Clawing back the losses + Sellers get generous + The cladding that should be replaced

Highlights from this week:

  • Some markets will take up to 15 years to recover losses
  • Why SME’s should think carefully about acquiring property in an SMSF
  • 71% of people say governments should do more
  • Not all cladding is the same
  • A simple rule about money


Some markets will take up to 15 years to recover losses – Adrian Haks

Kevin:   It’s really interesting. In the latest Herron Todd White Month in Review, which we’ve got available for you as a complete download. Just look below and you’ll see it. We’ve loaded it to the site. Go and have a look at it. I’ll give you a rundown, state by state, on some of the major issues that you’re going to find inside that report. But I want to focus very much on central Queensland as an indication of just how dramatic the downturn has been in that area. Impacted, I guess, on the back of what’s happened with mining.
Kevin:   Joining me to talk about this, Adrian Haks. Adrian is the Director of Valuations Residential for central Queensland for Herron Todd White. Adrian, thanks very much for your time.
Adrian:   Thank you, Kevin.
Kevin:   I noticed in the report, particularly in relation to Rockhampton, you talked there about renovation, which is the major focus of this report. But you talk about finance for major renovations in that area, we have to go back something like 10 or 15 years to see any improvement in capital growth because of the downturn. That’s pretty dramatic, isn’t it?
Adrian:   Yes, it is, it is. And we sort of see that the peak of the residential market was in that late 2008, early 2009. And then it has been on a gradual decline since then. So, yeah, that 10 year period is not many residential homes have seen much growth at all.
Kevin:   Now, we talked there about having to go back 10 to 15 years to see any appreciable growth to borrow against, but I guess the same or even a worse impact would be on those who are looking to sell. They’re facing the prospect of a fairly large loss.
Adrian:   Yeah, that’s correct. Yeah, that’s correct. Unfortunately, not many people would be seeing any improvement on the sale price of what they paid in that period. So, yeah, unfortunately we have been seeing a little bit of mortgagee in possession situations on the back of that.
Kevin:   Is there any indication, Adrian, as to how long it’s going to take to come back to norm, do you think?
Adrian:   Well, I think that during the peak it was quite high, the values, and in some cases unaffordable to many people. And on the back of that downturn in the mining and so forth, we lost a lot of employment opportunities and lost a lot of population. Which, as you would probably know, it’s very simple economics with regards to a lot of the real estate and value in real estate. It’s supply and demand. So on the back of new projects in the area, that’s where we can draw more population and employment opportunities and perhaps stabilise, which we think it is sort of stabilising now, and build on that in the near future.
Kevin:   Just staying in central Queensland for a moment. Gladstone, is it in the same category as Rockhampton?
Adrian:   Yeah. Gladstone, it actually suffered a lot worse than Rockhampton and a lot of other places because they had some fairly major projects underway with the LNG construction, the plant on Curtis Island and so forth. They had a major influx of population and a lot of construction of new dwellings, and a lot of investment by investors, both local and non-local, to take on that opportunity. But as soon as the construction was over, there was all of a sudden an increase in vacancy rates and empty houses, and a dramatic reduction in values over the last few years as a consequence.
Kevin:   Yeah. Well, you can certainly get a feel for the impact of that downturn by checking it out. It’s the Herron Todd White Month in Review, and the full download is available for you. I’ve been talking to Adrian Haks, who is Director of Valuations Residential for central Queensland for Herron Todd White. Adrian, thanks for your time.
Adrian:   Thank you, Kevin.
Kevin:   Interesting to note too a few other highlights from that report. In Canberra they refer particularly to the Mister Fluffy asbestos issue, which we’ve raised in this show in the past. But interesting to see that the demolition or the acquisition of a number of those properties, and the then demolition, has brought a lot more vacant land onto the market in Canberra. With the bonus there being that the councils have allowed much more density into those blocks, so I guess that’s on the upside.
Kevin:   Also an extensive coverage in the report in New South Wales about Sydney east, and duplex sites there that are too small for subdivision are being developed under company title. In Victoria, Melbourne’s southwest,  many councils there are considering planning changes to reduce minimum lot sizes as well. We’re seeing this quite a lot around Australia. We’re getting a lot more density into some of these capital city locations. Northern territory, Darwin, grants and discounts offer great incentive to purchase and renovate under $500,000. Good news for there.
Kevin:   And in Tasmania, higher inner CBD prices are pushing renovation options further away from the city. Once again, not a bad thing at all. But you can get a full coverage by downloading the report, which is available on our site. Now, look for the link just underneath this interview in the commentary, and that is the Herron Todd White Month in Review report. Download it. Quite a large document, but you’ll find it very, very interesting.

SME’s need to be careful about property – Jonathan Street

Kevin:   Investment for retirement in your self-managed superannuation fund by acquiring the business premises you occupy is both allowable, as opposed to putting your principle place of residence into your self-managed superannuation fund, and it seems like a good idea. Rules do not allow you to occupy your principle place of residence, but it is different if it’s your place of business.
Kevin:   It seems like a good idea, as I said, and good use of your super fund savings, but Jonathan Street from Think Tank Group says small to medium size enterprises in the retail sector should always think carefully about acquiring property for the dual purpose of using it for their business and for building their retirement savings. He joins me to discuss this.
Kevin:   Jonathan, thanks for your time.
Jonathan:   Good morning, Kevin.
Kevin:   Jonathan, why are you advising these business owners to hasten slowly, and I understand it’s restricted to the retail sector. Is that right?
Jonathan:   That’s correct, Kevin. It’s largely the softness that we’re seeing in the sector that’s been materialising over the last few years, but certainly coming into sharper focus in recent times with statistics that are being reported by the analytics firms, and these are principally firms that service global institutional investors. It’s good intel to actually feed down to the SMSF sector, but there’s certainly weakness in retail property values and returns at the present time, and we don’t see that changing in any rapid way in the near term. So I think it’s a case of being wary around particular retail properties and the location that they’re in, and also the purpose that they might be used for.
Kevin:   Well let’s have a look at the location. Does that advice hold true for regional as well as metro properties?
Jonathan:   It’s probably more pertinent for regional at this present point in time, Kevin, because, if anything, there’s a more pronounced softness in the regional areas, and retail tenants are finding it harder to make ends meet, and that’s leading to a softness in income and also a softness in capital values.
Kevin:   Yeah, ’cause I always looked at a softness in income, understandable, but I would’ve thought that owning the premises for a retail operator is probably going to lower their outgoings in some circumstances. Wouldn’t that help them?
Jonathan:   Well, I think it’s a case of values not having readjusted at this point in time, so we’re basically saying that values are overvalued at the present time. Consequently, if you’re looking to buy, you’re probably going to see price falls in the next sort of six to 12 months and you’re better off waiting for that.
Kevin:   Okay, so you’re not ruling it out all together, you’re probably saying maybe wait for a bit of a market alignment. Can you help us then with a bit of due diligence that you’re suggesting business owners should apply before they commit. What should they be looking out for?
Jonathan:   Yes, look, it’s definitely a function of timing, and there’s nothing to say that a retail or any other type of commercial property shouldn’t be considered for this type of wealth management structuring, but the due diligence that fundamentally goes into it applies to all sectors. At the moment, with respect to retail, we’d be recommending that people look very carefully at the location, so what that particular retail premises is surrounded by, what the passing trade that the purchaser or the occupier of that premises can count on for their particular type of business for the longer term.
Jonathan:   Because when we’re talking about putting a property into a self-managed super fund, it’s a long-term proposition that we’re looking, or that the fund members are looking to take advantage of once they move from the accumulation to the pension phase, so that might be 10 or 15 or even 20 years away, so you have to take a very long-term view on how satisfactory or appropriate that commercial property will be in those circumstances for those members.
Kevin:   In the case of someone who has an existing business and probably leasing those premises from another landlord, the opportunity comes for them to buy it. They would understand a lot of that due diligence you’ve just been through in terms of flow, where it is, surrounding businesses and so on, wouldn’t they?
Jonathan:   Absolutely. They’re best placed to understand that because they’ve had time in situ to really get a sense of how well that proximity works for them and their future business and their plans.
Jonathan:   It also gives a good opportunity to negotiate perhaps more effectively on a purchase price, given that the landlord is likely to be feeling these sorts of signs of weakness in commercial property, in retail, in commercial, in a number of instances in wide geographies across the country.
Kevin:   Very good insight, Jonathan. Thank you very much.
Kevin:   Jonathan Street’s been my guest. Jonathan is from Think Tank Group.
Kevin:   Jonathan, thanks for your time.
Jonathan:   Pleasure to be with you. Thanks, Kevin.

71% say government should do more to help FHB’s – Matt McCann

Kevin:   Boy, there’s a lot to talk about in the report I’m going to tell you about now. It’s the Real Estate Sentiment Report, that has been issued by or commissioned by Local Agent Finder. The survey suggested that Australians are extremely sympathetic to the plight of first homebuyers, as 71% of people believing the government’s not doing enough to help this group.
Kevin:   We’ll talk more about that, and some of the sentiments that came out of the survey, but joining me to talk about this, Matt McCann, from Local Agent Finder. Matt, thanks for your time.
Matt:   Yeah, no problem, Kevin.
Kevin:   I’d have to really question, because a little bit further in the report, two out of three people were willing to offer discounts to genuine first homebuyers. You wonder if that’s, would really happen. It’s a lovely sentiment, isn’t it?
Matt:   It is. It is a lovely sentiment, and I think, when you think about the report itself, it’s 1,000 Australians. There’s a lot of people in here, who … and you know, so 71% of them think the government isn’t doing enough for this group of people.
Matt:   I think what we’re seeing here in the responses is, the reaction to high house prices. What you’re seeing is mums and dads, who have got kids that want to own their own home one day, grandparents looking at their kids trying to get onto the property ladder, and buy … suggesting that, in the report, that they would be prepared to offer a discount. Two out of three of them were prepared to offer a discount.
Matt:   Now, I think what we’re seeing is that, generationally, wealth’s been created through property, for those two generations, and they see it as being very hard to get a foot in for their kids and their grandkids. So I think what you’re seeing is a fair bit of sentiment in this.
Matt:   Most of us will realise that, actually, when it comes to grinding through the process of a sale, we’re all looking to maximise the return we get out of our property sale.
Kevin:   Yeah. Of course. Of course, yeah. A couple of other interesting points, too, sentiment from sellers looking to sell sooner, rather than later, or as soon as possible. Which, I guess, is a reflection of just a little bit of uncertainty in the market, as to whether it’s going to continue to grow, or whether it’ll actually come back a bit, Matt.
Matt:   Yeah. Look, I think what that’s telling us is that, actually, people believe that the market’s going to stay either reasonably square, or drop slightly over the coming, and particularly, two years of what people are talking about, in that answer. What that says to us is that you can have a look at some of the, if you will, the headwinds on property value.
Matt:   Well, obviously, we’ve gone through a process of limiting the nature and extent that foreign buyers can come into a market, and acquire property, and certainly, the costs that have been added to that through state and federal government regulations have been considerable. Certainly, around lending criteria, is another big one, and we’re seeing the impact of the Royal Commission here, where, the banks are being asked pretty tough questions about the way in which they’ve assessed the eligibility for a loan.
Matt:   And we know that property financing drives property pricing, so those two things are connected. So, if you put that together, and then, and just have a look at what that means for a potential person who may well have been in a property for eight, 10 years, it might well be a time to realise some of that capital, that they’ve amassed with strong growth in property values over the last, really, five to 10 years.
Kevin:   I want to pick up on another point that came out of the survey, as well, and that is to do with downsizers, or retirees: 78% said that they think the government should be doing more. It’s interesting. I did an interview the other day with someone who pointed out to me that the size of the downsizer market is absolutely huge. It’s like a tidal wave coming through.
Kevin:   A lot of agents don’t realise that they’ve actually listed a property that suits the downsizer market perfectly. The number we came up with was about 54,000 properties in the last 12 months. It is a huge market, Matt, isn’t it?
Matt:   It is. It could be a bigger market, in terms of releasing family-sized properties to the market available for people to, obviously, to buy.
Matt:   Part of the problem is that, again, a lot of people’s wealth is tied up in that single asset that’s there, is their family home, and as they get towards retirement age, the inability to contribute, or maintain at least the capital gains tax break that you get from property, as opposed to other types of investments, means that people hang onto their properties longer, perhaps, than they really should for the utility that it gives them in where they live.
Matt:   We all know the story of Grandma and Grandpa are living in a four-bedroom house, in a great suburb, but can’t really afford to sell the house, and keep the same sort of standard of living that they do now, because that would affect other government entitlements, or retirement products that are out there.
Matt:   The government, in the last year, in the budget, did bring in a contribution. But it was capped at about $300,000. So I think there’s an area there, that the government could do more, in terms of being able to encourage, or at least, provide the tax for break, so that we’ve got many more family sized homes on the market.
Matt:   And hopefully, over the time, over time, that will mean that bigger family house will become a little bit cheaper.
Kevin:   Yeah, well, I do think, too, that developers are really responding to this growing market, and this need to offer more lifestyle villages. I think we’ve always heard of, if you’re going to go into retirement, you’re going into a village, and it means you’re an old person, and they’re not all that good.
Kevin:   But the lifestyle villages they’re building now are really very attractive, Matt.
Matt:   Well, they are. There’s a combination of, both, lifestyle villages, and some of the, what I’d call premium bigger apartments. We’re certainly seeing a lot of that in Melbourne, and to a lesser extent, in Sydney, where the two- and three-, and the three- and four-bedroom apartments, that, previously … you might have been the exception, are starting to became the rule, in terms of how people are thinking about development.
Matt:   And so, going from the four-bedroom house, or a bigger house, down to a three-bedroom … but a really good-sized apartment, with good amenities, and good access to public transport, and city views, even, become a really appealing proposition for someone who’s downsizing.
Kevin:   Let’s talk very quickly, just in closing, if we could, about advertising real estate agents and how they list property. I noticed that, in there, there was a large number of respondents, who said that they would like the agents to pay for the advertising. Just a couple of points on that. I think this has always been a debate amongst agents, and sellers, for quite some time.
Kevin:   But if the agent actually pays for the advertising, the seller loses control of where the advertising is placed.
Matt:   Well, I think there’s a yes and no in this one. I mean, I think, when we think about it, it’s sort of, at First Principals, we say, “There’s a whole lot of cost involved in selling, and do I go and put my property onto the market, and take the risk?” And that cold be anywhere between three and $20,000, depending on how much advertising you wanted to spend, to test out the value of my house.
Matt:   And so, what we say, there’s a whole pile of agents out there, who are saying, “We want more listings,” and I think that’s where the pressure comes, is that they’re looking for listings in a market that has traditionally … we’re at the bottom end of the number of listings and transactions for the 10-year averages, over the number of properties.
Matt:   So if they’re looking to bring more on, then the idea of doing that is to take some of the risk away for a potential vendor, who might be interested in testing the market, but doesn’t want to be interested in necessarily writing the check, particularly where, in an area where they think that property will have great demand.
Matt:   It also probably weighs a little bit of the risk/reward, that you give the agent, from the vendor’s point of view, a bit of skin in the game. You know they’re committed to getting a good campaign and a good outcome from that. But having said that, it does move where an agent will choose to put those advertising dollars, and that’s probably got some implications for a couple of sectors in the market.
Matt:   Is the agent going to be tougher on where the dollars should go, then a vendor who’s happy, he’s really on a path through?
Kevin:   Yeah, and I think the other point, too, is that sellers have got to be aware of the fact that the agents can actually put a lot of pressure on them to sell, just to recover the cost of the advertising, as opposed to getting them the highest possible price. Another point I wanted to make, too, if I could, Matt, and that is, on commission levels.
Kevin:   We think that agents make a lot of money. In Australia, the average commission’s about 2.6%, compared to, if you’re selling a property … well, agent commissions are, in the US, they’re around 6%, split between buyers and sellers. So, I mean, Australia is recognised as being one of the leaders, when it comes to marketing property, and I do think that a lot of that’s come out of the fact that sellers have invested in the originality of how their property’s going to be marketed.
Kevin:   So I would hate to see that change, Matt.
Matt:   Yeah, look, I think, from where we sit, the thing that you really want to understand about the nature of how you market a property are best explained by an expert. And our research will tell us that, actually, where most people will go for that expertise, in terms of how to market a property, is actually the real estate agent market.
Matt:   You know, the family and friends aspects, and the other … the reliable third parties that you know have gone through the process, aren’t as good, and consumers say this, aren’t as good as the real estates agents themselves. So there’s an expertise, there, that you need to access. I think that’s an … that’s  important, that we recognise that that is the skill that you, obviously, you’re talking about, but the skill that a very good agent can recognise for you.
Matt:   The question for a lot of people is, “How do I find that agent?” And obviously, that’s where the information that we have about agents allows vendors to go look at who’s got a good track record, look at who’s well-reviewed, and then, connect up with that agent.
Matt:   I think, though, there is an element of, “Do I have to pay for all of this type of advertising?” I think that’s the part, where, I think, there’s probably, might be a dual role to play. Do I need two portals? Do I need to do print? Do I need to do some of the things that, a little bit on autopilot, sometimes, to some of the agents.
Matt:   I think a good exchange in that, between you and your agent, will demonstrate the value of each of those channels. But, ultimately, we say, “Listen to the experts, listen to the real estate agents, about what you should do to market your property.”
Kevin:   Good thinking, and great research, too, and I appreciate you giving us some time talk it through, Matt. Matt McCann is from Local Agent Finder. Thanks for your time, Matt, great talking to you.
Matt:   No problem, Kevin. Cheers.

Not all cladding has to go – Paul Morton

Kevin:   The moment we hear the word cladding, we are taken to the memories of the horrific events that unfolded at the Grenfell Tower in Kensington, West London, in May 2017. What role did cladding play in that event? Was it a particular type of cladding, and has it been used in other parts of the world? Paul Morton from Lannock Strata Financing joins me now, to answer those and other questions that we’ve been asked.
Kevin:   Paul, welcome to the show, and thanks for your time.
Paul:   Thanks, Kevin.
Kevin:   What do we know about the causes of that fire in London, Paul?
Paul:   I think probably we should be focusing on the effect of the fire, and the dreadful thing there is that people died. Now, I don’t want to … No one in Australia should be complacent about this, but the issues in London about deaths are quite different than the issues that we have in Australia. In the UK, generally, there’s a fire policy of, if there’s a problem, stay in your unit, and in Australia, the general thing is, if there’s a problem, get out of your unit.
Paul:   So, one is the bad advice which had been given to people in the UK, and also their lack of passive fire safety systems. So cladding is a huge problem in Australia, but we … I mean, there was the Lacrosse fire in Melbourne about four years ago. Why didn’t people die? It was because of things like fire exits, and plans to get out, and evacuation strategies. So there is quite a difference between the Australian model of dealing with fire safety, and the UK model.
Kevin:   Can I just ask you then about cladding? Is all cladding the same, Paul?
Paul:   No. It’s all quite different, and the industry has come us with this wonderful euphemism called substitution, which basically means fraud. Now, we could go into the detail of the different types of cladding. Effectively, it’s an aluminium sandwich. There’s two thin strips of aluminium on the outside, and inside there’s some kind of foam. It depends what that foam is made of, which depends how fire retardant or how flammable it is. Now, with all the detail of these types of foam, it gets quite technical.
Paul:   The simple thing that we have in Australia is, there’s good foam, or good cladding, and bad cladding. The bad cladding is obviously the stuff which will go up in smoke. Now, the problem, though, is that it’s almost impossible to tell the good from the bad. You can’t look at a sheet from the outside and say, “Oh, yes. This is the good stuff,” because the foam looks the same. Because of the substitution, which I’ll call fraud, somewhere along the line from the manufacturer to when it got on the building, somebody has put the wrong stuff in. But you can’t rely on a stencil on the back of it, which says that this conforms to the appropriate standards, because that might be fraudulent. You can’t rely on the documents that you have about the stuff which was put on, because that could be fraudulent. The only real way to know is to have an invasive fire test, which is to take it off, and send it to the lab, and get them to send it.
Paul:   Now, the big problem, and this is facing governments all over the east coast of Australia, is we don’t know how much bad cladding there is. We’ve run fire safety seminars on cladding in Brisbane and Sydney and the ACT, and one of the engineers presenting at the Sydney one said, in his view, as much as 90% of the cladding on strata buildings, this is the aluminium cladding, is the flammable cladding, the bad stuff.
Kevin:   Is there a particular brand that is suspect?
Paul:   No. It’s so many manufacturers, most of them in China, and so many different types of cladding, that it’s not really brand-associated, and even so, you wouldn’t know which brand’s on your building. It’s just, it needs to be tested.
Kevin:   Okay. Well, if it’s tested and then it’s found to be suspect, does it necessarily have to be replaced?
Paul:   Not necessarily, but likely. So in Sydney, there’s the so-called 435, there’s a register of buildings being built in Queensland, and there’s also the various letters being sent out in Victoria. The rectification will depend what the experts recommend in your particular situation. So it could be to replace all the cladding. It could be to replace a portion of it. It might be that passive fire safety systems, sprinklers, exits, signs, evacuation procedures and things like that, are sufficient. I mean, there’s really two things we’ve got to take account of here. One is saving life, and then the second one is saving property, and the solutions might be different for each of those.
Kevin:   Yeah. What would be your advice to anyone who owns a unit in a development that they think might be impacted? What should they be doing?
Paul:   Okay. Well, I think the impact if you own a unit … Look, government and strata managers are getting onto this problem. The Victorian government is the first, and doing quite a lot of stuff early. New South Wales and Queensland are following on, but quite well. The government is doing something, and I don’t think, from an investor or owner point of view, you really need to get too concerned about, is the government following the right processes? Let them work them out.
Paul:   It basically comes down to you, as an owner, being aware that there are safety issues and there’s associated liability if you don’t do something. There’s compliance issues. There’s insurance issues, and the cost of insurance on these types of buildings is going up, and we’ve heard some horror stories of quite dramatically. Where it really starts to hit investors will be reduced property values, and we’re starting to see that. There was an article in AFR this week, talking about lenders assuming decreased property values for potentially affected buildings.
Paul:   When you come back to that engineer’s comment, saying, look, 90% of buildings with cladding have the wrong cladding, you’re guilty until you’re proven innocent. I think it’s going to be increasingly difficult to get loans on your property, and then the big one is, sooner or later, smart people, engineers and project managers and builders, are going to come up with a plan, and you’re going to have to approve that plan, because unless you’ve got an alternative, this stuff has to be fixed. There’s no doing nothing in this one, it’s working out the cost of funding the plan.
Kevin:   Well, what is the cost? Have you got an estimate per unit? I guess it’s going to depend on how big the development is, too.
Paul:   Absolutely. How big, how much of the bad cladding is there, in what positions it is. It could be … Look, the bad cladding is okay in its right use. If your use is on a sign in the front of your commercial building in the middle on the boondocks, if it goes on fire, health and safety are not really an issue. No one’s life is at risk. It’ll depend on the actual situation. Generally, people are saying it’s going to be about $50-60,000 per unit to fix a building, but it’s going to vary widely.
Kevin:   Yeah, of course. What sort of funding and support is available? I can image that Lannock would obviously … I mean, you’re deeply involved in this. You have a good understanding of it. You’re obviously providing a service for unit owners?
Paul:   Well, yes, and look, our solution is to help people to fund things, so that’s where we are. We’ve, for example, lent money to the Lacrosse Building in Melbourne, so that they could rectify their cladding. Essentially, for investors, it comes down to, they’ve got two options. They can approve a strata loan, which is where a company like Lannock lends to the actual body corporate or owner corporation, or they can remortgage, meaning that people increase or get mortgages on the individual units and then contribute that as a special levy.
Kevin:   Paul, just in closing, can you explain to me what the CRAs are? CRA.
Paul:   Oh, gosh.
Kevin:   I’ve heard that bandied around. What’s that about?
Paul:   It’s a cladding rectification agreement. That’s where the acronym comes from. There was legislation passed in Victoria, a month or two ago now, which was approving this type of loan. I think it’s highly problematic, and it’s really quite odd because I’ve seen a number of papers on, typically, lawyers websites, saying, “This is what a CRA does, and this is when it will become available.”
Paul:   Well, it’s basically a quadpartheid, if we could call it that, four parties. So there’s the lender, there’s council, then there’s all the many individual owners, and then there’s the body corporate or owner corporation. So immediately, we’ve got a lot of complexity. At this stage, I haven’t heard of any lender who’s willing to participate in that, and Lannock is talking with government and we’ll try and make it work if we can, and I haven’t heard of any council who’s yet willing to participate. So I think the best thing we can say about a CRA is watch this space. It’s on hold, don’t rely.
Kevin:   Yeah. Okay. Well, if you are in a situation, you’ve got a unit and you want to get a little bit more information, I’d suggest you go to the website. Just give us that website, Paul, for Lannock.
Paul:   For Lannock,
Kevin:   Okay, Paul Morton has been my guest. Paul, thanks for that interesting insight. It’s one that we’ll watch, and please keep us updated if you have any more information for us, please.
Paul:   Thanks, Kevin.

A simple rule about money – Ben Kingsley & Bryce Holdaway

Kevin:   Good friends of ours Bryce Holdaway and Ben Kingsley have launched another book. Hey guys, how are you doing?
Ben:   Good day Kevin.
Bryce:   Hi Kevin, how’s it going?
Kevin:   Yeah good. Good to be talking to you again and of course Bryce and Ben, are well known for their first book “The Armchair Guide to Property Investing” which fits really nicely with their podcast “The Property Couch”. So guys congratulations, nice to have you on the show. I want to talk about your new book which is called “Make Money Simple Again”. I guess the best way to launch into this Ben, is cause I think there’s a good message in here for families and particularly kids; how we should be educating our kids?
Ben:   Yeah Kevin, I think the actual money management system that we’re promoting is a top down system. It’s really easy money management solution for households to implement. So it works at all levels, whether you’re mature age or right down to adolescent. This whole money management system is great, so we refer to children and the way we are teaching them the value of money. What it does is it helps them to plan the years spending that they’re going to do and then tries to ensure that they trap the surplus. But the other important thing that we’re noticing in some feedback we’re getting is, and this is what we’re sort of teaching parents and kids to do is, don’t have a separate money management solution for the children, why not put that money into an offset account.
Ben:   So ultimately the family is benefiting because for kids to get into the property market into the future and to save up. Yes, it’s important for them to understand the value of needs and wants, and to realise the value of money. But we can set up a separate spreadsheet really easily, to track the money that they put into the parents offset. And then all of a sudden the parents will then feel committed to making sure that they may be go security guarantee or help the kids get into the property market. We’re seeing the Europeans and the Chinese have been doing this for hundreds, if not thousands of years, and I think we need to catch up to that approach. Where we’re sort of looking at family money, rather than just individual money.
Kevin:   Yeah, you make a great point there Ben, and I think you’re very right we’ve looked at this as individuals. Almost generation to generation, whereas one generation can help the next. It always gives them a leg up, doesn’t it?
Ben:   Yeah it does, and I think that the message here in terms of money has been a bit of taboo topic in many households in many generations. And I think with the advent of digital money and immediacy in terms of how we can track it and look after it. That conversation needs to be discussed, it’s the biggest form of argument in any household. If we can get in control of our money, then ultimately help each other, we do see that generational family wealth through some of the high nett worth families. These kids are basically trained and prepped in terms of how to look after the family estate and I can’t see why that couldn’t be the case for everyday mum and dad Australians to be able to get into that situation.
Kevin:   Yeah Bryce I’d love to hear your take on this too, cause young man, young family and what you’re talking to your kids about. But before we do, of course I’ve introduced to our audience on many occasions and that great series that you did Foxtels Lifestyle Channel “Location, Location Australia” is still running, I still see it from time. You’re looking remarkably young still though Bryce?
Bryce:   Yeah, I’ve seemed to have stumbled across the cure for ageing. Or Ben reckons I’m starting to get a bit older since I’ve been hanging out with him.
Kevin:   Yeah. It rubs off you reckon? Hey can we talk about your new series? Or is that not for publication?
Bryce:   I’ve just finished filming a series called “Escape from the City”. If any ones familiar with the UK version called “Escape to the Country”. No one in Australia escapes to the Country so we just Escape from the City. So it’s been fun being all around the country, been up and down the East Coast and for anyone who likes to sit back with a glass of red on their couch after a busy day at work and they wanna watch other peoples property journeys. It’s really gonna fill a nice space for them.
Kevin:   Yeah. Well that’s what we do all the time mate. Hey Bryce, can I just get your take before we have to leave, we’re just about out of time. Just quickly, is it harder do you think for kids nowadays to succeed, to get property and become successful financially?
Bryce:   I think to a certain extent it is, because the prices have gone pretty high. But I think there’s a couple of mitigating factors that are working against younger people. One is, when I grew up Kevin, you and Ben, the idea of getting into debt was a real taboo; it was pay cash for everything, don’t get into debt whereas now I think it’s become the norm for people to have credit card debt and to Tap and Go, and to really be disconnected from the decision that they’re making to purchase from the monthly credit card statement at the end of the month. So I think that is working against young people, young people who don’t get into credit card debt are weird. And I say weird in a good way, but for most people they’d be thinking weird in a bad way.
Bryce:   And secondly I think because of that sort of “Must have things now approach” that you and I and Ben weren’t exposed to when we were young, means that people aren’t prepared to get on the property ladder at the very first run, they really wanna take a big run up and get on the fourth and fifth run on the ladder before they can. I think couple of those things are working against them, but the bottom line is you talk to anyone in any generation, it was always hard to get their first home.
Kevin:   Yeah. Okay guys I’m just gonna leave it there but thank you very much for your time. All the best for the book it’s called “Make Money Simple Again”, my guests have been Bryce Holdaway and Ben Kingsley also from Empower Wealth. Gentlemen thank you, all the best for the book and look forward to seeing you on telly real soon, Bryce?
Bryce:   Thanks for the chat Kevin.
Ben:   Thanks Kevin.

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