Cameron Kusher on Media Hype and the Housing Supply Problem

In this episode, we'll be talking with well-known housing researcher Cameron Kusher, and we go to explore how our mainstream media misunderstands how our property markets operate and repeatedly gets it wrong when explaining the reasons behind our housing shortage and crisis, as it is often called.

Even worse, how this misunderstanding then feeds into government policy. What are some good ideas that governments should be considering but are too scared to table? Welcome to the elephant in the room. This is the podcast where we love to talk about the big things in property that never usually get talked about.

I'm Veronica Morgan, real estate agent, buyer's agent and buyer's agent mentor, co-host of Foxtel's Location, Location, Location Australia, author of Auction Ready and co-host of Your First Home Buyer Guide.

Hi, I'm Chris Bates, mortgage broker, currently ranked number three in the MPA Top 100 Mortgage Broker Awards. Before we get started, everything we talk about today is not personal advice, and we recommend you engage the services of a licensed and experienced professional.

Our guest today is Cameron Kusher, a property economist who has spent the last two decades working in head research roles at REA and CoreLogic and recently has been freed of his corporate shackles and we've invited him to come and have a candid chat with us about the state of the market as he sees it.

So it's really good to see you again, Cameron.

Thank you for having me.

Absolute pleasure.

Cameron, yeah, I do like that being free to the corporate shackles because often when we do talk to people, there is another party that they've got to represent and they can't say exactly what they think. And we love hearing what people actually think.

So, I mean, when you're looking at sort of property data, property stories, the media, because you are kind of in that space, I mean, what really frustrates you in the way that we approach it? And yeah, what would you like to see change?

Yeah, look, I think a lot of the analysis is quite simplistic. And honestly, that's because a lot of media these days is just about getting as many eyeballs and the most insane kind of headline you can say to get the most kind of clicks.

Um, so, you know, from, from my, my experience, you know, over 20 years of what works in the media, it's, you know, best of, worst of, um, you know, everything's got to be a crisis.

Um, and you know, the reality is very far from a lot of what the media is spinning things to be. Um.

yes there's definitely some challenges in the housing market um but you know not everything is a crisis um you know a lot of times when we're putting together lists of the best performing suburbs the worst performing suburbs that could be purely based on you know just a a shift in the type of properties that have transacted in that market which has driven price or rental growth much more significantly than the reality

So I think we can be having much smarter conversations about the housing market than we do. But the reality is that that won't get the clicks that the media organizations are looking for.

We all got certain passions in the market as well. There's certain things that we, you know, we either hate, really hate and really frustrate us and think that that's a real problem that we need to solve or things that we, I guess, our property philosophy believe.

What's the sort of Cameron, you know, when people go around the water coolers in the past and they sort of see you, they know that that's going to be your cup of tea and it's going to get, you know, get you going.

Yeah, look, I think for me, the thing that's going to get me going is everyone's got an idea of how we solve the challenges in the housing market and everyone makes it sound like it's really an easy thing to do, whether that's, you know, oh, we relax.

planning restrictions or we bring in more migrants to to build more houses the reality is there's a lot more moving parts to the market and none of these things are easy fixes to to you know improve the housing market conditions to get more supply to get people more access to the housing market i guess the other big one for me the big frustration i have is when we look at what um

federal and state governments continue to do, they focus on the easy things, which is more demand, getting more people to buy at higher prices, rather than actually delivering more housing at affordable price points for the people that desperately need it here in the country.

We definitely want to talk about some of your ideas around how governments could do better, right, and policy could be better. But, you know, what always gets me is this idea of making housing more affordable.

And if we managed to do that right now, apart from the fact that, what, you've got 11 million homeowners that would probably be pretty pissed off, you know, with a big drop in values. But, you know, that aside, even if we did it, it'd be a one-off correction, wouldn't it?

It'd be like a one-off reset and then off we go again. And at some point of time, we're going to get back into this same situation. So, you know, and that is one of the things that frustrates me.

It's like, you know, all these sort of talk about fixing it for today's generation, they'll be what we are, you know, as the older property owners, you know, give them 10, 15 years, they're going to be where we are.

So I guess how could governments, and also I guess we're recording this just before the election, but of course this will go to after the election.

You know, we've had quite a lot of, you know, first home buyer policies and it typically comes out in federal elections as well, which, as you say, are really focused on the demand side of the equation rather than the other side of the equation.

But how could governments, I guess, better assist the housing market rather than just provide more of that demand side stimulus?

Well, I think there's a few ideas there. And look, I think key is that we need to build more housing. Now, that's a lot easier said than done. If you go back to the mid-2010s, we were building a lot of housing. We were constructing about 220,000 dwellings a year.

But that was really being driven by the fact that construction costs were really stable. Interest rates were low and were falling. So a lot more projects became feasible under those conditions.

Fast forward to where we are today, we've got very high, we've got not very high historically, but we've got the highest interest rates we've had in 12 years. We've had construction costs surge, you know, 30, 35, some people say 40% through the pandemic.

So you've got this difficulty in making new projects stack up because firstly, A new property is going to cost a lot more than an existing property because of those costs, but also GST on a brand new property that you don't have on an existing property.

And most new housing in Australia is built when you get a level of pre-sales to get that finance going. So it's hard to get the level of pre-sales you need to go ahead and construct that new housing at the moment.

So I think we can look at ways to help new developers access finance. We have to look at ways to make bringing new housing to the market cheaper.

Now, whether that's, you know, helping out with construction costs, whether that's looking at the GST, whether it should be charged on new homes but not on existing homes, you know, whether it's other factors. And I'm sure there's hundreds of ideas out there. Right.

you go and talk to a developer at the moment and they basically say a lot of these projects won't become viable until property prices are up another 10 to 15%, which is just the cold hard reality of it.

And I think there's a lot of perception out there that people just think, oh, well, if we relax zoning restrictions, people will build. People will still only build if there's a reasonable return on the risk that they're taking to go and construct a property. And that's why at the moment

Most of the new house, new apartment construction is all that very high end, and we're getting very little of that cheaper one and two bedroom stock because it just doesn't simply stack up.

It doesn't really stack up for buyers either, but that's probably another topic, another conversation. One of the things that, as a comment about this election campaign, and as I said, I know that we're talking about this before the election, this will go to air after, but

But there were a number of comments that came out saying that basically it's not an election for renters. You know, like typically in elections, yes, I come out with a first home buyer grants and blah, blah, blah.

Which is sort of interesting because first home buyers really are a tiny proportion of the total market, but they're also a tiny proportion of voters.

There's a lot more renters out than there are first home buyers, but I guess the sentiment seems to go, maybe the bang for buck in terms of appeasing first home buyers is stronger for governments and prospective governments than it is for appeasing renters.

But the fact is that by focusing on profitability for developers, aren't we missing an enormous trick here? And that is that there's been this rapidly declining investment in public housing or social housing for decades and And at the end of the day, renters are suffering.

So rather than focusing on, you know, 100,000 odd first home buyers every year and making housing affordable for them, shouldn't we really be looking at creating a second tier market, which is predominantly for people who really can't afford to live comfortably in the private rental market?

Isn't that what we really should be focusing more attention on?

Oh, look, 100%. I think governments aren't willing to take on that responsibility, though. I mean, we've seen that over recent decades. And I think also government attracting the expertise to be able to deliver that housing is a real challenging part as well.

And also just the inefficiencies of government as well, the cost of delivering it. But that's not to say that we shouldn't be looking at public-private partnerships as to deliver government-owned housing. More community housing. Yeah.

Cameron Murray, who's someone that talks a lot about housing you're probably familiar with, he talks about looking at the Singapore model where the government basically builds social housing and builds all of the social housing. And look, I'm a very big supporter of that idea.

I think the private sector does some things very well. But delivering cheaper housing for people that can't access the market already is not one of the things they do.

And equally, if you do it in a public-private partnership, you are giving these private developers the work that they need when the cycle turns against them, when you do have that massive increase in construction costs or that massive increase in interest rates.

So I firmly believe that that's something that we should be looking to do. But no government is really talking about it. Obviously, we've got the half and that's trying to provide more money to community housing providers, but it's certainly not big enough.

And homelessness is obviously a growing problem here in Australia and it shouldn't be. We should have ways to address that.

I think that was one of Cameron's arguments that may have been him, may have been Cameron Murray, that is, may have been somebody else who was saying that the governments are already investing in housing. I mean, because there is existing social housing, so they've shown that they can invest in it.

And so rather than the – and I get all the names of these different funds all mixed up, but, you know, the federal government put together this fund to basically – the Housing Futures Fund, is that it, if I got that right –

Rather than actually create a fund to invest and to then build using the profits of those investments, why don't they invest in housing in the first place? And as the value of that housing goes up, then they can reinvest to profit. I mean, that was sort of roughly his argument. Yeah.

And I think he's spot on because, yeah, the HALF, which is the Housing Australia Future Fund, it invests money with the Future Fund and then you're only building based on the profit that that investment makes. And it's like, well, if housing is the problem, invest directly in housing.

Don't put it in this other fund and if it gets a return, we'll put it towards housing. If it doesn't, we won't. Yeah. I think they overthink this stuff a lot. I don't know that crisis is the right word, but everyone talks about this housing crisis.

If politicians think that it is a housing crisis, we'll put the money towards the housing market and try and fix that crisis. Cameron, I mean, you've worked at CoreLogic, Cortality, I think it is now.

Hasn't had as many rebrands as I have, but I'm not sure about that one either. But you've also worked at REA. I mean, what's your thoughts? There's a lot of bias in media, right? A lot of people are owned by certain people. You're out of that sort of REA world now, but...

Can you tell us about all the conflicts in the media world, not shooting yourself in the foot for a future job opportunity, but how conflicted is it and how does that make it difficult for the average punter in the street to get commentary that isn't biased, right?

Because it's really hard and they get swept up in the storm because they read a certain paper or they look on a certain website.

Look, I would firstly say that commentary in the media is difficult. Now, I worked at CoreLogic, which is now Cotality. They weren't owned by any media, but obviously their revenue comes from lenders, from real estate agents.

And there's certain things that the business wouldn't be comfortable with you saying, if you have an opinion that might be damaging to investors one of those business models. And similarly at REA, obviously at REA Group, most of their revenue comes from real estate agents.

They're also the majority shareholder of REA is News Corp. And to be perfectly frank with you, REA is probably the profit center of News Corp these days. So you've got to be careful there. If you look at Domain, they're owned by Channel 9.

So, again, another media organization. So, you're looking at where this commentary comes from and who it's going to. You know, a lot of the property listings portals are heavily or closely aligned with media companies.

And for a lot of those media companies, those property businesses are the cash cow of those companies. those businesses. So I think particularly at the moment, it's going to be quite interesting with Channel 9 and Domain because we know that CoStar has come in and lobbed in an offer to buy that business.

I haven't heard any news on that for quite some time. So last I heard was it was their best and final offer, but it's been radio silence since then.

But I think that's going to be very interesting because then you will have the number two player in the country, if that does go ahead, potentially not being owned by a media organization. And that will be interesting to see how that plays out.

Yeah, I mean, I guess all the different, some, you know, commentary might be coming from someone who works in the real estate agent, you know, head office, for example, or it could be, you know, news.com.au or, you know, a lot of people get news from lots of different sources or Channel 9 or Channel 7 or ABC.

I mean, we've seen a lot come out there. I mean, what's your thoughts on a lot of the commentary that comes out from that network and how they think about the property market?

Yeah, look, I think if we look at any of the networks, right, so you've got nine and nine and channel nine in particular with domain, you know, we look at things like the block, it's all sponsored by domain.

So there's a pretty tight tie in there.

Um, I think when I look at some of the ABC and there's some, there's some great journalists at ABC, um, but, uh, I think a lot of day, a lot of times these days, journalists are under so much pressure and so under resourced that, um, they will, they will take a media release and, and pretty much run with it at some, at some point in time.

One of the ones that's really been doing my head in for a while is this idea that when you have very strong population growth and you have very strong numbers of student, overseas students coming into the country, that it doesn't have any impact on the private rental market or it has minimal impact on the private rental market.

I think the Property Council did some research that they said, or they paid for some research that said they only are responsible for demand for 4% of the private rental market. And I've seen that. That rehashed a lot of places.

Now, the reality is the Property Council also have research that says there's only about 140,000 student accommodation properties in the country. And at the moment, there's more than a million overseas students in the country.

Um, so that clearly doesn't add up to me because not that student accommodation is not exclusively for overseas students and most overseas students aren't going to have a house of their own to live in here in Australia.

So clearly when you have this huge influx of people from overseas coming into the country, it does have an impact on demand for rental properties and in longer term that flows into demand for owner occupied properties as well.

That is so interesting because one of the things I learned through all of our interviews with Kent Lardner was around this questioning data. And I really have honed my senses on that so well.

much better than they were and certainly um and also you know that sort of Daniel Kahneman you know that that sort of systems one and systems two thinking it's like engaging system two more often um to actually do the hard work to challenge things that you hear and you know I've I've been known to say like I'm seriously how much a bigger dent is this you know this uh migrant

population of international students really going to make on the property market. So I've swallowed that one myself. But you're obviously looking at the same data source, the same source of that data and seeing what other data they're putting out and those things don't add up. I love that. But what about population growth?

Because, of course, high immigration seems like a particularly stubborn problem. And I was listening to a podcast that was talking about reciprocal arrangements with various countries that have been put in place by governments over many decades, and blue and red governments. It's not like it's just the current government.

And so, you know, like just the backpackers from the UK, for argument's sake, or other backpackers from Germany or just very, there's something like, I think it was something like 90 different agreements with different countries. You can't just unwind that, can you?

I mean, immigration then proves to be very stubborn because these are things that you just can't change. These are agreements made with other countries.

Yeah, and I think also the challenge with the high rate of immigration we've got at the moment is the federal government has consistently cut back on funding to universities.

So universities have gone and said, well, we can get overseas students in and that can subsidise the research we're doing and that can pay for all the funding cutbacks that we've had.

Yeah, okay.

I think my argument with that is, Um, why aren't the universities taking more responsibility of then housing, um, all of these? I mean, I live in Queensland. I go and look at University of Queensland. They've got so much land there.

They could be building towers and towers of student accommodation on their own land, and they're not doing that. And you know, the, some of the major universities in Sydney and Melbourne are the same. They've got a lot of land and they're getting a lot of benefit from overseas students coming into Australia.

why aren't they, and, and look, if they build that, that, those properties, that's an asset for them as well. So it makes sense to, to be making them, or to be saying that, that you need to do that.

Um, but, but I think, yeah, look, I, I think that, um, you know, there's these, these agreements, um, as you said, really hard to unwind them. Um, you know, we, we, we want to We want to have free trade agreements with other countries. And in those negotiations, things like that get thrown in.

So it's really hard to curtail it. But I think the crux of the issue is we have this very high level of overseas migration at the moment and governments aren't building it. We're not building enough housing and we're not building enough infrastructure.

So people aren't seeing the benefit of, you know, they're not enjoying the benefits that population growth can bring.

Yeah, and I think what is also important, and again, we're right in the middle of the end of this election cycle, so it's thrown around as a, you know, it is very political to blame each other, you know, different parties will blame each other for immigration and that being the root cause of, you know, where we are in property rights.

Market. And yet it's systemic. And, and yet there are things that could be done such as what you're saying there in terms of, well, make them pay a little extra and, you know, and then there's a, there's a levy for the universities to build accommodation.

You know, for example, there are practical things that could be done. Yeah.

Back to approvals. We were talking about that a little earlier. And one of the comments that you wrote in one of your pieces was when approvals are most abundant, it was a time of low and falling interest rates and low cost inflation. I sort of hadn't.

really realize that so and and you know we're now inflation just came out it's 2.9 now we're under the three percent threshold and and of course interest rates we're starting on the on the the fall cycle is it naive to expect that approvals will increase significantly in the current environment as a result

No, it's not naive. I think we will see an uplift in dwelling commencements and approvals going forward from here. We're already starting to see them tick a little bit higher.

I mean, the expectations at the moment is we're probably going to get three or four more 25 basis point interest rate cuts this year. So that's going to make sense. Um, new housing projects, more viable, it's going to make, you know, financing these projects, uh, easier.

The other thing I guess that's, that's really happened, probably not so much in Melbourne, but in Sydney to a lesser degree, but certainly in Brisbane, Perth and Adelaide. you've seen really strong price increases. So that gap between existing home prices and new home prices has really narrowed.

Melbourne's a bit of a different story because prices have actually been falling. So that gap, if anything, has actually been widening up, making these new projects more difficult to stack up.

But look, I think that with interest rates coming down, with inflation easing, and I mean, construction costs are still up significantly from what they were four years ago, but we're not continuing to see much of an escalation. That is certainly going to help get more housing delivered.

But, you know, the Housing Accord target is 240,000 new dwellings every year for five years. I don't think we're going to get to that. I think we're probably going to fall quite a long way short of that, purely because we haven't even touched 240,000 completions a year ever before.

We've gone close, but the cycle can change, interest rates can go up, anything could happen. It could be a black swan event. It's hard to maintain a level of housing construction you've never achieved before for five consecutive years.

In the teens though, you know, we had a lot of apartment construction in Brisbane, in particular in Melbourne and in Sydney to a degree, probably a slightly lesser extent then. And a lot of that was funded by overseas investors. Has that changed? I mean, you know, is there less of an appetite?

Because obviously, and a lot of buildings were with one and two bedroom apartments as well, right? So a totally different type of apartment.

uh, property that was being built or apartment that's being built versus the higher end ones and the larger ones for downsizes and families and whatever that, that's the current, um, you know, currently being, being developed. Is, is that likely to return ever, do you think?

Look, I think it'll come back eventually. I think the big challenge at the moment is, firstly, back in the teens, you could sell up to 100% of the off-the-plan apartments overseas. And the reality is...

A lot of these projects don't get up unless you get a lot of investors buying into them. And a lot of the investors that have historically bought into them have also been overseas investors. Now, you can only sell up to 50% of these new projects offshore now.

If we look at Victoria, they've increased the stamp duty levy on foreign buyers as well. So that's going to discourage people from coming in and purchasing off the plan projects.

I think it will eventually come back.

One of the other points, sorry, there to make as well is a lot of these developments also, you know, Asian property developers and a lot of them have actually pulled back out of Australia over the last couple of years as well. So they had those selling channels to go and sell them overseas.

Yeah. My personal view is probably a lot of this stock that would have been built to sell one and two-bedroom apartments is now probably going to come through as built to rent. We know that there's a lot of encouragement both from property lobby groups and the government to ramp up that sector.

Again, as you said, the election's going to have happened by the time this is published, but it does look like the Labor Party will stay in.

Coalition has had a bit of a different view on those things, that they want to encourage people to own their own home, whereas they say Labor's trying to encourage people to be renters for longer.

I think that we will see more of the stock that would have been that one and two bedroom sold off the plan is now one and two bedroom built to rent, particularly in a market like Melbourne, where you do have those additional taxes on people from overseas buying properties.

Yeah, something I've noticed just in recent weeks, to be honest, is I stupidly on Instagram started looking at new developments. And then I was like, oh, wow, I didn't know that was coming. And then, oh, wow, look at that development. And obviously a lot of them are in pre-sales.

And I'm just blown away. So it's really the planning control laws in Sydney are at least getting developers to start to try to get some pre-sales, right? And They're not only in the eastern suburbs. They're in the beaches. They're along the train line.

And these are the type of properties that haven't been built before. Lots in Chatswood and St. Leonard's. And they're completely different. They're all targeted at the downsizer and the family market. And there's waiting towards three and four beds and greener and bigger apartments versus before. Yeah. I think it's working.

I think the change in zoning is allowing developers to at least try to get something to stack up and see if they can sell it. Well, that's going to be a different thing. But there's an enormous amount of choice, I feel, out there.

So how do you feel about sort of what's happening in New South Wales and the change in planning controls? Is that something you, I guess, gives us an insight into the future of how cities are going to have to grow?

Yeah, look, I think so. And Victoria is very similar as well with the, uh, with the Melbourne, uh, plan as well. Uh, you know, it's all about activity centers being close to train stations and up zoning in those areas, which makes sense.

Um, because you know, that, that makes it easier to get around the city in Sydney, you've got the Metro as well. So you've got very quick access in certain parts. Um,

I've been out of my role for a few months, but previously when I was in there talking to people, they were saying the biggest challenge though is still making a lot of these sites stack up.

They stack up in a lot of the inner city areas of Sydney and Melbourne, but as you get further away, they're just not stacking up. The numbers just don't work to make these projects go ahead.

But again, I think these projects also need to get that one and two bedroom product in there as well as the three and four bedroom large family homes because, I mean, the... you're catering to this downsizer market, which that's where the demand is, but downsizers already have a house.

They already are coming out of a house into something smaller. We really need to be delivering housing for people that don't have homes, people that are stuck in the rental trap, for people that are stuck living at home with mom and dad that can't afford to get out of that property.

And that's the real challenge at the moment. And developers just aren't taking on that risk because there's no profitability in that one and two bedroom product. And again,

That's maybe where a government or a government in partnership with the private sector can start delivering that product, or there can be some incentives maybe to deliver that type of product into the market.

Yeah, I've been thinking about that, actually. So, you know, you're right. Whenever something changes, it has all these unintended consequences, right?

And if you have a big shift where there's a lot of new housing for downsizers, and maybe it's apartments but not houses, but I think that's a good thing when you think about it on the tin.

While, yes, you'd like to also be providing for first-home buyers and new people into the market and for the rental, so you need the investors in there as well, You know, a lot of downsides have been stuck in their homes, right?

Their argument is, I'm not leaving because I can't find something that I want to buy. In the area I want to buy it. Yeah, exactly.

So they're like, finally, well, actually, no, I would like that nice new kitchen and all the mod cons and the lock up and leave and it's big enough where I can have the grandkids around. So...

And at the moment, they're sitting in a four-bedroom house, you know, big block, unrenovated house that has got a lot of wealth in it. And there's sort of been a stop in the chain, right? You know, there's just, they're not selling and they're living longer than they ever have.

And, you know, the kids want to keep them in the property because that's their inheritance, right? But if they do move... Yes, some are changing dollar for dollar, right? And maybe they're paying stamp duty and they haven't got much money left over, but a lot of them don't, right?

And when they get that money, and they're usually doing quite well wealth in other assets because they haven't been forced to downsize before because they've been living off their supers, they're going to give that money to their kids, right?

So they downsize and then they give money to their kids, then they'll either pay off their mortgages and buy investment properties or they'll enter the market. And so I think when you...

stimulate the downsize of market it seems like you're creating more stock and that's good for the property market but i actually think it's probably going to create more demand money in the market that then people then leverage um and i think that you'll find that it seems like great you'll get the person in the four bed house or the three bed house that's you know got three kids and really wants the house that the downsize is getting so they'll move and they'll create more debt

And you'll find the person in the apartment will upgrade and they'll create more debt. And then you've got the first home buyer entering because they're getting cash from the parents. So I think one of those things, whenever you start to increase these transactions, it'll flow into other areas. What's your thoughts on that?

I haven't really been thinking about it.

No, I haven't thought about that too much, but I think it's a pretty well-made point.

I mean, you know, we know, I mean, I don't think anyone has great data on the bank of mum and dad, but we know that a lot of people are requiring the assistance of their parents to enter into the market.

And yeah, if you are downsizing out of that bigger home, not always, but sometimes you're going to be freeing up cash.

I've actually talked to quite a, and this is a Brisbane example, but a lot of the agents up here that I've spoken to about it have said they're actually not freeing up that much cash at all.

It's more of a case that they want a property that they don't have to maintain, that they can lock up and go and travel. Yeah. And they don't feel safe or secure doing that with a house.

But in an apartment complex, especially a lot of these boutique ones, you lift straight to your floor. There's a lot of security there. So I think if there's a way to get people to downsize but free up that cash more, then probably.

But if people aren't really freeing up that cash to assist their kids, maybe not so much.

or the other way around.

That's veronicamorgan.com.au.

If you're looking to buy your first home, thinking of upgrading to a new one or purchasing investment property anywhere in Australia, we would love to carefully guide you through this journey and importantly, get the finance right. Reach out via my website, alcove.com.au.

It is true that, yeah, I've anecdotally known that as well, that often when they're buying that new stock, if they are downsizing to one of those boutique apartments in the small complex, a larger apartment, often there isn't a lot of change, particularly if it's in the same area that, you know, because they want to stay in the same location.

I mean, you've actually said yourself that we don't have a problem with demand in this country and what we're talking about here is really that each time you open up something, it's like, well, great, another bunch of people will be able to rush in to take advantage of it.

So how much supply do we really need to bring equilibrium? Is it possible to achieve and can you maintain it once you have achieved it?

I think it's possible to achieve. Again, going back to sort of the teens, I think we were doing very well with housing supply, but that was because interest rates were low and they were falling. Most projects were stacking up. I think we were doing a really good job then.

The argument would be maybe some of the supply wasn't in the areas that people wanted it to be. Interesting with all these downsizes wanting to move into, you know, apartments now, a lot of them are the ones that have been so forcefully against higher density living in those suburbs.

But now we're at the point where they need to downsize into it. So I think we can deliver the volume of housing we need. The challenge is always going to be sustaining it across the economic cycle. It's a lot easier to do it when interest rates are low, when construction costs aren't escalating.

But you find yourself in a situation where interest rates are starting to rise, inflation's lifting. It's very hard to keep building through that cycle.

And again, I think that's where the public sector probably needs to step in and say, okay, we understand that, you know, the economic conditions aren't right for you to be building right now, but this is where we step up and we continue to add supply to the market.

Yeah, it's a very good point about that. And I think, too, that, you know, there is this sort of idea that we just build more stock that it's all going to sort out.

But the reality is, and, you know, we looked at many, many times referred to this, that you could have, say, the last boom in Sydney and Melbourne, which was, you know, 2012, 2017, thereabouts, there were people losing money in apartments everywhere. In Melbourne in particular, through that time. So they're losing money.

They're selling at a loss at a time when the rest of the market is booming. And in fact, I just looked at CoreLogic's pain and gain report for the December quarter. Similar thing, Melbourne as a region, apartments, still 37% of resales are at a loss there.

So, you know, this is still the hangover, if you like, from that overdevelopment of certain areas in the teens. And it's sort of interesting how we can be talking about a crisis and an affordability crisis and about how terrible it would be if property values fell.

And yet there are some key areas where property values are falling, have fallen, and that sort of continues to exist in the face of everything else that we're talking about. So that's what the risks of supply, isn't it?

It is. And I think it's also a challenge. I mean, we know that the thing that drives the value of homes higher is the land component. And if you're trying to encourage more people to move into apartments, which, you know, some people want to, but.

they're probably not going to get the capital growth that you would get with a house. And that really is going to, if that's how we want to go, I mean, let's have a discussion about it, but that's a big paradigm shift because most of Australians hold their wealth in residential property.

And historically, a lot of that wealth has been driven by increasing land prices over time. If you're in an apartment, you have a very little land component and you're mainly dwelling and dwelling obviously depreciates over time.

So I think if we want to get to that, and maybe we do, you have to give people some other ways to actually create wealth outside of property.

Yeah, because that's really built your rent when you think about it. All you're doing is renting in the form of paying a mortgage and you're not actually making any capital growth and you've got all the risk that goes with that as well.

And that's something that, you know, that first home buyers are encouraged to get into the, you know, off the plan space. And this is one of the things in my other, one of my, my alter ego is on Home Buyer Academy, helping first home buyers make good decisions.

And certainly it's not the firmest rung, first rung on the property ladder is to buy off the plan. And particularly if you're buying, you know, if we go to supply these smaller apartments that are more affordable, i.e. the one and two bedders, that they're likely to outgrow when they have kids.

they're not going to be able to leverage their way up the property ladder because they have no equity in those properties. So it is a, you know, we're talking about this is solving the affordability problem.

But in reality, there's a lot of people I actually encourage to continue renting rather than buy that type of property.

Yeah. I mean, the reality is, I think if you're buying an apartment as a first property and you intend to get married and have kids someday, you are going to have to move out of that because there's not enough affordable three and four bedroom properties.

But equally, you're going to be banking on, you know, wage increases more so than equity increases in those properties. And I know my first property I bought was an apartment.

Um, it didn't go up in price much, but I was lucky enough that my wage went up and that allowed me to upgrade, but not everyone's going to be in that position.

Um, so yeah, I think, but I think, you know, the, the rise of things like ETF investments and, and things like this, people know that they can put their money into those assets and maybe that's going to appreciate over time. Whereas, you know, 10, 15 years ago, you didn't have ETFs.

You had to go to a, to a fundee and get advice, what shares to buy and, and, Now the market might, you know, look at 2008, the market certainly went the wrong way and you, you get a margin call and all these sorts of things.

So yeah, but I think we want to give more people housing, but we also want to allow people the ability to, when they outgrow that housing, move into something that's more appropriate for them.

And I think at the moment, the choice is basically between an apartment, like a one or two bedroom apartment and a house. Whereas there's not really that choice for a lot of people as a sort of three or four bedroom larger apartment.

What is available out there for three and four bedroom apartments generally costs a couple of million dollars. And you can't make that leap from a $600,000 two bedder to a two and a half, $3 million three bedder. People just don't have the capacity to do that.

Yeah. Yeah, I think that's sort of the, I mean, planning, changing planning zones, I think that's why I'm for it, right? To be honest, I think we need to create more properties and actually give people these social challenges.

If downsizers don't make much money on their downsized new apartment, I mean, is it the end of the world, right? I mean, they've probably done all right in capital growth on their house. But if you are a first-home buyer... And you're looking to, it's not your forever property.

And you do, you buy something just to get security versus renting. And you don't understand the opportunity cost of maybe buying a different asset. And then all of a sudden you do get stuck in something that you're going to have to outgrow. Then you have to sell it.

And then the market does run on you and you really get left behind. I think that is an issue. And that's why I think zoning problems where you just put them all around train stations. And by the time when you first buy it, there's not many towers.

But when you go to sell it five years down the line, a buyer is saying, wait a sec, why would I buy yours when I can buy exactly the same new for the same price? I might as well buy the new one.

And they just don't age that well, particularly if they're trying to do them affordable. They can't use all the top fixtures and fittings. And so I think that's going to be the challenge, right? If we do get prices to go up,

which seems to be a good thing, then you'll create a development boom. Then the people buying those will be like, yeah, great. I've got something. I'm out of the rental market.

And, um, these apartments have been going up because there's been an undersupply, but then all of a sudden you're going to get it, you know, an oversupply. Right. Um, and I think that's the, if downsizes get caught out in that, well, you know, they can afford to lose the money when they die.

But, um, I, I, I am worried like you for the first home buyers that get caught up, um,

But, you know, and I think that's why zoning has to be spread because you can then, if you, rather than just put it in a glut, you, when someone does go to sell, there's only limited ones on the market because it has been spread across the whole city. Yeah.

Unfortunately though, NIMBYism will take over and people will just say, well, if you're going to do it, do it around the trains. And that seems to be the government's way.

You know, Cameron, you mentioned earlier about the GST on a brand new property versus not on an established. I mean, you could argue that it's just market value. I mean, you could argue that and that's just government gets a bit.

Although we do know that brand new property does tend to lose money the minute it's like a new car for the first few years. So that could account for that and other taxes. But what do you think, generally speaking, could be achieved through tax reform?

Look, I think the big tax reform that I think they should be looking at is moving away from stamp duty into land tax. And the reason for that is, like we've just had this conversation about downsizing.

If you're in this massive four-bedroom home that has a large land component, you're getting slugged with this larger land tax. You go, you know what?

So this is costing me X amount of money each year, but if I go and move into something smaller, even if it's still a house, but you go from that four bedroom house to a two bedroom house, which is all you need on a small block of land now, the land tax component is cheaper than that.

Or you go to an apartment. Yeah. Um, I think that's the way to get things moving. And then obviously apartments, because I have a much smaller land tax, uh, much smaller land component, you would, you would make it the land tax on an apartment is significantly less than it is on a house.

They probably don't want to get to the point where, where, you know, you look at places like Texas and things like this, that they've got these beautiful houses, they're cheap, but people can't afford it because of the land tax. So you've got to be very careful how you, how you manufacture this.

Be careful about how much governments can lift that tax each year. But I certainly think that it makes no sense to collect all this stamp duty from, you know, the 5% of people that sell a property in a year as opposed to collecting tax revenue from everybody. The transition's obviously the hard part.

Yeah, yeah. Hurts the government's coffers.

Yeah, it hurts the government's coffers, but also longer term, it gives them more certainty about what that revenue is going to be.

And I think the other thing is by actually going and encouraging more, it might make governments more pro-development because they say, you know what, if we want to grow this land tax revenue, what we need to do is zone more areas for housing and get more housing built. Get more transactions.

We can get more revenue off it. Yeah.

And, I mean, the ACT has been in a program of phasing out, well, stamp dues phasing out and land tax, that sort of broader-based land tax has been applied. Have you got any views on how that's travelling?

Look, I think there's a view that it's somewhat stalled. I think they probably tried to do it over too long a period. They're doing it over 20 years, and they're lowering stamp duty and increasing land tax.

And I think people are just now sort of complaining that, oh, I'm paying both, and that's the complaint. Uh, look, I think the best way to do it is just to basically cut the cord and say, okay, we're changing the land tax.

Um, anyone that's bought within the last five, 10 years, you know, pick you, you get a percentage discount on your, on your land tax payable until you've owned that property for 10 years and then you start paying the full freight rate. Right. I think that's probably the best way to go.

It reduces the pain, it gets everyone paying sooner rather than later, and it frees up the transactions in the market.

My only concern is a little bit, basically what happened when Dominic Perrottet changed it in New South Wales. You create a mini boom in prices. You bring a lot more buyers into the market very quickly.

And it's in the same vein as, let's just assume Labor has won this election because we're recording this before and it would have happened and they're $1.08 or something right now. Money's got it wrong with Brexit and Trump, so I've lost faith in money markets.

You've got to remember the 2019 election. Let's not get too certain. Yep, that's right.

Exactly, yep. I'm calling it, I'm calling it. I'm just going to go where the money is. But the 5% deposit scheme, no income caps, the city caps are much higher. Mm. that is a, that is a huge brave policy.

Um, when you sort of, and you know, and it's not just pro labor here or anti-labor, the liberal policies are also nonsense. I mean, tax deductible home loans on, you know, new builds, accessing super massive inflationary. So they're both as bad as each other. Um,

When you sort of saw them, they would go tit for tat. I think it was on a Sunday afternoon or a Saturday afternoon and my phone was blowing up. And what's your thoughts when you see this stuff? Like, does it really rile you up?

Oh, it's, you know, grab between your nose and just shake your head. It's, you know, here we go again. And to me, the problem with all these policies are Firstly, you're just encouraging more people to get into the market at the high prices that we're already at.

But secondly, it just means that next time, the next time you have to do stimulus, it's got to be even bigger. So, you know, the 5% deposit becomes a 2.5% deposit. Well, they did that.

Yeah. Yeah. And then, and then, you know, the, the 50,000 you can pull out of super becomes a hundred thousand you can pull out of super. And it's this zero sum game that, you know, I remember when first home buyer grants was 7,000. I did too.

And then in the GFC, they became 21,000. And then what was it? Home builder during the, during the, um, You know, that was 28,000, it was 28,000 or something. Now we're talking about, you know, you only need a 5% deposit.

Um, we're talking about, you can pull $50,000 out of super, uh, no standards.

And a certain level.

Yeah. It's like, where, where does this end? I mean, it just means that we're going to have to continue to throw more and more incentives that are bigger and bigger, uh, at the market to, to continue to get people in. And, and realistically, you look at the figures.

it's not actually improved home ownership at all. I mean, the rate of home ownership for young people continues to slide.

So yes, in the number terms, we're seeing more people come into the market when these incentives are there, but holistically from a market, you look at how many people of a younger age that are owning a property, it's continuing to slide. So it's not actually helping to boost home ownership.

It's, yes, optics and politics.

Well, it's funny. When we first started these podcasts, I remember Chris often would talk about the things that have allowed the property market to continue on its growth trajectory and would have been the freeing up of capitals, freeing up borrowing.

Then there was two, you know, dual income households in the back of the 70s, only single income and then the dual income. So you're thinking, oh, it's got to come to an end because you can't have three parents all earning money or, you know, send the kids out, you know, bring the kids.

and then but now we've got shared equity you know the governments are actually taking a share in the property so you and and reduce deposits and there's lots of ways in which um the governments are saying all right well let's let's just make this we'll add this to the pie um and so i think that that's the thing isn't it you've got to get more and more creative to try to fuel the situation where more and more people can get into the market um but

Back to this conversation we had a little earlier, which was there's always demand. If you make that opportunity for someone, they're going, oh, good, I've got a chance now, and they're in.

Having said that, though, there's a lot of negativity in the press around, you know, the hopes for this generation, they're locked out of the property market, which is, I can say it's bullshit because, you know, on Homebuyer Academy, we've got –

People in their 20s who are very good savers buying their first home, some of them on their own and they're not on huge incomes. So it's actually garbage that everyone is locked out of the market.

But back to that, you know what we're talking about, the media, the media loves a really big headline. And, you know, anyway, so you're going to say something.

Yeah, look, I would agree with that. I think we are still seeing people come into the market. I think that first home buyers look at these ideas and maybe, you know, they just want a home. So they go, great, I can get into the market super sooner.

I can pull 50 grand out of my superannuation and get into the market and then I've got a property. I'm fine. I'm good. So I think from their perspective, they look at it and probably go, this is great, but they're not thinking of that next generation of people wanting to buy a property.

No, because then they become like us. They become property owners and they don't care.

No, they're happy at that point. So I think that's definitely happening. In terms of, you know, there are still a lot of people out there that are buying properties, but I think the expectation of what you're going to be able to buy and where you're going to be able to buy is diminishing.

And certainly, you know, the first property I bought was significantly worse than the first property my parents bought. And I'm sure my kids, the first property they buy is probably going to be a lot worse than the first property that I purchased.

Although I might end up having to buy my kids their first property. Who knows? But I mean, I think that's kind of where we're at at the moment. But I think... things like rent vesting are going to become much more prevalent as well. You know, I just want to get a property.

I want to get into the market. So I'll go and buy something in a place that I don't necessarily want to live in.

But at least then I've got something, I've owned something, I'm building equity and then I can live where I want to. And I think that rent vesting will become much more prevalent going forward.

Yeah.

Yeah, it's interesting.

I mean, a lot of these getting more people into the market, you either give them cash or reduce their deposit. And so now everyone's got access to the bank of mum and dad.

I think the giving while living is definitely the new philosophy of 60, 70-year-olds because their parents gave it on when they died and they're like, thanks, mum and dad, but I don't really need it now.

You could have helped me out 20 years ago when I was stressing my eyeballs paying my mortgages and You know, that would have helped me a lot, but now I don't need it, I'm retired.

But their parents may not have had anything to give.

That's true.

Because, you know, generationally, I remember when I got married, which was a very long time ago, my parents sat me down and said, oh, we're so sorry, we can't help with the wedding because, you know, we weren't smart like other people and we didn't realize, we paid our house off and we didn't think we could invest.

I was actually amazed my parents were even aware that was an option. But we are talking the late 90s. I mean, this is a long time ago.

And so they're not even baby boomers. I think they're all, oh, no, no, my mom's a baby boomer. My dad's a solid generation, not quite that old. But the point being, there's a whole generation that didn't actually invest outside of their family home.

So they didn't really have that extra to hand down a Gen X. It's Gen X who are the ones who have really been investing over and above their home, and they've got more. And some of those younger baby boomers have got more.

Oh, it's a good point. I mean, you're right. But their wealth is in their property, right? And they had not much other things. So when they are only giving that money down, when they can actually give it down, when they're actually selling their property on death.

But my parents sold the family home, you know, they owned for 50 years or something. Maybe not quite that long. But, you know, they never renovated it. So it went from being when they bought it, it was new, to being a really... bit of a shitter that, you know, was renovated, didn't they?

You know what I mean? It's not like they're holding on to this fantastic home that people are clamoring and dying to move into.

It's probably just in a good location, right?

Well, yeah, it's definitely a family location and a young family bought it, right? And, you know, they're going to gradually renovate it over time. A tradie, I think, you know, bought it. But

The point being that there's a lot of this rhetoric around about, you know, oh, these baby boomers have got to move out and free up stock.

Well, you know, the sort of stock that they have, a lot of them are living in, isn't necessarily going to be the sort of stock that the next generation are automatically going to want to move into.

So some of those are actually being banded up with their neighbors and being sold for development sites. Yeah. They're ready to be knocked over. Yeah.

I think this kind of argument is why the coalition is saying super for property because a lot of people end up retiring with a lot more super than they need.

And I think their argument is that $50,000 can go towards getting you a house now, which is a lot more important for you to have a house now.

than you know potentially not getting one now and potentially ending up retired without without a home or without having paid off your home so i think it's it's kind of the the same argument here that you know wealthy wealthy older people should be you know giving that wealth to their children now before they go when they need it equally that fifty thousand dollars now is much more beneficial to you now than it is in 35 40 years when you retire plus that policy you actually have to pay that the amount you pull out back when you do sell that property

Now, you're going to miss out on the compound growth, assuming the share market's going well at that time, the compound growth you would get over that time in your superannuation. But, you know, I mean, superannuation's now 12% of your income, right? I mean, a lot of people only ever earn 9%.

They were self-employed, so they didn't get superannuation for a long part of time. And compulsory super only came in, I think it was 1989 as well. So a lot of people that are retired now spent the first 15, 20 years of their life getting no superannuation at all.

Yeah, and I can see that 12% going up, to be honest. I think there's a lot of conflicted interest in supporting superannuation industry. Topic for another day. So just to say that won't be 15% in time.

And, you know, they can recoup it, you know, by forcing people to save harder in the future, I think. But, I mean, their point around...

you know, if you retire with a lot more super than you got no property, there's a huge issue in, you know, people over the age of 50, 60 now retiring with no home security and being forced to rent in cities that are rents are going up.

And, you know, it's a double whammy and this might be, they couldn't afford to save. It could be divorces, injuries, health, you know, lots of reasons why they were never able to answer the market. And so I sort of get that point.

The bigger point I think is though, which is what you're saying is that to keep the Ponzi going, right? To keep Always inflating demand, right? Because there's so much money in the system. And I have to come up with creative options. I mean, I thought superannuation investing in property was dead.

Like, I called it out for many times. I was like, all the banks are out of it. You know, apartment inquiry. You know, they're going to shut it down. Like, it is... It's gone nuts. And we do very little of it, if I'm honest, because we're not massive fans of it.

But there's banks that can lend ridiculous amounts, double what you can do to change. There's really low deposit investment loans that have come back in the market. I remember back when I was in the UK, back in the credit crisis, and you're getting 105% mortgages.

I'm not exactly sure where they did that too much in Australia, but I feel like, you know, there's going to be 40-year loans coming. They're not that far away. And so, you know, it's always surprised you that there's always ways to keep the things going, Cameron, and there's never an end.

There's never something that's off the table. It's only off the table until some point.

Yeah, no, 100%. And as you said, you know, 40-year loans, I mean, I remember when 25-year loans were the norm and then it's 30 and now it's 40. And I think they also rely somewhat on people's gullibility.

Like, go and have a look at how much you actually pay on your mortgage over a 30-year loan. And if you extend that out to a 40-year loan, yes, you can borrow more in your repayments every month or less.

But you're going to be paying a fortune more than what you would have been if you pay that property off in 25 or 30 years. I personally think if you're going to ever do 40-year loans, it should only be for someone buying their first property. In their 20s.

And it should only be up to the point that you either sell that property or refinance that property. So it should just be purely... to get you in, because we know most people refinance within the first three to five years anyway.

So I think it's a very short period of time that you've got the ability to have that 40-year load.

Oh, I think on this, I agree with your philosophy there and, you know, your mindset behind it. I think what, which is what you made a point for, Veronica, around Gen X, their attitudes to investing and Gen Y and Gen Z, is the attitudes towards debt shifted dramatically.

Like the Martin Bums and dads and grandma, you know, had the tins and they had the separate envelopes and you've got to pay your mortgage off, pay it off as quick as you can, debt is bad, etc. That's not what the next generation think.

And their attitude of comfortability around holding debt is way higher. And so I think you'll find that people are going 40 years old across everything. And They'll also, every moment they've got the ability to take on more debt, they'll just be comfortable holding debt across their whole working life.

And they'll just sell their property on retirement.

And I think this is where we're shifting to is, you know, rather than having a third of the properties paid off, third with low debt, you know, we're shifting to less on those properties paid off, more and more people having debt, and more and more people are going to have higher debt as well.

So the instability in our market is going to start to increase because more and more people are going to be exposed to interest rates.

You won't need to put land tax in then because then when people get to retirement age, they will be selling because they don't want to go into retirement with a mortgage. So then they will downsize.

There you go. Job solved without changing anything.

We just got away 30 years, but we solved it.

Yeah.

Karen, you've got to have a property Dumbo for us. Something you may, you couldn't have said in the past, but you want to say now, come on, give us one.

I actually didn't think about my property Dumbo. Sorry about that. That's all right.

Take 10 seconds if you need to.

Yeah, property Dumbo. I mean, I've certainly had some property Dumbos. I decided in my mid-30s to move back into an apartment out of a family home.

Um, and then I ended up having to move back into a family home as my, my, um, as my, uh, family grew. So, um, that's my property. And then, and then I sold, I kept that property as an investment property and I sold it probably two years ago now.

And it's probably worth about four, three, $400,000 more than what I sold it for it. I could have held it. So look, I'm the property Dumbo. Uh, I talk about property, but I make some pretty stupid decisions myself.

Can I ask you a question, Cameron? What made you decide to sell it two or three years ago?

It was mainly just like we could have continued to afford it. It was interest rates were rising quite a lot and we just wanted the cash flow and didn't want the stress of, and it was an apartment.

So dealing with body corporates and, you know, strata titling and things like that, it just became a bit of a pain and we were just like, we don't need this stress.

But now you look back and think we could have held it.

Yeah, we could have held it and even if we wanted to sell it now, we could have probably made a lot more money off it.

Oh, I think so. So you're in Brisbane, right? Yeah. So that was a Brisbane apartment, yeah?

It was, yeah.

Yeah. And so Brisbane apartments have basically done nothing. Yeah. And then all of a sudden, whoosh, go. And then the house prices have run. Yeah. As house prices run, people have to make compromises to different types of houses. Then at some point they say, I'm not going to, can't afford a house.

I'll just get an apartment. Mm-hmm. under supply finally because demand's finally got more than the supply because they've been a building boom for so long and then that's forced people to then buy apartments so when you probably sold it you probably just didn't see that that momentum was building there where

At some point they're going to buy these apartments. I think that's what people have been saying in Melbourne for so long. So surely these apartments have to go up at some point, right? But it's not until house prices get so expensive that people are forced to make that compromise.

And it's why I say some suburbs of Sydney apartments have been performing just like houses because they've been piggybacking off. Ex-home buyers who love a house. It's also the type of stock.

You know, it's not your cookie cutter high rise that's going up.

But it's interesting, Cameron, because I, you know, I do a number of strategy sessions with people and one of the things that people often come to me, particularly in this period of, you know, higher interest rates is that I'm really hurting cash flow wise.

It's, you know, I really feel like this investing is not much fun. I want to get out. And so I like to sit down and look at the actual quality of the asset

and work out whether it's something that you will regret selling in the future because it is a good asset as opposed to, I don't know about that one. You know, it's not really going to hurt you one way or the other if you sell it.

So there's a lot to be said for just thinking, taking the pressure off financially in the short term but holding forth because you think, why did I invest in the first place? Because I wanted to build a future for myself, a financial future. Yep. So sort of keeping people's eye on the prize.

Look, thanks, Cameron. It's been really good having another conversation with you and I'm loving reading your, I actually put, we'll put a link in the show notes to a piece that you wrote about, you know, what is the affordability problem? This seems to be such a difficult nut to crack.

And, you know, you're on Substack there and people can subscribe to your work there as well. And also I'll put a call out because you are a

very very well respected property researcher and you know we always really enjoy our conversations with you you're a good thinker in this space so you know what i'm hoping that you get a fantastic um whatever you do next is is fantastic because we want to keep keep talking to you

Thank you very much. And yeah, thanks for having me on. And yeah, if any of your listeners are interested, follow me on Substack, follow me on LinkedIn or Twitter, engage with me, happy to chat. And yeah, looking forward to coming back again soon.

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