Property Hub - Investment Insights & Inspiration - Realty Talk - How cultural diversity is shaping property

Episode Date: August 28, 2024

There have been constant calls for interest rates to be reduced as a result of cost of living increases and housing affordability concerns.   So when a property professional suggests interest rates need to go up before they go down, we sit up and listen.  We do that today with Robert Mandanici from Paddington Realty in WA.   50 years ago the majority of Aussie families lived in 3 bedroom 1 living 1 bathroom homes on 1,000 square metre quarter acre blocks in the burbs. How times have changed.  Today the predominant housing type is twice the house on half the block size. So how do you invest for the future?  Bushy gets some answers on that from Aman Sethi, a successful property investor who has amassed a $10M portfolio in 4 years. Subscribe for free to Realty Talk on the Property Hub channel, join our community and get more insights here: https://linktr.ee/propertyhubau 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.See omnystudio.com/listener for privacy information.

Well, once again, well, there have been constant calls for interest rates to be reduced as a result of a cost of living increases and housing affordability concerns. So when a property professional suggests to us that interest rates need to go up before they come down, well, we sit up and listen. And listen today is what we did as Bushy spoke to Robert Mandansini from Paddington Realty in WA. Government have a lever where they can take the foot off the gas just a little bit and let the RBA do their job. You know, 50 years ago, the majority of Aussie families

lived in three-bedroom, one-living, one-bathroom homes on 1,000 square metres. Today, the predominant housing type is twice the house on half the block size. So how do you invest for the future? Well, Bushy gets some answers on that from Aman Sethi, a successful property investor who has amassed a $10 million portfolio in the last four years. Before we start, I want to thank our supporters and content partners,

Realty.com.au, BMT Tax Depreciation, Know How Property Finance, Get Rare Property, and Apira Marketing. You'll find us on all podcast players as The Property Hub, also on the Southern Cross Austeria Network, Hot Copper, and on all social media platforms. Finding the perfect investment property shouldn't be stressful. At realty.com.au,

we connect you with expert buyers agents who do all the hard work for you. Whether you're buying your first property or adding to your portfolio, our trusted buyers agents will guide you every step of the way. Realty.com.au, your gateway to the investment property of your dreams.

Find your perfect buyers agent today. Visit realty.com.au now to get started. Realty Talk and your host, Bushy Martin. Now, since interest rates started rising from their record lows and the COVID settings way back in May 2022, which was an attempt to quell post-pandemic runaway inflation, the cash rate has jumped 13 times from 0.1% to the current rate of 4.35%, which is actually the biggest leap in 30 years.

and it's been sitting on that level now since November 2023. As a result there's been constant calls for interest rates to be reduced as a result of the cost of living increases and housing affordability concerns. In fact at the date of recording there's been more mass media calls for interest rate drops as a result of global recession concerns driven by economic challenges and share market corrections right across the western world. So when we hear a shot in the dark from a property professional who's suggesting that interest rates need to go up before they go down we set up a lesson and rob mandesini from paddington realty and wa joins me now to unpack his raising so welcome to realty talk rob yeah thank you um thanks very much bushy um yeah interesting way

you put it there i think um yeah it's probably we'll put a cat among the pigeons but that's okay i'm happy to stand by that well i i having done a bit of research on your background i know you're to have some good reasons for it. But I guess to set the scene, Rob, can you start by sharing your read on what impact, if any, rising interest rates have had since they started increasing way back in May 2022? Yeah, look, well, I mean, look, we all know the theory. I mean, rising rates should curtail inflation. But I just don't think we're seeing inflation fall fast enough. And look, I come from the position where it's not households who aren't doing the heavy lifting i mean the burden is significantly on households and you know i don't think there's

any secret the burden i think affects um you know younger younger people more than anyone uh you know that burden of younger renters and people trying to get a start in the housing market um and and you know i'm almost at the position now where i'm saying um you know they probably just need to tip up just that little bit more um you know before they come down and and you know i think i think the biggest one there is households are doing the heavy lifting consumers to some degree are doing the heavy lifting um but government i mean government just keeps spending and uh you know government have a lever where they can take the foot off the gas just a little bit and let the rba do their job and you know i think where the timing couldn't be better we've had a

rba um monetary statement put out today obviously rates on hold again i'm going to change my tack a little bit and say it would have been the right call today, I think, you know, in light of the last 24 hours and worldwide market events. But ultimately, I mean, you even see in that statement today, the RBA still holds some concerns around underlying inflation that they just can't shake out. Yeah, very good comments. Again, to set some context there, Rob, do you think increased costs and reduced buying capacities and the related purchase price power that have really resulted from the increases in rates in recent times have had any influence on sales activity? Oh look some influence in some suburbs definitely so you know just speaking from

experience in Perth and let's say some of the outer northern suburbs we've at least seen some purchasing power decrease those still though with substantial savings you know in a good position can still make it happen even with the banks perhaps you know loading a bit of margin in on you know when they're doing their assessments of interest rates a lot of what we're finding though some of those younger entrants where say six months ago where rates were then they could have afforded and they could have made the purchase now can't not because runaway house prices but just because of that margin and you know we're still seeing a lot of banks saying they're not saying no they're just saying no not now so we're seeing a lot of that still I think

happening where they're saying to a lot of younger entrants and first-time entrants you're a good credit risk you've got a good record you've got a good job you've got a good savings history you just need to find a little bit more cash um or wait it out yeah well said the feedback yeah let's sort of and you've touched on this already but uh flowing into rental conditions uh the impacts of of uh interest rate hikes uh on that what what are you seeing on the ground in wa way? Look, so I think we've finally started to see a little bit of a ceiling. I think we've got to a point where, you know, tenants are definitely pushing back and saying, look, I can't afford that. We're seeing that. And on a personal level in my own office, I'm starting to see that when

it comes to lease renewals. So I've had about half a dozen lease renewals this week and a good proportion of those tenants are saying, look, we acknowledge that costs have risen, rates, insurance taxes and everything but we're just at a point now where we can't afford any more or look thank you to the owner i had one recently look a 90 increase and he just said look i can't do 90 i can do 70 he said so if the owner will accept 70 i'm i'm more than happy to to do that deal and look the owner said that's absolutely fine appreciate it they've been a long-term tenant they've got a good track record let's not you know cut off the nose to spite the face but uh we're seeing a lot more of that pushback

and a lot more of those conversations happening. And I just think we've just started to hit a ceiling with rents. Yeah, okay. Well, let's now dive deep into the topic of the minute and expand on your thoughts on why interest rates need to go up further before they actually start coming down.

So look, I'll caveat that with interest rates need to go up further if the government does nothing. and and you know that we've got a federal government in particular um you know they so they've done a few things now they've talked about bringing down energy prices but their solution to that was a direct cash injection the moment you put cash in people's pockets whether you credit it to their energy bill or you make a payment through the payment transfer system whether it's the tax system or centrelink or family tax benefit they spend the money even in my own household I'm going to get a couple of hundred bucks off my power bill so I

can probably afford to go out to dinner next week and have an extra meal out people do that it doesn't matter what doesn't matter what age you are it doesn't matter what income level or socioeconomic background you're from the perfect example the baby bonuses I mean sure they increase the birth rate of you know they did their job but they also put a lot of cash in the economy and and that's what we're seeing now we couple that with the tax cut package now whether you believe in the stage three tax cuts or the delay of those however they carved it up and changed it that's beside the point a tax cut is inflationary now i'm not so i'm not against tax cuts you take tax cuts you couple it with energy credits and you couple it with all these other false stimuli

that the government's putting out there and it does nothing it does nothing but fuel inflation so do i want to see families get slugged with a with another 25 point rate rise absolutely not um but if the government doesn't you know ship up and really stop stop spending then then you know the rba the rba only has one lever with monetary policy they can't do anything else exactly right now well let's dive into that a little bit because uh i think your qualification is really important if the government doesn't do anything else uh because you know let's face it uh putting the burden of spending and inflation on the 30% of people who have home loans is not really a very well-directed measure anyway in the context of a broad-based impact on fluctuating the spending

patterns. What are your thoughts on what other alternatives the government has and what other measures should we be looking at rather than relying on rates to do all the work? Yeah, look, I think governments have to be very careful with, and I'll use the term big builds. I think, you know, that's a very Victorian term, that one, you know, the big build project, roads and tunnels and rail. I think, and again, I'm not just levelling this at the feds.

You know, state governments, you know, have done a great job at causing some of these issues. And, you know, a lot of those are demand-driven issues where, you know, they're taking, you know, skilled labour and taking that on very large government projects with very hefty payrolls. And, you know, again, making it difficult for the rest of us to find trades, you know, you get something done in your own home or we get something done on a client's rental property and it is difficult to quite often to find people to do the work. So there is those, there are those demand drivers as well out there that, you know, have that effect and just keep pushing up prices.

So you've got big build projects, you've got government sort of, you know, spreading money, but spreading it perhaps the wrong way. And look, I think they've got to be more targeted. They've got to be more targeted. Give the help to those that genuinely need it and provide incentive to the rest of us who would do more hours. And we look at, you know, there are people of an older generation who are self-funded who would be happy to do more work, perhaps with a concessional tax treatment, and they'd contribute to the economy that way.

That's a very good way, I think, of also fixing the skills shortage, which in turn, that shortage bringing in more people and i'm not against immigration i'm against bringing people in where we can't house them so we have a skill shortage we need those people we bring them in and that you know again we need immigration to survive but we're literally bringing people here with no homes um you know so we've sort of got this this real vicious cycle you know issue that we're in every state i think is struggling with that yeah yeah 100 okay well uh let's now turn to the reality and and we've just seen the the RBA leave rates on sort of jumping into the future a little bit what's what's your read based on what you're seeing and again this is crystal

balling and there's a thousand different dynamics that are likely to impact on this what's what's your read on what the RBA will actually do when it comes to interest rates in the context of the continued global and national uncertainty and economic challenges that we face so look 48 hours ago i would have still been pretty bullish on a rate rise this month or next month yeah now looking at things you know i almost reversed that position this morning saying i could almost see a very cohesive argument for a cut i think the hold i think they've actually made the right this is probably the first right call i think they've made for you know a good couple of months in a hold and you know there is significant uncertainty um you know there is

something wrong right now in equity markets where um you know there was a bear market yesterday at about what 13 percent and yeah pardon me and and a bull market today at about 10 uh you know so there's global uncertainty obviously around um iran and israel and other middle east players uh you've still got issues in you know uh in ukraine and russia and look people say look they're so far away it doesn't affect us well you know it does and and the world is very well connected um you know and i think the flip side of that we're going to see more people want to come to australia and why wouldn't they i mean it's it's it's a good country we all know that um you know we're we you know we've got some faults but um you know by and large you know a bloody good place to

live we we all know that um but you know bringing that back to sort of crystal balling here and i think some commentary in the rba i think they've basically said you know we reserve all rights was basically the um the governor's statement today she was very much um line ball on on everything i think everything i think you can read into everything she didn't say and you know nothing's off the table yeah um and you know she said that she said nothing's off the table today um you know and i suspect they would have been close today and uh you know i'd gather this they're still balancing that concern of and you know a concern i would have out there is liquidity versus growth. And if growth really does stall, and she pointed at some commentary

around China and economic growth in China, and further stalling there, so I think it's going to be a very fine line. I think today sends a signal to the property market that property is still safe. I'd hate to see what signal a rate cut sends. I mean, that will go wild. But I think it's good enough today every time we get a hold decision the phone rings again people get an interest in buying um i've had multiple buyer agents on the phone already today sort of saying well what have you got what's coming up what are your maybes you know have you got some investors ready to move on uh people of a retirement age is there anyone we can convince to part with their property so um you know it's a good thing very well said uh and you're absolutely right in the

interconnected world that we now live in, which is instant everywhere. If the rest of the world gets a headache, we need to take an aspirin. There's no question about it. So look, I really want to thank you for the quite thought-provoking and somewhat contrarian views, which I think are right on the money in the context of the world that we're currently playing in. And it certainly reinforces the need to be very careful and strategic in relation to what we're doing in the property sphere. And we really appreciate you sharing all of this with us on the Property Hub today. So thanks again for joining us, Rob. Thanks very much. investment architects set you up with a sustainable strategy structured to lower your costs,

tax, risk and stress while increasing your capacity for growth. KnowHow has helped over 1,900 homeowners and investors secure more than $800 million in property wealth. So get set to live more, work less and live your legacy. Want to know how to invest in your freedom? visit knowhowproperty.com.au. This is Realty Talk powered by realty.com.au. Now 50 years ago the majority of Aussie families lived in three bedroom one living one bathroom homes on a thousand square meter quarter eighth of blocks in the suburbs. 30 years later the predominant housing type was four bedroom double living two bathroom double garage homes with outdoor frescoes on 500 square meter blocks so twice the house on half the block size and today

two to three bedroom double bath villas townhouses and apartments that come with or are close to community and lifestyle facilities are experiencing increasing demand now there's no doubt that the changing popularity and preference for different housing types has been affected by affordability over time but there's more to it than this and if you dig deeper increases in the proportion of overseas-born migrants is having a growing influence on housing types styles locations configuration and if you're to be a successful property investor you need to focus on scarce so you need to be securing property types and locations that are in the sweet spot of demand and appeal both now and in the future so what does the future profile of housing look like

Well, given the growing influence of cultural diversity on the cosmopolitan nature of our housing, to discuss this, we're joined by Arman Sethi, a successful property investor who has amassed a $10 million portfolio in just four years, and is also the founder of Jig's Migrant Talent Business, who we interviewed on the Property Hubs Get Invested podcast on episodes 336 and 337 not long ago. So welcome to Realty Talk, Arman. Great to be here again. How are you?

awesome i really enjoyed our chats recently and given your involvement both as a hands-on investor but also intimately involved in the migration sphere i thought very opportunity to get you back and get a hands-on perspective of this issue given its sort of growing influence and i guess to set the scene around that you know since world war ii the proportion of the Australian population born overseas has actually been increasing pretty steadily from about 10% to now over 30% and growing, which is actually the first time this high proportion has occurred since way back in 1893, would you believe? So about 27 million odd national population, well in excess of 8 million are now overseas born migrants. So it's no surprise that Australia is

proudly known as the migrant nation. So to dig a bit deeper into that subject, I'd like you to sort of start by sharing some more migrant demographic stats particularly in relation to trends in the numbers and ratio of migrants in terms of where they're coming from and also where they're choosing to to live like you can you put a little bit of color around that for us yeah definitely definitely um you know from a migration point of view most of them um as you may already expect they they come towards the east coast so i think new south wales is definitely the biggest so sydney and melbourne uh not far behind and you know the reason for that is obviously the job market um you know they uh it's much easier to find jobs

uh because the market is a lot bigger um in those areas and uh you know brisbane and queensland is starting to really catch up and and and develop that job market phase as well and um and then obviously you have the smaller markets like you know perth and adelaide and and they're starting to grow as well and i think you know that's that's one perspective i think the other perspective is that you know some of these cities have already got a diverse um you know demographic and uh when migrants first come here they want to go somewhere where yes it's a new place and it's exciting but there's also some level of familiarity uh you know attached to where they're going and that's probably one of the other reasons that um i think comes into you know people's thinking when

they're making the move internationally. Yeah, very well said. I think the latest stats I saw suggested that about 87% of permanent migrants live in capital cities, and well over half of the permanent migrants are residing in both Sydney and Greater Melbourne. So a big concentration there. Have you got any thoughts around the changing origins destinations for migrants? Because, you know, traditionally Australia saw a lot of people come from England, but I know that in recent times, India, China, New Zealand, and areas like Philippines, Vietnam, and Malaysia, et cetera, are seeing a much bigger increase in those coming in. What's your read and experience on that front? Yeah, definitely. Look, we have seen a bit of a change from that perspective.

um and uh definitely i think india and australia the relations are um strengthening and uh and and that has an impact in terms of you know the confidence levels of uh migrants from from there as well um obviously there was some you know uh challenges with with china and so forth and and you know i think that's obviously being worked through now um so yeah it is it is changing and definitely like you mentioned philippines vietnam thailand uh we're starting to see uh you know a of people come to australia and i think that is going to continue i mean given that if you look at you know say the other uh countries around the world like the us or um you know canada or uk i mean not there there is some challenges that are you know sometimes a lot more significant than

the australian challenges and and uh and because of that reason australia i think will will grow in popularity even more um over the coming years as uh as you know the the right mix of lifestyle and and and also the work culture as well absolutely yeah well i guess sort of given the cultural differences and expectations on where migrants are coming from and we know that and a lot of migrants initially rent before they in position or want to buy a property what's your understanding and experience in terms of the type of accommodation that migrants from major countries are generally looking to rent did you got any thoughts on that yeah definitely i mean i can talk a little bit about my personal experience because you know we were pretty much

the same uh we came here as migrants many years ago now and and we were renting initially in an apartment and you know what we were looking for was yes something that was convenient something with good public transport into the city uh for the work opportunity something that where we had um things like i guess an indian shop nearby and and some sort of indian community there um we didn't really want to go into the uh you know specific like a little india or something like that we didn't want to go into that zone because we still wanted something different but we wanted you know some level of comfort that you know we would be able to you know interact with people um and and go to uh grocery shopping for some of the things that you know kind of have that

comfort element attached so um you know i'm guessing it's pretty much the same i mean when speak to migrants now um they are very similar it's uh it's rare for example for a subcontinental person to you know come to australia and and start living in the east eastern suburb next to the beach so it does happen but it's rare um you know in sydney for example they live in more you know uh diverse areas like whether it's paramount or hornsby or stratfield um you know more areas that are you know quite central but also affordable and um yeah bring that familiarity to the table as well yeah the uh i guess if we we look at the initial shift from rentals to uh owning homes so have you got any thoughts on the type of homes that uh particularly the more recent migrants

from other countries are generally looking to buy and where that might be yeah look um i think again and you touched on this earlier that you know cost is a is a big is a big thing um so you know for most migrants you know getting that two to three million dollar home um as your first property purchases you know something out of the out of the budget and you know if they're looking at more the you know uh you know 500 to say 1.5 mil maximum you're still looking at um either you need to go you know really far from the cbd uh to get a house with land and you know four or five bedrooms um otherwise you're looking at you know a two or three better apartment which is more central and and and conveniently located so i think uh you know people are going more towards

towards that direction yeah no that's good i guess with the the increasing ratio of migrants making up our increasingly cosmopolitan and diverse community what influence do you think this is likely to have on housing types and locations both now but more importantly in the future as you see it yeah so i think look there has been there was a temporary shift uh as part of covid um towards you know the four and the five bedders and and because people started working from home they needed the extra space and and i think there was a um there was definitely a boom in that in that space uh in terms of demand not only for purchasing but also for renting as well because people needed that extra space and i think um you know i don't think it's a long-term

trend um i think now that uh you know more companies are uh you know getting getting people back into the office and and uh there's a strong push from a you know a broader economy perspective to get uh get back to um our pre-covered uh methods um i think that will you know again change towards you know people looking for more the you know convenient two and three bedders like you mentioned earlier and um you know being centrally located and uh and i think people are a lot more time conscious these days and and they uh generally speaking you know people are not in that zone where they want to travel for you know two hours three hours back and forth every day they'll rather keep it to a maximum you know 20 30 minutes and i think that's going to

play a big part in terms of um that change in uh you know the demand long term yeah 100 agree i'd certainly right across the board uh you know australian born as well as overseas born australians are moving toward more low maintenance and lifestyle that's that's focused on the lifestyle elements where they can get out and enjoy and mix rather than be spending time cleaning the house or or looking after the garden and I think that sort of trend is going to continue and I also think that you know the size of the family units has been decreasing pretty steadily in Australia now for quite some time you know I think we've seen a 40% drop in the family unit size over the last few decades which is of course uh leading towards smaller more compact uh properties that have all

the mod cons and the great places to live but uh not having uh acres of space and and massive yards that they need to worry about and therefore can be a bit closer to the action in terms of those lifestyle amenities is that that ring pretty true from what you were saying yeah definitely definitely i would agree with that and uh and people um you know they don't necessarily want to spend one and a half two hours you know um doing the lawnmower um every three or four weeks and and things like that so people are yeah definitely moving towards um convenience and and you know i think that's just not only in housing but across the board you know with um everything's at your fingertips now you know uber uber eats and you know everything is amazon

on prime delivery i want it now so um all those things are you know i think the general uh yeah demographic is moving in that direction yeah perfect uh given your sort of actively uh assisting migrants arriving in the country into jobs and and furthering their careers is there anything that you or your team are picking up in relation to their aspirations and expectations around the the housing element that you think is going to influence what happens in the housing market um look on the on that note not not very specifically i guess we engage with um you know the migrant community in more the early stages so when they've you know coming here obviously going through their visa process assisting them through that journey and then

you know them coming here and looking for their you know job prospects and and so forth so they're probably you know three to five years away from actually um you know buying something at that stage when we're really engaging with them, they're just starting to get their footing and so forth. But I think one thing people are looking at is that, you know, which suburb they're living in, which area they're living in. And I think the preference to kind of choose that proactively when they first strive is, you know, with the level of information and the level of research that's available now. So people are definitely, you know, kind of going with a mindset that if i start living here this could be you know my location for the next you know 10 15

years and uh so they they are being a little bit more strategic and doing that research up front yeah no well said i i sort of want to turn now to uh your perspective from a property investor's point of view and you know you've been very successful in building a pretty substantial portfolio on a fairly short space of time and diversifying that portfolio across the country using your glasses and looking at migrant trends and its impact on housing disgust how does that influence your thinking from a property investors perspective yep um look from a it's not something i've given you know extreme thought into i guess it's always been for me the the prevalent thought that stuck in my head is you know land appreciates

and and you know in value over time and and you know buildings depreciate in in value over time so if you're asking me purely from a you know investment point of view that's been the uh the prevalent thought that why we've you know the investment the core investment properties we've bought have all been on you know standalone land um and with the independent house on on top of that um and uh yeah i mean yeah over time is the demographic change and the preference change going to cause a significant shift um to that formula not working look i have my doubts i think there will be a a correction where you know obviously house prices and independent house prices have gone up extremely uh well as compared to apartments i think there will be a correction

to some degree um to get them back into you know the right sort of parallels um but i don't think you know there's going to be a uh uh you know negligible demand for houses let's put it that i think people still um there's enough people in the in you know in australia that that want the backyard that want the barbecue that want their pets and you know a couple of kids running around and and i think you know that's not going away anytime soon so i don't think there's going to be a major uh decline in in that demand as well totally agree yeah and i think there is you you you're right on the money there's a little bit of catch-up uh there's been such an undersupply of apartments particularly along the eastern coast that some of those apartments in high

demand areas in the right profile of apartments are enjoying some pretty good capital growth in the short to medium term but it's a the water's finding its level again and once we get back into the fundamentals you know the the big appeal of Australia is that it's the space that we get to enjoy and the opportunity to have a piece of that yourself that's big enough to enjoy that with a family but still be in close proximity to what will be lifestyle facilities is I think a big benefit for housing in Australia pretty much right across the country so look I really want to thank you for coming on to share your insights on it and it is quite clear that property investors do need to be taking into account the subtle changes in housing preferences that have been

driven by our ever-increasing overseas-born population as we move forward. And thanks again for joining us on the show today, Alan. No problem. My pleasure. Nice to talk once again. Property deductions can save you thousands of dollars each year. To make sure you maximize 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 1-300-728-726 today for an obligation free quote unlock bonus content now as a premium subscriber

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and Apiro Marketing. Until next week, all the bit.