Property Hub - Investment Insights & Inspiration - Realty Talk: An 80-year property journey

Episode Date: November 18, 2023

This week we wind the clock back some 80 years to check on the lessons we’ve learnt from history as Bushy and his guest Simon Pressley from Propertyology, go on a journey and pick through the data Simon and his team have assembled about what history has taught us and how those experiences have shaped us today.   NEW – join our Facebook group, The Property Hub Collective: https://www.facebook.com/groups/1857513011165686 Join the Property Hub community on Substack! Sign up to get Australian property news, opinion, and episodes in your inbox: https://propertyhubau.substack.com/ Subscribe to RealtyTalk on the Property Hub channel: Apple Podcasts | Spotify | Google Podcasts | Email Property Hub is a collaboration between Bushy Martin from KnowHow Property, Kevin Turner from Realty, Andrew Montesi from Apiro Marketing and Apiro Media, and Australia’s largest independent podcast network DM Media. Business and partnership enquiries: [e-mail] omnystudio.com/listener for privacy information.

Hi, and welcome to this week's Realty Talk Show. Today, we wind the clock back some 80 years to check on the lessons we've learned from history, or in fact, that we haven't learned anything at all. Bushy's guest this week is Simon Presley, one of Australia's most prominent thought-leading property analysts, a recent Real Estate Institute of Australia Hall of Fame inductee, and director of award-winning National Buyers Agency Propertyology. Simon and Bushy go on a bit of a journey and pick through the data that Simon and his team have assembled to the conclusions

that we can draw from those experiences. Hi, if this is your first time with us, welcome. You're going to find us on all podcast players and through the Southern Cross Austereo Network. If you like the show, make sure you hit that subscribe button. help us to continue to bring you the best guests every week. Join the conversation too anytime on Facebook at The Property Hub Collective.

We'll be back in just a moment as Bushy goes back in time with Simon Presley. Hi, just before we go back to the show, I want to spend a few seconds and tell you about a book that was sent to me that's now become my go-to reference when I'm looking for inspiration about property investment. You know, sometimes it's not about knowing all the answers. It's certainly more important to know what questions to ask. This book by Rasti is called The Property Wealth Blueprint. And it's one that you don't read just once and then put it away. It stays out as a reference. It's a book that you go back to time and time again, as I do, because it's packed with personal experience and with great examples of how to get property investment right.

It's very frank. It's to the point. And as you can see here, I've needed to bookmark several points and I can tell you that it's a constant companion on my desk here. The remarkable thing is that it's absolutely free on Rasty's website, getrare.com.au. Get Rare. It's a gateway to a richer life. The website there for you again get rare r-a-r-e.com.au so get this book get it for yourself realty talk from property hub on all podcast players now the german philosopher george hegel famously said that the only thing we learn from history is that we learn nothing from history and nowhere is this more true than the wonderful world of property where everyone mistakenly thinks that current property conditions are always unique and different from the past. But if you've been

involved in property for as long as today's special guest and I have, you'll know that history generally rhymes. Today, we've got the opportunity to put this right and to learn what property history lessons have taught us. So welcome back to the Property Hub's Realty Talk Show, Simon. G'day, Bushy. I'm really looking forward to this chat. It'll be quite nostalgic, I think, some of the things we're going to be talking about today. Absolutely. I'm probably going to reveal my age through our discussion mate but there's a lot of having a look at some of the stuff that you were suggesting we're going to talk about today yeah there was a lot of very fond memories that were emerging from that mate so I know everyone that's tuning in is going to

get a lot of that out of the discussion but just to sort of kick things off Simon can we start by getting you to paint us a picture of what Australia looked like way back in 1943 compared to how it looks now, starting with population and some other metrics? Yeah, so 1943, for those who aren't great with their history, we're in the back half of World War II. Of course, World War II finished in 1945. Australia had an enormous rental crisis. We sort of, before the war,

we already had a dire shortage of rental accommodation. And then when Australia chose to participate in the World War, not that we were given much choice, but we literally could not build any more homes, zero homes, because our skilled workforce was off fighting for our national security. So the rental crisis in 1943 was very much there and about to get worse for decades to come, as we'll go through. And national population back in 1943 was just 7.2 million.

It's 26.3 million today. You'll find this interesting. Today, there are about 1.1 million Australians who are 80 years or older. So they were born at the start of this 1943 period that we're talking. Life expectancy back then, it was expected that, you know, you'll live to roughly age 65. Of course, it was quite normal for people to die at 50. I mean, you and I would be gone by now, mate.

You'd be dead and buried. Absolutely. Never to be seen. But, you know, today, the age expectancy is about 85. um in in 2023 uh the number the total population in 1943 of 7.2 million australia today has 7.2 million people that are aged 55 and older crazy stuff yeah really interesting stuff mate uh sort of uh diving onto the population piece that you mentioned already yeah what impact has population growth had on property values

over that extensive period of time then? Not a lot, of course. I mean, population growth does influence property prices, but lots of things influence property prices. There never has been, whether it's 1943, 1973 or 2023, there never has been a direct link between property price growth and population growth. This graphic here looks at from 1970 to 2023.

the green columns there is the combined capital city annual change in median house prices and the blue wavy line going up horizontally across the page there is the population growth rate for each of the last what's that 53 years so you can see that australia has always been subject to high population growth rates but it's not like we can say a pattern where the years that we had the highest population growth produce the highest property price growth. That's never been the case, even though the banks, the economists, the world always preach population growth. It's bollocks.

This graphic shows it's bollocks. And the recent reminder of that, the two intense years of COVID, Australia actually had zero population growth. We've got to go way back to World War I, Bushy. So we're talking more than 100 years ago that the population growth rate in this country was that low, but yet we had our second biggest property boom without any population growth rate.

So, yeah, it's never been a big influencing factor. For those of you who are curious, the start of this period, 1943, a brand-new home, you would have paid between $2,000 and $3,000, depending on which part of Australia you're living in, but that's what you would have paid. And you spend that on the front door now, mate. So it's a pretty interesting comparison

when we look back at that. Now, how have the major towns and cities changed over time? And I'd love you to share some examples of how that looks, if you could, please. Yeah, I mean, well, I guess the pecking order is one thing that people might find interesting. So back in 1943, Gold Coast was nothing then like we know it today. In 1943, Gold Coast didn't even technically exist.

There was a series of very tiny villages, you know, about an hour south of Brisbane, nothing that you could really call a town. But, you know, now Australia's the sixth largest city and a very densely populated one at that, you know, one of the top three fastest growing regions in all of Australia. So that's the Gold Coast. Canberra, back in 1943, even though it's our national capital,

Canberra was only our 16th largest city in 1943. It's our seventh largest now. um perth um you know back in in the 1940s um was was big in terms of it was a capital city but adelaide was a significantly bigger city than perth back then um about 47 percent bigger in terms of population size um and jobs are different um you know back in the 19 you know late 1940s 1950s, 21% of Australia's workforce was in manufacturing, 9% was in agriculture. Today, about 14% of our workforce is in manufacturing

and only 2% is in agriculture. Of course, the services sector has taken up a lot from the manual labour days. Big shift, which would have an impact on where people live and how they live. You've touched on this already around the population piece, but I'd love for you to take us through some examples of how population growth looks versus housing values

with some specific examples that we talked about previously around Launceston and Townsville in particular, if you could. Yeah, absolutely. I could have picked any one of the 400 towns and cities across Australia, but we always talk about the big cities, don't we? Brisbane, Sydney, Melbourne. So I've chosen Tasmania as a southern-based city. Some people won't be aware, but Tasmania...

So Launceston is Australia's fourth oldest city. It actually was founded well before most of our capital cities. And today it's still a very sizable, 34th largest city. But its population has grown. It's grown everywhere. It's grown at different rates. The population growth has grown at different rates in different townships across the country.

But population has grown, cost of housing has grown. Launceston would have paid about $5,000 for a standard house in Launceston in 1950. today you really won't get much change at $650,000 to be honest and I can say that I've got a stake in Launceston myself. Population at the turn of the century, Launceston's

population was about 19,000 you know, today it's about 90,000 so you know, it's grown a lot and look, I'm biased but one of the most special parts of the world I think Townsville in the far north of Australia

it evolves incredibly You know, one of the most diverse economies in all of Australia today. But its roots, you know, it's our front line for our national defence. Townsville is Australia's military capital. But it's great for manufacturing and precious metals and tourism and education, health. Its population was about 10,000 people at the turn of the century. You know, today it's 200,000 people. one of our biggest cities one of our top 20 uh biggest cities but you know adversity we'll touch

a little bit on that but you know townsville over the last 80 years it's had cyclones it's been involved in in wars it's had recessions it's had a gsc it's had a health pandemic um the cost of a house has gone from a thousand bucks to you know 450 odd thousand dollars so over the last 80 years so but everything grows no matter what you throw at it housing shelter at the end of the day spot on some really good examples there. Now, I'd love you to talk us through some of the biggest property-related changes that you've just started to touch on that have occurred since the 1940s, starting with migration

and also how our neighbourhoods have changed over the years. This is where the nostalgia is really going to kick in. Oh, absolutely. And you and I, not many of our listeners will be old enough to remember this stuff, mate, but in our 50s, we can remember this. So, look, coming out of the war, Australia, yes, we were attacked. Now, Darwin was wiped out, and other parts of Australia were bombed,

but largely we got through World War II unscathed, and we were lucky. We dodged a bullet, excuse the pun, but we recognised that we might not be so lucky if there was a third World War, and we must populate. Our Prime Minister back then, populate or perish, was one of several famous sayings that he used, and we targeted the bombs. Australia is a convict country at the end of the day, and it took us a long time. They ruled us for a long period of time.

So there was this term some people might have heard of, 10-pound POM. If you were a POM, you literally could pay 10,000, so 10 pounds. And I think it took you about 16 weeks or something like that. The only way to get here was by ship. And you could come to Australia for a new life. And we just put so much marketing into the UK to say the great Australian dream. And so we had the 10-pound POMs from 1945 to 1972, a million POMs relocated to Australia. In the back half of that period of time, it wasn't just England.

There's a lot of culture today, Italy and Greece and lots of other parts of Europe that sort of come after the 10-pound POMs. So that was a big change. Their population grew a lot from that, but we become a lot more culturally diverse. The things we enjoy today is largely a legacy of how we responded to World War II. I just love the way our neighbourhoods have changed. Well, we've got a graphic here. This takes me back to being at my grandparents' place

as a 10-year-old playing cricket in the backyard, which was what you did for entertainment back then. You weren't stuck on a device like our kids are today. But this backyard is almost exactly carbon copy of my grandparents. So people are wondering, what's that Bessabrick ugly thing there in the, that's what they call an insincerator. Now what that was you didn't have recycle bins like we've got these days

that the council pick up and your rubbish bin was the old galvanised tin can thing which you only fit so much in so most backyards had the insincerator so you would burn your own rubbish and smoke would go everywhere too bad if you're a hay fever or asthma sufferer

but that was in pretty much every backyard and the old fashioned Hills Hoist, well that come out of You know, about 1953-ish, probably you and I used to swing on it and our parents would be whacking us over the head with the knife saying, don't do that, you're going to break it. But that's where we hung our clothes on. The Victor lawnmower, that's come out of the 1950s as well.

Not so pleasant stuff. We had a major problem trying to build enough homes for decades, really. And one reason was we haven't got enough timber to build the home, Skilled labour was the biggest constraint, but materials was also a serious consideration. So we developed this fabricated product called asbestos. So we're laughing at it now because it causes cancer. It's outlawed now.

But from 1945 to eventually being outlawed in 1985, pretty much any home in Australia that was built in that 40-year period of time, either all of the home or most of the home was with asbestos. Home sewerage, it sort of started to come in at the turn of, you know, early 1900s, but it wasn't until 1950, which is not that long ago, mate. No. It wasn't until 1950 that sewerage was a regulated requirement

to be put in new homes. So there were still plenty of homes in the late 60s that didn't have home sewerage. It was still going to what they called the traditional thunderbox. Well, I was sharing with you in the green room when I grew up on the booming rural metropolis of Garoke in Western Victoria, we had a drop pit toilet, Simon. I remember going out there on rainy, cold nights and dropping the torch down the pit to see my grandfather come out with a magnet and a string to try and hook it out of the sludge as a beam of light shone up from the slime below. Well, as we said earlier, mate, there's more than a million people that are still alive today that live through that. So things change quickly.

It wasn't until around about the 60s that there was any form of commerce in the suburbs. So certainly any white-collar service, any bank, the accountant, the solicitor, 100% of them were in the CBD. the only form of commerce that existed in the suburbs was uh was the old-fashioned corner shop so this is before Coles and Woolworths become the you know big conglomerates that they are today but groceries and we talk so in the in the 50s maybe every second house had a car which means that the other other houses didn't have a car you go around a lot by push bike and there's not too many groceries you can carry on your back while you're you know traveling your bike or walk um so most of us bought our groceries the whole shop not just a bit of milk and bread

um from you know walking 500 meters or wherever it was to the corner shop now that existed through to the 70s really um but as i said all business you went into town for that uh in about nine in the early 1970s is when supermarkets progressively started to be developed in suburbia yeah i'm a 1970s baby so it was about that time um that the westfields of the world started to pop up but they're a lot smaller scale than now um but that was the start of going to one venue for multiple different retail shops and then that that sort of progressively from there um we would start to see a real estate agent pop up in the suburbs and that sort of stuff but that's not that long ago um also around the 70s um maybe a little bit earlier the six-pack block of units

they started to pop up and we have a look at them now in places like sydney and melbourne they'll go up 100 stories but um you know two or three stories we started to see those in that period of time the rise of the middle class that happened um in the 60s and 70s we're talking you know we're measuring uh miserable at the moment the inflation being until the seven percent um we had decades mate was in double digit um territory but of course whilst the cost of Everything went up. The wages, you know, went up a heck of a lot as well. What we call FIDAG town planning.

So, again, from about the 1970s onwards, the town planners recognised that we want the cities to become more densely populated, so progressively the apartment blocks got higher, but we want more business there. We want to get everyone to come into town. The first casino that Australia had was in Hobart in 1973. Yep.

Seems like poker machines are everywhere these days. Fast food, that really took off. It started to come in in the 70s. The Golden Archers, Maccas, come to Australia in the early 70s, but they weren't in every sort of second corner until the 80s. KFC, Maccas, Hungry Jacks. We used to have children free roaming the street and we were very comfortable as parents that they were safe.

Not these days. Cubby houses were everywhere, tree swings. Two household incomes. they become more increasingly common in the 90s. And now a lot of households have two incomes. The regional expansion, that probably really started to take off in the mid-90s. And not saying that every regional town did it,

but it depends on their local assets, whether it's natural resources or farming or food production, whatever. Infrastructure, the 90s, we invested a heck of a lot in the airport infrastructure. And air travel started to increase a lot. The 1990s is when the really, really high-rise apartment stuff really started to kick in. And, of course, the digital platforms in real estate,

realestate.com domain, it was the very early 2000s. We take it for granted these days, but this time 20 years ago, they sort of only just started. Property data, CoreLogic Australia didn't exist until about 11 years ago. That's right. I remember back in the 90s combing through the newspapers with a highlighter and then getting out the street directory

to try and weave a path to look at all the properties all day Saturday. Yes. Just about every weekend we spent in the car driving around looking at properties. It's a far cry from scrolling with your finger on the phone these days, Simon. Yes, a heck of a lot of change.

When you go through it like we have in the last five minutes, We've packed a lot in in the last 80 years, haven't we? Massive change. And I think we forget, you know, until talking about this, there's a lot of stuff I've completely forgotten. And the change has been exponential, particularly in the last couple of decades. So I'd love to get your thoughts on how we've heard also in terms

of household size, the transport infrastructure impacts, impacts the the regional city development and any uh relationship between australia and our global economic ties so what what's your research telling you on that side yeah look i mean i've literally devoted years to reading you know the old archive newspapers and fascinating stuff so some of it you remember um you know as a young kid and some of it you know i wasn't even born but a lot a lot's changed um you know so coming out of the war um suburban uh development of housing estates was you know on steroids but the standard block was sort of 800 square meters uh and most houses were built for three bedrooms um whereas these days a lot of them are built four bedrooms

um yeah when we look at census data the official numbers um the the average annual people the average number of people per household in australia back then was four that's progressively reduced to today being 2.4 but it is a big drop um that's funny we've got over that period of time we've got households with less people in them but the houses themselves have become bigger and the blocks have become smaller so we are really you know causing some of our own problems um but what was also common probably up until uh the mid-70s to be honest bushy lots of households it wasn't just family members living in them because we had a dire shortage of housing it didn't you know correct itself with proper policy until the 70s uh lots of single people um really

had no choice but to hire a room from someone and that and that was common that um what we know today to be a boarding house which might be you know someone living in the country who's been sent away from you know by their parents lovingly of course but to school and sort of live on campus that's what you and i associate with a boarding house but but back then it could have just been a big home with 10 bedrooms and 20 people living in it absolutely and they were renting a room each so that's a big change transport's changed a heck of a lot you know at the start of this 80-year period uh trams were arguably the most common form of transport um progressively each household got a car now most households have got two but that took a long time um buses sort of started to

progressively take over from trams, I guess, because the bus can get to more drop-off spots, you know, when it's sharing the same route as the car. But it wasn't until about the 60s. I love looking back through old photos, you know, Brisbane, Sydney, wherever, and you see trams on roads where trams don't exist in most places. So that's changed a lot. I mentioned air travel.

That's changed a heck of a lot. And it's been one of many things that have contributed a lot to the love affair that australians have now with regional australia just so easy to get there i've already mentioned regional development at the start of this um 80 year period of time australia's closest economic tie was easily with the us easily but but it was sort of around about the 80s um that started to progressively transition more towards different parts parts of asia i mean the 1990s was famous in this country for um japanese tourism and stuff like that and now it's china it's india it's Vietnam, it's all of Asia, Singapore, Hong Kong, you name it. So there's been some big

changes there. Okay, stay with us. We'll be back in just a moment as Simon outlines the technological advances that have occurred since the 1940s and the impact that they've had. This is Realty Talk. At Realty Media Group, we've created and combined a suite of products to service the property distribution and marketing sector in Australia. We streamline the process, saving agents and consumers time and money. RMG's AI-powered proprietary solutions are set to shake up the Aussie market. Investment expressions of interest through Swarmer are open now. Don't miss out. This is Realty Talk, powered by realty.com.au. Back to Bushy and Simon as they trace the events that have impacted us as a nation over many decades. This time we focus on technology.

Now, I'd love for you to, there's been, you know, massive changes in the technology front. So can Can you talk us through the progression of some of those advances since the distant times of the 1940s? Yeah, well, I mean, it was only progressively in the 40s that households got electricity. So that really restricted what people couldn't do. But what we saw in the 60s, houses become warmer through kerosene heaters and oil heaters.

So you literally used to have businesses, you know, you'd place in an order and this big truck would come around with a cylinder on the back with oil in it, and they'd put this big hose in it and they'd top up your oil and, you know, winter months, you'd turn the oil heater on. Very, you know, environmentally friendly stuff, of course, Bushy. There's the kerosene heaters around then as well. Progressively, you know, we got reverse cycle air conditioners

that could provide cooling and heating, but it's not that long ago that it was brought in. the 1980s um was famous for videos um you know people at households were going out buying video recorders and then we go to blockbuster video and that sort of stuff and we get an entertainment you know from hiring a video and and watching the latest movie 1995 is when foxtail come in and now we're streaming everything um it's only a bit over 20 years ago that um all households had their own email address yeah before then pretty much everything was delivered by australia post i'm a fax machine and fax machine that's right everyone in fact it was fax was the only

way to do it it's only 2003 that facebook you know was was um was founded 20 it's only 20 years ago so much has changed 2010 i mean smartphones come in before 2010 but i would argue that the masses didn't all have a smartphone until around about 2010 so and now everything's online purchasing so it's it's changed a lot tvs didn't come in until 1956 but it was black and white so it wasn't until about the mid 70s um that we had color tv but all you had was three commercial channels on the abc and then when i was i brought up my country so we normally had two channels the abc and one other was pretty much it for me solomon and some great stuff there i want to sort of pivot slightly now into the world of credit because there's also been a massive evolution

in the world of finance can you talk us through some of the changes that progress through that that arena yeah look without credit there is no home at the end of the day you know home not just 80 years ago um you know housing has always been the most valuable asset that any of us can have people just don't pay cash for homes including the convict day so um and we're not going to have another gold rush you know like we had in the 1850s so so credit's critical you know reading back through through the archives and seeing the change in credit it's phenomenal on 1943 the start of this year we're talking about well Commonwealth Bank was government owned um but they weren't just a bank as we know them today because they were government owned they

they oversaw monetary policy so the setting of the interest rates was a term by the Commonwealth bank the setting of credit policies the the checks and references that banks had to follow when assessing a home application was determined by the commonwealth bank um that didn't change until uh where are we so afra you know they come in in uh 1998 yes yeah not that long ago um the reserve bank was not founded until 1960 and and initially the reserve bank was doing monetary policy and a bit of credit policy as well back in the 1950s no ifs buts maybes you wanted to buy a home stump up 30 deposit or it doesn't happen 30 you know so we had the housing affordability you know debate which has happened every year over the last 80 years and 200 years

for that matter um it depends how you hold your mouth you know if some people say oh well you know it cost me eight hundred thousand dollars now i can't afford that you know you guys never had it that tough but you know it's all relative um the interest rates that people pay was different in different areas, the size of the deposits that you paid. I mentioned two incomes, you know, that we didn't have before. So things are all relative. Private finance is really big for decades, not just in the 1950s. It was not uncommon for a vendor, someone selling a home,

for that sale to occur if they were a bit more financially affluent than others, they might help that willing buyer either by putting up finance for the whole spend action or for some of it because the banks would give them only a portion of what they wanted um a lot of hotel owners or you know more well-respected business owners on the side they would lend out money for things like housing um it was common for someone who wanted to buy a home and this is not just the 1950s this happened for decades beyond that for someone to buy a home and to say look the most that the bank will give me will be five grand to buy this $10,000 house or whatever,

but they might be able to get a loan against their car or something. So bill of sales, they were known as then, were very common. Mortgage insurance, a very important part for home ownership, especially getting that first foot in the property ladder. Well, that didn't start until 1965, pushy. And it was actually driven by credit unions. Credit unions had a big, big share of home lending until the digital world started.

Decimal currency, of course, come in 1966. In the 1970s, money boxes. We all had money boxes. All our loose coins. But it amounted to a lot of money. If you filled your money box up with coin, you could have $10. Now, $10 won't buy you much at all. Well, put some relative money around it.

I used to buy a bag of lollies for one cent in the early 70s, mate. So $10 on a money box went a long way. A long way, yeah. The Australian dollar was floated in 83. We're talking about credit. Banking deregulation was huge in the early 90s. So essentially what that meant was some of our bigger banks, I mentioned CBA, Westpac, they become privatised.

So they become responsible to shareholders. And it's amazing when you get rid of the political plonkers and you put in entrepreneurial and business-minded people, it's amazing what shit can happen. If only we did a bit more of that these days, right? But so loan products become very creative. Not only could you get credit with, you know, a smaller than a 30% deposit,

but the features that were attached to loans. Yeah, progressively we saw things like offset accounts and redraws and electronic funds transfers. None of these existed back then. You had to go into a branch and you had the old passbook accounts. So lots of change there. The Australian Stock Exchange was listed in 1998.

uh gsc was a big thing that was supposed to be the tax to replace all taxes in this country they wrapped up a lot of taxes but they still managed to leave out things like stamp gd and a bundle of other taxes but that was in the year 2000 it was also big for um for property markets because i guess um to compensate the the the um the initial hit of bringing in the gsc everything would essentially increase by 10 overnight um there was all these government grants thrown out you know, for first home buyers especially. So that was big. Mortgage brokers, I mean, they existed in the 90s,

but it wasn't until the 2000s that they really started to take off. I think in 2002, for memory, there was about 30% of home loans written were via a mortgage broker. Today it's 70%. Frankly, why would you go to a bank? There was a period of time there for about five years where there was such a thing as a 106% home loan. Yeah, I took advantage of one of those to buy an investment property,

mate, at the time. So I remember that very well. And why wouldn't you? I mean, I remember, you know, companies don't exist these days. There's a company called Rams, you know, subsequently bought out by Westpac. But, you know, Rams and a few others, 100%, 106%, where did that come from was sort of saying,

we'll give you the full 100% to buy the purchase property, but we know you've got stamp duty and a few other bits and pieces as well. Guess what? Well, you can funnel all that up in there as well, and that's sort of come to about 6%. So it wasn't that they gave them to everybody. You still had to prove that, you know, you had a savings pattern, even though you mightn't be putting any cash in

and you had a stable job. But I'm not saying we need to go back to 106% home loans, but there were some things there that I think we can take back out and look at, you know, the housing situation today. We've been through a GFC. 2008 credit become very hard to get for a few years there. Australian property markets actually stood up really well, but it was harder for people with good, strong credit

to get a loan for a couple of years. And then the last one with credit reform, 2015, not that long ago, those crazy buggers called APRA just squeezed the bejesus out of things for a few years there. They certainly did. There's some really good info there. Now, I want to sort of switch into the old favourite that the media likes to talk about,

and particularly in recent years, and that's good old interest rates. So what impact have interest rate changes had on property values? And is there any correlation between the two, Simon? Yeah, I guess similar to the population thing. Does interest rates influence property markets? Yes, everything influences property markets. Is it the dominant force? It never has been.

And again, we've got that same 53 years of evidence here, reminding our viewers the green columns is the change in median house price in each of the calendar years. And look, if anything, I put a big orange box there, around a period where interest rates not only did they go up, consistently go up, but they went up a lot. You and I will remember paying really high teams, maybe even 20%. 17% when my home loaned at one stage at that stage, mate.

Yeah, but look what property prices did. Look at the green columns. I would argue that they went up a lot more. It's evidence. In the 50s, 60s, 70s and 80s, house prices increased at a much higher rate than any period since then. but interest rates were a lot higher. Yeah, recession.

The box I put around there is a 17-year period from 1974 to 1992. That 17 years, Australia had three recessions. The cost of a house went up 400% in just 17 years with three recessions. So whenever, now and for the rest of anyone's life, whenever you hear the word recession, Beware the economists who will scream doom and gloom and tell you it's physically impossible for property prices

to go up during the recession. It's called bullshit. In 2020, we had another recession, and we also had a property boom. The second highest property boom in the history of the country, I think, quoting you on that score, Simon. Correct. Yeah, correct.

Yeah, no, that's some pretty good evidence there. Now, I want to sort of switch across to control over property and rents in particular. What, if anything, has changed in relation to those over the years? Yes. Look, I wasn't aware until this stuff we're talking about here with rent control is not something that you're going to learn in school or economics degree or whatever.

I've never heard of it. I'm 53, mate. I never knew of it until rummaging through all the archives. The number one topic I think that's dominated Australian current affairs over the last couple of years is rent, but a poorly controlled message. The commentary has been focusing on the price of rent when the problem is actually we don't have enough supply of rent. And there is all this evidence.

Australia had an enormous rental crisis from 1912 through to in some parts of Australia in 1970. 1912 right so so that's a couple years before world war one we already had a shortage now all markets will have periods where there's a bit more rent supply than what we need and appear with the shortage it's just coincidental that in 1912 we had a shortage that's due to no one's fault it just is what it was but then when world war one started in 1914 we lost their skilled labour because they were fighting for the country's survival

so we had an inability to build more rental supply of course rents went up because there wasn't enough supply and the regulators come in and said we can't have that we're going to stop a landlord's ability to increase rent of course why is an investor then going to go and invest and provide more rental supply I could sort of understand it when you're at war

because you literally can't build anymore. And the reason rent controls were brought in during World War I was literally that, the skilled labour's not there. But then coming out of World War I in 1918, the skilled labour had returned. We still kept the rent controls in place. Not long after that, we then went into the Great World Depression. So no one wanted to invest anyway.

In fact, Australia's unemployment rate hit about 20%. So why would you be investing? And then not long after that, we went into World War II. So we lost our skilled labour again. So again, through no one's fault from 1912 to the end of World War II in 1948, we effectively added no more rental supply, but we kept adding the population to it. You'd think sanity would then prevail when all the wars were over.

We've got to encourage more investors. But no, we focused on let's keep a lid on rent because the tenants can't afford it. and that really shrunk rental yields and discouraged investment. Sanity didn't prevail until in some states mid-60s, in some others 1970 when they said, we actually need to bite the bullet

and do the only thing that will fix this. And that's to encourage people to invest in their future and some will choose property as their asset class to do that and that will fix this problem properly. But from 1970 through to let's call it 2019, a year or so before COVID, we were fine. Australia was fine. But now we've gone crazy with rental legislation

and we haven't learned anything from all those decades of proof, mate. Yeah, it just never ceases to amaze me. Yeah, we keep making the same mistakes. What about rental yields? How have they changed since the 1950s, Tom? Yeah, so we'll go back a little bit further. A hundred years ago, we were having this conversation, mate, as an investor, and we would have been standard 11%.

standard yield without even trying 11 but progressively um down to the start of this this period here 80 years ago it would have a standard yield would have been 7 and then as now it's not a one fits all yeah um you know some locations a bit better you know some a bit less but the average um yeah in the 50s would have been about 7 and that's progressively shrunk even at the price of rent like everything else has increased when we express that value of rent to the value of the actual property that you have to purchase and convert it into a yield. The yields have consistently retracted.

This time, five years ago, that standard yield would have been probably 4.5%. Again, Sydney and Melbourne would have been below that. Other parts would have been a bit above that. Today, a standard yield is about 3.5%. Plenty of parts of Australia where you've got a 2 in front of that. We need to take a good look at that because rental accommodation is never going to go out of fashion, mate

No Well, we'll always need it 80 years of evidence, we've always needed it We're always well in the future and rental returns are important to that Stay with us, we'll be back in just a moment as Bushy asks Simon about what Australia was like 100 years ago and about some of the moments of adversity that have actually shaped us

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realty talk exclusive to the property hub let's get back to simon presley and bushy to retrace some character building national events that have occurred since the 1920s now we've touched on a few of these throughout the conversation but i want you to remind us of the series of so-called world-ending events and moments of adversity that Australians are experiencing since the 1920s, Simon? Well, what we know is it doesn't matter what year we were looking in the archives, there was always, I call it shit happens, there was always something. It was just a different thing. We've spoken about this period started at the end of World War II, but there's never, ever been a single year in the last 80 years where there hasn't been a major war,

at least one major war somewhere always um but yet property prices have gone from two grand this time 80 years ago to the current combined capital city average of about 950 grand so don't let anyone tell you that wars will you know suppress property prices because wars have always been there um we've had multiple oil crises um we've always needed petrol over the 80 years but there's been lots of them in some of the wars have been related to control over oil fields But there's been plenty of times there where it felt like overnight the price of petrol at the bowels has spiked, including now. In Australia, perhaps more than any other country in the world,

we've had so many natural disasters. No town, big or small, has been immune to multiple natural disasters over the last 80 years, but the cost of housing still goes up. There's been numerous stock market crashes, some directly in Australia, some globally. I mentioned the recessions, to be specific, 1974, 1983, 1991, and 2020. Yep. At the GFC, we had the health pandemic.

So that's a lot of stuff, mate, in 80 years, not to mention politics and taxes and always something. Absolutely. And to state the bleeding obvious and to, I guess, stress this point, just to reinforce, what impact have any of these had on residential property values, and can you give us a couple of examples just to really underscore that? Most of those moments of adversity have had no direct impact,

although in the moment, you know, when there's the announcement that there's an initial fear of the unknown, but that's more a sentiment thing, you know, until we get our head around things. You know, someone might delay buying, you know, their home or something like that because they've been told via the news that the world's going to fall apart. That's a sentiment thing that, in time, people adjust their heads

and they realise, hey, the world didn't fall apart. I guess there's been a couple that have had a more direct impact. The GFC didn't destroy property markets. We certainly didn't have a crash. But the effect of the GFC on property markets was more a lagging effect. The GFC was in 2008-9. Adversity is always followed by stimulus. No matter what form the adversity comes in, money solves all things.

And governments all over the world will always throw money at them, as they should, whether they throw money in the right areas, well, that's always going to be debatable. They're always going to respond to adversity with money. Sometimes they hit the mark with it, and sometimes they don't. But the GFC is probably the biggest one. I mean, COVID really hasn't had any material impact on property prices at all. In fact, if anything, what it's done is changed the way I think a lot of people have considered what they value most. and we've re-evaluated our priorities and there's been lots of people that have moved home

or renovated homes or moved town, worked from home. So I'd argue that of all the moments of adversity, COVID's probably had the most positive influence of all of them. 100% agree, 100%. It's brought forward a lot of trends that were already in play to our benefit, actually, in that context. Now, we've talked a lot about what has changed, Simon. And what hasn't changed much in property over the last 80 years?

Well, we've always needed rental accommodation. For every single one of those last eight decades, three out of 10 households have been rented. Every single one of them. Now, in some individual years, it's been 32% rent, and some others have been 28% rent. But give or take, three out of 10 households, for every single one of those last eight decades,

I would suggest that's a big, big, big body of evidence to say to everyone listening to this today, we're always going to need rental accommodation for three out of 10 households. I bet we get our shit sorted and start doing what we need to provide rental accommodation for those three out of 10 households. That's never changed. The government contribution to the rental pool, one thing that hasn't changed there, it's always been a very small contribution, but the contribution has got smaller and smaller and smaller. were um today um our combined uh eight state and territory government and the federal government uh they own nine percent of australia's rental pool so it's the everyday aussie that owns the 91 percent and they're the ones that need to be encouraged to provide more um interest rates inflation they've always been around um there's been lots of periods when they've been incredibly

high a lot higher than what they are now negative gearing has been out not just for that 80 years but for more than a century. Negative gearing is actually not a formal policy. It's just a term that people use. It will always be around because, well, I assume it will always be around because the tax office will always require people to declare income and claim expenses. And property, the biggest expense is debt.

Hence the word gearing and negative gearing. The biggest expense will be interest. And in periods when interest rates are high, that increases the chances that the property will run at a loss rather than a profit, hence the word negative. So that will always be around. There was a two-year window in there where the Hawke government, 85 to 87, thought it was wise to scrap it.

And people voted with their feet and it made the problem worse. They brought it back in in 1987. We've always been popular, highly sought out from overseas migrants. They've become a national security policy. the 10-pound bombers we were talking about earlier, to protect themselves, populate or perish. But I think all World War II did was open up all the other countries to, hey, there's this, what we call the great southern land down under

and all the great opportunities that we offer. That hasn't changed over the last 80 years. I can't ever see that changing. And the greatness it brings to our country, the great diverse foods and cultures and clothing, it's been awesome. housing supply has always been a bone of contention the whole 80 years um the archives are you know like every month there's a story somewhere about we don't build enough we don't build enough every month there's a story about housing's expensive including when a brand new house

cost two thousand dollars um it wasn't affordable and we got a we got a newspaper clipping i found in the archives 1950 um front page of the sunday telegraph only one in five people stand a chance to buy a home in 1950 we were saying that some things will never change my friend no it's some really good examples there of exactly that what we keep thinking it's new it's all happened before if we sort of wrap a big bow around all this simon what are some of the key takeaway lessons that we need to be heading from all this well i think the biggest lesson is we've all heard the saying safe as houses i've given you a 80 years of evidence to i guess show why that term exists i didn't create it um no one can stack their name to it but we can see um it's true it doesn't matter

what happens to interest rates what happens to inflation what happens to population what happens to the economy what moments of adversity that are out there humans always need shelter housing is not an index we always need shelter and no matter what has happening in the world good or bad and we don't just live in the same house all our life so even without population growth property transactions still take place because household circumstances change incomes change families change and when people transact in real estate they create competition and competition causes prices to grow with or without bloody population growth i'll keep saying it it's the existing population that buy 95 percent of the property um a graphic i've put together here

showing the last 80 years bundle up into into um four blocks of 20 year periods and showing how many times value did the standard house increase by so the 20 years ending 1960 so the 40s and 50s um capital city house prices increased 3.6 times the next 20 years so the 60s and 70s house prices increased sixfold the next next period of um of time so we're looking at the 80s and the 90s they increased 4.4 times and the most recent 20-year block they increased 3.7 times wrap all that up and what that says 80 years of evidence is a pretty good chance bushy no matter where it is in the state that you buy a property today and 80 years of evidence so it'll be worth at least three times that maybe four maybe five times that over the next 20 years so if you're

40 years of age and you want to exit the workforce in 60 years i'm sorry age 60 in 20 years time get busy safe as houses beautifully said mate it's certainly a very solid foundation this is this is not just cherry picking like a lot of data tends to do this is a long-term look at what's happened over that time and it's it's all all predicting uh that there's no reason why that's not going to continue given the the underlying fundamentals are exactly the same So, look, there's some really good examples there. If we sort of paint the picture of what things are going to look like in 20 years, do you want to put a bit more shape around that?

Yeah. So, I guess I'm just making some assumptions based on previous numbers. You know, if history repeats itself 20 years from now, so in 2043, a national population is likely to be about 34 million people. Now, don't say that won't happen. That's too many people. when we had 7 million people living in this country people were saying we could never survive with 11 million people let alone 20 million people let alone 26 million that we are today

um simply got 34 million uh population we're likely to have a housing stock of about 15 million properties uh the standard house price if it increased let's call it three and a half times over the next 20 years a standard house will be worth 2.7 million that's not a luxury home that's a pretty basic three bedroom you know weatherboard house somewhere in australia 2.7 million dollars so don't moan and groan about housing affordability they were moaning and groaning about that 50 years ago it will it will keep happening uh life expectancy we're going to live longer so if you don't want to work the whole time um the scientists the medical scientists Let's say that the life expectancy will be about 85.

But we're going to have literally millions of people living well into their 90s, hundreds of thousands of people that will exceed a century year old. So if you want to retire at age 60, you've got 30 to 40 years of income you've got to find without going to work. Again, get busy, invest in your future.

And the fact that we're living longer is again adding significant pressure to housing demand because there's more people living longer in some form of housing, which is going to put more pressure on the supply side of the equation as a consequence of that. So we're all heading in the right direction. Anything else to add to that? I think our workforce, we're heading close to this now.

I reckon 20 years' time, one in five households, they will earn their income from home. Yeah. We are very close to that now already. I think a lot of people thought out of COVID, this is a fad that won't last very long. Technology is not going away. If you've embraced work from home and you already love it,

I would suggest that no employer is going to be able to drag you back. So that trend is here to stay. Three out of five, maybe 3.5 households out of 10 will be rented. Yep. But certainly it still will be at least three. I think some lifestyle trends, if you think about an ageing population and technology and trying to crystal ball those things together,

I think telehealth, it's not a standard. thing now um we've tried it during covid i think it will become a standard thing um there will be sometimes when you have to be face to face with a medical practitioner but i think we'll be a lot be doing a lot more diagnosis um by telehealth i think clean foods natural environment home deliveries um yoga um lagree cycling all these lifestyle enhancements some of us um found a are liking to during covid some are already doing that but i think that trend is going to continue superannuation if you are listening to this and your retirement strategy is superannuation give yourself a slap that is not a strategy that is sitting back in a world of complacency

expecting that the money that your employer puts aside and locks it up for you will be enough when you retire we are really close to that access age being 70 or more if you want to exit the workforce before that and your only retirement strategy is super good luck with that oh and with governments seeing this massive growing lolly jar in front of them uh with with uh sinking budgets uh we've already seen that the number of changes that are occurring uh to superannuation legislation so if you think what you're going to do today is going to be the same uh when you get to retirement age you're in for a big shock so if you you're not going to start self-funding your own investment in your future then you really only got yourself to blame

absolutely which leads to my last point on this um age pensions today if we spend 60 billion dollars with a b per annum funding what we could otherwise phrase as back-ended unemployment benefits age pensions why because we don't encourage investing this is not a criticism of old people this is just stating the facts right 60 billion dollars per year imagine if we actually encouraged investing how much infrastructure we could build with just a portion of that right so um living longer the reliance and not encouraging investing the government funded um taxes that they collect that need to be you know pushed pushed aside for age pensions is going to be an even greater reliance so um invest in your in your future

because no one else is going to do it for you. Beautifully said. And what a fantastic run through everything that the past has taught us. So there's some really important lessons there. So I really want to thank you for all of these evidence-based insights, Simon, which certainly reinforce that in terms of property performance variances, what stands the test of time is that the more that things appear to change, the more they actually remain the same.

And it's clear that property is not reliant on one current dominant driver, but is actually affected by a multitude of dynamic factors that all support ongoing growth. In addition, what's really crystal clear to me is that the ongoing opportunity that property will continue to provide for hardworking Aussies to secure their future lifestyle for those who actually learn the lessons of history that you've just demonstrated and are brave enough to ignore the uneducated negative noise that they see in the news that sadly prevents or delays many from getting invested and enjoying the exponential benefits of the magic of time, leverage and compounding returns create is really important that people start now to take some action. So

I really want to thank you for this massive wake-up call and reminder, Simon, for sharing your endless hours and years of expert research and to spend the time doing it here on Realty Talks. So thanks, Simon. My pleasure. Insinkirator. Remember the Insinkirator. Realty Media Group is offering shares in a crowdfunding capital raise, and we invite you to participate. RMG delivers innovation through AI-powered solutions to the $1.6 billion property marketing sector in Australia. With a proven track record, we're poised for growth.

Investment expressions of interest through Swarmer are open now. Don't miss out. Subscribe now to Realty Talk. It's out every week. and that brings us to the end of this week's show a big thanks to simon and bushy for a show packed with really interesting insights and some wonderful and sometimes revealing events from over the past eight decades thanks simon a real lot of work went into putting this together and we appreciate it make sure you don't miss a single episode of realty talk or bushy's get

invested podcast delivered to you each and every week you can do that by subscribing to the property hub now on your favorite podcast player or wherever you're listening to or watching this show also join the conversation anytime on facebook at the property hub collective thanks to our supporters and content partners realty.com.edu bmt tax depreciation know how property finance get rare property and apiro marketing i'm kevin turner on behalf of bushy and the rest of the property hub team we look forward to seeing you again next week