Property Hub - Investment Insights & Inspiration - Realty Talk - No housing crisis silver bullet

Episode Date: August 8, 2024

Anyone going in search of a single, simple solution to the housing crisis will soon learn there is no such thing.  Owen Davis is the founder of Leifield Property Group and he believes we should look at the activities of the suggested perpetrators to find the solution. Emma Slape - a Director of the Real estate Institute of South Australia reveals that the number of enquiries from buyers to purchase residential property outside the state they live in has jumped significantly and a fair proportion of the interest is in properties in Adelaide. 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, welcome to the show. Well, anyone going in search of a simple, single solution to the housing crisis will soon learn that there is no such thing. It's a long-term issue, which has been exacerbated by the short-term issues that have happened during the COVID years. That's Owen Davis, the founder of Leafield Property Group, who believes that we should give credit where it's due and look at the activities of these suggested perpetrators

because they could quite easily be the source of the solution. And then Bushy is joined by Emma Slate. Emma's the director of the Real Estate Institute of South Australia and Emma reveals that the number of inquiries from buyers to purchase residential property outside the state in which they live has jumped significantly. That's according to research by realestate.com.au. And Emma points out that a fair proportion of the interest is in properties in Adelaide.

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 Apiro Marketing. you'll find us on all podcast players as the property hub also on the southern cross stereo network hot copper and on all social media platforms 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 1300 728 726 today for an obligation free quote. Realty Talk and your host, Bushy Martin. Now, over the last couple of years, it doesn't seem to matter where you turn, the housing crisis just seems to be the topic of media conversation and like all complex and dynamic constantly changing environments it's common for us to try and simplify the cause down to just a single denominator. So some are blaming migration, others are building industry and sadly most target the so-called greedy mum and dad investors who actually provide about 80% of rental accommodations across our great nation and they become the convenient scapegoat for

all of our property yields. Consequently, a host of half-baked, ill-conceived, reactive band-aid solutions keep getting thrown around to deflect the blame, and we hear anything from rent freezes and caps to limits on Airbnbs, and these cut-off-your-nose-despite-your-face list of quite short-sighted suggestions just keep coming from politicians and others who clearly don't understand the intricacies of housing and the property industry. But could the wrongly blamed perpetrators of the problem actually be the source of the solution? Well, to get the low down on possible tax reforms and incentives to help the housing crisis in both the short term and the long term, from an experienced property professional who's active in the rental trenches and manages

properties right across the country, we're joined by Owen Davis, the founder of Leapfield Property Group, who specialise in property management across five states and 249 suburbs and counting. So welcome back to Realty Talk, Owen. Thanks again for having me. Owen, I guess to state the obvious, what are the problems and issues that you're actually seeing in the housing crisis on the ground across the country? Yes, well, I mean, first of all, it does vary from state to state and from region to region. The number one issue is people just struggling to find a place to live. it's um let's just take price out of the factor altogether it's people need to put a roof roof

over their heads and if um and that's simply because there's not enough properties um yeah there's parts especially in in in queensland that and you know even though we we're we hear hear this as he say but it's reported to the government that people are living in tents in parks um i mean and families doing this or living out of their cars uh and that that is homelessness and we we shouldn't have that in in this country there is a there is enough land there's enough resources and we shouldn't have people homeless purely because they um there's not enough properties so um that's a problem the the second main issue is is because of that lack of supply the the uh the prices are just skyrocketing and you know i've been in in

this industry and this business for a long time and to see what properties are leasing for now and um yeah it's it's just like wow um and you know it's um and not that they're not worth it from a market point of view because the market does set the prices and the the property owner needs to get a return on their investment um that is comparable to to the level of investment and what the market is willing to pay. But when you look at the incomes that people have got that are applying for these properties, yeah, in some cases there is a huge disconnect.

Yeah, very well said. So I don't want to lay on this too much, but the city that you talked about, what's your read on the causes of that over time? uh i mean there's several short-term um causes um um yeah and we all know about the issues that during the covid years with um supply chain issues and and um delays in getting um uh new developments approved and so on and and bank lending and um and the the the inflation issue that's pushed up pricing of all of the building materials.

I mean, we could go on and on about that, but let's assume we all know about those issues. We've all heard it. But even before COVID, we already had an undersupply issue. Yes. And a lot of that is still stemming from government on all levels holding up the process of approvals. and also all of the government taxes that are involved

on all levels of government that takes advantage of developments and new builds happening. So it's a long-term issue which has been exacerbated by the short-term issues that have happened during the COVID years. Yeah, very well said. Yeah, go on. Thank you.

um so to to move on from there we we there's a lot of things that yes you in your opening you you talked about the the band-aid solutions that the governments have been trying to put on and um well we we do have a short-term crisis that we need to to fix um in the short term but we need to look at long-term solutions to this as well absolutely well said well why don't we jump straight into those because uh i i guess you know you you've mentioned to me uh pre-talking today about uh some potential tax reforms and incentives that you think need to be considered to actually help the crisis both short and long term can you expand on those for us yeah sure uh let's look at the short term um i just talked about you know all levels of government having their

you know hand in the kitty with new developments um and when we've already got pricing pressure inflation pressure pushing up the the the cost of materials for building um taking taking away the the red tape issue of getting these uh properties approved for for building let's make it cheaper to be able to actually build them and the one thing that government has the ability to control is the level of taxes that they put on these things and that that could actually help the inflation issue as well you know they're handing out three hundred dollars putting on everyone's electricity bill um yeah that that's great for a short-term issue but yeah people need to live somewhere well why can't we reduce the cost of housing everyone's saying that housing is costing

so much we can reduce that cost of housing you know we were happy to spend a hundred billion dollars or however much it was um during covid years to lock people in their houses and pay them money to to to not work how about we spend that same amount of money to be able to provide them with the opportunity to buy a house for themselves or to have a house to even rent instead of letting them live in tents in parks that's you know it's that's the first issue that they could do let's take away all of the um uh and to maybe help pay for that let's take away the demand incentives so yeah there's a lot of incentives both federally and and state governments that are that push up the levels of demand so we we need to um help increase the

supply issue and reduce demand so let's give a take away those stamp duty concessions let's take away those cash handouts and let's make properties cheaper by reducing those taxes so that's that's the that's my short-term ideas of some solutions that governments could do love that what about the long term yeah long term i mean this is a bigger picture which you know some people don't like my ideas around this but um you know uh stamp duty and land tax reform it's been talked about to death by state governments um and but no one has had the the gumption and the guts to to actually do it the previous new south wales state government started trialing for first home buyers um that um uh were over and above the stamp duty concessions um for for zero stamp

duty to be able to start paying a land tax instead of um uh instead of a um a stamp duty so that they could spread spread that cost out because we've got a lot of young people with high incomes but next to no savings so um yeah being able to to put that money into a deposit on a property that cash but they've got the income to be able to support an ongoing tax yeah that's fair yeah um but but then you've got the disincentive on the other side for people who have owned a property for many decades um and they've been living there and the the pension system um if they've retired has a disincentive for them to to um not sell and downsize because if they release cash into to be able to invest for their own income then they might lose their

pension and because their principal place of residence which might be a nice big huge house that's worth millions and millions of dollars but they don't have the income to support and upkeep yeah and and uh the upkeep of this property so we've we've got a um a disjointed market from that point of view and so some reform so i'm not saying that we necessarily have to charge a land tax on owner occupied um but that is one option you know it can be tiered um it can be altered doesn't have to be across the board um but you know reducing that barrier to entry to to um get into a property but it's also a barrier of selling a property to downsize yes yeah very good points i think the minimizing that hurdle it is an accessibility hurdle not an affordability

hurdle as you say because it's just that that savings gap that people need to jump over i think the really needs some uh long-term national foresight at the federal level to actually underpin them uh the state governments because sadly the state governments rely very heavily on that stamp duty uh to their programs uh so just as you said just as the federal government was very quick to call a national cabinet to address the health crisis. Why they're not doing the same sort of exercise in relation to the housing crisis

really makes me scratch my head, particularly when you read reports of $40 million being spent just on an advertising campaign to tell us about the 300 bucks they're going to put in our electricity account. You would think that that sort of coin could be much better directed towards these sort of long-term thoughts.

So they're going to ultimately benefit all of us. Yes. So, look, again, only just scratch the surface, Owen, we'll definitely get you back to dive into this and other subjects moving forward. But I just want to thank you for these sustainable solutions to the housing crisis in front of us based on your very hands-on industry expertise.

And thanks for your generous time on the Property Hub today. Thanks for having me and, yeah, be glad to come back any time. Excellent. Successful property investment is a game of finance. Do you have the right team and the right game plan? Realty Talk is brought to you by KnowHow Property. More than mortgage brokers, Bushy Martin and his team of 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, the share of inquiries from buyers to purchase residential property in the state has jumped significantly in recent times, just under a quarter of all inquiries to purchase property on realestate.com.au across the country coming from buyers based in a different state to the one that they were looking to buy in over the last 12 months. And that's a jump of 35%

on the year prior. And my good old hometown of Adelaide in South Australia has been the most popular state with interstate buyers over the last year, accounting for just under 30% of the state's inquiries, which is nearly one in three. So why is this? What's changed and what's driving this growth trend in borderless versus backyard property buying? Well, to reveal what's really happening in relation to interstate interest and the impacts, if any, that it's having, We're joined by Emma Slate, the two-decade property veteran who spent 10 years as a general manager of the Real Estate Institute of South Australia, where she now continues on the recent Board of Directors, alongside her very demanding role as a CEO of Turner Real Estate, which is South Australia's largest property management agency. So welcome back to Realty Talk, Emma. Thanks, Emma.

Now, Emma, interesting exercise and there has been a bit of a change in appetite in this regard. So what's your local take on the changes to the level of interstate interest by buyers and buyers' agents in recent times? I've definitely seen a real uptake in that probably in the last three to four years, I'd say. We're probably starting to see a little bit of it leading into COVID and often it's driven by someone who might have grown

up here still got family here know Adelaide I mean certainly for a lot of property investors knowing the area is important to them and they just can't afford particularly Sydney or somewhere like that so they say look one day I might come back to Adelaide or I love the security of Adelaide I know that it's a really dependable market and so they're turning to it there and we're also seeing now that property prices have increased so much in Adelaide and we're still seeing a very tight rental market that investors with a budget will come along and say I'd love to buy two properties in Adelaide I really think that's going to be a better investment for me both capital wise as well as yield wise rather than buying in Sydney or Melbourne and I think

the Melbourne market definitely has people a little more spooked at the moment so they're definitely turning to Adelaide and, dare I say, Perth as well because that demand is there, the economy is fairly strong and long-term projections show that we are going to have strong demand for rental properties for quite some time with both net migration and also a lot of industries investing a lot of infrastructure in and around Adelaide. Well said.

that sort of relative affordability piece is certainly a strong one. But digging into the details a bit, what sort of property types, locations and price points are interstate buyers and their advocates focusing on? Yeah, we're definitely seeing a lot of people sort of come around and say, what could I buy for $500,000 to $600,000? And that's probably just the cusp of where we would recommend investing. If we have the capacity with the investor to look

at something around the $700,000, we're starting to look at more of a family home in the outer suburbs. So we might be 20 kilometres out of the CBD, but we'd be looking at a probably three bedroom home, perhaps built in about the 1970s. It's going to be in a decent area with strong home occupiers around the area, schools, facilities, all those types of things. So it's going to be a well-performing rental long term if the budget is five to six hundred thousand absolutely we can still make that work but we might be looking at something on a smaller parcel of land we might be a little closer to the city we're not going to get as much capital growth but certainly there's still a lot of good quality units or small houses that we could get perhaps

within 10 to 15 kilometres of the city in that price bracket as well. So, again, it depends how long people are looking to hold and whether yield in the short term is more important or whether they want to see that capital growth longer term being the number one priority. Awesome. Now, I'd love your thoughts on what impact at any is the increased level of interstate interest having on local property conditions

And if so, where and what type, I guess? Yeah, what we're starting to see often with interstate investors is they are really keen to get into the market at a certain price point. They're very unemotional about their buying. So often they might be in the hunt for a property, but they might not be the successful purchaser every time. So turning to the sales side and what we see in that type of business,

we'll see those offers but it tends to be where they're really really keen to secure something sooner rather than later into financial year sometimes has a bit of bearing there if they're looking to reduce their tax but not just interstate investors a lot of investors full stop in our circle at the moment sort of waiting for prices to abate a little bit waiting for bargains I'm not sure if they're going to happen, but they seem to be investment ready. So what that tells us is now and in the next sort of 12 to 18 months, we will see those people enter the market one way or another. So some are looking for more of development sites longer term,

those larger blocks of land that were perhaps built in the 60s and 70s, particularly in those sort of outer areas, looking to perhaps subdivide them into two or three properties so we've also got that dynamic of an investor in certain pockets of the market too particularly when you're talking about relatively flat land that makes it an easy subdivision project yeah absolutely now i guess given that you're on the ground and know the local conditions intimately what's your guidance and advice for interstate interests that are relying primarily pretty heavily

on desktop data and other people's opinions and looking to secure properties that are sight unseen in South Australia. What's your thoughts on that one? I think understanding the demographic of the area is really, really important. Some of the properties that may fall below the sort of 500,000, 600,000

may be an area that attracts a different tenant demographic than would be ideal. perhaps a much higher concentration of tenants in the area rather than owner-occupiers, and that will have an impact long-term on capital investment. You may also find a little more troublesome tenancy. So we would definitely say get to know what's going on in the area, talk to agents about where they see the pockets of different suburbs. And school zones are becoming more and more important. There's a couple of key schools in Adelaide as it would be in every state

and sort of come April, May when the schools are asking for those leases and two years in advance we find those properties very hotly in demand. So if you own one of those there's a price premium attached to that which these days could be between $50 and $70 a week which of course adds up over longer term so getting to know those subtleties is really important um to make sure that you're absolutely maximizing your investment and and return on what is a pretty big commitment long term with property look yeah i really love your insights emma we've only really just scratched the surface on this and and other great local topics but uh i want to thank you for these very valuable and thought-provoking insights and uh thanks again as always for taking the

time to join us here on Southern Cross Austerios National Property Hub platform. Thanks. No worries. My pleasure. Are you curious about harnessing your super for property investment? Propel your future with the enlightening online seminar, The Ultimate Masterclass to Self-Managed Superfund Property Mastery. Reserve your spot now at getrare.com.au forward slash SMSF. Spearheaded by rasty from independent buyers agency get rare properties this master class unravels strategic property investment using your self-managed superannuation fund you know it's not just about learning it's about transforming your financial future through education so embrace this opportunity to enrich your investing acumen enroll now in the free master

class and begin a journey that marries insight with action, leading to a financially empowered tomorrow. Unlock bonus content now as a premium subscriber. Join us for more property news each week with Realty Talk and Get Invested. You can do that by subscribing to The Property Hub on all podcast players. Don't forget to join the conversation on Facebook. Just search the Property Hub Collective and give us a like and make sure you follow us. Thanks to our supporters and content partners, realty.com.au, BMT Tax Depreciation, Know How Property Finance, Get Rare Property and Apiro Marketing. Until next week, all the best.