Property Hub - Investment Insights & Inspiration - Realty Talk: Why rents increase + Broken Rental Market + Lowball Strategy

Episode Date: May 5, 2023

This week’s show has a strong rental crisis flavour with some negotiation sprinkled on top. Legendary investor Steve McKnight looks at the current rental crisis to answer why rents keep marching up. Evan Thornley from Longview reveals why the rental market is broken for everyone and what can be done about it. Bushy outlines his thoughts on how the rental crisis can be resolved by embracing investor landlords as friends not foes.  They are the solution not the problem.   Kevin Turner continues our special series on the art of negotiation and this week he talks to Buyers Agent Cate Bakos about whether it’s a good strategy to make ‘Low Ball’ offers to secure a below market purchase. RealtyTalk is part of the Property Hub podcast channel, your home for property investment insights, inspiration, and stories from Australia’s top property experts, investors, leaders, and analysts. Subscribe now to get every RealtyTalk episode delivered to you each week for free, and also get full access to Get Invested, the leading podcast for Australians who want to unlock their full ‘self, health, and wealth’ potential and get inspired by the stories of investors, founders, and entrepreneurs. Subscribe to RealtyTalk on the Property Hub channel: Apple Podcasts | Spotify | Google Podcasts | Email Property Hub is a collaboration between Bushy Martin from KnowHow Property, Kevin Turner from Realty, Andrew Montesi from Apiro Marketing and Apiro Media, and Australia’s largest independent podcast network DM Media. Business and partnership enquiries: [e-mail] omnystudio.com/listener for privacy information.

Welcome to Realty Talk, the show that brings together the country's most authoritative and respected property experts. Follow us on all the socials and subscribe for updates and exclusive offers. Realty Talk is powered by Realty.com.au. Connecting buyers, sellers and agents differently. Welcome to your Property Hub's Realty Talk show. We're trusted boys for property investment insights, inspiration and stories from Australia's top property experts, leaders and analysts. I'm Bushy Martin from KnowHow Property Finance, and this week's show has a strong rental crisis flavour with some negotiations sprinkled on top. Legendary investor Steve McKnight kicks things off by unpacking the current rental crisis to answer why rents keep marching up, when will it stop, and what does it all mean to you? We're then joined by Evan Thornley from Longview, who deep dives into their recent white paper

to reveal why the rental market is broken for everyone and what can be done about it. I then share some thoughts on how the rental crisis can be better resolved by embracing investor landlords as friends instead of foes and starting to see them as a solution rather than a cause. And to conclude the show, Kevin Turner continues our special series on the art of negotiation. And this week he talks to Buyer's Agent Kate Bakos

about whether it's a good strategy to make low ball offers to secure a below market purchase. And before we get underway, if you're enjoying the show, we need your help. In order to continue to attract the best guests to share their insights and innovations,

could you please do yourself and the world a massive favor by taking just a couple of seconds now to hit the subscribe button wherever you're listening to or watching the show because for every new subscriber we're going to donate a day's worth of life-saving water to families in Tigray Ethiopia so make the world a better place by taking a few moment few moments should I say to subscribe now and make sure you also sign up on the realty.com.au homepage we'll also get a free copy of my award-winning book Get Invested

just for making the effort we've got more great insights to share so let's get underway 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 It appears that the sudden but not unexpected national rental crisis is currently on everyone's lips. In the past 12 months, rents in Sydney have surged up by nearly 30%, according to a recent article in the AFR, while Melbourne and Brisbane each posted a 24.8% increase, and the other capital cities have notched up increases in rents of between 5% to 18.3% on an annual basis. So to unpack why this is and what it all means for tenants and investors alike, we're joined by highly acclaimed and respected investor and philanthropist, Steve McKnight, who's also the author of his current bestseller, Money Magnet.

So welcome back to Realty Talks, Steve. What an honor, Bushy. Thanks for having me back on. No, the honor is all mine, mate. As you know, I've been a massive follower of yours for many years now. So very humbled to have you back on the show. but a great topic to get our teeth into because you know the national rental crisis currently appears to be the talk of the town so to put some perspective around what's happening from your

point of observation observation why are rents marching up so strongly isn't that fascinating because if you had said to someone a few years ago when we're in the midst of covid and you had landlords not being able to increase their rents and having to give tenants holidays that we'd be now in this position that rents are booming, exploding, increasing at rates that, frankly, in my lifetime, we haven't seen. Likewise.

I don't think anyone would have believed it. We have to sort of pinch ourselves. And then we wonder whether this is a golden time for investing because our income's going up. Yet at the same time, until this month at least, prices were going down. How can rents go up and prices go down?

that doesn't seem possible in the realm of investing yet here's where we are today and what does it mean does it mean that we're just making more profits and we should be happy or is it a precursor possibly to some uncertain times ahead and I think the old saying that you need to hope for the best and plan for the worst is once again a good saying to remember here for investors because it looks like there's a situation where because of immigration that rents are going to continue to go up there's going to continue to be pressure put on housing builders are going broke so there's less houses being built at a time when there's more people coming into the country and when people come into the country they tend to rent before they own

which would tend to indicate that this pressure on rental prices is going to continue for the foreseeable future. So what could go wrong? What could go wrong is that this continued pressure on rent leads to higher inflation. Higher inflation leads to higher interest rates. Higher interest rates will eventually cause a recession when basically all the toys get thrown out of the cot. And as investors, what seemed like a positive could end up becoming a bit of double-edged sword where we gain on income but lose on capital value yeah yeah that's a very good read of the exercise and unfortunately the mainstream media focuses on what's right in front of us right here right now without thinking about the implications of what's going to happen down

the track so given your read and your knowledge and expertise in the area steve when is it likely to stop do you think when we stop getting people coming into the country and why would people stop coming to Australia or that's the demand side or the supply side gets fixed and we're not building as many homes because the cost of construction's gone up and it's builders are going broke so I can't see how this problem is going to be fixed and then of course there are the crazies in government who are talking about the need to have a cap on rents well how's that fair there's no cap on interest rates there's no cap on my landscaper's cost to mow my lawn but all of a sudden I've got to put a cap on my rents because it's an essential service

do you want people buying houses and offering rental properties or not one possible fix that could happen is that they add a tax on short-term rentals like airbnbs to make them less attractive certainly if you dropped a lot more rental stock that were taken out as airbnbs back into the rental pool that will theoretically bring rental prices down and and that's the path of least resistance I see for the government to say to people well if you're going to go and do that then we're going to hit you with this now what will this be I don't know I'm not the government but if they find a way to tax the transaction and make it less appealing then that's that's one possible fix to this situation otherwise I can't see it rectifying itself in the short term

Well, I think that the governments generally need to stop villainising investors as the evil enemy that's raping from the poor and becoming rich as a result, and instead actually incentivising investors, because mums and dads are the only ones that are really adding to housing and rental stock. The government stopped doing that decades ago. So I think if there was a bit of a change of heart, probably not likely to happen, mind you, but I think there was a change of heart to recognise that, you know, at the moment we seem to be cutting up our nose to spite our face by attacking the very source of where the future housing supply might come from.

But maybe I'm too old and too jaundiced to be in this exercise, mate. No, I think you're right, but you're wrong, unfortunately, because everything you see from the super changes to accounts over $3 million is the government saying, look, if you're someone who's lucky enough to have wealth, well, then you can pay more. There's not really an acknowledgement of the risks that were taken or the hard work that was done to get there in the first place.

It's simply you've got it, we're going to come and grab it. And I think that there will be continued pressure on some of the incentives that investors have enjoyed, such as discounted capital gains tax and other things franking credits again all this will come back into the spotlight as the government tries to balance its budget and struggles to do so and whether or not investors have probably had a good run or not is open to debate i actually personally think so i don't think it's really fair to only tax capital gains 50 percent and give taxpayers a tax deduction for the losses they make if you want us to share the risk then you

shouldn't you shouldn't only pay half the reward so i think there's some room to move to bring it back to fair but whether or not they go fair or go over fair only only time will tell but what do we do as investors you know we don't make the rules we have to abide by the rules and we have to try and find our own path of least resistance obviously it's great that your your rent's gone up but then again your cost of everything's gone up as well your interest rates are higher cost of trades people is getting higher so you may not necessarily be much better ahead on a net basis but at least you're not going backwards yeah and if the property market uh starts going up interest rates now on hold let's see how long that lasts but that might bring some more people

back into the market and a bit more confidence into investing so all in all probably a good time to be a property investor in the face of it totally agree what about the tenant side steve what's your view on what what if anything tenants can do about the current situation well i've got a daughter who's desperate to move out of home because dad's a an evil overlord and he's someone who's who would move it out if she could afford to but cannot and that's a that's a bit of a source of frustration for her I don't know what to do about this because unless you've got help from the bank of mum and dad or or a relative to to help you get into it you might have to go back to a shared house situation and and decrease your your standard of living

in order to to get out on your own two feet now this has happened before I don't know if you remember the first place that you lived after you moved out of home bushy but it's unlikely to be as good as the house you're in now let me share with you that example i i shared a place in darwin with 13 others steve uh and uh just to ram that home that meant that nothing was ever left in the fridge and and they're all boys so i had to wear gum boots in the shower that that's how bad the place was so um that i'm coming off a fairly low bar there steve sometimes people think that it's always been roses and beers uh on a friday night but it hasn't the first place that i rented was barely livable and you you build your base from there so you do what you have to do and

and you get on with it and we can bemoan the things that haven't gone right but then again people have got much more opportunity in different fields than existed when we were younger people so So, yes, it's harder in some instances. It's easier in others. You just try and have to – we just have to try and do the best you possibly can in the circumstances that you've got. Get educated. Get creative if you have to.

And, yeah, find a way or make a way. Yeah, I agree. A good friend of yours, Ian Ogata, the work he's doing in the co-living space, I think has the real potential to make a meaningful difference if it's embraced at the right levels, both for landlords and tenants, actually. in the context of, you know, sort of the cost equation. I just think we need to be thinking a little bit left of centre and not only focusing on the greedy landlord

as the villain for all lils. But that's something we can talk about at another time. Steve, I really want to thank you for very timely insights as always. And thanks again for joining us on the show today. Just summarising, Bushy, don't worry about what you can't do. Focus on what you can do. Beautifully said. Well, it's clear from Steve's comments

that current rental conditions aren't likely to change anytime soon. So if you'd like to hear more from Steve on this and a host of other property and finance related topics, feel free to enjoy his podcast at moneymagnet.au forward slash podcast. And if you haven't done so already, while you're there,

do your future self a massive favor and grab a copy of his great new book, Money Magnet. And while I'm on the topic, the audio version is just about to hit the store. So if you'd rather listen than read, the opportunity is there for you. So stay with us here on your Property Hub for more of Southern Cross-Oz Stereo's trusted voice for all things property here on Realty Talk. Property deductions can save you thousands of dollars each year. To make sure you maximise deductions, you need to work with the most experienced quantity surveyor in the country.

BMT Tax Depreciation is the leading specialist in the industry. They've completed over 700,000 tax deduction schedules for residential investment and commercial properties Australia-wide. BMT guarantee to find double your fee in the first full financial year deductions. Call BMT on 1300 728 726 today for an obligation free quote. While constant media noise is being made about housing affordability in the rental crisis, with hard-working mum and dad investors being villainised as convenient donkeys to pin the tail on, the reality is actually very different, as it's clear that our current Australian property system is failing everyone, including renters and landlords alike. So what's the truth behind

our national housing crisis, and what, if anything, can be done about it? To address this urgent, long-ignored problem with well-considered solutions, and avoid the current stream of finger-pointing, knee-jerk, ill-conceived, band-aid responses that are being bandied around by vested interests and politicians' policies on the fly, we're joined by Evan Thornley, the founder of integrated residential business Longview, who partnered with Australia's leading online property exchange network, PEXA, to produce a detailed data-driven white paper on Australia's broken rental system. And he joins us today to reveal the details. So welcome back to Roofty Talk, Evan. Thanks very much, Bushy. It's a bit of a depressing intro,

mate but uh it is what it is i guess well i'd say unfortunately it's the the cold hard reality but your white paper certainly puts that in proper perspective so having enjoyed and read it appears that your conclusion is that the australian private rental market is broken as it works for no one so why does australia's property market fail both landlords and renters yeah look i'll deal with both quickly um bushy probably it's less news to people that australia is a pretty tough place to be a renter particularly at the moment given how tight vacancy rates are and climbing um rental prices and difficulty of securing a home but even when that was not true it turns out australia is one of the least attractive places in the developed world to be a renter

particularly because we're very short rental tenures people keep moving more often here than anywhere else and often not because they want to um so you know you imagine you're you're a single mum with three kids out in the suburbs moving on average every 20 months there's just nothing good about that um it's expensive it's stressful uh you're often paying double rent for a period or you're fearful of actually being out of a place um the costs of moving are expensive you know there's nothing good about that and yet there's nothing good about that for the owners either for the landlords. So Australia is a tough place to be a renter. And yet, partly because of that, there's an assumption and often a widely held view, therefore, it must be a fantastic place

to be a landlord. Unfortunately, that's not true either. I mean, part of Longview's business, you know, we manage 4,300 rental properties. And so we're the meat in the sandwich between landlords and renters all the time. And we know how difficult it is for both of them. um you know there's so many challenges you can have as as a landlord um that um you know perhaps in many cases you're not expecting um you know most people aren't necessarily good at something they've only done once or twice in their lives and for most of us 71 percent of landlords only own one investment property and it's often a new decision so there's a lot that they may not know when they go into it um but at the financial level i think there's an assumption again that

if renters are doing it tough financially landlords must be making out like bandits and the truth is some landlords are doing very well but the majority of them are not and again it goes back to did they buy a good asset is this a property that ultimately is going to deliver them good capital growth and the surprising thing about Australian property is most landlords make a worse investment decision with their investment property than they do with their own home they actually they misunderstand what's important in their investment decisions and so they tend to buy properties that have not as much what we call land content i don't necessarily mean just square meters of land but what proportion of the value is in the dirt as

opposed to the building right land appreciates buildings depreciate so a lot of investors buy properties that are mainly building and not much land, and so get poor investment performance. So when we looked at it across the system, about 60% of landlords have made a lesser financial return than they would have, for example, if they just stuck their money in super, right? So that's not saying all landlords are like that, or that's an average position. There's a very wide variety of outcomes for landlords but in the majority of cases in more than half the cases they're actually making poor to very average returns so the system's not working for them if you're making less than you could have made in a much simpler investment with much less headaches

you know and liquidity and and diversity in a way that you don't get when you only buy one property and hope that it's a good one that's not a good outcome so we think the system's not working for landlords any more than it's working for renters at the moment. Yeah very well said well regarding the sort of the rental experience side of the equation then and you've touched on this a little bit already but how does Australia compare to other developed countries? Yeah well not well is the answer as I say I mean one of the best metrics we think is is tenure how long you on average live in the home and Australia is the shortest in the developed world and you know there's any amount of sociological evidence the importance of putting down roots becoming part of

a community getting to know your neighbors you know keeping your kids in the same school all of these basic factors we know that people would prefer to stay somewhere longer right because owner occupiers tend to be in their homes five times longer than renters so it's pretty obvious that given the choice most people would prefer to live a lot longer the second massive problem is maintenance particularly in older dwellings and a lot of rental properties or older dwellings have significant maintenance issues many times again the the new owner the landlord isn't necessarily aware or isn't fully prepared for the scope of the work or the cost of that work or suddenly it's upon them and you know you need a new water membrane and that's

12 000 bucks and and you're not going to get a dime extra rent for it right like there's a lot of stuff goes on and often their maintenance doesn't get done that makes the tenancy experience much worse it often then means the building gets damaged more it ends up costing the landlord more so that again is an example of where something is not good for the landlord or for the renter so in in other parts of the world you know let's take germany or northern europe a lot of rental housing is owned by large institutional owners they own it for a long time it's always rental housing people can live there or you know becomes it's their home they may not have their name on the legal title but it's effectively their home they live there for a long time they're part of that

community they have stability the property is properly maintained and similarly for the investors in those institutions you've got professional management of choosing the right assets you've got professional management of maintenance you've got high occupancy level because people stay for a long time and they're good tenants and they take pride in their home so you know there are other ways of organising a housing system and a rental housing system than the way we as Australians have kind of sleepwalked into where we've got to and whilst it might sound like that's bad news the good news as far as I'm concerned is everybody realises we've got a problem and no one's sure where we're going to find the money to fix it right and you know everyone every debate on every

issue in Australia always starts out with the government order you know the government ought to do this the government ought to do that if that's your theory of change I'm old enough now that I've heard the government order for 40 years and the government ain't gonna right if they were gonna it would have been done by now and actually ironically they don't have the money you know Australia's governments will spend about 11 billion dollars this year in housing and look that's a lot of shekels. But let's think about this. Australia's landlords have $2,000 billion, $2 trillion invested in rental property. That's a lot of money. And yet they're getting poor returns on that investment. So there's a massive pile of capital, two thirds the size of the entire

superannuation system that is currently on average being poorly invested so if we're looking for where is the money going to come from to build a better housing system I think it already exists it's in the hands of landlords and if we can create opportunities for landlords to get better investments that deliver them better returns and less headaches and that system is also better for tenants like the system that exists in parts of northern Europe then I think I'm very optimistic there's a huge opportunity for a win-win there for both sides so whilst it is a very pessimistic situation right now I'm optimistic that there's at least a path out of it which is better news than what you've got otherwise which is you know we're going to

keep this battle between landlords and tenants going mediated by politicians and newspapers and somehow something is going to get better despite all evidence for three generations that it's getting worse absolutely so let's drill into that a little bit uh i'd love for you to put some shape around any short-term solutions to this quite urgent and far-reaching problem than ever i wish there were short-term solutions to a problem that's taken four decades to build um but there aren't a lot right i mean our current rental affordability crisis as many people will tell you is a crisis of supply of dwellings you know the population is flooding into the country faster than we're getting stuff out of the ground right now yeah there is no short

term fix for that governments will probably pretend that they've got some fixes because they need to be looking looking like they're doing something but unfortunately it's going to take a couple of years for that supply side to catch up and you know i wish there was a quicker answer but just because there isn't an immediate answer to a large-scale problem doesn't mean you don't work on it right i mean quite the opposite if you look at i mean maybe a different example but you know we now have the best retirement income system in the world yeah right um and one of the biggest domestic savings pools in the world which is fabulous for our economy and and gives a lot of comfort to many australians as they move into retirement because of our

superannuation system that didn't that took 40 years to build that because some visionary people a while ago said boy we're heading for a train wreck here with an aging population and if we don't do something now this is going to get a lot worse and they did and it took a while but now it is transformative when you look at uh you know changes in say public transport you know i'll take a melbourne example that's my home you know they're building the whole new suburban rail link it's going to take 20 years it should have been done 50 years ago but at least they're working on it now and 10 or 15 years from now because they've been working on it for a while we will have that system. So thankfully, it won't take 20 years to build a better

housing system. We could start doing this stuff in the next few years, but I can't pretend that it's going to solve today's rental problem or today's landlord problems because we've created them over generations. Yeah. Very well said. Well, look, I really want to thank you for opening our eyes to better ways of looking at our national housing crisis, Evan, and thanks again for joining us and sharing this on the show today. Thanks very much, Woody. Thanks, Evan.

Well, it's clearer than ever that in the context of our current housing crisis, our housing system is the real underlying cause of the problem. And if allowed to continue on its present course, it's likely that our crisis is going to go from bad to much worse. So it's obvious from Evan's discussion today that the interplay between properties, landlords and renters requires everyone to collaborate to create new systemic sustainable solutions. The current blame game aimed at landlords or renters is actually a false battle. And the interests of both groups and all interests of parties need to be addressed if sustainable solutions are to be implemented. and this is where private and public partnerships are required to step up and we all need to show some long-term vision and take personal responsibility and leadership for fixing this issue instead of just playing the point the finger on the teflon non-stick approach to

making it someone else's issue so if you'd like to learn more and dig into the details you can access evan's series of white papers in full and for free on longview.com.au and keep an layout for our upcoming white paper number three that's going to lay out solutions that swim with the tide of the economics of Australia's unique property market. Keep listening for more on your property hub's longest running and most popular national property show here on Realty Talk. 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 Know How 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. If you've got an ear for property, you're no doubt constantly hearing about our national housing and rental crisis. And the convenient cause by politicians and many other parties who really don't actually understand the situation

is to blame so-called greedy rich investors as an easy donkey to pin the tail on. But does this mythical misguided argument actually stand up to proper scrutiny? Well, to help you answer this, I'm going to deep dive into the subject and then suggest what the real solution to our current housing crisis actually is. Because unfortunately, I'm increasingly finding that in our current short-sighted, instant reactive world, many just jump to quick conclusions where they attack the symptoms rather than find out true causes, which means there's a tendency to blame someone who generally is actually unable to speak for themselves.

And in the case of the housing and rental crisis, the convenient voodoo dolls and pin cushions are the mythical, demonized, greedy property investors. But is this actually and really the case? Well, let's have a look at the true facts versus the fiction on property investors. According to the tax office, there's currently just over 2.2 million

property investors in Australia who collectively own a total of around 3.25 million properties of the 11 million-odd dwellings in the country, which is roughly between 8% to 9% of our 26 million total population. Now, this increases to over 13% of the working age population for those aged between 15 and 64, and for reasons that I'll reveal later and will actually become self-evident,

investor numbers are actually falling, not growing. And based on these HEO figures, here's how many properties investors actually hold in Australia. Just over 70% of investors hold one investment property. About 18% of investors hold two investment properties. 9.7% of investors hold three to five investment properties. And just 0.8%, which is under 20,000, investors hold six or more investment properties. So if you look at this, about 90% of property investors own one to two investment properties, which means that all in all, the number of investors with a large property portfolio

is statistically insignificant compared to the overall population. But what's more revealing is how profitable investors are and how many are actually running at a loss. So let's have a look at this. Of the 2.2 odd million current property investors, according to the ATO again, about 60% are reported to make a net rental loss each and every year. The ATO's figures also reveal that Australia's property investors collectively incurred a total combined net rental loss of over $166 million in a financial year. and the data also shows that investors with fewer properties are more likely to be carrying these losses. Now these stats highlight the complex and often financially challenging property investment

landscape that exists around Australia so let me emphasize this reality. Just under 60% of property investors lose money on their properties every year to the tune of a loss of about $5,600 per investor. While of the 40% odd that do manage to make money, the majority only average around $6,000 a year in profit. So while investment properties are clearly a way to accumulate capital gains over time, cash flow profitability from reliable rental income is actually in the minority. It's definitely not guaranteed. And with costs continuing to escalate, it's actually getting much harder. Now, does all of this sound like rich, greedy property investors making squillions of dollars at the expense of poor, unsuspecting tenants? Certainly not from where I

sit. So when this data is analysed for the majority of mum and dad property investors, it's easy to see just how financially difficult property investing can be. And this all flies in the face of the misguided myth that all of our considerable housing woes lie at the feet of greedy rich investors who clearly don't even exist. To the contrary, the majority of investors are just hardworking Aussies like you and me who are simply trying to secure their future by adding to their retirement nest egg through capital growth, while it's actually costing most of them thousands of dollars each and every year to hold onto the properties.

And they're trying to do, and all they're actually trying to do is to help self-fund their retirements and actually reduce the government's future pension burden. but instead of celebrating investors for making this considerable sacrifice they're continuously castigated and pilloried left right and center as silent scapegoats and have actually become the constant target for ever more restrictive and costly limitations as recent examples investors have been have seen fittings depreciation eliminated from existing properties land tax thresholds have been increased and look through trust provisions have been implemented that we've seen constant rounds of residential tenancy legislation changes that favoured tenants at

landlords expense and have made it much more difficult for landlords to evict tenants and much more restrictive requirements have come in that have resulted in considerable code and compliance costs mushrooming into the tens of thousands of dollars we've seen insurance costs ballooning local councils are imposing short-term accommodation limits on airbnb properties banks now make investors pay higher rates and costs and there's been a raft of misguided naive attempts by state governments to increase land tax for interstate investors and introduce rental caps just to name a few restrictions. And these are just the tip of a growing iceberg. Is it any wonder then that property investor numbers are dwindling rather than growing?

So from where I sit it's clear that investors aren't the cause of the national housing accessibility and rental crisis. The root origin of our housing woes has been decades in the making and it actually stems from the decisions by federal and state governments in the late 1970s and early 80s who decided to wash their hands of responsibility for provision of housing supply when the privatisation movement decimated housing commissions and made housing construction the sole domain of the private sector. Now we all know that private sector provision of anything needs to be driven by required profitability measures, which means that a just-in-time housing provision approach

has been adopted for over four decades now, and this has resulted in a constant lag between required demand and delivered supply. So housing shortages have become baked in to the structure of our current housing system. This has been exacerbated by growing obstacles caused by lengthening delays in approvals for land titles, development and building applications, and occupation certificates.

and this has led to shortages of available land in the right places, higher developer charges, inflexible planning laws and ever more restrictive financing and lending requirements. Based on research by the Australian Housing and Urban Research Institute from the latest census data available, only 1.5 million new homes will build in Australia in the 10 years from 2006 to 2016, which includes the national construction boom period between 2015 to 2018, after which new dwelling constructions dropped off substantially even before COVID came in and struck. Now, it's also important to note that the growth of housing stock in each state and

territory was very uneven during this time, ranging from 26% in Western Australia to just 12% in New South Wales, which is roughly the reverse of what it should have been to cater for where the housing needs actually were. So not only have we not been building enough new dwellings, but we've been building the wrong numbers and the wrong types in the wrong places, which further exacerbates the housing shortage situation, particularly in the eastern states. Now, 1.5 million new dwellings built over 10 years is the equivalent of about 150,000 properties a year. But according to further modelling predictions made by the Australian Housing and Urban Research Institute, or AHRURI for short, I can't even say that, Australia has 1.3 million households that are in housing need, potentially rising to 1.7 million households by 2025, and this excludes the impact of rapidly increasing immigration numbers. On top of this, Parliamentary Library Research also estimates that Australia has a shortfall of 524,000 social housing dwellings this year, set to increase to 671,000 by 2032. Other recent Aruri research deals that although low-income households are a critical part of the workforce, they're increasingly unable to find affordable rental housing near the employment centres of Australia's major urban areas.

Across Australia, they project there's a shortage of 173,000 affordable dwellings in the private rental sector available for these households. Now, looking to the future, according to MacRindle Research projections, Australia needs to build an additional 3 million homes over the next two decades to provide the needed infrastructure to house Australia's growing population. Now, again, that's the equivalent of 150,000 new homes a year. But, according to Statistica, only a little over 133,000 new home building starts commenced last year in 2022, with about the same number projected for this year and only marginal increases over the next couple of years. And to add insult to injury, following the short-lived COVID stimulus-induced building frenzy, the construction industry has been decimated by spiralling costs on fixed-price

contracts and excessive delivery time delays. Consequently, many builders have gone bust or are going bust, and the damage this has done to homebuyers' confidence and trust in the building process will take years to recover. This all means that on top of the current significant undersupply shortage of housing, in the years to come, the supply gap will actually widen further as we fall behind to the tune of approximately 15,000 homes a year. So how will the growing housing supply shortage be solved? Well, it's certainly not going to be bridged through government housing supply.

Even though the current federal Labor government are promising a housing construction surge to build 1 million houses by the end of the decade, the Greens have also warned that the government's five-year housing construction plan would deliver just 3% of the social housing units that are needed over the next decade. So, who's left to bridge this ever-widening housing and rental crisis gap? Well, maybe I'm getting old and I've been around too long, but to me, it seems glaringly obvious. And you've probably already guessed who it is. By process of elimination, the only ones left standing at the end of this game of musical chairs are none other than the supposed villains in this story. And that's good old mum and dad investors like you and I. so instead of demonizing hard-working property investors who are only trying to self-fund their

retirement instead of penalizing and restricting us and treating us as foes governments at all levels policy makers media commentators and the banks should all be doing the absolute opposite and embracing us as friends and starting to treat us as the solution rather than the problem instead of making it harder for us to invest in property they actually need to further incentivize more of us to invest in increasing housing numbers and the overall rental supply through improvements in tax concessions depreciation benefits stamp duty reductions and a host of similar measures that have worked so well in the past now i know that this is unlikely to be popular and our pollies may not have the backbone or political will to reverse their current misguided

perceptions, but the solution to our national housing and rental crisis is actually in plain sight and is staring us right in the face. All we need to do is reframe invested foes into friends and further leverage the power of over 2.2 million investors and hardworking Aussies to help make this happen. While the solution is glaringly simple, it won't be easy and it won't happen quickly, but where there's an investor will, there's always a way. That's more food for thought, so stay with us for more. As one of Australia's most outstanding buyers agents, Kate Bacos has a wealth of knowledge and experience when it comes to helping families secure their dream home or the perfect property

to add to an investor's portfolio. So who better to talk to about successful negotiation? And this time I asked Kate about lowballing and if it's really a good strategy to get a below market purchase. That's coming up next. Almost $9,000 in first full financial year deductions. Call BMT on 1300 728 726 today for an obligation free quote. Well, you've probably heard of lowballing. It's very much associated with what agents do when they don't necessarily want to disclose a listed price.

They will lowball it to try and get some offers. But there is another adaption to that, and that is as a buyer, when do you low ball? When do you go in and try and sneak in and get the property for a really good price? Kate Bacos, is that something that you do as a buyer's agent? Very, very rarely, Kevin. In fact, there's only one time that I would consider low balling. But when we think about the negative impact of low balling and the damage that you can do for yourself as a buyer, you've got to be really careful about applying this strategy

because it can backfire. Tell me how it can backfire. If your offer is so low that the vendor takes offence, and if you're dealing with an emotional vendor, let me say most are, especially when they're selling a home, they can take offence and know exactly which buyer they don't want to be dealing with. So if you've thrown in an offer that's so much lower than you're actually prepared to go and you've insulted the vendor they might have a bias against working with you and as as rational as that sounds I've met plenty of vendors that would rather not sell a property than sell to someone who's offended them so you've got to be really clear about that the other one is the agent if you're low-balling on a regular basis and that's what sort of

reputation follows you in agent circles bear in mind these people have CRM systems they're all into LinkedIn, they understand everything there is to know about buyers based on what they pop into this system. If you're known as the low-balling buyer and your search has been going for a little while, you might find that you're not getting very much support or assistance or confidence from the agent. In the introduction, I mentioned there about agents low-balling on a listed price. I know there's been a lot of legislation in Victoria and in New South Wales to ban that or make it difficult for agents to do that is it still happening kate are you experiencing that unfortunately underquoting is definitely still happening and there's a

philosophy out there you know quite a bit long watch it go where you'll catch all of these people in the net and some of these people won't necessarily have the budgets but it's a fair assumption that people who fall in love with the property might stretch their budget and be prepared to to pay the higher price for it unfortunately it doesn't always work like that and it's a bit of a heartbreak for buyers it's a time waster and it costs them mental energy emotional energy and often money when they're gearing up to do their due diligence but in short agents do it for one reason and one reason only it's to to put the hook in to get more people through the property and also to be able to say to the vendor say you've had you know 50 groups through it's been a good

campaign i haven't done anything wrong but if they're catching the wrong fish then it's a bit of a pointless campaign yeah sometimes too it's an indication that the seller wants more than the agent thinks it's really worth and the agent knows that they're not going to get any inquiry at that level but still there's no excuse for it because you know at the end of the day the seller's needs should be met if that's what the seller wants they have a right to advertise it at that price and the feedback will determine where the seller goes, gives them a chance to make a decision, and no one's going to get burned along the way.

Look, I agree with you, Kevin, and if a seller's expectations are disproportionate with what's out there, an agent has the opportunity to say, look, I'm not wasting my time on this campaign at this stage because it will be fruitless for everyone, or I'll take it on when you give me the indication that you're willing to make the market. Hey, did you mention there, you know, when not to use lateboarding

or when it's not a good idea, is there ever a good idea or a time to use it? Yeah, there is, Kevin. Sometimes you'll find that a property's been languishing on the market or it's very compromised but the compromise doesn't impact you or that for whatever reason it doesn't have mainstream appeal and the vendors are quite desperate. Putting forward a low ball offer when a vendor's really desperate isn't quite as offensive as doing it at the very beginning of the campaign.

But more so, if you are low balling, it can work for you if that is absolutely your best offer for that particular property. So there's no more petrol in the tank. You've done your numbers or you've worked to your capacity and that's all you've got. You can just put it on the table. And sometimes I say to agents, I don't want to cause any upset here. I'm definitely not wanting to offend you or the vendor.

The price that I'm offering you is not necessarily representative of market value, but this is it. This is the offer. It's all I've got. Take it or leave it. And sometimes it can go your way. In such a competitive market too, getting your offer to the top of the pile is a real skill. Kate Bacos will give us some advice on how you can do that when you return.

Kate, thanks for your time. My pleasure. And that's another wrap for this week's show. Another big thanks to our guests, Steve McKnight, Evan Thornley, and Kate Bacos. And before we go, make sure you don't miss another episode of your trusted voice for all things property by subscribing to the Property Hub on your favorite podcast player now, where you'll also enjoy the Get Invested podcast that are delivered to you each and every week.

Thanks again to realty.com.au, BMT Tax Appreciation, Apiro Marketing, DM Media, and Southern Cross Austereo for their ongoing support. I'm Bushy Martin from KnowHow Property Finance, and along with Kevin Turner

and the entire Property Hub Realty Talk team, please remember that wealth is the transfer of money from the impatient to the patient. Let's get invested, and we look forward to seeing you again next week.