coming back to Resi and you know I think this is a thing with residential there's . It's such a good investment because long term , australia is growing and we've terrible at building enough homes , so it really does support it , support pricing longer term and and that's you know it's not changing .
You know we saw it through this interest rate cycle that , even though interest rates went up and we had the usual people coming out talking about 30% price crashes , prices came back hardly anything and now they're back above where they were in 2022 . And a lot of it has to do with that demographic change and population growth .
Now , narita , my last question . I could talk to you all day , but I want to talk about the change in listings . Yes , so obviously it's very clear that some investors did get ahead of themselves and are probably struggling with these higher interest rate environments and are potentially tapping out .
We've obviously been clear to sort of do whatever you can to hold on , but some aren't holding on . What are you seeing in your data around ? Who are the people who are listing to sell ?
Is it the you know recently bought our first home buyers who are getting in because they had really cheap interest rates and now they can't afford it with a young family or whatever ? Or is it investors or you know ? What are you seeing in terms of the feedback from your wonderful network at Ray White ?
Yeah , it's a hard one to measure . I mean one of the things when you sell a property you don't need to say what you used it for . So you know there's no formal data source and we have had , I think , our logic made some estimates based on looking at properties that were rented and have subsequently sold , so that data is shown .
A pickup in investors selling Definitely there's . You know there are investors selling because they are struggling with repayments and you know , and not maybe not even struggling with repayments , but perhaps you know they want to pay down debt on their primary home and you know there could be a variety of reasons .
But , you know , not a bad time to get out , given prices have come back and you know the market's doing okay .
The one group that we have seen a lot of selling is holiday homes and in areas where that did really well through the pandemic not necessarily areas that where you can drive to capital cities you know if it's within commuting distance of a capital city it's generally doing okay .
There are areas that are a little bit too far to commute in that do seem to be seeing quite a significant increase in properties for sale and a reduction in pricing . So that's clear . You know holiday homes is clear . Investors yeah , you know , we know that they do seem there is a group that do seem to be selling .
But what was quite interesting is that when we look at listing authorities so that's the point at which someone signs with the Ray White agent hasn't yet listed on any of the portals we did see a really strong number , a lot of properties being sold late winter and we , as we've headed into spring , we haven't seen that momentum continue . So maybe it's looking .
It's not looking that great in terms of listing . So so that I mean obviously as really an agency . That's , that's disappointing . But but what I think it probably what it probably is showing is that the distress of investors is probably , has probably been overstated and people are holding on if they can , and it makes sense .
You know , we know it's good to hold on to property . We're not . But also we're not seeing owner occupiers selling up and and this is not surprising , obviously it's not surprising people will do anything to hold on to the family home and they'll cut spending on a range of other things to do so .
But then the holiday homes you know , if you're not using it , airbnb is getting restricted , restricted in a lot of areas that you know , it starts to become a really secondary thing , so , so I think that's really behind it . What we are hoping , though , is that a lot , a lot more of the strengths in the market will get more vendors out there and in .
You know that it's a bit of a circular problem . There's not enough listings . People don't sell , because , often , people that are selling a subsequent buyer . So you know , there's this kind of circular problem that , when we see low levels of listings , that it just discourages people from coming out into the market .
Well , interesting . So I'm with Ben . I'm always happy to have you on and chat extensively with you now . But my final question is just you're in New Zealand next week , so do you get a ? Do you get an opportunity to sneak out and watch the race , or is the dance card full ?
No , I think I will . So we've got events on every day , but I think on Tuesday I've just got an evening event , so I hopefully will get to watch . How about you guys ? Are you off to the races or ?
No , not personally I will have . I grew up in . I grew up in West Australia , so in summer we were three hours behind because of daylight savings and my father worked for the TAV over in Perth and loved horse racing .
So I'd wake up in the morning and I'd hear him listening to the races going and they're off and racing and that's actually traumatic for me to hear that . So I actually , and I've worked in a casino over in Perth , so gaming is not really my not really my thing , but I'll see the result . I'll have a look . I'll get a . Marks the festivities we do .
Live in a state that gives us a public holiday for it .
We get to spend a bit more time in it , but it's always a pleasure .
It's been too long . Thank you for accommodating me with my texts back and forth to you to find this time slot for us to chat and , on behalf of everyone , on the PropertyCouch narrative , thanks for joining us today .
Thanks for having me . Thanks . Narrative .
Oh there you go Ben , Like it's just . It had been over a year since we caught up with Narita and I never get sick of listening to her riff about a topic that you and I are really passionate about .
But she's very well researched , she's very well connected , she is a person of incredible influence within the industry and we're really lucky that we get to share her insights with our audience .
Yeah , what I you know . The great thing about Narita is she's able to also put very complex thoughts into tangible and easy ways to understand it . But to your point , the connection piece is really important , right ? So one people , you know , certain people can just look at data and be stuck at their desk and that's all they'll get .
But when you're networked in those construction industries , when you networked across the biggest real estate network group in Australia , you're getting feedback , rich feedback that you're also overlaying to form . You know , we know that property is a science and an art .
So when you're getting all of that feedback , you're quite well informed and she , you know it's a delight for Narita to be able to share that information with you and I face to face and then obviously , to our community . So I could , as I said , we could talk to Narita all day .
Well , if our community ? For most of them they'll be listening right now , but for some of them they'll be watching , so they get to see one of the best at their craft , doing what they do . Quote of the day for me , ben stimulus was like a snake swallowing a goat .
That doesn't take a while for that goat to be digested .
If that doesn't cause the right imagery around all that stimulus spending , I don't know what does . So there you go , ben . We've got squeezing oranges at the top of the show and now we've got snakes swallowing a goat at the back of the show .
So all right , as I go into my life hack today , ben I , a couple of weeks ago I talked about that Netflix series , living to 100 , the Secrets of the Blue Zone . So spoiler alert if anyone's planning to watch that . Just quickly fast forward at this point .
But one of the other ones that we found that I found super interesting and I wonder if we can implement it as a life hack into our own life . Ben is in for the Okinawa people , so this is still .
The Okinawa people , which was the first episode , was the concept called a MOEI , spelled M-O-A-I-S MOEI , and what they had is this village and it was a financial arrangement that they had with a group of people that supported each other within the village , but it actually had some flow on benefits of that .
So if you think about they're in this village , they're in their either in their 80s or their 90s or some of them were centarians and they got together regularly and what happened is they would put a little bit of money in that was then designed to support each other in times when they needed a little bit .
So it's like the bank of the village rather than the big institution bank . But here's the here's the beautiful thing about it . What it did is it actually created support from a social , financial , health and spiritual interest . Right ? So , because the quote was loneliness can cost you 15 years of life , and that was a US study 15 years of life been loneliness .
So if you were able to create a MOEI and I looked it up it means a meeting for a common purpose and it's also , when I looked it up , said in Japanese and originated from the social support groups in Okinawa and Japan . So it originated here . But that'd be like you , me , me and none of your Collinwood mates .
But we get a few people together when we have nothing to talk about , mate . If we did that when we hit 80 or 90 , then we get together . Not only are we saying , hey , look , do you need a couple of shekels for what you're doing ? Here's a couple of shekels for what I'm doing . But it creates that environment where we're not lonely , we're connecting .
And so if we want to know what these secrets are for these people who have an above average number of people that hit the big 100 and get the letter from the king if they are part of the Commonwealth . Then there's a little secret that they create a MOEI , a financial arrangement to support each other , but creates a village . I love it .
I think it's really good .
I reckon the idea is good . I reckon it's great A group of us , though a grumpy old man together just sitting down trying to solve the world's problems . Yeah , can you imagine that ? Probably trying to make Frio win their first premiership , oh mate that was going so well until you got on provoked attack . I'm about to go on a little short break .
You're not coming in on one minute .
Oh , mate , you can get stuffed , but I think the idea is there . So I reckon Australia has so much going for it , ben , I think we do so much so well in this country , but what I don't think we do well is rituals and little cultural experiences . Where we bring people together , we get so much lifestyle and stuff .
But I love parts of what you get in Italy and part of what you get in Japan and part of what you get in some of those village environments where the people remain the people and they do things together quite often and then it comes .
I've just spent some time over in the Philippines , as you know , ben , and you see the communities and the village and the people getting together and they don't have a lot of material , but they have a lot of smiles on their face and they have a lot of Spirit that comes from being around others . So I reckon Australia could do better than that .
So my life act today is see if you can create your own Moai and don't wait until you're 80 or 90 or 100 . Do it as soon as you possibly can . I don't know what the solution is to do that , ben , but it's something , it's a concept that I loved and I reckon if people can like .
I can tell you , bryce , whether and whether you're doing it at a coffee shop or whether you're doing it around a campfire in Somewhere . So I was right , the beautiful nation that we have , with all of its natural resources .
If you have an experience sitting around a campfire for an extended period of time , over a couple of days , then that if that's not grounding enough for a connection , and you know , I suppose that's , that's the identity that I've been fortunate enough to be , what I don't know . You do some caravanings . I like you , can't you ?
know money doesn't buy that , like you don't .
You don't need a lot of money for that . You don't need a lot of money for that type of experience .
Success is leaving clues here . Ben , you know the people that make sure . If in the US because the US and Australia are similar in terms , you know we're part of the West Loneliness can cost you 15 years of life , well , if you know that up front , far out , we need to be making sure we create our own equivalent of a Moai . So there you go .
So beautiful I'm . Arguably , the whole episode was what's making property news , but just a little bit vicing on the cake for what's . Well , I will finish off .
I'll finish off with some further insights into the sentiment survey from our good friends at Pippa , and this question sort of relates to the what's the return on investment ? What , what ? What am I expecting to get out of investing in property price ? So this is not necessarily in the why . This is the what I expect to get out of it .
We'll talk about the why in an upcoming episode . So that there were six Opportunities for a response and so you , you put them in order of preference and so let's go from top down , because I think it's more of Effect here .
But the number one Return on investment that people are expecting and these are obviously clever people , I mean our property investment community , clever people 1550 responses and 65% voted number one long term Capital growth Wow , no , no one reason now , and if you , they didn't vote that one as number one , 24 percent of people voted as their number two .
So it really was . I mean . So an overall , overall ratio score of five point four , eight out of a possible six . That's telling you something . The second one was long term rental , ie , passive income . What are we talked about on this show , bryce ? Passive income , getting some growth so you can get some high passive . It I'll tell you what .
So that came in at number two , but it was only 25 percent . So there you go , we . So we you know the bees knees is capital growth . Coming in at number two is Long-term passive income , rental income , that you know , and 53% of people had that as number two if they didn't already have the long-term capital grapes . Number one .
So that had a ratio of four point nine percent . Number three was short-term price grade , so we like to time the market as number three . So that came in , interestingly enough , for number one is only like three point six , one percent , so that's how small it was . And number two , it came in to eight point one , nine . So this is the third reference .
Or Mmb , you put him in order and it still only had twenty four point two , six percent , so it only had a score ratio of three , so fifty , fifty . So those people who know how to play the long game . Yet we want to get a little bit of growth early , but there's also a lot of people who are willing to buy counter cyclical and play the long game .
Coming in number three . Number four , which really didn't obviously rate much at all , we're short-term cash flow , but we can understand from a strategic point of view . Some people are gonna need that and I think you know Millennials and Gen Z's are gonna need that as part of their strategy to be able to get into the market .
And then we've got number five was renovating for profit . And then number six check this out short-term tax benefits Just didn't even rate . Didn't even rate a mention . It came in number . It came in last in terms of the type of return on investment that investors are looking for when they're buying property . Bryce .
I love that , mate . I love what I love and I hope that people can absorb here is it's a sophisticated audience . We're getting these results so kind of . It's not easy to to to Synthesize a sophisticated audience's thoughts , but through that sentiment survey you've been able to do that .
So if you're listening to this and you're new to the game , success leaves clues and what you're seeing there is how . This is how people who've been playing the game for a little while Actually think and what they prioritize and what's important to them . So very good , ben , super insights . Are we done or is there a no ? Is there another one for next week ?
or are you know we're done ? I'm trying to keep us around an hour . I mean I could talk all day . You know me . Yeah , let's try and see if we can . You know around that , around that hour , I don't know .
We'll let the let the editors be the judge I reckon we might be around an hour today , so very good . Thanks again to Nerida for Partying her schedule been . I was texting back and forth looking for opportunities and then you were going overseas that we found a little window .
So it's always nice to get the three of us in the same room , even if it's a virtual room . Been just to share some thoughts on for the benefit of people in our community , mate , but until next week knowledge is empowering Bryce , but only if you act . See you next week , folks . Hey folks , bryce , here again .
I just wanted to catch you real quick before you go .
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