When investing in property, choosing WHERE to invest often keeps folks up at night. That’s why, in today’s Q&A Day, we are answering questions that speak to this very issue.
Here’s what we’re unpacking:
Also, as market conditions change, we’ve been noticing some concerning ads popping up, which is why we’re sitting down to unpack: What does modern-day spruiking look like?
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When investing in property, choosing WHERE to invest often keeps folks up at night. That’s why, in today’s Q&A Day, we are answering questions that speak to this very issue.
Here’s what we’re unpacking:
Also, as market conditions change, we’ve been noticing some concerning ads popping up, which is why we’re sitting down to unpack: What does modern-day spruiking look like?
FREE STUFF MENTIONED
LISTEN TO THE FIRST 20 EPISODES HERE >>
MOORR MONEY MANAGEMENT APP:
👉 Apple: https://apple.co/3ioICGW
👉 Google Play: https://bit.ly/3OT86bW
👉 Web platform: https://www.moorr.com.au/
FREE MASTERCLASS:
- How to Build a Property Portfolio and Retire on $2,000 a week >>
FREE BEST-SELLING BOOKS:
- The Armchair Guide to Property Investing
- Make Money Simple Again
FIND US HERE:
- Website
- Instagram
- Facebook
- Youtube
All right, folks, welcome back to the Property Couch podcast and have we got a great episode for you? Today we are talking about spruiking, modern day spruiking and comparing it to the spruikers of the past so that you can see exactly what they're up to today. And we have a listener question that came in and said you guys despise Canberra. Is that true, ben? We uncover that in detail today. What else do we cover?
Speaker 2:Yes, bryce, in further questions that we've got on this Q&A day, we are talking mining towns, what to look out for, what are the demographics that we need to look at. And then, when we talk about towns that are outside of our big capital cities, of course, we're going to talk regional towns as well. So some great questions on regional towns and also what to look out for in a mining town. And then, finally, in what's making property news it's the end of the month we get the CoreLogic data. We go around the grounds and see which markets are performing well and which markets aren't.
Speaker 1:Which markets aren't folks Stick around for that? Let's rip into the show.
Speaker 3:Welcome to the Property Couch where, each week, you get to listen to two of Australia's leading property and money experts Bryce Holdaway, co-host of Location Location, location Australia on Foxtel's Lifestyle Channel and co-host of Escape from the City on the ABC. And Ben Kingsley, chair of Property Investors Council of Australia and a back-to-back winner of the Property Investment Advisor of the Year Award, and both are partners of the multi-award winning Empower Wealth, co-creators of MORE, the free lifestyle design app, as well as best-selling authors of the Armchair Guide to Property Investing and Make Money Simple Again. Stay tuned as they bring you the insider's guide to property finance and money management.
Speaker 1:All right folks, welcome back to the Property Couch Podcast and welcome back to YouTube. Mate, I thought you're probably more relieved than this time last week. I would have thought.
Speaker 2:I tell you what. Yeah, no, I was worried that we'd be 0-4, but it's nice to just basically have four points on the board. You know all you do, as Craig says, you know. Fly says you've just got to qualify, and to qualify you've got to get a certain number of wins, usually about 13. Well, we've now got one of those 13.
Speaker 1:Yeah, you're doing it the hard way, not like the 3-0 Dockers. Let's see what it is 3-0 Dockers, 3-0.
Speaker 2:3-0. 3-0. 3-0, 3-0.
Speaker 1:There we go.
Speaker 2:I like that. That's good, that works.
Speaker 1:Playing the 3-0 Carlton this week. So we'll see how we go, but that's good news. Both of our teams and of course the boys were happy.
Speaker 2:Ben Geelong decided to have a 45-minute three-quarter-time break just to make sure they got the job done.
Speaker 1:Bit of a longer thanks to the lightning, but, um, I had um samuel out in the water yesterday. We had um stand-up paddleboards. You know, when it's stormy the water's just fall out like a lake. Oh yeah, yeah. But we're out there and, um, I was pretty stoked with him because we're out there and there's there's thunder and there's lightning and we're getting rained on and everything and he's um mate. He's just in his boardies, didn't even have a wedding on.
Speaker 4:So and then?
Speaker 1:he's like I said there's no surf, he goes dad, let's just go and check it out. So I had to go home, drop off the stand-up paddleboard, get his surfboard, then take him out for a surf and you end up getting a few good waves, which was fun. But I wanted to talk about modern day spruiking before we kick off today, Ben.
Speaker 4:Okay, yeah.
Speaker 1:Because back in the day, here we go. You have two middle-aged folks talking about your age back in the day. Hey, when I was living in perth, I went to um do you remember um observation city, and it's now the rendezvous. It's the only rise on the entire coast of western australia.
Speaker 1:So alan bond famous sunday sessions at observation clearly knew some folks that allowed him to get the only high rise approved in western australia on the coastline. But I remember going there and there was a big seminar on Ben and I would go there and there would have been hundreds and hundreds and hundreds I don't think a thousand, but high hundreds of people in the room and there was Peter Spann, there was Robert Kiyosaki, there was a bunch of these big names and that's how it was done back then Ben when they'd get a fancy hotel room and they would come in and because they had big budgets, they could.
Speaker 1:They could wow people and get sort of social proof through having lots of people in the same room. But at the end of the day, the concepts we've talked about this a fair bit on the podcast the concepts that they were talking about was wealth creation, investing, putting some of your hard earned away into that. But the challenges for us was the vehicle was questionable. Well, I think I want to talk about modern and so that's where the Spruikers, that was the playground of the Spruikers and that's where they were born. I think it's worth talking about how that's pivoted now. Ben um, what is the playground of the, the, the spruikers in present time? Because that was in the early 2000s.
Speaker 1:Here we are in almost a quarter of a century later, here in 2024, and the landscape is is different, but it's got same scenarios where people with big budgets, because of the product that they're pushing, are making an enormous move online and they are clever and they're crafty and they're prolific right, absolutely prolific in the spend that they have online. But the challenge is the spruiking is still the same and they're talking about 30%, 40% returns, and I just want to address that with you, ben, because we really want to. Some of them are okay, but a lot of them are making claims and making statements that are in the too good to be true category, in a way to get cheap clicks and getting people into ecosystems that then put them into a world that, back in the early 2000s, ben, that world was done one-on-one offline. It's now being done online and I think it's important we raise it?
Speaker 2:Yeah, it is. I mean, if you think about back in the physical sessions some of them you could even get an eye fill at lunch or something like that like there's alternate plate serves, you get chicken or beef or whatever it was, and they were spending around $100 to $120 per person. Now, ultimately you've got to say, well, who's paying for that? Well, the people who would eventually buy the properties through them, and effectively the developers would give them a huge fee and that would justify their spend. The modern day spruiker is sort of using the same sort of principles that I'm going to spend about $100 to $150, $200 per sets of eyeballs and I'm going to chase you around the internet with basically repurposed marketing. You around the internet with basically repurposed marketing and I'm going to sell you on this idea that I can get instant returns for you okay, and I'll get above average returns that potentially the share market or other sort of traditional forms of slow investing may not get you. And that works really well, right? Because it taps into a recency bias. It taps into this idea that I can make good quickly and get rich quick, and it attracts a lot of people who don't have necessarily that financial acumen who will then think about it and process it out. So they only need to get 10% of the group signing up there, because there's enough in the amount of commission or money that they earn through the kickbacks and the soft dollars and all of that that they're doing. But that's where you'll find them. You'll find them in Facebook, you'll find them in Insta, you'll find them anywhere online where they can find those eyeballs. And they are going to be talking about quick movements in value, which may or may not be true because, remembering, they're making up the assessment. They're basically saying, based on this valuation that I did it might've been a computer valuation, or based on a so-called bank valuation that they got done. But if they're buying, say, tens, if not hundreds, of properties each month for their clients, the question is still going to be asked is well, they're just handpicking a couple for them. So you want to be sort of thinking about more broadly what sort of returns they got.
Speaker 2:Now with us, just as a reminder, we've been doing this for a long time. We're boringly predictable. We think in decades. We're thinking in longer term returns and so, even though the shorter term returns may look attractive and they might have examples of that we've got, obviously, other evidence and when I was the chair of the Property Investment Professionals Australia you know which is the peak association for the industry there was plenty of people who wouldn't sign up to our association because they didn't adhere to the code of conduct, which was about full disclosure of commissions. Kickbacks off dollars that are going on and we're basically seeing situations now where the market is right for a lot of that type of activity. We've even heard, anecdotally, stories of buyers agents paying kickbacks to selling agents. Now, if that's not a complete conflict of interest in terms of those selling agents in certain states around Australia.
Speaker 2:So there's no doubt the industry has to be cleaned up.
Speaker 2:There's no doubt that there needs to be regulation brought into this space and you've got to be careful in terms of who you work with.
Speaker 2:It's an unregulated industry. There are a lot of people trying to make a quick buck and you've got to remember the people who are spruiking their services. Usually there's a really low barrier of entry, you know. In other words, they don't have to go off and get financial services qualifications. They potentially aren't even QPIAs Qualified Property Investment Advisors and they're just spruiking their wares and all they are is excellent at marketing and getting that big message out there. And so it's really important that you, that buyer beware KVDM tour buyer beware, in terms of those activities, of what's going on out there and then have a think about and look at the fundamental returns over the decades not necessarily the short-term trading or speculative returns that we told you about that were going to come, especially when APRA are forcing all the investors into the cheap end of the market, and so there is this bubble, this speculation that is forming in that lower end of the market in some pockets around the country.
Speaker 1:Yeah, and you've got to remind yourself are you an active or a passive investor? Because quite often some of the spruiking is you being active. You're getting trading in and out of markets, right, and so we know, statistically not many people buy an investment property and when they do, they only stop at one. So the propensity for people to want to trade in and out I guess with social media it's probably we'll find those stats start to skew. More people will, given the information that's available, more and more people will feel confident investing in property and multiple properties. So it's always just lift your eyes, go up 30,000 feet. Are you active or are you passive? And the window of time when they got their results been so. If the window of time was that post when interest rates were super low and that post charge that we spoke about on the podcast, where the car was fueled, the engine's revving, they just weren't allowed to let anyone back in the car. If it's that time, sure, but is that a repeatable piece of history that will happen going forward? So and I guess for us we were always, always on this podcast, for clarity for anyone who's listening we're always talking about long-term investing, right. We're never talking about the short-term trade, always talking about long-term investing, right, we're never talking about the short-term trade. So we were on record as saying, hey, listen, we're probably not going to go into the Tasmanian market, for example, and some folks were going well, you missed the boat because the Tasmanian market did really well. Well, it did well in a short period of time, but historically, over a longer period of time, that hasn't been the case, given the fundamentals required to support sustainable long-term growth. And now what we're seeing is we look in the rear vision mirror. We see there was a window of time when you had that short-term spike, but now, going forward, you see there's population decreases. You'll talk to this later.
Speaker 1:In what's making property news, You'll see some of those rents are coming back, Some of those values are coming back. So if you're holding those properties and you didn't trade and be active in those times, that's something that needed to be thought about. So that's what we were always trying to do to protect this community who want to play a conservative, get rich, slow, long-term game, which is what we're always trying to do. The decisions we make now have got to make sense in five years, 10 years and 15 years time, not just in a small window. So I was really passionate about this, Ben, because these advertisers and I'm not going to name them, we don't do that here, but they are prolific.
Speaker 1:If you are on YouTube, you are on Instagram, you're on Facebook, chances are you've seen these ads. Right and full disclosure, Ben. We're putting up some ads too, right? So we're trying to get people to get a free book from us and we're trying to get them to be interested in getting a free report from us. So we're also playing the paid ads game as well. But some of these I know for a fact that some of the budgets are $8,000 a day. Do the math on that. That's a lot of money. So that's how you can be prolific. We certainly aren't spending anywhere near that, Ben.
Speaker 1:So, I just want to be clear. We are also trying to encourage people to come into our world so that we can help them play a game that is a buy and hold passive game. But yeah, it's just when some people are coming and talking to us and saying, well, can you get the 30% returns that some of are coming and talking to us and saying, well, can you get the 30% returns that some of these others are saying we're like, well, no, we never say that we will. What we do say is that we'll actually build a plan that actually has you very clear on a North Star. We'll give you a plan what those stepping stones are that you need to do to cross the creek, and we'll do it in a way that has us being very mindful that we're playing with other people's money Ben, very mindful of that fact.
Speaker 2:Yeah, there's a lot going on here, Like ultimately and we've got a question coming up in Q&A which I'm excited to answer which is regional versus city investing, and a lot of that has got to do with this whole concept of entry level and percentage gains. Remember, we always say you bank the dollars, you don't bank the percentages, and we are definitely seeing some interesting purchases going on at that absolute entry level where I'm sort of going to drive that land value over the next two to three decades versus what's going to drive the irrational behavior that we're seeing in those particular markets. So I think I'll keep my powder dry for when we get to question number three on that particular story.
Speaker 1:So if you're seeing these ads and you're seeing multi, you know 20%, 30% returns. Just have a look at what that means for doubling cycles if that was to continue to happen all the time Some of them are doing 50% to 60% returns price, which is that's what I'm saying.
Speaker 2:If you bought 1,000 properties, there's every chance that one of them might have gone up that sort of number in a short period of time, but you've just got to be careful in terms of the sustainability of that. So if you want to speculate, that's where speculation happens and that's where irrational behavior takes hold. But if you want to believe in the fundamentals and I'll talk to you about a riddle later on in the episode that will get you to that fundamental thinking that's going to be really important for you.
Speaker 1:Very good, Very good. Hey, I got a message in my Instagram from Adam Crane he was one of the guests on Summer Series, Ben about how to deal with divorce. He says this little message Hi Bryce, Adam Crane, here. I did a winter series with you and Ben around navigating divorce. Thought I'd share something interesting with you from my recent experiences. My property in Carrum Downs is changing tenants due to them purchasing their own place. After the first two inspections I've had 12 applicants, eight of which are saying they've had to move due to landlords selling property because costs are too high. That's in Victoria, Ben, for those playing at home. Fascinating Good sort of cold-faced feedback there too. And then this too, from Adam. Anyhoo, look forward to you getting stuck into Ben about the wobbles being 0-3 tomorrow. So don't let me down. It's a shame we're not talking about 0-4, Ben, but it's good to know that you've got a lot of people interested in seeing how you're going there with 0-3.
Speaker 2:Well, I love. Thank you, Adam, for reaching out to us. There's a couple of good news stories in there. I'm really thrilled for the tenants who are moving out because they bought their first home. So just tick, big tick.
Speaker 2:We are a big believer that every Australian should own their own home, super passionate about that. But I mean that's ground truth, evidence of exactly what we've been telling you that Victoria government have cooked the books in Victoria and basically investors are voting with their feet and so, in short, that is a problem for the current people looking for rental property in Victoria, because rents are going to go significantly higher and there's going to be a chronic shortage of rental accommodation. So you've heard me talk about this at the end of last year. It's now starting to take shape. These things take months and years to play out, but that's basically what's going to happen.
Speaker 2:So unless the government do something about reversing their policies, you're going to see tens of billions of dollars go into other states and territories, which is what's happening. So Victoria's Now again on my first rodeo. I've seen this sort of stuff happen again, and the next generation of politicians realise the mistakes of others and they rectify that and all of a sudden pop, you get this massive push in terms of property values and market movements, which will ultimately what happened in Victoria again at some point, and certainly Melbourne, but right now you know it could be one of the cases of being greedy when others are fearful, but it's definitely going to play out that way for the short term. So Melbourne is going to underperform the broader market over the short term because of those restrictive policies.
Speaker 1:Eight out of 12, ben, that's two out of three people looking because the landlord prior said we're out of here, right? So stick around to what's Making. Property News, ben. We'll lean into this even further. And just a reminder, folks, that Adam sent a little message to me via my Instagram. So if you want to send me a message via Instagram, happy to take that there. Leave a voice message, like Chantil did last week. That's the way we want to play around here.
Speaker 1:Hey, my Mindset Minute theme today, ben, is I've recently read a book called the Magician's Way by William Whitecloud. So if anyone is looking for a book, this has had one of those fork in the road moments for me and it was really profound, so I've read it a couple of times since the beginning of the year. My wife's read it, a bunch of my close mates with a growth mindset have read it, so it's been a real discussion point for us. And one of the quotes from this book is really profound in its simplicity. It says you're not meant to change your beliefs, you're meant to change your focus, right, face value, okay, fair enough, but this is looking under the bonnet on that quote a little bit further, because your experience in life is determined by what you put your attention on. So where your focus goes, your energy follows. If you focus on end results, you inevitably attract what you want. But here's the kicker in this, right. But if you focus too much on what you have to do to get what you want, you end up attracting your doubts, fears and beliefs, right? So the conclusion is there's never anything to do, but always action to take.
Speaker 1:Now that'll take a little while to sink in, because I've spent the better part of the last few months really resonating on that. There's never anything to do, but always action to take. You go, hang on. What does that mean? Well, action is about taking direct steps based on the obvious towards creating what you want, whereas doing is about fulfilling certain conditions you believe are necessary before you can get what you want. So the analogy in the book Ben talks about the swing circle and it talks about you know, I know, you play golf. I've played plenty of golf in my journey. Actually, I played some golf over the weekend, had this hole-in-one competition up in Kyneton. I was close, ben, but Andrea ended up doing this hit, had this big circle around the pin landed in the circle you got a hot dog, so she got in the circle which was humbling right, but then we asked if it was a gluten-free hot dog.
Speaker 1:Humbling right, um, but um, then we asked if it was a gluten-free hot dog, wasn't gluten-free. So there we go, um in the in the book. In the book, um, it talks about a lot of people when they're playing golf, and so the golfers who are listening to this will get this you focus on your swing and your technique and you know, don't hit the um, the rough on the right and make sure you miss the water on the left. And you know I hope it goes straight. But the, the focus is we should be focusing on the whole, not the technique, because if all you're doing is focusing on the whole, um, clearly, whatever the, the, the actions that you are taking will work towards that end goal, rather than, what have I got to do, ben, I've got to change my backswing and I'll make sure I get it right, and I've got my feet apart and I've got the club as far away and it's the t up as high, and have I chosen the right club? And then, and then the epiphany that I got after sort of chatting with this group of mates and Andrea about it. It's not only do you think about from the perspective of the tee, looking towards the, the flag, but just imagine you can. You can get yourself all the way to the flag and then actually be standing in the point of view of the flag, looking back at myself, myself doing the T. All of a sudden, you totally take your mind off what you need to do and then just go. What are the actions that I need to take to get from that spot there where I T off, to arrive here where I need to be? So it's just been this really profound meaning and focus. So where your focus goes, your energy follows. So there is never. This is something that I want everyone to ruminate this week. Some might just go, wow, that was too ethereal. But some might go, that's really landed. But there is never anything to do, but always action to take.
Speaker 1:How does that relate to property investing, ben? Well, there is always the need to be focusing on the end goal here, which is lifestyle by design. It's not money, it's not getting rich, it's just lifestyle by design. And then, in order for you to get that, change the perspective of where you are, not from where you are now looking in the distance to where that needs to be. Actually, just imagine yourself embodying in that future space where you are creating the lifestyle that you want, looking back at where you are now and just what are the actions that you need to take. Is it still listening to some podcasts? Is it reading a book? Is it reaching out and having a chat to someone? Is it finding a mentor? Is it actually buying some property? So anyway, ben, just a little-.
Speaker 2:Can I add to that, because I love it? So let's put it into practical terms. The action that you need to make is make your wealth speed go faster. That's the action you need to take, beautiful, and one of the ways in which you can make your wealth speed go faster is investing in property. So so that that's the practical element of what you've just been talking about. Right, like it's just. And so how do I make my wealth speed go faster? Spend less than I earn, how do I make? And then what do I do? I the surplus, and then how do I put that surplus to work? Because if your surplus is not working hard for you, then you're leaving money on the table. So, putting basically Bryce's conceptual ideas in front of you, that's the practical actions you need to take, really simple, 100%. So, folks, william, whitecloud, you need to take.
Speaker 1:Really simple, 100%. So, folks, william Whitecloud, the Magician's Way. There is a messy bit in the middle, ben, it was interesting, it was a yeah. So anyone who's read the book they'll go. They know what I mean. If you're about to go and get the book, you'll see there's a little bit in the middle which is a bit oh. But then by the time you get to the end of the book it totally makes sense why they went down that path. So there you go, the Magician's Way by William White Cloud.
Speaker 4:Hey Q&A day today, Ben Q&A.
Speaker 1:We've got some great questions that have come through from our community. Again want to encourage anyone who's listening to this We've gone through a season now where we're catching up on a lot of the questions that we've been asked from our community and anyone who leaves their details and they make it to the podcast here, Ben, we'll give them a free start and build course valued at $497, just from having your question read out here on the podcast for the benefit of the community. The first one here is from Jenna. Her question is about investment property in Canberra. Let's have a little listen to that question now.
Speaker 6:I love the show. I've listened to every episode. A bit of a fan. I've done your property plan through Empower, used your mortgage broking services, your BA services and your accounting services. Thank you for all the information and services that you provide.
Speaker 6:I have two questions today and it is specifically related to my situation, but I think a few of your listeners will have similar questions. To begin with, for background, my partner and I have our PPO are currently sitting at around $490,000 on our mortgage and remaining $300,000 in equity. That $490,000 includes a $100, dollar equity release which we use to buy an investment property in south brissey. My biggest question is based around the fact that our ppor is located in canberra. Um, I've listened to you guys for several years and specifically on your more recent podcasts you reiterate that you despise having an investment property in canberra. Our ppo is not our forever home, but we would be happy here for another four or five years.
Speaker 6:Our original plan was to transition our PPO into an IP and I guess my question is would you still recommend this? For more context, our mortgage is currently about $2,400 a month and, being very conservative, we could get up to $2,500, even $3,500 a month in rent, understanding that there's the complications of land tax. My question is what would you do with this house? Sell or turn it into investment property? My second question, as I believe I know what your answer will be to the first question, is what happens to the equity release against our current ppor? If we sell, will we need to pay this off or can we leave it as is, as the interest is textorg? Thanks, guys, love your work.
Speaker 1:Ben, have we ever said we despise Canberra as a destination for investing? We have had language around discouraging but despise.
Speaker 2:Despise is a strong word, look, I don't mind the idea of it and I think you know in terms of what Jen is trying to say is, yeah, our appetite for investing in Canberra is not strong. We did a lot of research on it several years ago and concluded that we're giving basically all the money to the government. So you know, in terms of the passive income that's going to generate, even though we get some capital growth, we want some income coming off it as well. So here's the story, jen, in terms of the passive income that's going to generate. Even though we get some capital growth, we want some income coming off it as well. So here's the story, Jenna, in terms of.
Speaker 2:There's a couple of things here. First of all, I've got to make sure that I'm not giving specific personal advice. I'll try and speak more generally, but if I had a property in Canberra, which is a principal place of residence, I'd still be quietly confident that there'd be capital appreciation in that particular market. On the fact that it's a government town, there's always money. Governments are always the biggest spender on most things and when they are, there's always inflationary elements to that. That'll flow through into higher wages and that'll flow through into higher property prices over time. So you're pretty much guaranteed that the town will never die and that's reality, right? So there will be capital appreciation. So if I've got a principal place of residence in Canberra, they're going to give me 5%, 6%, 7% growth and that'll be okay.
Speaker 2:Now, given that you're only there for a short period of time, potentially to do what you need to do, the pivot here is all right, well, where are we going and what is the story of the future growth, of where you're going to buy in? Because I have some thoughts on this generally around that if you can have a significant value of your wealth in your principal place of residence, which under the current laws is capital gains tax free and the current laws doesn't attract any land tax right All of those things, because I think they may change in the future but right now, assuming that that is the case, then I would try and buy, use as much of that equity and gain that I've got into that next location. But let's say that next location is a lifestyle location where you don't have that mix of high industry, mix of human talent and you don't have that gross domestic production and economic activity that's going to continually keep driving value value in higher wages and higher prices and wealth creation and then wealth transfer, all of those things that continue to keep building your prices. Well then you may decide to just hold on to that Canberra property for at least the next six years, because we know the six-year rule means that if I've moved from that particular location, I still have the luxury of potentially getting the future capital gain as well as the rental income. And then any future capital gain may not also attract principal place of residence exemptions. So that is a judgment call that you'll need to make, based on what that next move will be In theory.
Speaker 2:Do I like holding on to long-term investment properties in the Canberra market? Well, again, it just comes back to the ultimate return I'm going to get. So if it's a freestanding house where I've got a huge land tax issue and they are super aggressive on land tax, then maybe not. But if you've got a unit in a small block where the land to asset ratio is quite low, your land tax threshold might actually mean that you do get a higher yield and there's good income coming off that particular property. I'm not advocating for buying that property outright, but I'm just letting you know that there's always a case by case, and that's why individual advice has got to be based on the merit of your circumstances as to whether I would hold or whether I'd move into another market.
Speaker 1:Yeah, and there's recycle costs that need to be considered here as well. So you're actually it's not a decision on should I buy there? I've actually already bought here. So what should I do going forward? And I think for all the Canberrans is that right, ben? The Canberrans who are listening to this. I've been to Canberra. It's wonderful, like it's actually quite surprising when you have this stereotype of what you expect in that capital city.
Speaker 1:The internet is amazing, it's ridiculous and the nightlife is vibrant and the restaurant scene is, so it's a wonderful place for homeowners right.
Speaker 1:So the reason that we to quote you despise it here, jenna, is largely around. If you've got a choice on where to invest and you don't live there and it's typically the second highest cost in the country to buy into that market and you go there and from day, dot the land taxes and the rates and everything's really high, and to boot. For those people who haven't been to Canberra or haven't studied that market, you don't have freehold title there, you have leasehold title. The government owns the land. You pay a lease they're typically 99-year leases that you have on these properties and they reduce over time and then when that reduces down, they've got to renegotiate the lease with the government. So ultimately the owner of the land ultimately remains with the government, right? So it's a different system compared to all other parts of the country. So the rates were higher. The entry costs are higher. The title system is different. So the rates were higher. The entry costs are higher, the title system is different.
Speaker 1:So we just formed a conclusion that there was better opportunities to put your money. But arguably Victoria is having a red hot swing at trying to make it a disincentive as well. But still, the price the median price across Victoria is generally for a lot of real estate is generally less than in Canberra. And full disclosure we don't put a lot of people into Sydney property as an investment right now, largely because the entry cost to buy into Sydney it means that you've got to have really high incomes to be able to afford the disparity between yield that you're getting on those properties and the outgoings, particularly in the current environment. You'll find a lot of Sydney people are also investing outside of Sydney. I was talking to someone last week, ben, that's got a very large rent roll of Sydney-based investors in the eastern suburbs, so you can imagine the pinnacle of cost to hold properties in this country. And she was saying, yep, we're finding it difficult to retain the book because they're thinking of selling and moving into other states where there's other opportunities. So I think it's important that we put some context here for Jenna and for everyone listening that there was some science behind the numbers, the spreadsheet of why our decision to go to Canberra or not go to Canberra as a place to seek out as an investment. That's where it came from. It came from a spreadsheet, not from a distaste for Canberra or not, thinking it's a great place to live or not having the amenities Equally.
Speaker 1:We've said that about Hobart before, ben. We spoke about that at the top of the show. Now we then have people write into us and they say one in particular. I remember writing to you, ben, saying I know you said don't buy in Hobart, but let me tell you a story about how I bought this property and did really well, and this property did really well and this property and did really well. I'm like wonderful, if someone can find the nuances within these markets.
Speaker 1:We are not putting a blanket by saying you will not make money in Hobart. We're not putting a blanket by saying you will not make money in Canberra. What we are saying is based on the fact that we're trying to curate a community and give them the best opportunity to hit their North Star in the most conservative way so that they don't take any above-average risks or expose their cash flow and their buffers to any unnecessary drawdowns. That is how we came to the conclusion with Canberra. But in Jenna's case, ben, it's not a case of should I invest there. It's a case of I already have a foothold here and I'm thinking about my next move. And I'm also thinking about what that looks like for the loan in her second question as well.
Speaker 2:Yeah. So what we saw play out, let's go back to the land tax. So that's the big holding cost, right? So Canberra has very, very high holding costs. Entry costs are cheap because there's no stamp duty, but the holding costs are excessive. And then so we then studied the rental yield over time and renters have been paying a premium because the holding costs of the investor, the small business owner, has also been higher. So this is when you start to get government intervention right.
Speaker 2:And so what have we got now in Canberra? We've now got a threshold, we've got a throttle on how much rents can increase. So you get a labour-leaning green government in there that doesn't let the market be the market, and because they're charging higher land taxes to disincentivise investors, they have a lot less rental stock available to them. And so now what they're doing to further complicate the challenges? They're now throttling the rental market. So that's the risk you have in being in a marketplace, and a small marketplace like Canberra. Where, say, the Labor Canberra government who might be left leaning or whatever? They'll come in and continue to keep doing that, right? So that's the problem you got. So to run your small business in Canberra, you're always potentially going to have the threat of the government interventions that will make it even harder for you to do business in that state. And back to Bryce's point, this is exactly what we're seeing happening in Victoria and Melbourne, and that's going to be a massive problem for a big mega city like Victoria. And so eventually, as that government gets voted out, the next government will come in and they'll make it more attractive and incentivise it.
Speaker 2:Now, will that happen in Canberra? I'm not so sure. It's such a small community, right. So that's the risk you've got. So yeah, by way of example, if the Victorian government decided to introduce a rental freeze or a rental cap or something like that, goodbye the reputation for tens of billions of dollars of investment coming into it. It would just be a nightmare, right, and that government will be forever tarnished with that decision that they made, and it'll obviously give a huge advantage to the next government that comes into power. And so you don't want to be that political party doing that, but that's exactly what's happening in Canberra.
Speaker 2:So there's a lot of disincentives and a lot of what we. You know there's always different types of risk and we've always talked about in terms of regulatory risk. And so the biggest challenge we've got in Canberra and also in Victoria is the regulatory risk, all of these additional costs. Canberra also now have this policy where you have to have I think it's five or six star grading for the property in terms of insulation, you know, and it's green sorry, it's climate change footprint. So all of a sudden you've got further costs that you've got to put into that property and you've got to maintain that property at a certain level. Well, it just becomes very, very difficult to then get a return on your investment. So the money flows out of that particular market and those people who do stay, the rents go up and then. But if you get a government and then start throttling the rent and throttling those small businesses, they'll vote with their feet and that'll cause more harm than good. And that's exactly what you know we're worried about in terms of what's going to happen in Victoria.
Speaker 1:Yeah. So we're being the guide here, ben. We're not getting caught up in the nuances that happen, but a shout out to anyone who has built a property portfolio in Canberra and they'd actually like to speak to those points, because we're more than happy to share with our community what that looks like and how you've navigated the things around land tax and how you've navigated all of the things that we've just spoken of. More than happy to come on. So, and again, we're not saying you can't make money in Canberra. So, just for the avoidance of doubt, we're not saying that you can't make money in Canberra, but, in terms of looking at it as an option, there is an opportunity cost and that opportunity cost is up until this point and for the foreseeable future.
Speaker 1:That opportunity cost for us is we're directing clients' attention to other states, and well, largely states I was going to say states and territories, but at this stage states around the country. So that's something for you to think about too. So, jenna, that's the first part, ben. The second part of the question goes back to your mortgage-broking part and it's largely around the question that people have if I do sell my house and I've got this attachment loan from the investment property I've purchased. How does that transfer? It's done hundreds and hundreds of times every time in the month, ben, so just be worth reiterating how that works.
Speaker 2:Yeah, ultimately, if we've got a credit facility that's secured against a piece of real estate and we sell that piece of real estate, we've got a couple of choices to make. So, in Jenna's case, if the investment's done very well so let's say a property's done well that they've owned we'll revalue that property and we can potentially move that equity across into a new loan facility against the investment product they've got. So that could be one way in which you solve the problem. But let's say there's still a continued shortfall against that particular property. So you can do what's referred to as a substitution of security, so you can then notify the bank to say, hey, I want you to take a portion of, I want you to take that $100,000 equity loan and I now want to apportion it against this particular property over here. Now that might be a new property that you've bought and in, so of Gemma and that move out of Canberra and move into a new property that you've bought and in, so of Gemma and that move out of Canberra and move into a new property.
Speaker 2:They've just got to make sure they've got provisions for that amount, because what we don't really want to do is pay that non sorry, that deductible debt down.
Speaker 2:We want to make sure that on our principal place of residence, that the that non-deductible loan is at the lowest balance we can get it at. Or we can also, you know, put the proceeds of the sale into that offset. But make sure that there's enough of a provision there to also continue on with that $100,000 equity split if they do need to transfer it across to any future property that they buy. So you can't then just say well, we've set it up and the bank's going to continue to let you have a facility of $100,000 if it's not secured against something. So your investment savvy broker is going to sit down and work out with you where are the values at for your existing property or your portfolio of properties and then work out a way that makes a lot of sense that you continue to keep that security facility open and that allows you to continue to keep claiming the interest on that loan for that particular property.
Speaker 1:Well, so just to your first option there, ben. Just to play that out a little bit further, imagine you bought a property for $500,000 and you've got an 80% loan, so it's $400,000 loan against the property you purchased and 100,000 from somewhere else. Let's ignore stamp duty costs. I just want to keep the maths really simple, right? So you've got a 20% deposit against your home. Let's say that $500,000 property has now gone up to 650, ben. So 80% of the value of 650, quickly do my maths is 130 off, so it's 520, I think.
Speaker 1:Quickly do my maths is $130,000 off, so it's $520,000, I think. Which means that the original $480,000 loan will now be able to stand alone against the security of the purchase at $650,000. In fact, you're probably servicing, if servicing allows be able to pull out even a little bit more in that scenario. So the $650,000 at 80% now covers the original loan that you had, plus the security you took on the other property. So that's Ben's first point. It may just stand alone now and you no longer need the additional security. So just trying to put some rough numbers to that first option. If that's not the case, ben, you then go to the second option that you just described.
Speaker 2:Yeah, and look if you're working with a good broker.
Speaker 2:If they're not doing this review with you every 12 to 18 months, then there's something wrong. Like, ultimately, you know, a proactive, investment savvy broker should be, you know, connecting with you and saying, hey, you know, I've just done some valuation to your property. I've looked at your pricing of your mortgage. Hey, extra, extra, extra, we can move some things around and get restructured. For that we can release a little bit more equity if we've still got plans to make sure to buy that next property one of three that you might have plans to buy, or whatever it is so that should be on an ongoing basis to allow that to happen.
Speaker 2:And, of course, we're huge believers when you're talking about moving to a peak of cycle, and we're not anywhere near a peak of this growth cycle at the moment. But you also you know we talked about that through throughout the almost 500 episodes is time to get that revaluation time to lock that equity in and then ultimately have that available to you. You know to be greedy when others are fearful later on down the track as part of the strategy that we uh, we would advocate for so, jenna in um rounding out, hopefully that's uh, that's helped you with our despising of Canberra.
Speaker 1:It's just our preference. To go somewhere else is probably a better way to frame that. You've already purchased in there, so it's different. So then there's recycle costs and you've said that you have used. You've had a property plan with our team and the original plan was to transition your PPR into an IP, so we factored that in, so we factored in these questions. So what I do is just circle back to your advisor and lean in on those questions, because we'd certainly love to help you make the next step in the most optimal way, giving you the most peace of mind and also not sending you any mixed messages based on a headline that we've used in the past around Canberra Ben on the podcast. That might have led to a little confusion there.
Speaker 2:Hey, bryce, just a quick one before we close this one out. I've just brought up a little chart that I was sort of looking at whilst you were doing those numbers before. To my example that I was sharing with you before. Let's have a look at the end of March $935,000 is the median. Canberra's median is $964,000. Melbourne's gross rental yield 3.1%. Canberra's gross rental yield 3.7%. There's that margin that you're paying for the higher cost, right? Let's have a look at units. Melbourne's unit median price $612,000. Canberra's slightly, a little bit lower than that 585. Melbourne's gross rental yield on units 4.6. Canberra's gross rental on units 5.1. So you are paying that premium.
Speaker 2:So the market is deciding that over time that if the government enforces more costs on them, there's ultimately going to be more costs passed on to the tenant in higher rents and I cannot stress that enough for governments and regulators who are listening to this. And then, if you start throttling those rents or putting rental freezers or those types of things on your game's over, you are creating or losing investment. You're losing people to build those homes, you're losing tradies, you're losing your dynamic economic. You know dynacism, if that's the word Dynacism, dynacism. Thank you, bryce. Right, that's what you lose, and so that is just dumb politics and it's dumb economics. And so, from that point of view, if you want to play popular politics to meet the needs of the short term, understand the unintended consequences of what you're bringing to the market.
Speaker 1:Oh, you had your talking to politician voice on at the end there, ben Thanks mate, I thought I'd do that. Hey, next question's from Jenny. Got a great question around what is actually considered a mining town. Let's have a little listen now.
Speaker 5:Hi Ben and Bryce Jenny here. Thank you for the invaluable content over the years. Without the education provided in your potties, we would never have embarked on our property investment journey. I have a few questions regarding mining towns which I believe the community can benefit from. We do not invest in mining towns, as two wise men have informed us over the years. But which towns are considered mining towns and how do you work this out? Is it just the suburb where the mining actually takes place or does it extend to surrounding suburbs? Would you look to ABS data to see the percentage level of residents who are employed in the mining industry and if so, would say anything over 5% of the population working in the mining sector? Then make that suburb a mining town. Your wisdom on this would be greatly appreciated. Thanks, boys.
Speaker 1:Hey, good question, Ben. Like we talk around, we throw out mining towns as if it's a platitude that everyone should understand, but it's good to actually get a little nuanced here on what that actually means.
Speaker 2:Yeah well, I've never had the question asked me in terms of what percentage of people can be in the mining industry. There's an easy way to look at this Just go straight up to the 30,000-foot view and ask lots of questions around. Why 30,000 foot view? And ask lots of questions around why? Okay, so if I've got a town that's solely built around a particular resource that I pull out of the ground, ie coal, or if I have an iron ore town and it's just a single purpose mining town for that particular you know metal or you know what I call it fossil fuel then the reality is that that's the risk. The risk is, if that fossil fuel price tanks and the cost of getting that resource to market is too expensive, that town will die. That resource to market is too expensive, that town will die and those jobs will go and then ultimately, you know, the economic activity, the gross production that's occurring in that particular area will stop and all the ancillary jobs that go off the back of that in terms of the pubs, the bars, the food supply, the supermarkets, the general stores, the recreational stores all of that stuff die on the back of if it's producing the vast majority of income in that particular town. Because that's what happens. Minors get paid over above wages because there's risk. There's also hard to attract them to do the work that they're doing. It's not a popular job and so they've got to pay a premium to get people into those particular markets. So if you've got a town that's a one trick pony, whether it be coal or whether it be iron ore then you absolutely run the risk of getting yourself into the economic cycle of that particular mineral or resource and you will be burnt more than you will not be burnt in those particular times, because when you want to get out, everyone's trying to get out at the same time, and so that ultimately means demand dries up, supply blossoms and of course during that stage you obviously have to meet the market, and meet the market means dropping your pants on price, and that's exactly what we're seeing throughout those super cycles and those mining cycles of those towns.
Speaker 2:But if you talk to me about, well, what are the new generational types of resources? So you've got rare earths. They are becoming more and more of a thing. You've got lithium, you've got other sort of multifaceted mining opportunities that are driven out of a particular location. Then of course you de-risk that even further to making sure that that's the case. Uranium is another one. There will be further focus, I suspect, on nuclear power over time as AI becomes a big thing and we're just going to be so energy hungry that we're going to need to look at alternative energy production sources, such as nuclear. So when you're looking at all those things, try and make sure that you're thinking about how diverse is the opportunity in that particular thing, and then if that's more than 30% of the population, then you're starting to get into a risk element in terms of what that looks like.
Speaker 1:Yeah, I think the key thing you said there, ben, is to try and lift up to 30,000 feet rather than get too granular on it, because it's not like saying, hey, is Port Hedland a mining suburb, but is South Hedland okay? It's like, well, if you zoom back out you'll realise that it's all still related to the same mines. And if you haven't been up to those mines, ben, I have for the show I have, for back in the day I flew up there and I did some presentations to the mining community.
Speaker 1:Take away the mine and people don't want to be there you know they they are there because of the mine and they that could ripple out 10ks, it could ripple out 5ks, it could ripple out 3ks, it could ripple out to the next town a bit further south, a bit further north, but take away the principal reason that they can go and earn good incomes in those areas, they would not be there and I think it. I think the contrast here for help to for this question, here for Jenny, is Perth is often referred to as a mining town and the reason it's referred to as a mining town is because it's a hub of mining activity. If you go into the CBD of Perth you see big buildings with big mining companies at the side, woodside or whatever, at the side of these buildings. It's because a lot of head office activity is based in Perth. Because it's in the same time zone. They can get up there to the mines if they need to, but a lot of the corporate part of the mining industry is done in Perth.
Speaker 1:So does that mean Perth's a mining town? No, it's not. In the past it's actually been closely, particularly the performance of the real estate market. It's been closely linked to mining. But it's not a mining town. But it often displays certain characteristics that a mining town would do on a very large scale, whereas Perth has got a whole bunch of other industry outside of mining that drives that economy.
Speaker 1:So Perth is referred to as a mining town but it's not a mining town. But it's got a concentration of people who would have that fly in, fly out capacity because they are in the same time zone and they can be a part of that. So but if you went into a suburb in Perth that had a very high concentration of mining workers in that suburburb, it still doesn't mean it's a mining suburb. It might have some form of risk if they all got laid off at the same time, ben, for that particular suburb. But given the surrounding economy that happens in that town, you'd find if that did happen people would leave that suburb and other people would overflow to fill it up. Because Perth is not dominated by whether or not Woodside or Fortescue Metals or any of those big Bahamut mining companies have a little change in what's going on with their iron ore price for example, but it does affect it, but it's not a mining town.
Speaker 2:Yeah, but Perth has some incredible advantages in regards to its mine and its gross production. Gross state production because it's not a one-trick pony. It's got ore, it's got rare earths, it's got lithium, it's got gas, huge amounts of gas reserves. You know off those shelf areas there it is. So it's a diversified mining centre and you know the land mass in itself attracts to this idea. Then you overlay that with what you would call stable, probably low corruption type governments, the want for international investment to come into those markets to extract those minerals and to add value. All of those things add truth. But then you overlay best beaches in Australia, you could argue some of the better climate, dry heat. In terms of that, you've got all of those attractions, then fisheries industries, so there's so much more that is on offer in that particular centre. So you might argue that, if you wanted to summarise it as what is its strength, there's no doubt that a lot of its value comes from its unique assets, which is the land and all of the minerals that it has associated to that. But what we're talking about is there is a lot of wealth in that town, there's a lot of extra opportunities and you know the waterfall effect of industry that comes off the back of that. And now the competitive advantage that the Western Australian Government has in terms of the cost of manufacturing its gas prices are something like 70% cheaper than what we pay on the East Coast. It has a better royalty scheme. In regards to that. It could raise its iron ore royalties. I definitely think there's more money that we could probably earn as a country in terms of raising those royalties from where they are. There's no doubt that, I think, would be more equitable and fair.
Speaker 2:But that just gives you some idea in terms of what's happening in a place like that. It's becoming and next week I'll talk about population story and the changes that are going on in population in an update there and you can see it just playing itself out. It's now building on itself. It's now building all of those other infrastructures and all those essential, so university and and all of that, and cultural centers and all those things that just make it an attraction center to get you know, to attract the best and brightest. And that's what's happening in perth. It's it's going to have a golden era, I suspect, over, you know, the next uh, couple of decades not to mention some of the best things come out of perth ben west I don't say west is best for nothing.
Speaker 1:But hopefully that helps you with your question there, jenny, and largely if you go back to one of our core fundamental frameworks that you can get in the first 20 episodes of our podcast. It's around economic activity, human interest and human behavior. If the mining town didn't have the economic activity, the human interest would disappear. There'd be no status living up there and the human behaviour would largely mean that everyone says let's pack up shop and let's go back to somewhere, because they would be chasing whatever opportunities they have wherever they are. So in some of those big mines in Western Australia they're not packing up anytime soon. There's lots of jobs.
Speaker 2:Yeah, we did a study on Broken Hill Bryce, didn't we?
Speaker 1:That's another, so I think I'm trying to remember what episode that was. I'm what is it? 418 or something like that. Episodes that we want to um, that we want to highlight here too. Ben, we spoke to a lead agent. Yeah, in um headland. Um, we'll put the um. I can't remember off the top of my head, but we're going to put the the link in the show notes.
Speaker 1:Yeah, so that, so that, um, jenny and anyone who's interested in this type of question can go and re-listen to that one, because it's in our archive, it's in our history, but it's so incredibly powerful to answer this question, because there was this really awesome peak and then there was this fall as well, and then the one that you and I talked about, the productive use of the land. So we'll put the link in the show notes around productive use of land as well. Well, broken Hill is that perfect case, and I forgot to mention even gold. The land, yeah, so we'll put the link in the show notes around productive use of land as well.
Speaker 2:Broken hill is that perfect case. And I forgot to mention even gold. I mean, you know western australia is full of gold. So you know, like there's there's so many opportunities in terms of wealth creation. And that then flows onto what we've talked about before, which is this transition of wealth, and we're going to talk more about the three3 to $4 trillion of wealth transfer that's going to happen. You don't just need good incomes anymore. If you combine good incomes with also wealth transfer, that is going to, you know, bode well for the value of things, especially land, you know, in certain locations over time, because, at the end of the day, how do we show off our wealth and all of that? It's through basically our houses, and you know all of the other ancillaries that go with that. So that's not going to change anytime soon either.
Speaker 1:Good question, jenny. Thanks for that. That's five back-to-back questions from the ladies Ben over the last two episodes. So I'm super stoked with that and I want to just shout out to all of our lady listeners if you shout out to all of our lady listeners, if you want to give us a question, we definitely, definitely want to hear from you. This question here is from Gary Ben. It's regarding regional properties.
Speaker 4:Let's have a listen to what Gary has to ask us. Hi Bryce and Ben, my name is Gary. I live in Spotswood, which is the west of Melbourne. I've just got a question I'd like to ask you about regional properties.
Speaker 4:Two years ago I went through our financial planner and buyer's agent and got a three-bedroom house in Ballarat North and just outside Melbourne and my question was that there's been a lot of talk regarding regional properties versus sort of properties near the CBD.
Speaker 4:Now I just wanted to get your thoughts on what you class as a good regional property, because you know, especially in Victoria we have regional areas such as Geelong, ballarat and Bendigo and they're not exactly what I would call small. They have a lot of amenities, a lot of industry and job creations out there. But I just find that when you read information they're quite vague about regional properties. They say they don't do as well as inner city and obviously at the moment they've not don't do as well as inner city and they obviously at the moment they've not increased as much as near the inner city. But I'm just interested to see your thoughts and maybe have a bit of a deeper look or a deeper dive into the regional market, as we like. I think we'd like to focus on the inner cities and the central CBDs, as Melbourne and Sydney. It'd be good to hear your thoughts on that. Thank you.
Speaker 1:Regional properties, ben, regional versus city. What I find interesting about this question, ben, is they're not all the same the regional cities. I live in a regional city in Victoria but I'm an hour and a quarter down the road. I can go to Ballarat and be an hour and a quarter down the road. I can go to Ballarat be an hour and a quarter down the road. I can go to Bendigo be an hour and a half down the road. You can go to Shepparton.
Speaker 1:What's interesting about the geography of Victoria is north to south. It's actually quite small compared to north to south in West Australia and north to south in Queensland, for example. So when you talk about regional in Victoria, you have to make certain allowances in terms of proximity to the economic hubs of the central CBD, versus regional in Western Australia could be super regional and no sort of direct link to Perth or the same in Queensland. So it'd be nice for us just to really outlay this for our listeners, because there's no blanket here around regional and there's no blanket around why they perform differently to others and you've got to really look at the nuances compared to where they are in proximity to the capital cities.
Speaker 2:Yeah. So I think that's a really nice caveat in terms of positioning that story. I think there's also a message here, before I go into the logic, that I want to sort of bring to the table, and that is that if your budget doesn't allow for you to buy into a bigger centre, but you do want to have some exposure to direct residential property and run your small business private rental accommodation business then we're not saying no, that's not what we're talking about here, and we know that that's where most of the spruiking and actions happening in terms of entry level, and look at these percentage growths. That's what we've also been talking about. In terms of the next phase of investors, younger investors, they've got no choice, in the sense they can't walk out and buy a million dollar property in an established market, getting that deposit, having that ability to be able to build up to that. So let's acknowledge that in some cases, there are people who will be going into these markets as their only choice, as opposed to potentially a preferred choice, and so that's not a bad thing, subject to, obviously, where they buy and what they buy.
Speaker 2:Here's the riddle, bryce, that I do want to talk about, though. I want to talk, and I've been sort of continuing to remind people of this as we talk about property over the decades. And that is this the riddle is how can you well will regional land grow higher in value than land that you get in a city location? Now, if anyone out in our community thinks that they can argue a point that says that regional land will grow stronger over the next 20 to 50 years, how can that possibly be so unless something changes in the city locations? Ultimately, if that's not possible, there's no such thing as ripple effect. If that's not possible, there's no such thing as why is land more expensive closer into a economic centre than what it is outside of that economic centre? Well, like, why is it that our city fringes, why is it that our regional communities have land values that are lower than what we see in these big economic centres? And that is ultimately a case of the economic activity and what thrives in those centres, and then human interest and human behaviour, stuff that we've talked about, based on also productive use of that land, and then people also, you know, acting sensibly and sort of saying there's a low margin of risk or a high margin of safety in terms of going into those centres. So that is the riddle that I would like someone to prove to me.
Speaker 2:That sort of says land values in those areas will go higher than land values in a city location, because there is no evidence of that anywhere around the world where that is the case. Where that is the case except for tax havens, where people are transporting their wealth into particular locations which there is scarcity to be able to put into those particular markets. So we still have examples of really high desirable markets like the Hamptons and so forth. Whether you're on the beach there, well, that's all about the scarcity of that particular beach strip and about the $10 million to $50 million mansions that live on the beach there. Well, that's all about the scarcity of that particular beach strip and about the you know, $10 to $50 million mansions that live on that particular strip. So that's artificially manufactured and that's status, human behaviour and bragging rights sort of going into those particular markets.
Speaker 2:But on the whole, there is no economic reasoning that land out wide and its productive use would actually make that value of that land be worth more than in a city location. Now, does that mean that it might trend at the same value? So I'll go and buy three of those regional properties versus the one in the city, because I get a higher yield. Yep, that can also be true. But just also be mindful of the type of tenant and what's going to happen in those particular towns that you're going to go through these types of fluctuations. Because we have done the math in our research centre right and we know that it's between 0.5 and 0.7 in terms of that inner city ring over the long 30-year period where the values have grown by slightly more than what they have in those other areas. That's not to say that you can't get that value in those other areas. That's not what we're talking about.
Speaker 2:But what we are also saying to you is that timing the market into regional areas is really important. And what I'd also say to you is that when you're going into those markets, you may not necessarily want to go into those markets with a view that it's buy and hold forever. Right, Because those markets can also have very, very long periods of flat or non-existent growth or correct in certain aspects of their valuations because of the cycle of movement of people into those areas where, if you see I mean go to the Great Depression, what happened when there was no job. Everyone comes to the city to try and find work right. That's basically what potentially happens Now. Our Gen Ys and Millennials, and even Alphas. They've never seen tough economic times right in real terms and they haven't seen a serious recession where you're talking about unemployment at 10% and lots of people and so again, you want to go to where the safety lives and the margin of safety is always going to be in your bigger cities. That's not saying don't invest in regional, but just basically have a look at the vehicle in which you do that and I'll put my hand up.
Speaker 2:I've got two regional properties. I've got one in Cairns and I also have one in Broome. I've told you about those properties. They are bought in my self-managed super fund and I've done that specifically for a timing exercise to get in, make a dollar and then ultimately get out of those particular so they will not be buy, set and forget whole properties forever, and so I will time those executions where I see the market peaking and then ultimately, then I'll take my cash and I'll reinvest that money.
Speaker 2:Now, why have I done self-managed super fund? Now, this is not advice. I've got to stress. I'm not telling you all to go off and set up self-managed super funds. They are inappropriate for the vast majority of people. You need to have sophisticated understanding of financial literacy. You're responsible for that, so I put that caveat out there. There's 10% to 20% maybe, but the rest of the population don't worry. But I've done that purely because if I sell the property it's only a 10% capital gains tax. So I've made it clearer that it's in my best interest that if I'm going to trade those properties, I'm going to trade them in a vehicle that allows me the best return that I can comfortably get. So there's my little diatribe Bryce in terms of how I look at regional versus the city market.
Speaker 1:I think there's real validity in some of the things that you said, right. So I think that, particularly the part where you said hey look, if people can't get in capital city, they need to consider that. So hopefully people don't read that we're saying you've got to go avoid regional and you've got to be in the CBD, because some people I've got regional properties, ben, I've got a couple in Torquay, I've got one in the biggest regional, the highest profile regional town in Australia, the Gold Coast right, and I've had that for over 20 years years now I can tell you that's had some metamorphosis of um, of uh, performance, I've got to say but um, you know, the gold coast still for some time had this even though it's highest profile, six largest population center in the country, it's still by nature regional because it's located outside the major capital cities. It's now becoming a major hub. But a lot of people still needed to go.
Speaker 1:When I lived, lived on the Gold Coast, ben, I was getting on a train at Robina and I was going into Central and then I changed the train and I'd go out to Milton and then I'd walk to my place of employment at the time, but I'd live on the Gold Coast, so it was definitely where I needed to go to get the income. This was well before work from home was normalised where it is.
Speaker 1:But now that particular city is now metamorphosing again because there's a high concentration of entrepreneurs now in that particular city because they can now work from home and they've got the commute. So that's the highest profile regional centre that you've got in the country and then right to some of the lowest profile. So I think we've got to remember the commuter belt is something that's super important here, because COVID came and everyone just bolted Ben. It was like you know, everyone scamp it and they just went out and they just and it made sense because we're trying to escape from those lockdowns. But the ones where they've gone well past that commuter belt are the ones that have seen the biggest pullbacks on that as well. To your point before about whether or not you would keep them long term, yep, that's an option to maybe sell it or it's maybe an option to keep them because historically they've been really good performers in terms of yield and that yield is something that the portfolio. We want to retire out the debt and we want to be able to have the passive income that we talked about last week, ben. We want that passive income to be able to provide us with cash flow, cash flow in our hands, so that we can go and do the things we want for lifestyle design, so they can be wonderful sources of cash flow for our clients' portfolios.
Speaker 1:This particular question from Gary talked about Ballarat. We've bought lots and lots of properties for clients in Ballarat over the journey as well, so that's good. So it's all coming down to margin of safety. You know what does the margin of safety look like for you if you're buying into these locations. If you go back to our summer series, our very first summer series last season, ben, we've got this young, incredible property investor who decided to invest in Albury and built a portfolio. I knew that and got that performance from that portfolio. So again, seeing examples I talked earlier that you know Victoria is very blessed from a regional perspective. In my view, there's so many options that you can have that sort of hub and spoke out from the central business district that allow you to go to these beautiful regional towns and still have access to the capital cities that I don't think the other states have as much. So that's different as well. You've got this big economic centre in these regions close by.
Speaker 1:But hopefully, to your question, gary, you've bought one in Ballarat, right? So you want some confirmation potentially that you've done the right thing. I don't know. I don't know where you've bought, but depending on your goals, it could quite possibly be very, very good for your portfolio. So there's certainly no major red flags at this point with the amount of information that we have in the question.
Speaker 1:Secondly, to Ben's point, it's very unlikely that the productive use of the land will ever be at a higher level than you get from these central CBD locations, and Ben would love to hear your thoughts if you have an alternate thesis. He described that, so therefore I think that if you can make sure that you are looking at things like location away from the economic centres, what sort of population size do these places have? What is the economic base of that region? To the previous question we had around mining town, it's no different than for some of these regional towns that are reliant on one particular industry, whether it's agriculture, whether it's tourism, whatever it could be, not just mining. These are the things that we need to be thinking about when we're thinking about regional. But if capital growth is the game, ideally you want to be around the capital city so that you get the best chance of getting that growth, and regional might be something you consider to help with cash flow over time.
Speaker 2:Yeah, and if you're considering it, focus on what Bryce just talked about. The commuter belt is really really important, plus also the lifestyle drivers. So what are the lifestyle drivers in that particular? And then what's the diversity of industry and infrastructure? So if the town has a university, it has a large hospital. It's basically trying to continue to keep growing from a small town. Because you're either two things You're either dying or growing as a town, right, and you want to be looking at your town in terms of its population story. Is it growing as a town? Is it attracting people? All of those things bode well for the future value of that land and being part of a commuter.
Speaker 2:If you think the next 50 years, those cities will probably stretch out very close to what Bryce was talking about. If you go back 50 years or 70 years on the Gold Coast, compared to what it is today, it's just going to be absorbed into southeast Queensland and then, so effectively, brisbane and the greater Gold Coast will become one large, connected, integrated city, right? So you're then going to sort of say, well, goldie's not really a regional town, so you want to make sure that you're looking at the commuter story, or you've also then got to make sure that is it a sustained significant town? So it has to be, it absolutely has to be in the top 50 centres of population. And then you want to have a look at its population story and then what's driving that population story? And if it's one or two industries, pass, okay. Pass, because ultimately, regional property prices will be determined. When you think about the weighting and the weighing machine over time will ultimately be determined by what values you get in your bigger capital cities.
Speaker 2:No other way. Because how do you benchmark prices for regional towns? You've got to benchmark them against the city locations. That's how buyers do that. Owner occupier well, okay. Well, if I go and live in Adelaide, but if I go and live in the Adelaide Hills, I've got $100,000 or $200,000 less, and so that's how they look at things. Right, it'll never be that the Adelaide Hills will be more expensive than downtown Anley or somewhere like that where it's an inner city location as part of that particular story.
Speaker 2:So I think it's really important that people understand that, that that that regional towns will always be price takers. They will not be price makers, but they will go through status periods. I mean, you know, our most favorite one is um is Harvey, not Harvey Bay. It's um is um is harvey, but not harvey bay. It's um um byron, byron bay. My bad, there you go long weekend. So yeah, it's byron, like now byron. Property prices are off 30 and they're off 30 from where? From their peaks, because everyone was moving up there for covid and so they are now adjusting that.
Speaker 2:In terms of people I go actually not much to do up here. I think I might move back to sydney or melbourne because I've got that luxury of, you know know, high price and high value, high incomes to be able to, you know, make that flexibility. But that's not like every market, but that's a classic case of high status. Where do you live? I live in Byron, you know, or I live in Noosa, or I live Torquay, or I live down the peninsula, you know, in terms of Portsea, all of those ring true.
Speaker 2:But remember that the generation of wealth that allowed them to buy there usually comes out of the bigger cities and them selling their businesses, that they potentially prospered in the bigger cities. And I'm saying that as a generalisation, not as a complete, absolute rule, but that just gives you some idea. So if you think about those things top 50 regional centres. Look at the diversity of industry. Look at the economic and public, health and education infrastructure. Look at is it growing in population, is it part of the commuter belt into a greater metropolis? Or how quickly can I get access to that greater metropolis? You know, to make sure that that city is going to be alive and thriving in the next, or that regional town is going to be alive and thriving next 50 years, and then you can still time the market. But also just remember that it may not necessarily be a complete, absolute buy and hold strategy like you might adopt in a bigger capital city market.
Speaker 1:Very good. Jenna, jenny and Gary, thank you for your questions. Please reach out to us. We will give you a free copy of Start and Build, and I just want to encourage anyone who's listening to this to make sure that you either leave me a message on Instagram or go to our homepage on thepropertycouchcomau, press the button there, leave your message and we'd love to cover that in an upcoming episode of the Property Couch.
Speaker 1:Hey, ben, my life hack today is make decisions like Jeff Bezos. I know you're nodding for the people who are listening only, and they can't see that online on our YouTube channel. Recently, we pulled our team together and you spoke to them about some principles, and one of those was the decision the two kinds of basic decisions that Jeff Bezos makes, and so I thought it was helpful as a life hack here, ben, because he doesn't deliberate over easily reversible decisions, but many of us place equal value on almost all decisions, and the question is why? And the answer is we don't want to be wrong ever, but sometimes it's okay to be wrong, and so what the lesson here is? Here's a guy who fluctuates anywhere between the wealthiest to the second most wealthiest to the third most wealthiest, based on the share price of the day. Who's got over a million employees? How does he actually make decisions that move the needle? And this is how he does it Type one decisions, he says they're almost impossible to reverse and calls them one-way doors.
Speaker 1:So think of selling your company or quitting your job or jumping off a cliff. Once you make a type one decision, there is no going back. So think about those one-way doors in a restaurant, ben, they only go one way, they don't flip back and forth, whereas the second type is an easy to reverse. He calls these two-way doors like starting a side hustle, offering a new service or introducing new pricing schemes. So he says, whilst type two decisions might feel momentous, with a little time and effort they can be reversed. And so interesting, type one, type two. But unfortunately it's easy to mistake a type two decision for a type one decision, meaning that you need to let caution creep in and assume so do that and you become paralyzed and you make no decisions at all.
Speaker 1:So I had a look into one of the shareholder letters that Bezos wrote and he said this some decisions are consequential or irreversible, or nearly irreversible one-way doors, and these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. If you walk through and you don't like what you see on the other side, you can't get back to where you were before. We call these type one decisions. But most decisions aren't like that. They are changeable, reversible. They're two-way doors decisions. But most decisions aren't like that. They are changeable, reversible. They're two-way doors. If you've made a suboptimal type two decision, you don't have to live with the consequences for that long. You can reopen the door and just go back through.
Speaker 1:Type two decisions can and should be made quickly by high judgment, individuals or small groups, right so, ben? So it sort of led me to reflect what could we be making type two decisions instead of type one decisions that will make lasting change in your life? So I thought well, writing a budget using a seven day float, testing new habits and routines, maybe driving, reaching out to new friendship networks, investing in a new skill, volunteering for charity, like the list goes on, ben. But my life hack today and I've been thinking on this since you floated a couple of weeks ago, ben, and hopefully our team has been reflecting on it too, ben since you floated it a couple of days, but try it out.
Speaker 1:It's a new framework on decisions. Is this a one-way door decision or is this a two-way door decision? And if it's a two-way door, don't necessarily give it the same amount of effort and weight that you would for a type 1 decision. Ben, I know you're probably itching to say something.
Speaker 2:Well, I'm just going to put one little sort of sentence on the back of it Don't procrastinate. You still got to make a decision. You still got to take action. Too often the one-way door decisions leave people paralyzed to actually make decisions.
Speaker 2:So, if it is a one-way decision, get more detailed information, get supporting evidence, build your thesis around why you think it's going to work, and get it challenged by friends and family in terms of got this really strong belief or whatever it is. I want to basically know whether my thesis and all the evidence that I put together supports that particular thing and then act on it. And if you need professional guidance, like if it's investing in property, I would say if you'reed by the one-way decision, go and get some evidence, go and get some data. Why are they saying buy here? Why are they looking at that particular location? What's been the historical performance of that location, not over the last five years or 10 years, but the last 30 or 40 years? That backs up that thesis.
Speaker 2:What's going to happen in that location? Is it going to be green fill? If there's going to be backfill, where's my margin of safety? What's my productive use of that? All of those things lead into making the big decision, which is the one-way decision, which are super meaningful decisions that will have a massive impact on your life. That was more than one sentence, ross.
Speaker 1:Oh no, it's good. It's a good contribution, but it's largely around.
Speaker 1:If you think about our case study episode we did a few weeks ago, ben, where our client was riddled with anxiety and that was around some of those type 1 decisions, but having the line of sight and the detail around that meant that those decisions were easier and the appropriate amount of deliberation with high judgment, individuals and in small groups within that family unit meant that they were able to make decisions going forward. So there you go, folks. Try that new framework out the decisions you're making. Are they type one decisions, which are one-way doors, or are they actually type two decisions, which are two-way doors? Hey Ben, what's making property news?
Speaker 2:Oh, big show, Bryce. I'll try and be quick on this particular stuff. Thank you for those who have been hanging around. But, bryce, we got the results out of our good friends at CoreLogic over the start of the week and we saw the house price movements again moving in that positive direction. For the 14th straight month, we've seen the national value growth, and we all know that national is only a figure of our imagination there's no such thing as a national house but we get a sense of what's going on. So that means that since the decline of 7.5% that we saw between April 2022 and January 2023, we've seen a 10.2% increase in dollar terms, or approximately a movement of around $72,000 hitting those people's bank accounts, technically, if they owned property. Now we've been setting new national benchmark highs since November of last year. So every time the market's moving and it's a fair indication that people are getting smarter and they're anticipating at some point later this year, potentially, we'll see interest rates get down, and so we are seeing more people taking proactive action in terms of getting into the market. So I think that's an interesting one, and it's all obviously driven by the story of under supply versus the overall level of demand, and that's what we're seeing in value supply versus the overall level of demand and that's what we're seeing in value.
Speaker 2:So quickly around the grounds 0.3% for Sydney over the quarter, 0.9% Increase. Melbourne flat for the month Over the quarter, the only market in Australia that's gone backwards by negative 0.2%. Brisbane 1.1% for the month very strong. 3% for the quarter. Adelaide 1.4% for the month very strong. 3.3% for the quarter.
Speaker 2:Perth the standout which we predicted at the start of the year. 1.9% for the month, 5.6% for the quarter. It is not done yet. It's got more to go, probably a lot more to go, in fact. Then you got Hobart it's peaked out at 0.2% growth and 0.1% the quarter. Darwin was negative 2 for the month but positive 0.4 for the quarter. Canberra positive 0.4 for the month and positive 0.8 for the quarter. So combined capitals 1.5% for the quarter or 0.6 for the month, and combined regionals also are going pretty well outside of regional Victoria at the moment 0.6 for the month and 1.8% for the quarter. So that gives you a wrap. We've got no RBA and economic update this month, so that means we'll be updating a property deep dive in the May RBA rate call because they take a break during April Now that they're in six-week cycles rather than the first Tuesday of every month.
Speaker 1:Very good. So, folks, you're right, ben, we did cover a lot today, but hopefully there's some big rock stuff that we covered around regional and mining towns and also why we had that view of Canberra and what that meant for returns and, to your point, the premium that the rents attract in that city because of those extra costs. So, yeah, we've covered a fair bit today, folks, and hopefully that's helped you. If you've enjoyed that episode, we'd love for you to screenshot it and send it to a friend, send them a text message, put it up on your social media. Please tag me. If you do that, I'll put you on to my stories as well and show you that supporting the property couch and we appreciate that, mate. But until next week, ben.
Speaker 2:Knowledge is empowering, but only if you act on it.
Speaker 1:All right, see you next week, folks. Hey folks, bryce, here again. I just wanted to catch you real quick before you go. If you're new to our community, I want to encourage you to listen to our very first 20 episodes, as the concepts we share in EPS 1 through 20 are foundational principles, pillars and frameworks that you need to know for you to get the best value from our content week to week on our show. My little tip is to listen to it at one and a half speed.
Speaker 1:Now, for those of you that are time poor and don't have the option to go back to the beginning, don't worry, because we've got you covered as well.
Speaker 1:We've created a binge guide that summarizes these foundational episodes into one easy to digest booklet so that you can get up to speed super fast. So go to the show description on whatever device you're listening to now and simply click on the first 20 episodes link to download it straight away. Oh and, by the way, whilst you're there, you'll find a few extra goodies for you, including a link to download our Lifestyle by Design app more, the home of Wealthspeed and Wealthclock, and our hugely popular Money Smarts money management system, as well as how to get free copies of our bestselling books. Now, just a reminder that anything we cover on this podcast is not considered to be financial advice, and we certainly recommend that you seek out expert advice tailored to your unique circumstances, and everything we talk about is general in nature. Folks, I want to encourage you again to click on the show description, wherever you are listening, to access all the free goodies we have for you Until next week.