Property Hub - Investment Insights & Inspiration - Realty Talk: Bouncing Boom! + Deposit Bond Ins and Outs + First Home Affordability Boon!

Episode Date: October 15, 2022

Despite media reports to the contrary, Australia’s property boom isn’t over and Arjun Paliwal from Investorkit is back to unpack why and where. If you're short on cash to cover the deposit on your next property purchase, a deposit bond may be your answer. Grant Bailey from Deposit Assure returns to reveal the ins and outs of when and how you can use them. NSW has introduced changes to Stamp Duty that will minimize the deposit hurdle for first home buyers that will have significant flow-on effects for housing demand in some areas and Rasti Vaibhav from Get RARE Buyers Agents reveals the positive impacts. RealtyTalk is part of the Property Hub podcast channel, your home for property investment insights, inspiration and stories from Australia’s top property experts, investors, leaders and analysts. Subscribe now to get every RealtyTalk episode delivered to you each week for free, and also get full access to Get Invested, the leading podcast for Australians who want to unlock their full ‘self, health and wealth’ potential and get inspired by the stories of investors, founders and entrepreneurs. 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.

Welcome to Realty Talk, the show that brings together the country's most authoritative and respected property experts. Follow us on all the socials and subscribe for updates and exclusive offers. Realty Talk is powered by Realty.com.au, connecting buyers, sellers and agents differently. Hi and welcome to Realty Talk, which is now proudly a part of the new and expanded Property Hub, your home for property investment insights, inspiration and stories from Australia's top property experts, investors, leaders and analysts in collaboration with Piro Marketing and DM Media, Australia's largest independent podcast network. I'm Bushy Martin from Know How Property Finance and we've got more great insights and opportunities for you in this week's show.

To kick things off and contrary to mainstream media reports, Australia's property boom isn't over. And Arjun Palliwell from InvestiKit is back to unpack why and where. And if you're short on cash to cover the deposit on your next property purchase, a deposit bond may just be the answer. Grant Bailey from Deposit Assure returns to reveal the ins and outs of when and how you can use them to your advantage. And to round out the show, New South Wales has recently introduced changes to stamp duty that will minimise the deposit hurdle for first-time buyers. and it's likely to have significant flow-on effects for housing demand in some areas. So Rusty Vibe Have from Get Rear Buyers Agents

reveals the positive impacts and the property opportunities. But before we get into it, make sure you don't miss another episode of Realty Talk by subscribing to Property Hub on your favourite podcast player, where you'll also get two powerful episodes of Realty Talk, as well as the Get Invested podcast delivered to you each week. and make sure you also sign up on the realty.com.au homepage where you'll also get a free copy of my award-winning book Get Invested just for making the effort. We've got a lot of great info to reveal so let's get on with the show. Greetings and welcome. As we're seeing expected declining

median property values in our two biggest cities being Sydney and Melbourne after the recent COVID overshoot, with these two capitals representing a large portion of the national real estate data, where most of the mainstream media also resides, it leads many to think that conditions are weak right around the country. But is this really the case? Well, according to today's special guest, Australia's property boom isn't actually over. Following his team's intensive research, it's been revealed in a recent white paper that analysed Australia's housing fundamentals. So to break down the ongoing opportunities, Arjun Palliwell from National Data Driven Buyers Agency Investor Kit joins us again on the show. So welcome back, Arjun.

Great to be on again. And you're spot on. The boom is not over in many parts of Australia. Yeah, exactly right, mate, which is what I'm really looking to unpack today because the headlines and nightly news would lead others to think differently. So to kick things off then, what are the housing fundamentals that you look at and why, Arjun? Yeah, so property at the end of the day is a behaviour that has two people as part of this equation, the behaviours from a seller's perspective and the behaviours from a buyer's perspective. They're the end outcome of property market movements, whether the up or down, but what drives, influences, creates opportunities, creates lack of all of these behaviors is

fundamentals. And these fundamentals, we split them across what we call demand, supply, and confidence. Now, with underlying demand, supply, and confidence, we try to break these down into, hey, what are the core drivers? And I came up with 25 fundamentals when reviewing the data. Now, these fundamentals were across core categories of people movement, economic activity, finances, affordability, current supply, income supply, and confidence. And all of these had subcategories, which I won't go through every single one, but 25 total key points came out

when our review of fundamentals occurred. And so why these were important to review is that they shaped the many different angles of property that influences those core end behaviors that will make a seller want to list or need to list, which is the core impact for many of those thinking of the scare mongering side of things. And then you have the opposite side, which will make buyers want to buy or need to buy when you get into FOMO. So really that's the behavior is the end outcome. And all of these influence behavior with different weightings attached to them. Yeah, I love it. And what you've immediately done there is made it obvious that rather than the indicator of the hour that the media likes to try and suggest that it's all about interest

rates causing property prices to fall, if interest rates is just one of 25 other dynamic and changing indicators that starts to drive what's happening in property in different locations in different ways, then it starts to put things into perspective. So given that then and applying that to the property conditions over time, how is this placed during our booming year of 2021 versus what we're experiencing now? That's the best thing to do because if these fundamentals are legitimate, if they're real, do they really make a big difference? Why not look at how strong they were during the times of boom? So great question. 22 of 25 fundamentals were either strong or very strong during our peak rates of capital growth. Now, if we added to that 22 open borders,

this would have been 24 of 25 isn't that crazy 24 of 25 fundamentals would have been either strong or very strong when it came to that time so that is where it was when it was there in the peak boom periods now where are we today we are now at 17 of 25 so two key points 17 is still a net positive, although it doesn't factor into account weightings of certain fundamentals. But that 17 to 25 still being healthy is very likely to also have some things that could change very quickly when I touched on one example being the borders. So overall, being 17 of 25 is a healthy position. If I'm passing my school test at 17 of 25, as the saying was, peas still get degrees. So that's the way I think of it moving forward. Love it. Great analogy. So what changes do you

foresee occurring in Australia's housing fundamentals in the short to medium term then, Narjan? So let's track down some of these core fundamentals that I rated as weak. And this is very important. The ones that were too weak ones we rated on the people movement category were net overseas migration and international visitors. So we all know that that is having a lot of pent up demand starting to come back. But what we're having struggles with is actually getting people through, whether it be varying rules across different countries, whether it be backlogs of visas, whether it be, you know, just the actual people feeling like now is the time because of, you know, all that's gone on in the world the

last two years, but the desire is there. So I do see over the short to medium term, although it takes time, these two fundamentals can turn around from weak to actually be strong. I don't think they'll be very strong like they were pre-pandemic for some years. But as we change, as we normalize rules across the country, we do start, across the globe, sorry, we do start seeing this become very strong. So that's the people movement side of things. If we move over to the finance category, on the finance category i do see only once we can find a neutral setting for our interest rates and or the first decline this is where it gets interesting once we see a neutral setting or a first decline i've got two fundamentals we've rated as weak one was borrowing capacity and the

second one was interest rates now interest rates weren't rated weak due to where they are as a percentage. They were rated weak by us due to the rate of change and how much and how fast that occurred. So it's these things, because at the end of the day, if you touch on my first point, behavior is more important for a price decision rather than a number on a spreadsheet. So we need to think psychologically when it comes to property investing. And it's not so much the cost of that money because all our other finance indicators are quite strong. Delinquency rates being as low they are. It's actually the change that causes that sentimental shift. So I think from the short-term perspective, the borders, the interest rates, and lastly, the consumer sentiment index,

these are the three core indicators to see that I think will be those weak ones that we've rated today that may come back onto this strong equation. Now, if I throw to you the final point, well, Arjun, let's play devil's advocate. What about those strong ones? Could any of those strong ones turn weak. Sure. Let's start talking about those too. Because at the moment, we do have strong ratings across many of our finance categories. Example, household savings ratio, new loan commitments, loan to value ratios, bank delinquency. We could potentially see the decline that's already started in new loan commitments. It's still well above averages. So we are still strong position but that could continue to pull away as buyer behavior wishes to slow down finance

take up that could end up being a fundamental that moves from very strong to strong to balanced but it's still got a long way to drop in that curve before it becomes back to longer term averages and becomes weak and lastly you know we have a roaring economy at the moment from unemployment in job advertisements at 3.5% as of June 22, lower since 2008, and 284,000 on job advertisements as of June 22, the highest since 2008. So those things, if the weight of business confidence changes amongst rising costs, inflation, they can start to ease off. But again, they're moving from very strong to strong. And I do also expect them to ease off as our borders open and we get more labor availability. But again, these are moving from very strong rates, historic lows and highs

for job ads to strong. So I still think that the metrics to watch are those visitors, the interest rates, the borrowing capacity and sentiment, because they're the missing components that take us from a 17 to a 21 out of 25 ranking. Yeah, you make some very good points there, because for someone who's as old and crusty as I am, who's been involved in property for 40 years or so, all I'm seeing is things return to normal. But it's the behaviour change that you well point out that affects the perception. And we're seeing a lot of sentiment driven activity given the mainstream media's focus on that. So I think you make some great points there. Getting down to the point again then, what sort of property locations and profile opportunities

are you seeing emerging from this research then, Arjun? Yeah. So what we're definitely seeing is that when we start to spread apart the core supply component data, there are some markets that have returned back to five-year averages of their listing trends. Sydney and Melbourne are the ones that scream out to me to begin with, and some of their surrounding major regional centers. And that to me does say that there is a lot of supply balance.

Now, if there is a supply balance there of a five-year trends, and remember, COVID was not the whole five years. So it does mean that we're balanced even pre-COVID. Any changes in buyer behavior are more sharp in terms of their end outcome of price, discounting, days on market. And so that's clear and apparent. Now, when it comes to the rest of the country, there are so many examples of major regional centers and smaller capitals that still remain anywhere between 30 to 47% in some of our data points, even some cities up to 65% percent undersupplied in comparison to pre-covid so there is a huge supply floor and that's what's going to dictate the pressure or the lack of pressure in some markets because at the end of

the day whilst buying demand is clearly lower nationally we do see supply levels vary so much that relative demand is still a different story from city to city now um you did mention one core part before about media and that big change um to throw something out there we actually came up with a unique data point that's actually only unique to us. We actually reviewed and sat down and reviewed 90 days of data across the top three media producers in Australia. And on the topic of property, that is, from a national presence. So we found that only 24.7% of their journalism over that 90-day period

had a positive note to property. So this clearly shows that there is a clear shift in media cycle. and that's important to note as you think of how sentiment is out there totally agree and uh it's good that you've actually put some uh quantified those numbers i i'm i'm surprised that the it's as high as you're suggesting positive on the positive front because uh i don't listen to much of the mainstream media but it still filters through and uh i think it's it's really interesting that given that focus, what I'm hopeful of, and this might sound a little bit contrarian,

but as soon as the mainstream media finds something else of note to scare us with, then interest rates and property will probably die on the vine and we can get back to normal. But we shall remain to see what happens there. Look, it's always very interesting enjoying your insights, Arjun, and I really want to thank you for coming on and sharing your time with us today. Thank you, my friend. The fundamentals remain rock solid.

Fantastic. Well, it's clear that despite the misleading mumblings in the mainstream media, the fundamentals of housing in Australia remain very strong. And from where I sit, it looks like we're in the eye of the storm when it comes to ongoing property price growth. So it's just a matter of where and what, not when. So if you need further assistance to identify better than average performing properties to take advantage of current conditions, reach out to Arjun and his team at investakit.com.au. Stay with us for more here on Realty Talk. Property deductions can save you thousands of dollars each year. To make sure you maximise deductions, you need to work with the most experienced quantity surveyor in the country.

BMT Tax Depreciation is the leading specialist in the industry. They've completed over 700,000 tax deduction schedules for residential investment and commercial properties Australia-wide. BMT guarantee to find double your fee in the first full financial year deductions. Call BMT on 1300 728 726 today for an obligation free quote. Hi and welcome. Now on a recent episode of Realty Talk, we started looking at the benefits of using a deposit bond as a deposit to secure a property when your hard-earned savings or cash are tied up or otherwise disposed. So if you haven't seen that episode, make sure you have a look at it. And today, we're going to dive a little bit deeper to look at what situations and

circumstances are best suited to using a deposit bond to secure your next property. And to do this, we're joined again by Grant Bailey, the Head of Partnerships at Deposit Assure. So welcome back to the show, Grant. Thanks, Bushy. Thanks for having me. Yeah, my pleasure. Now, Grant, to sort of kick things off, what do property purchasers need to know about deposit bonds? Well, I think that it's just having that knowledge that they're available. I think the big thing is a lot of people aren't aware that the product exists.

Traditionally, it's been distributed as a business-to-business proposition through mortgage brokers and banks, etc. But certainly, I think when I always have the summer barbecue conversation and people ask me, what do I do? I sort of hold up on the back of my phone. i've got the brand and they sort of try and have a stab at what it is so um so there's not a lot of people that are aware of it but certainly when you explain it to them um the the invariably response is gee i wish i had known that was about that when i was purchasing the last property um so i think that's the key is just being aware of it and hopefully things like this can can get the word out about the product um and that is it's just a safe alternative to paying a paying a cash

deposit and as long as you can demonstrate your ability to purchase the property um it's an insurance issue product backed by qbe and it uh we don't take any security off the purchaser so the advantage of that is it can be put in place very quickly indeed oftentimes within a matter of hours it can be facilitated so which is great if there's a you're competing with someone to secure the property or you're going to auction tonight and things of that nature yeah spot on no okay that's great well i'd like to sort of drill down a bit now and look at a number of different scenarios and how deposit bonds can actually help in those scenarios so uh starting off uh let's have a look at the buying and selling exercise how does that shape up well it's just

really um when you're selling existing property um oftentimes you're uh exchanged on on an existing property um and i've personally used the product in this case we'd uh exchanged on a on an apartment and we were looking around for properties and we were actually on our way to an open for inspection, but went past another property that was open for inspection and this was on a Saturday and there was another party interested in the property. All our money was tied up in our existing home

pending the settlement of that home. So we were able to literally that afternoon afternoon secure the deposit bond notwithstanding it was a saturday and we exchanged on the sunday so and took the property off the market so um so it's a great tool if you're whether you're upsizing or downsizing you've exchanged on your existing property that haven't yet completed that sale and realized your funds that hey there's this one we want to secure in the meantime it's a great way and a lot of people use the product in that in that scenario certainly yeah it's a very useful scenario in terms of giving a little bit of advantage there as you just noted in potentially

yeah pipping the post with another purchaser if you can put the cash on the dash by the deposit bond so quickly then that that gives you that advantage so that's a good benefit let's turn now to first home buyers grant where are they deposit bonds useful to them well oftentimes the the first home buyer doesn't have the full deposit that the seller or the vendor requires so So certainly the first-time buyer might have a 5% cash deposit, but the vendor was wanting 10%. Alternatively, the first-time buyer is relying on a family-pledged loan, the bank of mum and dad, and they're lending them, say, the 20% secured against the parent's property, and the first-time buyers are getting an 80% loan against the new property purchased to minimise mortgage insurance.

So in those situations, once again, it's a timing issue. that the 20% to complete on the purchase will be available at settlement. However, in the meantime, the parents might be asset rich, having spent their life paying off their home, have a lot of equity, if not unencumbered, but don't have that cash deposit to put down to secure the property. So once again, if the first time I can demonstrate they've got their mortgage in place, the loan approval in place

for the full purchase price, we're comfortable in issuing the deposit bond off the back of that, the loan approval. Yeah, awesome. Okay, well, let's turn now to investors. Where is a deposit bond of great benefit to them? I think with investors, you have a couple of scenarios. If you're looking at a lot of time, investors wanting to maximize tax advantages, and in doing so, they're looking to purchase and borrow 100% of the purchase price. So in those cases, why put down a 10% cash deposit when for a small fee, you can put down a deposit bond. And then when it comes time to complete on the purchase, you pay the full purchase price. So that's a great advantage for investors, but also purchasing off the plan. A lot of people purchasing off the plan are for investment purposes. Once again, I've used the

product for that purchase buying off the plan. And oftentimes when buying off the plan, the contract will have a a sunset or registration date and invariably that's longer than the actual build time for the projects and the reason they have a sunset date is to allow for things like you know wet weather delays, site contamination, industrial disputes, things like that. So it's beyond the actual anticipated build but if I've I still have to put my money up for potentially for that period so if i'm buying for investment that's a great way um to to use the product instead of putting out my own cash now when settlement might not be till the end of 2023 or 24 or beyond depending on the project and where it's currently at it's a great way to keep hold of your own money and

purchase a deposit deposit bond in that case um when we do issue deposit bonds off the plan we do issued to the sunset date. However, if it completes more than six months before the expiry of the deposit bond date, you will get a partial refund on that if you apply and just demonstrate that you've settled on the new property purchase. So certainly for investors, it's a great opportunity to say putting down your money. As I said, I've used it that way and we certainly get a lot of people that are purchasing off the plan. I'd say around about 70 odd percent are investors that using the product for that purpose yeah are there any other situations uh that we haven't talked about where deposit bonds can provide a great solution then grunt well i think it's mainly for

the for the short-term existing title property it's the the upsizes downsizes first-time buyers and investors and in the off the plan space it's with um investors and primarily investors and certainly there's a lot of downsizes that have moving out of home um and want to get something fairly upmarket we find a lot of the downsizing markets where they're purchasing for two three four million dollars um well as as a retiree i might have funds in superannuation and things like that i don't want to have to access that to put down on on that sort of money two three four hundred thousand dollars when i've got a product like this available so it certainly makes sense yeah absolutely now let's talk about the qualification process in terms of you know what

does it take to actually secure a deposit bond? For first-time buyers or for anyone purchasing an existing title and a registered title property, it's just a case of demonstrating you have the loan approved, subject to valuation, then we can issue the deposit bond. Alternatively, if the loan approval is not where it needs to be, subject to valuation only, we can do our own assessment and issue the deposit bond on that basis. But they need to have equity in an existing property or someone, a close family member who would guarantee the equity in their property for the product.

There are two ways with the short-term product up to six months for registered title property. For off the plan, you have to own an existing property and have equity in it to be approved simply because loan approvals are only valid for about 90 days or so versus off the plan

where we can issue the deposit bond for up to 60 months. So we don't rely on loan approvals. Rather, we rely on an alternative assessment, which includes having equity in an existing property. Yeah, brilliant. Now, there's been a lot of movement in the industry with the digital revolution. Has this assisted the deposit bond side of the equation? Certainly.

Deposit Assure are the only provider of deposit bonds that have a digital bond. And once again, it comes down to the speed of being able to facilitate things for people. So it's a fully digital end-to-end process. So the application that goes out to applicants, they can docu-sign it, they get a payment link to pay it, then the deposit bond guarantee is issued electronically as well. That goes to their conveyance or solicitor, which has an access code, and then that gets forwarded

to the vendor's solicitor or conveyance, which they also have a code. So it's fully digital and secure. and it's a great as I said things can happen in an hour or so from an application to exchanging on a property with a deposit bond application. That's an incredibly quick turnaround so when speed is over the essence that's a great advantage. Final question then Grant, why do purchasers need to consider using Deposit Assure to secure their deposit bonds? Well we've provided of great product through the qbe product underwritten by qbe so qbe are upper regulated

and s&p a a rated as well so there's that security from not only the purchase perspective but also the vendors perspective in accepting the product and the the digital process which is unique in the marketplace we can facilitate the product for effectively anywhere in anyone in australia if they're a resident australia no matter where you are if you have access to the internet we can help you um and aside that we've got a great team support team in place so only this weekend we were referred late friday a um a customer with uh from from nab um the uh customer then reached to us out to us on saturday and they're all very stressed they wanted to secure this property they were selling a property for low twos and buying for 2.84 million dollars um and they

ended up sending the the details to us on sunday morning and funny enough they exchanged on sunday with the real estate agent so um because they were concerned that it come monday that the other party was interested wouldn't get their act together so i think it's that service that we have the team behind it regardless being digital we're able to help them uh secure the property and uh and secure their their new dream homes so certainly upsizing so yeah well what i'm hearing there is it's it's not a monday to friday service you're offering uh people need help uh securing these over the weekend that's still an option as a grant correct it certainly is yes yeah that's that's great to great to hear because a lot of people do their property work over the weekend as we know

yeah so that's awesome well look thanks again for opening our eyes to the opportunities for deposit bonds and thanks again for your time on the show today thanks bushy appreciate the opportunity thanks right well as you can see there are a multitude of situations where deposit bonds can come to your rescue to help you quickly and easily solve the initial deposit hurdle when you're purchasing your next property. So if this sounds like something you'd like to look at, reach out to a good mortgage broker or conveyancer and perhaps reach out to the team at KnowHow Property Finance or get in touch with Deposit Assure Direct on depositassure.com.au. Stay with us for more here on Realty Talk.

Property depreciation is the natural wear and tear of a building and its assets. Property investors can claim depreciation as a tax deduction each financial year. Depreciation is a non-cash deduction. This means you don't need to spend any money in order to claim it. On average, BMT tax depreciation fined residential investors almost $9,000 in first full financial year deductions. Call BMT on 1300 728 726 today for an obligation-free quote. Greetings and welcome.

Now, housing accessibility has been a big issue for many aspiring homeowners for many years now, with the deposit hurdle proving to be a showstopper for would-be buyers as saving rates just haven't been able to keep pace with rising property values. And one of the biggest cost hurdles has been the state government-imposed stamp duty costs, which can add anywhere between 4% to 6% of costs on top of the property purchase price, depending, of course, on which state you're buying in. Now, in response to this, New South Wales has recently announced significant changes to stamp duty that have the potential to unlock a flood of property activity. So, to see what impact this is having and is likely to have on the ground, we're joined by the founder of leading

national buyers agency, Rusty Vybhat from Get Rare Property. So, welcome back to the show, Rusty. Thank you so much, Bushy. It's always a pleasure to join you. Thanks, Rossi. Well, look, getting straight into it, and in very simple terms, what are the changes to stamp duty in New South Wales and when are they coming into effect? Sure. So the latest NSW government budget included a very groundbreaking

new policy to offer first-home buyers, in particular, the choice to pay a one-off lump-sum tax, referred to as stamp duty, or an annual land tax when purchasing homes under a certain value. So essentially, it's just giving an optionality that do you want to pay one-off stamp duty, which we have been paying, or pay on the regular basis, annual basis, particular land tax. So it basically dissolves the issue for the people who are struggling to put their deposit together and the stamp duty together to get in the property market. Now, with this choice, they can choose to only save for the deposit money and pay annual land tax moving forward. So this is coming from 16th of January as a choice that will be offered. But having said that, it's already out there in legislation.

What it means is that for someone who's buying now, they have to pay a time duty, but come 16th of January next year, 2023, they can claim it back and choose to go and pay on an annual basis. Can you give us an example of what the quantum of difference is between the lump sum and the sort of annual figure that they would need to pay? Sure. So if you look at for New South Wales, average drilling price is about $1.2 million. Now, if you have to go for a stamp duty one-off payment, you're talking about something in tune of $50,000 one-off stamp duty. The new rule says that you have to pay, if it's your first home, one has to pay $400 plus 0.3% of anything for the land value over there. So roughly, if I have to do quick maths,

I should have been more prepared for this, probably paying about 4000 or so, I would think, for that kind of number. That's a massive reduction, which, you know, potentially could open up a field of opportunity for those who are struggling to put the deposit together. So as a direct flow on from that, Rusty, what impact do you think this is going to have on property purchases in the short to medium term? Sure. So just on that very quickly, the first one, like, you know, like people on average are saving about 4.5 years of their annual savings to get to their deposit and then another one and a half or two years for the stamp duty but if you take that off it's actually allowing

people to get in the housing market sooner yes so that's a great good savings and of course i'm talking about 20 savings here certainly allows you to get into and that's the whole concept of this legislation to make it affordable for the people to come in in the market now if you understand the whole concept of this making it affordable it what it does is it actually makes it affordable and the demand actually goes up what it also does is the prices also go up because the equation of economics 101 more more demand and probably pretty much the same supply the price will go up so it's a very good solution for maybe an immediate solution to ease up for individual that they can go in the market but overall it is actually pushing up the pricing

in the long mid to long term so be mindful of that now my understanding isn't correct if i'm wrong here rusty but this applies to property purchases up to a maximum of 1.5 million 1.5 million it is that's right in south wales yeah okay so what types of properties and locations and areas are likely to be most affected by this do you think yeah so i'll probably give one more difference of understanding i mean i thought it's much more cleaner for me to put it this way that the standard is calculated on the purchase price that what we are transacting on however the proposed uh property land tax is actually calculated on the unimproved value of the land alone so it has nothing to do with the building value yep so for example if i'm buying a property

as an home like a landed property of 1.2 the standard is about 50 grand but if i talk about just the property with the land value and then i'm just paying the tax on the land value now essentially it is making the market distorted in a way because now really people have to think through and also there's another difference is that this is only offered to the home buyers especially first home buyers yes now if you go and go as an investor there's a different pricing as in the way it is calculated so it's kind of encouraging one particular segment which is again politics is about making it affordable for the first home buyers, but then kind of not really penalizing, but it's like putting it out there because it comes as a choice. It also says it's

a choice. It means that if depending on how long I want to hold that property for, typically the assessment that I've actually read through, if somebody is holding the property for more than 15 years, probably they're better off paying the stamp duty upfront the way it has been compared to paying small chunks every year. Now, it's again distorts in a way because if someone is thinking about holding it for short term, maybe going there as a renovator or flipper,

it makes sense for them to take the exemption and pay on an annual basis and then don't really worry about it. The best part of it is that in general, stamp duty is a very distorting element of the markets as in the transaction because there's additional transaction cost. The buyer is selling, sorry, buyer is buying it, seller is selling it, but there's a lot

of leakage and standard is being one of them. When we take it off, it just makes it easier for the transaction. Now, what it does, so what it also does is that, for example, like a young couple who wanted to buy their dream home, until recently, they would be thinking about buying a big, decent home for themselves so that they don't really have to transact multiple times. so they probably might go for a four-bedder home but now they understand that they can afford only this much so let's go and buy a small home until they start raising the family then they can go and upgrade themselves because transaction cost is low similarly for the old age people like who

don't really have to downgrade they can potentially now downgrade because they see the value of you know less holding costs because the land tax is value it's a proportion to the land value of the property yes so the reason i'm sharing all of this is because that can actually help us lead into some conclusions that the transitions are actually will be more openly done there one has to really be careful about what choices they are making as an example if you buy a landed property has a house there's a land tax component significant i mean there's some land tax right but if you go and buy an apartment where you're holding off your land value is pretty much insignificant relatively speaking there are the land tax will be minuscule for them yes so there's

a more of a kind of if somebody's thinking about investing in a home investing versus buying an apartment the distortion in this would only lead me to think that i should be buying an apartment for me to live in so one has to be very careful that it's it's one factor and only one factor one has to be really be mindful as a savvy investor or savvy household what they really want to do because government job is to make it affordable and they are doing the right thing for themselves but we individual have to take care of our own household balance sheet more than any other thing totally agree yes yeah that's a that's a really good summary and and a really good uh dive into the flow-on effects and potentially the unforeseen consequences that might come out of

this. But it's certainly going to free up the ability for more property transactions to occur without that hurdle in place. So some pretty exciting times ahead. If we look at the initiative that New South Wales has sort of really been innovative in this area, do you see this being like to be adopted in other states and territories around the country, Rusty? This merits and demerits to both sides. So first of all, stamp duty serves as a very good source of revenue for the government.

So we have actually New South Wales in general has probably achieved about $2.5 billion as a revenue collection from stamp duty. So our New South Wales Premier wanted to go a bit more harder and really make it easy for everyone. But because of the balance sheet, he had to restrict this offering only to first-home buyers. As I said before, this initiative by itself certainly makes it affordable because you don't really have to save for your stamp duty. But then at the end of the day, it's not really helping the cause of making housing affordable because it's serving only one segment.

So there are merits to both sides. ACT in general have already taken the way of like decommissioning the stamp duty over long periods in 20 years whether other states come to the party or not this is this is a debate going on there might be the case maybe they just really want to see that how New South Wales fare first in my mind then probably they might take a bit more informed I guess decision out there certainly matters for someone to consider for sure yeah no well look that's been a really good deep dive into the situation there, Rusty. I really appreciate these very timely hands-on observations. And thanks again for your time on the show today. My pleasure, Bushy. Thank you so

much. Thanks, Rusty. Well, as you can see, the significant stamp duty reduction in this property accessibility cost hurdle will have positive impacts for a host of buyers with flow-on effects for home price points, types and locations, which is very fertile ground for both owner-occupiers as well as investors. So stay with us for more here on Realty Talk. Now, before I leave you, here's a couple of thoughts from me. Firstly, it was really great to see the Queensland government has shown the common sense to buckle under the pressure to suspend their idiotic interstate investor land tax changes, with a big thanks to PIPA, PICA, and the Real Estate Institute of Queensland for helping to make this happen, and RealtyTalk has

been a very strong supporter and amplifier of their voices. It's really good to see that the power of the people still has an impact. Secondly, and on a completely different note, if the federal government is serious about curbing inflation and reducing the rising cost of living by continuing to increase interest rates without property values continuing to fall in many areas, then it's time they asked APRA, which is the Australian Prudential Regulational Authority that polices and enforces bank lending policies, to investigate reducing the 3% loan servicing buffer rate that's added on top of current rates to ensure that you and other borrowers can afford future rising rates. Now, while it was understandable why the safety buffer loan servicing assessment rate was

increased substantially when rates were at historic lows, adding another 3% on top of the current average discount available rates of around about 5%. The results in a loan servicing assessment rate of 8% plus doesn't seem to make a lot of sense in an environment where RBA rate rises are actually starting to run out of steam. And this 3% artificial buffer is having a substantial effect on reducing your borrowing capacity, which also reduces how much you can pay for a property, and hence is part of the reason why home values are falling in some areas and for some types of property. So to raise rates, to reduce spending and calm inflation

without seeing the values of our properties fall, why not revisit and reduce the 3% servicing buffer? That's more food for thought. And that also brings us to the end of this week's show. Another big thanks to our guests, Arjun Palliwell, Grant Bailey and Rusty Vypav. And to make sure you don't miss another episode of your trusted voice for all things property,

subscribe to our property hub on your favourite podcast player, where you'll also enjoy the Get Invested podcast delivered to you each and every week. And make sure you also sign up on the realty.com.au homepage to get a free copy of my award-winning book, Get Invested. And while you're there, make sure you check out one of Australia's most extensive range of properties for sale from over 7,000 real estate agents nationally, where you'll even find properties that just aren't listed anywhere else. Thanks again to realty.com.au, BMT Tax Depreciation, Appiro Marketing and DM Media for their ongoing support. I'm Bushy Martin from Know How Property Finance. Remember to always get invested in your knowledge before you get invested in your property

and I look forward to seeing you again next week. Miss something in this week's show or want to catch up on past shows? Do it anytime at realty.com.au where we connect buyers, sellers and agents differently.