{"id":12279,"date":"2017-06-16T03:00:26","date_gmt":"2017-06-15T17:00:26","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=12279"},"modified":"2017-06-16T03:00:26","modified_gmt":"2017-06-15T17:00:26","slug":"there-is-no-affordability-crisis-in-australia-take-the-media-with-a-grain-of-salt-chinese-investment-expected-to-fall","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/there-is-no-affordability-crisis-in-australia-take-the-media-with-a-grain-of-salt-chinese-investment-expected-to-fall\/","title":{"rendered":"There is no affordability crisis in Australia + Take the media with a grain of salt + Chinese investment expected to fall"},"content":{"rendered":"<p><b><i><span style=\"text-decoration: underline\">Highlights from this week:<\/span><\/i><\/b><\/p>\n<ul>\n<li>The facts about housing affordability in Australia<\/li>\n<li>Where the bargains are for under $400,000<\/li>\n<li>Why the market is set to continue to rise<\/li>\n<li>The correct level of gearing<\/li>\n<li>Changes to legislation that will impact vast numbers of buyers and sellers<\/li>\n<li>Getting your gearing right<\/li>\n<\/ul>\n<p><strong>Transcripts:<\/strong><\/p>\n<h2>Take what the media says with a grain of salt\u00a0\u2013 Chris Gray<\/h2>\n<p><b>Kevin:<\/b>\u00a0 Joining me in the show now, Chris Gray from Your Empire buyer\u2019s agents.<br \/>\nChris, you\u2019ve just returned from an overseas trip. It doesn\u2019t hurt to leave the country occasionally to get a bit of a perspective about what\u2019s happening back here. What\u2019s your take on the market right now, Chris?<br \/>\n<b>Chris:<\/b>\u00a0 It\u2019s great to travel the world because you get a different perspective on things. I was in Guangzho in China about six weeks ago, and they were selling apartments for $40,000 or $50,000 a square meter \u2013 $50 million penthouses \u2013 and I\u2019ve just been in Seoul, literally flew in this morning, and again, property prices are high there.<br \/>\nIt\u2019s very easy for us in Australia to say \u201cOh look, property prices are high and that\u2019s all going to crash,\u201d but at the same time, we are in the top ten of the best cities to live and work in the world and the property prices reasonably should be up there. I think you just have to take the media and take some of these thoughts with a pinch of salt, because just looking out the window now, we live in an amazing country.<br \/>\n<b>Kevin:<\/b>\u00a0 We talk about the cost of housing but we then associate that with affordability. Do you think that\u2019s a valid argument? Is property becoming unaffordable?<br \/>\n<b>Chris:<\/b>\u00a0 It is definitely an argument, and it\u2019s one that is a worldwide issue as well. Again, I think when you\u2019re comparing us to other countries you have to take the exchange rate into account as well, because if the exchange rate changes 20% or 30% compared to Europe or Asia, or the U.S., we\u2019re still earning Aussie dollars and we\u2019re still paying the same mortgages, so whatever something is in another country, I think is absolutely irrelevant.<br \/>\nJohn Edwards from Residex \u2013 who a lot of us have followed for decades \u2013 one of the things he\u2019s said is that affordability is a problem but the market finds a way to get around it. So, we live in smaller houses than our parents, we have two income earners, we have first-home owner grants, we have very, very low interest rates, and all of these things help for us to be able to afford the property.<br \/>\nThe bottom line \u2013 again, quoting him, as one of my guests on <i>Sky News<\/i> \u2013 is it comes down to supply and demand. We know areas around Australia \u2013 like the mining towns \u2013 where there\u2019s a massive supply of properties and no one works there, and so the market\u2019s going to crash, and it might have crashed down to 20% of the former prices, but we know that there are other places in Australia where there\u2019s no stock, there are lots of rich, high-income, young people who are willing to work and are willing to sacrifice who can afford that and there are parents who will give the kids a 10% or 20% deposit to help them get into the market. This is the thing that the economists don\u2019t always get, I think.<br \/>\n<b>Kevin:<\/b>\u00a0 Chris, the point you made there, that comment from John Edwards, I think is very, very worthwhile considering just for a moment and that is we do adjust over a period. I look back several decades and I\u2019ve told this story before about how difficult it was then, but we adjusted and we did purchase.<br \/>\nDo you think sometimes we just complain about a situation and try and make it better for ourselves rather than try to look for an opportunity to adapt?<br \/>\n<b>Chris:<\/b>\u00a0 I reckon 99% of the time, we complain, whinge, and moan. It\u2019s either bashing the banks or you\u2019re bashing the politicians or something. I recently did an article talking about my first home, which I bought at the age of 22 \u2013 so 24 years ago, so obviously a long time.<br \/>\nThe numbers then were I earned \u00a310,000 and I could borrow three times my income \u2013 so \u00a330,000 \u2013 and that would get you nothing. You\u2019d be in a horrible little pit in a horrible place in town, but I guess with being able to work out my numbers and also having parents\u2019 support in terms of a guarantee \u2013 so not necessarily a handout but more of a guarantee to get me through the mortgage \u2013 I borrowed seven times my income to buy a place for $70,000 or $80,000 that was worth $100,000.<br \/>\nI negotiated well. I got 20% off, which was two years\u2019 salary. My mortgage was massive \u2013 it was more than my income even before tax \u2013 but because I was willing to sacrifice and have two people live in the house, their rent actually paid for the whole of my mortgage.<br \/>\nI guess the equation then is do you want to live in your own home and own it 100% but live in a bad place, or do you want to suffer and have a couple of other people living with you but spin it and get some mates in and have a good time because then suddenly they can pay all of your mortgage?<br \/>\nI think it comes down to if there\u2019s a will there\u2019s a way. If you really want something to happen even if you have no money, no job, no nothing, there is a way. You just have to work a bit harder.<br \/>\n<b>Kevin:<\/b>\u00a0 Yes, make those sacrifices. \u00a0Final question for you \u2013 I probably know your answer to this one \u2013 whether or not you can see the market continuing to rise, Chris.<br \/>\n<b>Chris:\u00a0 <\/b>In some areas, I think it will, yes. I think in a lot of areas, it won\u2019t. With APRA, with the banks changing all the serviceability, it\u2019s getting tougher and tougher. Even with me, I have $10 million of debt, before they used to assess me at $500,000; now they\u2019re assessing me at $1 million. So, it hits all of us, and even though we professionals may make it look easy, it\u2019s not.<br \/>\nThere are some areas that are really going to be stuffed, and I think it\u2019s the high rise developments, the brand new stuff that\u2019s being overpriced, sold to foreigners who can\u2019t get the loans to settle on it. I think those are the danger areas \u2013 not all brand new property but some of it.<br \/>\nAgain, the further out areas, some are going to be good and some are going to be bad. But again, my core thing \u2013 everyone knows my strategy \u2013 which is the median-priced, blue-chip, inner-city suburbs, there\u2019s no more stock and there are lots of queues of people with money. It\u2019s not going to go down, I think, but the growth rate is going to go down. I think we\u2019re still going to be in the positive growth but just not as much in the double digits as before.<br \/>\n<b>Kevin:<\/b>\u00a0 Always good talking to you, Chris Gray. Chris, of course, from Your Empire buyer\u2019s agents.<br \/>\nChris, thanks for your time.<br \/>\n<b>Chris:<\/b>\u00a0 My pleasure. Thanks a lot.<br \/>\n&nbsp;<\/p>\n<h2>Chinese buyers are concerned about buying here\u00a0\u2013 Dave Platter<\/h2>\n<p><b>Kevin<\/b>:\u00a0 We seem to be continually talking about the impacts on the Australian market and a lot of people, probably unfairly, align activity coming from overseas, particularly Chinese investors. But there are two top issues at the moment for Chinese property buyers in Australia that have been highlighted by the global Juwai network. Joining me now, global spokesperson for that website, Dave Platter.<br \/>\nHi, Dave. You\u2019re obviously getting a bit of feedback about what\u2019s concerning Chinese property buyers in Australia right now. What are they?<br \/>\n<b>Dave<\/b>:\u00a0 Hey, Kevin. Thanks so much for having me on. Yes, at Juwai.com, we have a customer service center up in Shanghai and talk to customers all the time. It\u2019s not just web forms, but people on the phone, on WeChat.<br \/>\nThere\u2019s a lot of new red tape, new taxes and regulations in Australia that are confusing them and causing them to ask a lot of questions. Something new is the vacancy tax proposed in the federal Budget.<br \/>\n<b>Kevin:\u00a0 <\/b>So, they\u2019re concerned about these issues. I want to dig a little bit deeper into the two issues too, but is there any indication that these two issues are stopping them from investing in Australia?<br \/>\n<b>Dave:\u00a0 <\/b>We haven\u2019t seen that yet. We expect investment in 2017 to be lower than 2016, but 2016 was an all-time record. It was the highest amount of Chinese property investment ever seen in Australia. It was something like $32 billion of approved real estate investment. That\u2019s the official stats from the FIRB.<br \/>\nSo, we expect it to be lower than that. But the first quarter was already on par with 2015\u2019s first quarter, and in its time, 2015 was a record year as well, with something like $24 billion of investment. I think it might be around there.<br \/>\n<b>Kevin:\u00a0 <\/b>You mentioned there about the vacancy tax proposed by the federal Budget. How many Chinese buyers would that actually impact? How many are not planning to occupy?<br \/>\n<b>Dave:\u00a0 <\/b>It would hardly impact anyone as far as we can see. Most Chinese investors who are buying property for investment, just like probably most of Australian investors, they need to rent out that property in order to get the income stream. They can\u2019t just buy an investment property and leave it empty.<br \/>\nAbout one-third of Chinese buyers are buying for investment, with the others buying mostly for their own occupation. And of that one-third, it must be a miniscule percentage who would actually leave their investment property empty.<br \/>\n<b>Kevin:\u00a0 <\/b>What is the second issue that\u2019s concerning them, Dave?<br \/>\n<b>Dave:\u00a0 <\/b>Another issue would be the new levies proposed by New South Wales. You know, this just came out as well on the news, that New South Wales wants to <b>[2:48 inaudible]<\/b> Chinese buyers with some extra <b>[2:50 inaudible]<\/b>. And they\u2019re hoping that they might be able to somehow benefit first-time buyers from this.<br \/>\n<b>Kevin:\u00a0 <\/b>Do Chinese buyers see this as a bit of an insult? Is this what they\u2019re questioning?<br \/>\n<b>Dave:\u00a0 <\/b>When you\u2019re buying in another country, you expect there to be local regulations and taxes that you have to comply with, and you just have to get to know what those are, so you ask a lot of questions. But on the whole, they don\u2019t take it personally because it\u2019s not just Chinese buyers who have to pay these things; it\u2019s all buyers.<br \/>\n<b>Kevin:\u00a0 <\/b>When you do your research, do you try to gauge\u2026 Well, you obviously do because you indicated to me that you felt that investment this year was going to be lower than 2016. What is the level of investment in Australia by Chinese investors?<br \/>\n<b>Dave:\u00a0 <\/b>Last year, in the last financial year, it was $32 billion, and the one before that, it was about $24 billion.<br \/>\n<b>Kevin:\u00a0 <\/b>And this year, you\u2019re predicting that it\u2019ll actually be lower than that?<br \/>\n<b>Dave:\u00a0 <\/b>I wouldn\u2019t want to put a hard number on it, but we think it\u2019ll be lower than the most recent year and closer to the prior year, yes.<br \/>\n<b>Kevin:\u00a0 <\/b>Just your view now, as an individual \u2013 I know you\u2019re a spokesperson for Juwai \u2013 do you believe that the impost by the federal government on particularly foreign buyers is fair?<br \/>\n<b>Dave:\u00a0 <\/b>If you\u2019re talking about the vacancy tax, it strikes me as a perfect example of bad policy. First of all, it\u2019s been tried in other places, like in Vancouver, and they just don\u2019t know how to enforce it. There\u2019s no way to find out who has left their property vacant.<br \/>\nFor example, the data that we have here in Australia, some academics did research and they decided that 50 liters a day of water usage was the minimum that the typical person would have and therefore if you use less than 50, the property was vacant. Most of the properties they found vacant were in the inner city, but if you think about someone living in inner city in a small apartment, using a laundry down the hall, showering at the gym once in a while, it\u2019s easy to come in under 50 liters a day.<br \/>\n<b>Kevin:\u00a0 <\/b>I guess the same criticism could be leveled and has been in the past at those who have large homes and leaving anything up to 60% or 70% of the home largely vacant when it could be let out \u2013 the empty room story in Australia.<br \/>\n<b>Dave:\u00a0 <\/b>Absolutely, yes, I know what you mean. Does everyone who has worked hard and raised their kids and is now living in empty nests, do they all have to take in roommates? I don\u2019t think so. I think what\u2019s driving the market right now seems to be low interest rates, so affordable loans over the long term, and just a shortage of supply compared to population growth.<br \/>\n<b>Kevin:\u00a0 <\/b>I appreciate you joining us today, Dave. Dave is from the global website Juwai. I appreciate your time. Thanks, mate.<br \/>\n<b>Dave:\u00a0 <\/b>Thank you, Kevin.<br \/>\n&nbsp;<\/p>\n<h2>Get your gearing right\u00a0\u2013\u00a0<a href=\"http:\/\/realestatetalk.com.au\/featured-channel\/michael-yardney\/\" target=\"_blank\" rel=\"noopener noreferrer\">Michael Yardney<\/a><\/h2>\n<p><b>Kevin:<\/b>\u00a0 What\u2019s the correct level of gearing at this time in the property cycle? Let\u2019s have a look at that. <a href=\"http:\/\/realestatetalk.com.au\/featured-channel\/michael-yardney\/\" target=\"_blank\" rel=\"noopener noreferrer\">Michael Yardney<\/a> joins me from Metropole Property Strategists.<br \/>\nGearing your way up the property ladder, Michael. How much gearing is sensible at this time?<br \/>\n<b>Michael:<\/b>\u00a0 Kevin, it\u2019s a good question at a time when interest rates are starting to creep up and people are wondering how they\u2019re going to cope. Let\u2019s talk of some big picture principles first, if we could.<br \/>\nIt depends what your strategy is. Some people are interested in cash flow-positive properties. My strategy is strong capital growth. Firstly, that will influence your gearing levels because if you\u2019re hoping for positive cash flow, you either have to buy secondary properties with better return or lower your loan-to-value ratios.<br \/>\nBut Kevin, when you start off, we all need money. Unless you win the lottery, none of us have a big windfall that you can actually invest with without any borrowing. I think beginners really have to just accept the fact that they start with as low a deposit as they can.<br \/>\nThere are still some banks lending at 90% loan-to-value ratio where you\u2019re putting 10% down, but the majority of the time, you have to put in 20% and borrow 80%, and even if you don\u2019t have that financial buffer we talk about, I guess the first step is to get in the market, and to do that, you usually have to borrow as much as you can, Kevin.<br \/>\n<b>Kevin:<\/b>\u00a0 Michael, what about midway up the ladder? Does that strategy change?<br \/>\n<b>Michael:<\/b>\u00a0 Yes.\u00a0 I think as you start to build your portfolio, you now have to take fewer risks and start securing your assets by giving yourself slightly lower loan-to-value ratios and putting some money aside in those cash flow buffers, whether it\u2019s in your offset account or in some other form, like a line of credit.<br \/>\nThe concept is to keep something there for the rainy day. But still, if you\u2019re at the asset growth stage of your investment career, you are going to have to stick to an 80% or so loan-to-value ratio.<br \/>\n<b>Kevin:<\/b>\u00a0 What about when you reach the top, Michael?<br \/>\n<b>Michael:<\/b>\u00a0 When you get to the next level, your aim is to start living off of your property investments. I believe in living off of equity; other people talk about living off of your cash flow. Either way, your job is to lower your loan-to-value ratios so that you can slowly transition from one stage to the next.<br \/>\n<b>K<\/b>e<b>vin:\u00a0 <\/b>Michael, how do you make that transition?<br \/>\n<b>Michael:<\/b>\u00a0 It doesn\u2019t happen overnight. Some people say sell a property. There are people saying to buy ten properties and at the end, sell five and keep five without any debt. It doesn\u2019t work because when you sell the properties, you pay capital gains tax, you pay agents\u2019 costs, and you only have about 20% equity in your property anyway because you have a loan against it. So, you don\u2019t end up being debt-free that way.<br \/>\nThe way I would propose it is just don\u2019t do anything; basically let your properties grow in value and your loan-to-value ratios slowly drop as the properties increase in value and you don\u2019t take on more loans. Or you can add some value to the property by doing renovations or development and getting better cash flow that way.<br \/>\nNow, I\u2019m not allowed to give superannuation advice, but I know some people take some money out of their super when they retire \u2013 and that can be in a tax-free environment \u2013 and pay off some of their debt, again lowering their loan-to-value ratios.<br \/>\nLook, sometimes you do have to sell a property to get out some extra equity to lower some debt. Another thing people can do as they transition to that stage where they\u2019re now going to live off of the cash flow of their properties, Kevin, is to add some commercial properties to their portfolio.<br \/>\nCommercial real estate has higher yields but lower growth, so it\u2019s inappropriate to do it too early in your investment journey, but near the end, that makes a good adjunct to your capital growth properties, Kevin.<br \/>\n<b>Kevin:<\/b>\u00a0 Well said, Michael. Thank you very much, and some very sound advice there.<br \/>\nMichael Yardney, of course, from Metropole Property Strategists. Thanks, Michael.<br \/>\n<b>Michael:<\/b>\u00a0 My pleasure, Kevin.<br \/>\n&nbsp;<\/p>\n<h2>There is no affordability crisis and here is the proof\u00a0\u2013\u00a0Simon Pressley<\/h2>\n<p><b>Kevin:<\/b>\u00a0 We hear a lot about housing affordability and a housing crisis. There is no housing affordability crisis in Australia because the majority of locations remain affordable to property buyers. That\u2019s according to new research from Propertyology.<br \/>\nThe research found that 56% of local government areas in Australia had median house prices of $400,000 or below and nearly 70% had medians of $600,000 or less. Whether or not you think that\u2019s affordable, I don\u2019t know. But we\u2019re going to get the facts now because the author of that report, the man from Propertyology, joins me, Simon Pressley.<br \/>\nYou gave a presentation that I attended during the week, Simon. You went through the areas. Let\u2019s just pick through this, if we may. 56% of local government areas in Australia had a median house price of $400,000 or below. Surely, that would indicate that we don\u2019t have an affordability crisis.<br \/>\n<b>Simon:<\/b>\u00a0 That\u2019s right. More than half for a grand sum of $400,000, and that\u2019s a detached house. Obviously, apartments increase these options even further.<br \/>\n<b>Kevin:<\/b>\u00a0 That was going to be my question. Is this total properties? Is this houses and apartments?<br \/>\n<b>Simon:<\/b>\u00a0 The 56% figure is the number of local government authorities \u2013 of which there are 550 in Australia \u2013 where the median house price is $400,000 or less. So, in more than half of Australia, you can buy the detached house\u2026 If we include apartments, yes, that comes to 69%, so almost three-quarters of the country.<br \/>\n<b>Kevin:<\/b>\u00a0 How does it compare to, say, a couple of years ago \u2013 I don\u2019t know whether you\u2019re able to give me that comparison \u2013 in terms of some of the regional areas that took a bit of a nosedive? Because I imagine we are talking primarily about regional areas now.<br \/>\n<b>Simon:<\/b>\u00a0 Definitely, that would cover most regional cities in Australia. There are a couple of regions that are quite expensive. Wollongong and Newcastle, for example, are actually more expensive than a few capital cities.<br \/>\nBut for the $400,000, you can buy a detached house in Brisbane for that, in Adelaide for that, in Hobart for that. There is certainly nothing wrong with the quality of infrastructure and employment opportunities in those cities.<br \/>\n<b>Kevin:<\/b>\u00a0 I guess a lot of the housing affordability crisis centers around the fact that the majority of people prefer to live or choose to live \u2013 or have to live, I guess \u2013 in Brisbane, Sydney, and Melbourne, the main areas. And all of this affordability discussion is largely centered around Sydney, I would have thought.<br \/>\n<b>Simon:<\/b>\u00a0 Wholly and solely centered around Sydney, in our view. Even Melbourne, which is officially Australia\u2019s second most expensive city, for $600,000, which most household incomes can afford a property for $600,000, a detached house in Melbourne \u2013 and there are 31 LGAs that make up greater Melbourne \u2013 in nine of those, you can buy a detached house for $600,000 or less, and 26 out of 31 LGAs in Melbourne, you can buy an apartment. Almost all of Melbourne, you can get a property for $600,000 or less. It really is a Sydney-centric debate.<br \/>\n<b>Kevin:<\/b>\u00a0 What about Brisbane? We\u2019ve heard a lot about how affordable property is in Brisbane. What did you find out there?<br \/>\n<b>Simon:<\/b>\u00a0 Brisbane\u2019s median house price, greater Brisbane is $515,000. I\u2019d suggest that that\u2019s still very affordable. But I guess the further you get out from the CBD, for a detached house, the more affordable that gets.<br \/>\nAt the low point, you could buy a house in greater Brisbane \u2013 the outer suburbs, as I say \u2013 as low as $350,000. And for apartment living, you could be right in the city for $500,000 or $550,000 or, say, five kilometers out from the city, two or three train stops, for around $400,000 to $450,000. Brisbane is Australia\u2019s third biggest city, so you can own a property for somewhere around $450,000.<br \/>\n<b>Kevin:<\/b>\u00a0 We have the double whammy here, too. You have very affordable prices in some of these areas that you\u2019re talking about here as well as the lowest interest rates we\u2019ve seen, certainly, as long as I can remember anyway.<br \/>\n<b>Simon:<\/b>\u00a0 Yes, I don\u2019t think there\u2019s anyone alive in this country who has experienced interest rates lower than what we are, which again, contradicts what has become a national debate that we have a housing affordability crisis.<br \/>\nI guess it\u2019s extended to more than a debate. We\u2019ve actually had policies adjusted, whether it was credit policies enforced by APRA or changes in the federal Budget that are targeted largely to investors, all over an alleged crisis Australia-wide. It\u2019s horrible, according to these so-called experts. All the evidence contradicts that.<br \/>\n<b>Kevin:<\/b>\u00a0 One of the things that was discussed quite broadly, too \u2013 probably not enough, in my view \u2013 at your luncheon, Simon, was the demonization of property investors, and how they\u2019ve painted almost as being greedy landlords. You actually had someone on stage who admitted that she didn\u2019t even want to tell her friends and relations that she was investing in property for that reason, for that stigma.<br \/>\n<b>Simon:<\/b>\u00a0 It\u2019s sad, isn\u2019t it? We\u2019re talking about a 25-year-old young lady, motivated, driven, owns two investment properties, middle-income earner, and she was afraid to tell her family and friends that she was responsible and hard-working and did good things with her money because she was worried about what the backlash would be.<br \/>\nIt\u2019s sad when we\u2019re worried about that sort of thing, when all we\u2019re doing is being good with our money and trying to be proactive so that years down the track, we\u2019re going to afford to retire on our own terms rather than being reliant on taxpayer pensions.<br \/>\n<b>Kevin:<\/b>\u00a0 She was asked why she felt that way or did she even try to explain her situation. She said that she and her partner were just over it. They were sick and tired of trying to explain it, so it was only a matter of time that people started then to say to them \u201cWhat are you doing, again?\u201d It is a stigma.<br \/>\n<b>Simon:<\/b>\u00a0 It is. It\u2019s sad. It shouldn\u2019t exist. As we spoke about the other day at the luncheon, Kevin, I think leadership for anything starts at the top, so we need to stop talking negatively about investing. It\u2019s a positive thing. It\u2019s something we should be encouraging. We should be teaching our children to be responsible with their money and save their pennies so that when they enter the workforce, they\u2019re similarly living within their means and planning for their future.<br \/>\nWe should be talking positively and encouraging investment and not looking to bash them with a stick and blaming them for something. It\u2019s sad to think that society in general has become one where we look to blame. Then we figure out who we want to blame and how we\u2019re going to penalize.<br \/>\nThat has certainly happened with property investors, whether it\u2019s paying more interest on a loan than an owner-occupier, or being harder to get a loan because of tighter credit policies, or further diluting negative gearing benefits, or just accusing investors of depriving generations of home ownership. It\u2019s wrong.<br \/>\n<b>Kevin:<\/b>\u00a0 There was a slide you used at the luncheon that was a real eye-opener to me \u2013 I\u2019ve never seen it used before \u2013 and that was just how much of a contribution investors make to the overall economy.<br \/>\nWe talked there about leadership, and where is that leadership going to come from? It has to come from politicians. It has to come from the government, who need to be promoting the benefits that investors bring into the community.<br \/>\nCould you spend a moment and talk about that?<br \/>\n<b>Simon:<\/b>\u00a0 I\u2019d love to. Imagine Australia, because we talked property investors, if they just didn\u2019t exist, there would be three million fewer dwellings for those who don\u2019t own their own home. Not everyone aspires to home ownership or just aren\u2019t motivated enough.<br \/>\nAustralia has 9.7 million properties. Two-thirds of those are occupied by the owner, with or without a mortgage, and three million of those are occupied by a tenant and are owned by mom and dad investors, not rich lawyers and surgeons or anything like that. Certainly, very few properties are owned by governments. Three million properties are owned by mom and dad investors.<br \/>\nSo, imagine Australia without that. The homeless situation would be disgusting. Think of all of the jobs, directly or indirectly, that are related to maintaining a rental pool: the property managers, conveyancers, trades people, building inspectors, accountants doing our tax returns \u2013 tens of thousands of jobs that are directly and indirectly related to property investors.<br \/>\nAnd taxes, directly to property investors\u2026 these numbers were released only a couple of weeks ago by the AGO. Stamp duty, last financial year, property investors alone contributed $8 billion to the Australian economy. For $8 billion, we could fund two Brisbane Cross River Rail projects, or we could build four new state-quality hospitals for $8 billion. That\u2019s just in one financial year from stamp duty revenue.<br \/>\nCouncil rates: $130 million is paid by property investors, which goes towards footpaths, potholes, and rubbish collection services. Land tax is not payable on the family home; only investors pay land tax. That was $7 billion last financial year.<br \/>\nNot every property is negatively geared. Generally speaking, the longer we own it, eventually it becomes positively geared and then the property investor pays more tax. There was $7.5 billion paid from rental gains last financial year, and God knows what capital gains tax revenue is collected each year. We estimate that $20 billion is paid to the Australian economy from property investors in a financial year.<br \/>\n<b>Kevin:<\/b>\u00a0 It\u2019s very frustrating that these are the figures that aren\u2019t used and it\u2019s that emotional\u2026 It\u2019s almost the low-hanging fruit. \u201cLet\u2019s blame investors, if there is a crisis, for this crisis, this affordability.\u201d<br \/>\nYou actually have come up with a number of solutions that we\u2019d like to put forward and just spend a minute or two on what you think can be done to encourage people. What is the solution to this, do you think, Simon?<br \/>\n<b>Simon:<\/b>\u00a0 I think that the easiest and most cost-effective solution doesn\u2019t actually require any policies; it\u2019s just attitude, it\u2019s education, and it needs to start with prime ministers and treasurers and premiers and industry leaders.<br \/>\nMake all of Australia aware of the wonderful lifestyles, the affordable housing, and employment opportunities throughout all of regional Australia. That doesn\u2019t require a policy, a tax; that\u2019s just a discussion and maybe a clever advertising and marketing campaign.<br \/>\nTry to change the image that a lot of capital city folk have when they hear the word \u201cregion.\u201d We have a lot of clients who, for example, have spent their whole life living in Sydney or living in Brisbane and when we raise the prospect of investing in a regional location, for example, they immediately say \u201cOh, not a mining town.\u201d<br \/>\nThere are mining towns that represent regional Australia, but there are also plenty of beachside locations, like Gold Coast, Sunshine Coast, Cairns, inland Australia, some beautiful places like Orange and Bendigo.<br \/>\nThere are capital cities that don\u2019t get much mention, like Hobart. For anyone who has been to a holiday in Tasmania, they go \u201cWhat a beautiful place.\u201d Its economy is the best improved economy in all of Australia over the last couple of years, and housing is more affordable in Hobart than in any capital city in Australia.<br \/>\nIt costs nothing to just have these discussions and change the perception that other parts of Australia don\u2019t have as big of a <b>[12:17 inaudible]<\/b>. There are parts of regional Australia where the unemployment rate is below the national average, below several capital cities. But most people wouldn\u2019t be aware of that because they have a different perception in their mind.<br \/>\nIn terms of policies, I\u2019m a big believer of Barnaby Joyce\u2019s suggestion with decentralization. What is to say that every government department has to be located in a capital city? It\u2019s more affordable to build that office in a regional location where the land is cheaper and you create employment opportunities with it.<br \/>\nBig businesses could consider this as well. Why does the head office have to be in Brisbane or Sydney? It\u2019s probably more affordable to be in a regional location for some businesses from a stamp duty point of view.<br \/>\nI don\u2019t think they\u2019re ever going to get rid of stamp duty, but certainly, they could at least consider some instances where they waive it to encourage mobility, whether that\u2019s the baby boomer generation, for example, who are retiring and are prepared to move from an expensive Sydney\/Melbourne to a more affordable regional city. Take away the barrier, take away the stamp duty cost for someone in that situation.<br \/>\nOr someone who is prepared to move for employment opportunities, who isn\u2019t in a retirement stage in their life but is prepared to move to a more affordable location. Again, take away that barrier known as stamp duty.<br \/>\nPeople need to think outside the square a bit. The issue is nowhere near as big as what is being reported. I just think Australia\u2019s population is unaware of all of the options and the solutions.<br \/>\n<b>Kevin:<\/b>\u00a0 Very well said, indeed. Simon, thank you so much for your time and your insight, and for providing this report and putting the lunch on. I think it was a real eye-opener for the vast number of people who were there. Thank you. I appreciated it, and I appreciate you spending some time with us today on the show too.<br \/>\nMy guest has been Simon Pressley from Propertyology. The website is Propertyology.com.au.<br \/>\nSimon, thank you for your time.<br \/>\n<b>Simon:<\/b>\u00a0 Thank you, Kevin, and thank you for your wonderful leadership in helping us share this story for others to digest. You\u2019re doing a great job.<br \/>\n<b>Kevin:<\/b>\u00a0 My pleasure. Thanks, mate.<br \/>\n&nbsp;<\/p>\n<h2>You need to prove you are not a foreigner\u00a0\u2013\u00a0Peter Maloney<\/h2>\n<p><b>Kevin<\/b>:\u00a0 There\u2019s a legislative change that I want to mention to you that\u2019s going to have impact, I think, right across\u2026 Whether you\u2019re a buyer or a seller, whether you\u2019re a real estate agent, whether you\u2019re a lawyer or a conveyance, it\u2019s going to impact a lot of people.<br \/>\n\u2026A legislative change to give lawyers and conveyancers extended powers as they take on the role of tax collector during the property settlement process. From July 1, the changes to legislation will limit capital gains tax exemptions availability to foreign and temporary residences and increase withholding tax for foreign tax residents.<br \/>\nI\u2019m going to get a further explanation on this and its impact because there\u2019s been another change. Peter Maloney joins me, who is the CEO for GlobalX.<br \/>\nPeter, thanks for your time.<br \/>\n<b>Peter<\/b>:\u00a0 It\u2019s great to be with you again, Kevin.<br \/>\n<b>Kevin:\u00a0 <\/b>I know you\u2019ve put a warning out on this, and it sort of snuck up on me. I didn\u2019t realize that this threshold had been lowered from $2 million down to $750,000. When does this take effect?<br \/>\n<b>Peter:\u00a0 <\/b>It comes into effect as part of the federal government\u2019s most recent Budget, from July 1<sup>st<\/sup> this year.<br \/>\n<b>Kevin:\u00a0 <\/b>Okay. Explain to me what is going to happen. What does it all mean?<br \/>\n<b>Peter:\u00a0 <\/b>It\u2019s been pretty silent up until now. In the prior year\u2019s Budget, the federal government introduced a foreign resident capital gains withholding tax and applied that to all properties sold with a value greater than $2 million.<br \/>\nWhat the government called for was for all vendors selling a property greater than $2 million to apply to ATO for what\u2019s known as a clearance certificate, in essence, demonstrating that they are an Australian resident. If the person could not demonstrate Australian residency, the purchaser\u2019s solicitor was obliged to withhold 10% of the transaction value \u2013 so the value of the property \u2013 and remit those funds to the ATO within one working day.<br \/>\nWhat the federal government has done in the current Budget is quite dramatic. Under the old model, only 11% of Australian properties were sold with a value greater than $2 million. The federal government has now elected to drop that threshold down to $750,000, and it is a staggering, now, 68% of all Australian properties. 68% of Australian vendors must now apply to the ATO for a clearance certificate to prevent themselves from having 12.5% of that property value withheld and passed on to the ATO.<br \/>\n<b>Kevin:\u00a0 <\/b>So, is the requirement to get these clearance certificates\u2026 And I\u2019ll ask a few more technical questions about that in just a moment. What\u2019s involved in getting one of those certificates? How long does it take?<br \/>\n<b>Peter:\u00a0 <\/b>You can do that online. The ATO has a website online for the application of a clearance certificate. It\u2019s an online form, the consumer or their representatives will fill that out, and the estimated turnaround time from the ATO, if there are no questions regarding the data on the form, is three to five days.<br \/>\n<b>Kevin:\u00a0 <\/b>Is there a cost involved in getting one of those certificates?<br \/>\n<b>Peter:\u00a0 <\/b>No, the ATO doesn\u2019t charge for the issue of the certificate.<br \/>\n<b>Kevin:\u00a0 <\/b>Unless you\u2019re doing it through a solicitor, I guess, and they\u2019d probably some sort of administrative charge.<br \/>\n<b>Peter:\u00a0 <\/b>Well, that\u2019s right and there\u2019s a bit of a trick to that. Because under this regime, if property lawyers or solicitors or conveyancers are acting as the recipient of the tax to pass it to the ATO, they technically fall under the Tax Agent Services Act and cannot charge a fee for that process.<br \/>\n<b>Kevin:\u00a0 <\/b>Okay. That\u2019s in the event that they have to claw back this 12.5% we\u2019re talking about?<br \/>\n<b>Peter:\u00a0 <\/b>That\u2019s right.<b><\/b><br \/>\nBut it\u2019s dramatic, Kevin. Last year, under the current regime at $2 million, there were 30,000 applications for a clearance certificate. From July 1<sup>st<\/sup> and in the forward looking year, that number will jump to 400,000.<br \/>\n<b>Kevin: <\/b>This is an administrative nightmare. You\u2019re talking there about the turnaround of these certificates being three to five days; I can see that blowing out to be anything up to two to four weeks, at the best.<br \/>\n<b>Peter:\u00a0 <\/b>Last time we spoke, Kevin, we spoke about the great things that were going on in digitalization of the property settlement process with electronic conveyancing. Now this just flies into the face of that process where the whole economy is looking to digitalize, but now we have a processing place that requires paper to come back in to the property settlement process.<br \/>\n<b>Kevin:\u00a0 <\/b>Now, I understand in the release you put out, you were talking there about lawyers and conveyancers having to get involved in this process. And of course, they will be ultimate collectors of this tax, if it applies. But the issuing of the clearance certificate, surely that\u2019s going to come back to agent at the point of listing. Do they have a duty of care to tell their seller?<br \/>\n<b>Peter:\u00a0 <\/b>That\u2019s right. So, the solicitor has the obligation to withhold the funds and remit the funds to the ATO. But I don\u2019t disagree with you, Kevin; for the process to work smoothly, if the listing agent advises their customer at the time of listing that the value of the property may exceed $750,000, it would be in the best interest of both the real estate agent and the consumer to have that notification and apply for the clearance certificate sooner rather than later.<br \/>\n<b>Kevin:\u00a0 <\/b>Can you see a time when the clearance certificate is just going to be part of the listing process, no matter the value of the property? It\u2019ll just become part of the process. Is there any reason why that can\u2019t happen?<br \/>\n<b>Peter:\u00a0 <\/b>There is no reason why that can\u2019t happen at all. Absolutely no reason at all, Kevin. And it\u2019s probably a very wise recommendation.<br \/>\n<b>Kevin:\u00a0 <\/b>We\u2019ll certainly carry this across all of our audiences because I think everyone needs to know that this is actually applying, as from July 1<sup>st<\/sup>.<br \/>\nPeter, any other points you wanted to make before we close off?<br \/>\n<b>Peter:\u00a0 <\/b>Really, just for your listeners to be aware. We looked at last weekend\u2019s auction results around Australia, and of all the properties that were sold in Brisbane, 88% of those would have required a clearance certificate. Under the old regime, it would have only been three properties.<br \/>\n<b>Kevin:\u00a0 <\/b>And what about, say, Sydney and Melbourne? It would be even more acute,<b> <\/b>wouldn\u2019t it?<br \/>\n<b>Peter:\u00a0 <\/b>The largest high sold property last week was a $3 million residence in Dicky Beach. Now, we have every suburb of Brisbane being affected.<br \/>\nThe numbers on Sydney were 400 out of 453 properties would have been affected. In Melbourne, it was 61%, ACT 52%, and Adelaide 53%.<br \/>\nThere are other complications as well, Kevin. Imagine a family who is trying to sell the property on behalf of their deceased mother, at 92 years old, who had never worked, never had a tax file number, doesn\u2019t have a record at the ATO. We would question how is the ATO going to issue a clearance certificate if that person is unknown to them?<br \/>\n<b>Kevin:\u00a0 <\/b>Yes, great question. Lots of questions, and only the passage of time is going to be able to help us answer some of those. But Peter, thank you for raising this with us. It\u2019s timely that we would be looking at it right now.<br \/>\nPeter Maloney from GlobalX, thank you very much for your time.<br \/>\n<b>Peter:\u00a0 <\/b>Great to be with you, Kevin.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Highlights from this week: The facts about housing affordability in Australia Where the bargains are for under $400,000 Why the market is set to continue to rise The correct level of gearing Changes to legislation that will impact vast numbers of buyers and sellers Getting&#8230;<\/p>\n","protected":false},"author":176692471,"featured_media":12283,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[10,11,13,24],"tags":[101],"class_list":["post-12279","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-shows","tag-podcast"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - 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