Property Hub - Investment Insights & Inspiration - Realty Talk: Short term thinking on long term property problems

Episode Date: July 14, 2023

The problem with politicians making decisions is most times they are short term thinkers - normally their own term.  There are no quick fixes to rental shortages and housing affordability.  If politicians can’t do it, we ask the question about who is best to frame thinking around long term solutions.  We try to come up with some suggestions you will never hear from pollies and we attempt to apply some sound reasoning behind future direction! NEW – Join the Property Hub community on Substack! Sign up to get Australian property news, opinion and episodes in your inbox: https://propertyhubau.substack.com/ Subscribe to RealtyTalk on the Property Hub channel: Apple Podcasts | Spotify | Google Podcasts | Email Property Hub is a collaboration between Bushy Martin from KnowHow Property, Kevin Turner from Realty, Andrew Montesi from Apiro Marketing and Apiro Media, and Australia’s largest independent podcast network DM Media. Business and partnership enquiries: [e-mail] omnystudio.com/listener for privacy information.

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, one of the shows on the Property Hub, distributed by DM Media. You're going to find us on all podcast players and through the Southern Cross Oz Stereo Network. Realty Talk is Australia's longest running property podcast with over a decade of presenting property investment insights, inspirational stories and unbiased advice from Australia's top property experts, leaders and analysts.

So what have we got for you this week? Well, when it comes to ways to optimise your property borrowing capacity, it pays to be curious, to be questioning and to think outside the box. That's according to Andrew Courtney. You need to kind of prepare for the worst and capitalize on the upside because everyone can talk about blue skies. But the problem is, have you actually stress tested the current scenario that you're in so that you can understand what will happen at worst case scenario? Andrew explains in his chat with Bushy that it's best to have a standalone loan structure that avoids any cross securitization or cross collateralization. That's hard to say. Make sure that you've got those in place.

You're going to get some out-of-the-box suggestions from Andrew as well today in the show. Bush is also joined today by Airbnb super host Jules Rolnik, who says measures introduced by local and state government bodies aimed at limiting short-term accommodation as a way to force more properties towards long-term tenants is not the answer. And, in fact, it could even be unworkable. There's no rules and regulations in place. Okay, 180 days, can live with that possibly.

All of a sudden, bang, bada, bing, the government councils have brought in or want to bring in, oh, we want to just cut that down to 60 days. Well, where does that leave me as an investor? So what does she suggest? Well, we'll find out today. As a measure of housing affordability, there is a lot more to what influences property prices

than just household income levels. That's according to Stuart Weems. Passy has increased significantly by about threefold since the early 80s or the mid 80s. And that's really been thanks to banking deregulation, greater competition. The internet has certainly helped that. So it means that I can leverage my income to a much greater extent today than what I was able to do 30 years ago. And I think that's made a really substantial contribution to property price growth historically.

Despite the scary headlines about how unaffordable property is, people continue to buy and to sell. So is it all about how much we earn or how much we can actually gear? What are your thoughts? Some really great questions that Bushy and his guests will set about answering today. So if you like the show, make sure you hit the subscribe button and help us continue to bring you the very best guests. We'll be back in just a moment as Bushy kicks off our show with Andrew Courtney. 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 Realty Talk and your host, Bushy Martin. Now, if you've been listening to Realty Talk for any length of time, you would have heard me say that when it comes to building wealth through property, your buying capacity is your scarcest asset and your most valuable resource. And this has become even more important and critical to your ability to secure property as rapid rises in interest rates and the bank's addition of the 3% servicing buffer to your current interest rate has meant that your buying capacity

has likely plummeted by over 30% over the last 12 months. So if you're a property buyer or investor who's reaching the limit of your borrowing capacity, how can you improve and optimise how much you can borrow and how much property you can buy moving forward? Well, to further open your eyes to ongoing opportunities, we're joined by Andrew Courtney for part two of our special feature

revolving around the doubling game. Now, Andrew is the co-founder of Plenitude Wealth, a multidisciplinary financial advisory firm. So welcome back to Realty Talk, Andrew. Glad to be back, Wushu. Andrew, we're really looking forward to sort of diving deep. We had a great conversation about the Dublin game recently. So for those who are listening in who haven't seen that,

I strongly suggest they go back and have a listen to that. But jumping into the borrowing capacity subject, it certainly is the talk of the town in recent times. So to set the tone, what are the biggest influences on borrowing capacity? Yeah, well, there are two biggest influences. There's, I mean, in the helicopter view is the income and expenses. It's really as simple as those two, right? So you've got to ask yourself, well, how can you make more income? For most of us, unfortunately, income's capped, right? And we're getting bonuses and that kind of thing. And unfortunately, we can't double or triple our income in one year. Most of us can't anyway, right? So therefore, we need to have a think about, well, how do we lower our expenses? Unfortunately, right in a time of inflation, just like where we are right now, it's very, very difficult to do that. But one of the key things you may want to consider is have a look at have a deep dive into your day to day expenses and look at your credit card statement, look at that limit of yours, right? look at your personal loans all of those kinds of things and make sure that you lower those things if not get rid of them as best you can especially if you're looking to increase your borrowing

capacity in this current stage yeah absolutely spot on so sort of going a bit further of that why is borrowing capacity important in the context of the doubling game that you've shared with us previously on the show yeah sure because look property is a beautiful asset class here in here in Australia, you can actually lever up dramatically in property, right? You can go as high as 100% LVR, loan-to-value ratio, on the properties that you acquire, right? So the beautiful thing about this particular asset class is there is no margin call, especially in residential, right? So what you can utilize this thing within the doubling game context is to amplify the return on investment. So instead of going for the share market and averaging 10%, 12% per annum, what you can do

you can average 25%, 40%, 70% per annum, depending on your loan-to-value ratio, right? Therefore, like you said earlier, it is your scarcest resource. You need to make sure you plan for it because if you spend it all at once, most Aussies, unfortunately, fall for this trap of buying the biggest and best property

they can afford to live in, right? Unfortunately, they get stuck and they don't realize five to seven to 10 years of inaction builds up millions of dollars of opportunity cost yes the old uh taj mahal owner occupied home can be real golden handcuffs in in that capacity so tell us you've touched on this already but how can property buyers then improve and actually maximize their buying capacity improve well what you need to do is you need to make sure that your yields are high enough right your yields are higher because if you're buying in a let's call it a capital city at the

moment you're getting two and a half three percent yields right so that's a real challenge because you've got a massive hole in your pocket especially if you've got an investment property or sorry i should say especially if it's your principal place residence right so one particular strategy is reinvesting right i'm sure your audience know all about reinvesting but it's one thing that we need to talk about even more because you need to the investors out there who are looking to grow their wealth faster, need to hold their breath for as long as possible, build a robust property portfolio that ideally pays for itself ASAP, right? So there's the yield play. And then there's a small renovation. There's small little tactics like adding an air con,

right? Lick of paint, new floors, potentially not necessarily brand spanking new kitchen, just a new lick of paint on the kitchen, potentially a new benchtop. These are the little things and definitely um manicuring the lawn making sure that a bit of landscaping is spent but it's amazing what you can do to increase the yield of the property thereby allowing you a little bit more cash flows in your back pocket thereby increasing your borrowing capacity once more right in a time right where we are right now it's very very difficult to do that but every single dollar counts so what you need to ask yourself is how can you increase the yield in that property so that you can get more buying capacity back absolutely spot on i love that now

work that's something i'd like you to unpack for us a little bit because there's been a lot of industry talk about creating limitless buying capacity by using special purpose vehicles and individual trust structures as their purchasing entities can you give us your thoughts on the pros and cons of this approach and and a little bit of detail around what that looks like yeah sure well look the the pro is yes you can get unlimited borrowing capacity but it's not right now right it's over a certain period of time because a lot of people tend to kind of spruik this idea that you can get it right now but unfortunately not all of us have a ton of cash in our pocket and putting they're happy to put in 25 30 deposits down to get the unlimited borrowing

capacity right so so the challenge the con associated with the with with uh acquiring under a trust is the fact that there's a cost associated with establishing it along with a cost for compliance on a year-to-year basis similar to your personal tax returns you have to lodge a tax return on a year-to-year basis right so what happens is it's it's a bit of a cost and you need to kind of weigh out how you can utilize this particular strategy to ensure that you're utilizing your scarcest resource your borrowing capacity right i'm in i'm all for it to be quite honest I think it's absolutely worthwhile if you use strategically, and more importantly, if your horizon, your long-term time horizon is 10 to 15 years, right? Because if you're looking at one or two years, it'll probably cost you too much, right?

And it may not work for you, depending on how deep your pockets are, right? So it depends kind of answer, and I'm sure your audience hates this kind of answer. But at the end of the day, without knowing your full circumstance, it's very difficult to kind of make a judgment call on how it works for you. But as a broad-based statement, it's absolutely worthwhile considering it as part of your investment strategy moving forward. Makes sense. So looking in from the outside on what you're saying there and paraphrasing what you're suggesting around this, that if you are able to buy a property in a trust and providing that the trust with the property in it is positive cash flow, so effectively the property and the trust are looking after itself on a standalone basis, then what you're saying is that the the lenders can excise that particular property from your personal buying capacity and therefore potentially able to increase your buying capacity and your

purchasing power result but the the key exercise you've just mentioned there from what i'm picking up is that to get into a positive cash flow position it generally means you're going to have to substantially increase the deposit or the equity that you contribute to the property to enable it to remain in a positive cash flow income position. Am I reading that right? Absolutely. And, yeah, you've definitely read between the lines,

so I thank you for that. So, yes, the game is to replenish. So it's not necessarily unlimited borrowing capacity. It's more replenishing your borrowing capacity by asking the bank, saying, Are you okay for us to excise that particular side of the equation, financial equation, from our personal financial equation so that we can go again and become directors of another trust or of another corporate trustee, I should say, and acquire another property with our newfound borrowing capacity that we've recently replenished? Yes. So certainly an extra feather on the bow that potential property investors and buyers can consider obviously means talking to an accountant and engaging the right lender who's open to that strategy, because I'm sure the mainstream banks, it's going to be a little bit beyond their understanding and risk tolerance in the general format.

But again, taking into consideration each individual's personal circumstance, worth investigating at the very least. Now, just to close out the topic around this, because while we're always focused on rewards, there's always risk attached to everything we do. So what are some of the risks that borrowers need to be aware of when maximizing their borrowing capacity, Andrew? Yeah, well, look, I think in the end, the first port of call is understanding that you need to have a buffer in place. You need to have emergency funds and you need to stress test your current property portfolio in terms of the interest rates that you're currently on. Obviously, we've had a massive run of interest rate hikes, and we're feeling the pain at the moment. But, right, it's not the end yet, right? We might have one or two more, right? So you need to stress test by one or 2% at the very least, and make sure that you've got some funds available. Because if you're going too hard too early, you might put yourself in a position that you don't, that you may regret in the future, because you may have to sell one of your properties, right? If you're forced to, you may have to, right? And if you're forced in that particular corner, you may be negotiated down because you're forced to sell one of your properties. sell and the banks may take a lower offer right so you don't want to put yourself in that in that position right so essentially the risk is making sure that you've got a buffer in place so that

when the interest rates increase right you're completely fine right obviously you need to have a buffer in place and make sure that after you've done the building and pest inspection line up a ton of line items or that you can chip away at for maintenance purposes in years one two three four and five right make sure you budget that out on a year-to-year basis as part of the cash flows of that particular property because something may happen and if you can see it coming guess what you can plan for it and make it a hell of a lot easier all right so that's the big thing you need to kind of prepare for the worst and capitalize on the upside because everyone can talk about blue skies but the problem is have you actually stress tested the current scenario that

you're in very very important to stress test so that you can understand what will happen at worst case scenario absolutely beautifully said and i really want to thank you for sharing these innovative insights on this capacity critical subject andrew thanks again for your time on the show today looking forward to the next one thank you andrew well if you'd like to learn more about the dublin game and what uh andrew can offer you in that regard check out plenitude wealth.com.au and as you've just heard when it comes to optimizing your buying capacity and property purchasing power so you can take advantage of the doubling gain you need to be curious questioning and think outside the box and incorporate all of the means and methods at

your disposal so that you can continue to build your wealth and your asset base but reinforcing andrew's word of caution do it safely and don't overextend yourself on your borrowings by building in rainy day reserve buffers having a standalone loan structure that avoids any cross-securitization or cross-collateralisation, play the long game and have clear exit strategies in place. In other words, again, as Andrew has just said, make sure you plan for the worst and then hope for the best. Stay with us for more on your Property Hub's trusted voice

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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 exclusive to The Property Hub. As a result of growing concerns about the permanent rental crisis around the country, many councils and state governments are looking to adopt draconian, knee-jerk, reactive measures to limit short-term accommodation as a way to force more properties towards long-term tenants. Brisbane City Council is now charging homeowners who list an entire property on platforms like Airbnb and Stays 50% more on their rates. While Warrnambool City Council in Victoria recently introduced a $400 annual fee for short-term accommodation providers, and the Victorian Government is now considering introducing rental caps and new taxes on owners of Airbnbs and vacant properties. In New South Wales, short-term rental accommodation has already been capped at 180 days a year in a number of local council areas, including Greater Sydney, Ballina and Byron Bay. And the Byron Shire Council has also sought to further restrict the number of days that non-hosted short-term accommodation can be rented out for down to 90 days, with the Independent Planning Commission recommending this be dropped to just 60 days, which is just over one night a week.

How ridiculous. But will this be another case of biting off your nose to spite your face? Well, to discuss this issue, we're joined by Jules Rolnick, an Airbnb super host, who's the author of the award-winning book, Secrets of a Superhost, How to Become an Airbnb Rockstar. So welcome to Realty Talk, Jules. Hi, Gushy. Hi, everyone. It's going to be a great topic, and there's a lot of nonsense going on in this space at

the moment, as I've sort of alluded to, Jules. But as a fairly new Byron Shire resident, what are your thoughts on the Shire's move to cap airbnb non-hosted stays down to 90 or perhaps even 60 days a year yes i am fairly new in the byron shire but yeah it's an interesting topic isn't it because i can sort of see both ends of the spectrum you know by especially in the byron shire it's gone absolutely nuts with short-term accommodation which has had the flow-on effect of pushing locals and long-term renters out further and further which in turn has a flow-on effect for the retail trade the the pubs the clubs the bars i was in byron the other day and i was actually in shock i was

walking down can't think what street it was but there was about four retail outlets that had closed down so i can understand from a community perspective how difficult it is um to have all these short-term accommodations go crazy and there's not much accommodation for locals and long-term tenants but on the flip side i can also see from a perspective as an airbnb host you have purchased a property and for a lot of people they buy property to have as a short-term accommodation they're not living on the property they haven't got it as a holiday home they purely buy for that reason and why not and it has gone absolutely gangbusters here in the Byron Shire the difficulty is say for example I bought a property and I'm buying it

purely as an investment for short-term accommodation. There's no rules and regulations in place. Okay, 180 days, can live with that possibly. All of a sudden, no consolidation. Bang, bada-bing, the government councils have brought in or want to bring in, oh, we want to just, you know, cut that down to 60 days. Well, where does that leave me as an investor?

Really, can I swear? Well, absolutely right. My concern, Jules, is that there's this, I think, misguided belief that getting ready short-term is going to open it up for longer-term rental, but I think there's a bigger implication, and that is it's likely that those that have bought it, assuming they're going to get some short-term accommodation income, will sell the property to owner-occupiers,

which is not going to improve the rental situation at all. What are your thoughts on that? yeah yeah absolutely it certainly will i mean um when you look at it from an investor's perspective what are they supposed to do as they've bought this property they've got 60 days to rent it out what are they going to do for the rest of the time even if they rent it out turn it into a long-term rental um investment they're going to lose because the short-term income is so vastly different to a lot, you know, long-term income, and they might possibly have to sell their house, and that's just, yeah, that's not acceptable, I might think.

What other impacts do you think it's likely to have, Jules? Well, with the way the market in general has gone, and the rental market, even if short-term accommodation is narrowed down, people can't afford around the Byron Shire, how can locals afford, what they could probably afford three, four years ago before the pandemic, before the increase, is how could they even afford to live in the Byron Shire? So that's something to think about. Yeah, very good point. So from a host perspective, what, if anything, can current short-term

stay accommodation hosts do about these proposed changes, do you think? A zippo. Zippo. Because we're at that mercy of the regulators in my opinion if they would have a conversation or give investors you know time and you know you just get sort of thrown oh we're gonna we want to have 60 days we want to cut it back from 190 days days to 60 days well what about a conversation what about um investors having some notice rather than just being thrown out, this is what we're going to do. I just think there needs to be more dialogue, more communication,

and that's just not happening at the moment. Totally agree. Yeah, one thing that I am going to suggest people do who are in this situation, the Property Investors Council of Australia, which is the voice of property investors across the board in this country and a national lobby group uh if if there are short-term accommodation posts here that aren't a member of picker jump on board because they do have dialogue with government at levels and the more people that join that group the bigger the voice they have the more opportunity there is

to get governments at all levels to sit up and take notice so definitely suggest people do that um jules given what's happening with the the so-called rental crisis around the country Do you think this is a sign of things to come in other areas around Australia? Absolutely, and across the world. I mean, it is already happening, as you mentioned, in Victoria, in Queensland, in all states. This is a crisis. The housing market is a crisis. The homelessness is a crisis.

So this is going away, and this is just going to get bigger and bigger until it hits the tipping point. And, yeah, so I don't see in the foreseeable future it getting easier. Agreed. What's your thoughts on any better alternatives and options that can balance the tourism versus the resident accommodation needs then? Look, I think, I mean, at the moment, you're sort of stuck between a rock and a hard place. And I go back to, again, the dialogue between government and investors

and that sort of, I can't say long term because at the moment I just think you know we're sort of in that situation but I certainly think that we certainly need to there needs to be change on a grand scale and we shall see where it goes interesting times look I really want to thank you for these very sobering and balanced insights Jules which reinforces that my belief that reactive responses that treat the symptom rather than looking at the cause are actually likely to result in much bigger unintended consequences.

So I encourage everyone to check out secretsofasuperhost.com and your business, Sliding Doors Consulting. So thanks again for joining us on the show, Jules. Thanks, Gautam. 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. Know-how 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 now back to realty talk and bushy martin now median commentators often refer to the price of property relative to household incomes for example it's estimated that property in melbourne and sydney now costs more than 10 times the median household income But is this really a meaningful measure? Because if it is, property can't continue to grow at a faster rate than our incomes.

And if prices continue to rise faster than income, how's property going to remain affordable? Well, to shed some proper light on buying capacity and what really drives property prices, as well as what we need to be focusing on when investing in property moving forward, we're joined by Stuart Weems, an accomplished author and the Director of ProSolution Private Clients, a multidisciplinary financial advisory firm. So as always, welcome back to Realty Talk. Stuart. Hey Bushy, great to be with you. Always is mate and I've picked this topic up from some of the great blogs that you've written on your website in recent times but to sort of put some context around the discussion on this today. What factors have driven property prices higher in the

past? Yeah, it sort of makes sense to us that property growth should be linked to incomes because the thesis is how can you afford to pay more if you're not earning more? And that's always been people's worry is when we do equate property prices to incomes, we see that they're outgrowing incomes. And so, of course, the natural assumption is, oh, well, property prices can't continue to grow. And that's really been a consistent observation over the last, well, I've been in this business more than 20 years, probably longer than that, but I've only been paying attention for 20. But the problem is what you can't argue against, Bushy, is that people are still buying properties and they're still paying more. So we can't argue that they're unaffordable. What we

can argue is that they're less affordable to some but they're still affordable to many so we can't get sucked into this idea though hang on property prices can't keep growing let's ask ourselves how are they growing and what cohort is able to to buy them so i think if we look at what has driven property prices over the last say 20 30 40 years i think income's made a contribution and i think earning capacity has certainly improved with globalization and the internet working from home particularly over the last number of years you know i can tomorrow go and interview for a job in new york if i want you know if it's a remote remote jobs that's great and that's increased people's uh income and incapacity but really um borrowing capacity

has increased significantly by about threefold since the early 80s or the mid 80s yeah and and that's really been thanks to banking deregulation greater competition the internet has certainly help that. So it means that I can leverage my income to a much greater extent today than what I was able to do 30 years ago. And I think that's made a really substantial contribution to property price growth historically. Yeah, very good point. Well, given where buying capacities have gone to, what's your read on what's likely to happen with buying capacity in the future and what's the flow on effect in terms of the impact on property price growth then? Yeah, so I think when we ask ourselves you know if borrowing capacity is increased by threefold over the last 30 years

will it increase by threefold over the next 30 i think that's going to be very difficult i think it's very unlikely to happen you know i think actually borrowing capacity is likely to be static i don't think it's going to change very much which i don't think it's going to deteriorate but i don't think it's going to improve uh substantially either i think there's greater focus and regulation in the the mortgage market and um and you know with the royal commission and those sorts of things happening and rightly so you know just because someone's willing to borrow doesn't mean a bank should lend to them and there should be some onus on brokers and lenders to make sure that they're doing the right thing by borrowers so i don't think that there's you know

rising tide all ships rise and so 30 years ago if you bought property probably almost anywhere in Australia you've probably done really well well I just don't think that that rising tide's going to be there partly because of borrowing capacity so we're going to have to start thinking about what else is going to contribute or drive property prices in the future yeah very good point well while we're talking about borrowing capacities and incomes and it's in its relation to property do locations with higher incomes perform better from a property price growth perspective as you yeah so there's there's not very good data to um to be able to firstly there's a there's a few problems firstly to pull apart there's a lot of things that contribute to price growth and so to

isolate just one factor like income is really difficult yeah um if we want to look at incomes in particular locations we're using abs data from census and so forth which tends to be quite old and arguably not very complete but when you do look at that data there isn't a big relationship between incomes and and price growth but i think that's probably um because the data isn't either complete or accurate or out of date and and so forth but i think if we if we think about this logically we've got to think about what other resources do we use as individuals to um to be able to upgrade our home and buy property obviously most uh owners property owners in Australia are owner-occupiers. And that's the main dominant driver of the market, thankfully.

And so we've got to then think about as investors, what are owner-occupiers looking for and how are they utilising their financial resources to pay more for the next property or to upgrade? Very good point. Well, let's dive into that. What are some of the other financial resources that people are using to upgrade their homes and or invest in property? Can you give us a breakdown on that? Yeah, so I mean, we would know from our own professional and even personal experiences bushy you know that that you will uh when you set a a financial goal or sorry lifestyle goal of living in a particular location having a certain size house to accommodate your growing family or all these sorts of things you really do draw upon

lots of different resources in order to do that whether that's business exits starting a business it could be inheritances could be other resources like drawing on financial savings or if you've invest in the share market sometimes you liquidate that my wife and i upgraded our home a couple of years ago we sold a commercial property it was just a great time to sell and it was a we really wanted to execute on that goal so and that's the whole reason we invest obviously is to build wealth to achieve our goals yeah um and a lot you know higher income earners these days are getting paid through uh employee share options a lot as well you know a lot of a lot of my clients are getting given stock in these us listed businesses or even australian listed businesses that are really a

major almost i'm going to call it a windfall gain i'm sure they've worked hard for it and they deserve it but it really does um boost their capacity and it might not go towards borrowing capacity but it certainly goes towards their their deposit or contribution cash contribution and so these things weren't as prevalent um 10 or 20 years ago and so i think there's lots of resources that we can draw upon or that people will draw upon in order to pay more for that for a property in a really desirable location very well said so if we put all this together and we we mix in incomes and borrowing capacity and the other drivers that you've been talking about in relation to property price growth what do you think what does the future look like in

terms of the impact of these things on where what when and how we should be investing moving forward yeah so if i'm a property investor of course i am and i'm thinking about you know where what sort of property and what location do i invest in i really want to be thinking firstly very long term because quite often i think you know if we look at the media and we read the news and stuff it's all very short term but if i'm gonna if my plan is to own a property for many decades then really I don't really care what's going to happen in the next 12, 24 months. I'm really thinking in decade intervals. And so then I'm really thinking about, okay,

if borrowing capacity is not going to change much like it has over the last 30 years, then I really want to invest in areas that aren't linked to income. Certainly there's going to be some areas, you know, if buyers of properties in a particular location are reliant only on income to be able to pay more for the property, well, then we know the growth isn't going to be that substantial if borrowing capacity is static.

So therefore, I need to invest in locations where owners or people that desire to own property in that location have resources in addition to income to be able to contribute to that price growth. And so really, I want to be investing in areas where sort of the wealthiest 15% or 20% of Australians want to live, and that's typically going to be desirable blue-chip suburbs that really have vast amenities and wide appeal to a lot of Australians.

I know it's not very sexy because it's not shooting the lights out to say, look, a blue-chip suburb is going to do well over the next 30 years, but I think investors can't invest assuming it's going to be a rising tide. I think the next 30 years, the returns in property markets will be quite different between an average quality location and a really good location. And all we need to do is look at wealth inequality and how bad that's getting,

how much the top 15% own of total wealth. And that doesn't slow as we're seeing in the US and we're really following their trend to a large extent. We're seeing that perpetuates much deeper and much longer. and so you want to be able to ride on their coattails i guess and invest in localities and types of properties that are going to benefit from those demand factors i think you've summed it up extremely well because as you sort of mentioned earlier we've gone through an unusual period where the post-pandemic uh the the rising tide has floated all property ships

and i think there's never been a greater need to focus on quality now as a consequence of that and the easy maths is just to go where the money is so you uh you know those blue chip locations that are tightly held uh where people do have the resources is obviously going to be at the bullseye uh of the dartboard and i really appreciate you bringing bringing all that to our attention steward and thanks for broadening our understanding of this very important subject and thanks for enlightening us on the show today yeah thanks very much bushy thanks you well as you've just heard property is a multifaceted and dynamic environment and there's a lot more to property prices than just household income levels. And while the mainstream media likes to keep us scared nervous

by writing endlessly about how unaffordable property is, people continue to buy and sell property and push prices higher. If you'd like to know more on this and Stuart's other informative insights, check out prosolution.com.au. Stay tuned for more on your property hub's trusted voice for all things property here on Realty Talk. for a free estimate of the likely deductions. This is Realty Talk powered by realty.com.au And that brings us to the end of this week's show. A big thank you to our special guests,

to Andrew, to Jules and Stuart, and of course, Bushy Martin. Before we go, make sure that you don't miss a single episode of Realty Talk or Bushy's Get Invested podcast delivered to you each week and every week. And you can do that by subscribing at the Property Hub now or on your favourite podcast player

or wherever you're listening to this show. Thanks to our supporters to realty.com.au, BMT, Tax Depreciation, Know How Property Finance and Apero Marketing for their ongoing support. I'm Kevin Turner and on behalf of Bushy and the entire team at Property Hub, we'd 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.

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