Transcript generated automatically by AI and may contain errors.
Chapter 1: What is the main topic discussed in this episode?
Hello, I'm Alan Kohler, editor-at-large of Intelligent Investor and finance presenter and columnist and podcaster for the ABC.
And I'm Stephen Mayne, contributor at Intelligent Investor, founder of Crikey and shareholder activist. And we are the Money Cafe.
Money Cafe. G'day, Stephen.
Lovely to talk to you. Alan, where do you want to start? I just read your column on the ABC this week about the budget. That was quite a sweeping, interesting piece. Why don't you start with telling us, as the dust settles on the budget, what do you reckon the government is doing and how's it going?
Well, I had two points to make in the column. It's always difficult to do a column where you're saying two things. But anyway, I think I managed to weave it together, which is the first thing was that I'm starting to feel like we will see more affordable housing
that all the things that are being done, including interest rates rising, which is not being done for housing purposes but interest rates are going up, will all combine to cause house prices not to rise for a while. But the problem with that is that there is a dark side to that, which is what I pointed out, which is that a whole lot of people who bought houses recently
in the last few years, and in particular we're talking young families using a whole lot of debt, they did so on the understanding that they would acquire equity over time because house prices always go up. And so they are going to be disappointed, I think, if the government succeeds. And this was always going to be the case.
I mean, you can't actually make housing affordable while house prices continue to go up, obviously. So, therefore, all the people who have bought in the last sort of five to ten years at very high prices using a whole lot of debt are going to find themselves not building equity as they expected.
Particularly those in the government's new 5% scheme, which was one of those last little encourage, leverage, you know, borrow up to 95%, we'll cover your mortgage insurance tax.
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Chapter 2: What are the current trends in the housing market?
I think the national house prices will fall. I mean, in the last sort of couple of decades, house prices have fallen significantly. three times by between 7% and 9%, so that'll probably happen again. I suppose I'm really talking about the 10 to 20 year timeframe, and I reckon that we're in a situation now where house prices probably will not rise for a long time, like 10 to 20 years.
And a fair chance that volumes will fall. Because if you're not a forced seller, and people generally aren't, and particularly with all those with grandfathering or grandparenting, why would you sell? Just, you know, hang on to your negative gearing. So I reckon it's interesting. I reckon you may see the state governments losing some stamp duty revenue because...
turnover will change because people have less incentive to sell. Some people are saying, well, I'm going to wait for the correction before I buy. So, yeah, that's where you get that reduction in auction clearance rates because buyers and sellers now just have different perspectives. The buyers are all saying, I'll wait for my 10% correction.
The sellers are saying, I want to get last week's prices. And then you get a bit of a standoff and you get a reduction in turnover. So, And what about on the rents front and the building approvals? I saw the drop in building approvals in April, 3.4% drop was a bit of a worry. John Simon warning on 7.30 the other night that rents are going to skyrocket.
Look, building approvals are volatile. I think you need to take a bigger picture of those things. I mean, look at actual commencements. and housing completions, and they are rising. I mean, they're not rising. The trend is definitely higher. It's not rapidly higher, but it's certainly increasing.
And I mean, I don't think it's inevitable that would happen because, you know, it's been now a couple of years now since the housing accord process began. I mean, for those, basically for those entire two years, I've been reporting that the completions, housing completions are falling well short of
the target that the Housing Accord set of 1.2 million houses in five years, which requires 20,000 completions a month to meet, and they've been, you know, 15,000 to 17,000 per month for a couple of years now. But I think that all the things that they put in place as part of the Accord, which is to tell councils to approve more housing agreements
and to shift the zoning and get new high-rise apartments built and all this, that's kind of now starting to work. I mean, they always said it would take a while and it has taken a while, but it is now starting to happen. You know, there's plenty of headwinds such as, you know, construction productivity is still low. It's hard to get it up.
They haven't been able to get houses built in factories, you know, with prefabs and so on. That's really not happening to the extent that anyone wants. But, you know, there is a gradual rise in completions. There is a decline in immigration happening.
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Chapter 3: How are recent budget changes affecting housing affordability?
I mean, it's nowhere near what Pauline Hanson would like or Angus Taylor's kind of predicting massive collapse in immigration. But it is coming down.
And speaking of Pauline Hanson, she's got a negative gearing policy of no more than two houses per person, which would actually have a much bigger – particularly if you didn't have grandfathering, that would – That would trigger a lot of selling. But what about the broader One Nation, the rise of One Nation?
Like the FinReview Redbridge poll, you know, on Monday, the FinReview went with the narrative of budget disaster for Labor, budget spurs One Nation vote. There's a little bit of chatter that, you know, Labor could get spooked by the polls, by the sort of One Nation, now the most popular party, and could wind back some of their budget changes to...
But focus mainly on just the property side of things and wind back some of the CGT on shares and trusts, et cetera, et cetera. So what's your take on the One Nation thing? I mean, we've never seen a duopoly busting rise in the polls like it. I mean, it's quite common around the world, but it's, you know, I mean… It's not stopping, is it?
They're not imploding and it's going to have a massive effect, presumably starting with the Victorian election in November when they'll probably do better than South Australia where they got 10% of the seats and 23% of the vote.
Yeah, well, so the Labor Party's already spooked. The coalition's definitely spooked. And so they should be. I mean, Cos Samaras of Redbridge, who's been doing these polls, who I was supposed to have lunch with today, but he's just cancelled on me because he's got some urgent job from a client. But he's been saying that basically the political duopoly in Australia is finished. It's over.
We've now got three parties. And what's occurred is not so much a shift to the right but a resorting of the… of the electorate into new and different collections. The supporters of One Nation are kind of people who are disenfranchised. They're sick of the system.
I think one of the interesting things is that the American electorate got to that point 10 years ago when they voted for Trump, and it's taken us 10 years to get there. And I do think the difference perhaps is a slower kind of concern about immigration. I mean, I think 10 years ago America was kind of really worried about illegal immigration and people coming across the border.
I mean, at that point in Australia, we still had the kind of the hangover of Abbott's Stop the Boats and Labor's kind of falling into line with that where, you know, there was offshore processing. So, we didn't have the same kind of… illegal immigration issue that America had 10 years ago.
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Chapter 4: What impact does the rise of One Nation have on Australian politics?
It isn't something that can be just kind of a speculative investment that you flip.
That's the whole point. And negative gearing, particularly on new builds, it does encourage holding for five to ten years because it takes that long to really – Work through all the depreciation and get your tax down. So you're really doing it when you're in your maximum wage earning years and you're sick of paying 80 grand to the government and you only want to pay them 60 grand.
And so you just do the negative gearing through those high paying years. And if you can later live in it or one of your kids can live in it or – That's the game. So I don't think you're going to get negative gearers flipping. But I do agree with the argument that it'll prop up the purchase price off the plan and the secondary market will be weaker.
So don't expect to be doubling on your new apartment anytime soon.
I think Mark's point is that the fact that the secondary market is not there, he says, will mean that the primary market, you know, the first buyers will kind of think twice because they'll think, oh, crikey, I can't, you know, there'll be no market to sell this asset if I buy it. even with the negative gearing.
And apartments are the most affordable part of the market. So a lot of people's first purchase is an apartment. So I hope we don't see massive growth in apartment prices. I mean, people are going to be able to get into a home. and rent, we need more construction. So hopefully we will get investors supporting off-the-plant purchases that make projects stack up economically.
And Harry can go out and build a few more 10,000 apartments to add to his $29 billion wealth or whatever it is. All right, your turn, boss.
Ethan says, most can see how disincentivising property investors from buying more houses is theoretically helpful to first home buyers, but how can anyone accept that at the same time increased taxes on young people's shares and crypto assets, increased taxes on their businesses and ever increasing government deficits will somehow solve intergenerational inequality?
Who's paying off the never-ending debt? I think this just raises the point we haven't discussed, which is that the CGT tax changes include a provision that says the minimum tax now on capital gains is 30%, which is an interesting addition. It means that young people who are on low wages and therefore a low marginal tax rate, if they make any money from shares or any kind of capital gain,
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