Hello, and welcome to The Australian's Money Puzzle podcast.

I'm James Kirkby.

Welcome aboard everybody.

Hey, how quickly sentiment swings a from one week to another.

We have been skeptical on the show, of course, for some time about Ray Kutts and how many more there would be, and really I think it seems to be consensus now that that's it for Ray Cutts.

I see my esteemed colleague James Glynn of The Wall Street Journal and The Australian this morning saying as much I agree with this that there won't be any more Ray cuts I think they could be flat for quite a while.

But also I don't think in any way that will disturb house price bounce we're getting just now.

I'd be maybe more concerned about things like CGT changing.

There's a Senate inquiry led by the Greens on that, or may I say overkilled maybe on the grunt and assistance that has been sort of directed towards young first home buyers, Not that I want to be mean to them or anything, but economics would suggest that it just lifts prices in that area, and that's what we've seen already clearly.

So to talk about this and other matters.

I have as my guest today Cameron Kusher, well known of course because he was in Core Logic, he was in a prop track and he is now an independent consultant at Kusher Consulting.

How are you, Cameron, Well, thanks James, thanks for having me here.

Great to have you on.

So I mean some people of course.

Paul Bloxham, HSBC chief Economist, a week ago said it's time to lift rates and it's not the only one.

What do you think, with your deep expertise the residential housing market in Australia it's link with rates.

What do you think the listeners should be thinking no change for quite some time or even to be on alert for a lift.

So my view is on a hope for quite some time.

At this point, I probably feel like the next move is still down, but I don't think that it's likely to well into next year.

And the reason I think that the next move is likely to be down mainly comes down to the fact that the Reserve Bank are only forecasting the unemployment rate to peak at four point four percent.

I think we will be extremely lucky if the unemployment rate only hangs at about four point four percent, and I'm probably of the view that we're already seeing the labor market weaken, and I think probably getting up towards a five percent unemployment rate is somewhat more realistic.

And if that does occur, and if the jobs market really starts to stall, then the Reserve Bank may have to cut interest rates to try and stimulate that area of the economy.

But I don't think we're getting any rate cuts anytime soon.

So we'll meet the assumption that nothing will change flat perhaps for quite quite a good quite certainly we're talking well into next year.

Okay, Now, this houseplace rebound which is getting head owns everywhere.

Are you convinced that there is a house price rebound and residential property prices in Australia and do you think the conditions are there for it to extend.

I've definitely convinced that we're seeing a rebound in housing prices and I do think it's going to carry on.

What I would say, though, is I think if you go back to the middle of the year, the expectation was that interest rates would probably be fifty basis points lower than they're going to be by the end of this year, and then we're probably going to get another one or two cuts in twenty twenty six.

So I think that the fact that the Reserve Bank has made it quite clear that there's no interest rate relief coming in December, and there's probably not any coming for some time, I think that could cause the rate of price growth to slow.

But I still expect we're going to see prices rise, and that's purely a function of the fact that we've got very strong demand for housing.

People have seen a significant increase in the equity in their homes, maybe not so much in Melbourne and Hobart, but certainly in other parts of the country, and I think that is going to continue to drive more and more people to want to upgrade, more and more people to want to go and invest in residential property.

And you've also got the other factor is that there's just not much property on the market.

We're seeing low levels of supply in most parts of the country as well.

And when you've got increasing demand and you've got low levels of supply, those are the conditions that create higher house prices.

So in terms of predictions banks et cetera, talking five percent increase NICHE of mined twelve months is that.

How does that sound to you?

I think five percent actually sounds a little bit light on.

I think we'll be getting closer to sort of eight nine percent price growth over the next twelve months.

I haven't put together my forecasts yet for next next calendar year.

I'll be doing that in the next month or so.

But yeah, I think, you know, a high single digit figure and maybe in some markets double digits again.

The area is most likely to see double digit price growth again is probably Perth, Brisbane, Southeast Queensland as a whole, and Adelaide, which is crazy given how much prices have already increased over the past five years.

But you look at those markets and there's just such a tiny amount of supply on the market, and we're still seeing a lot of people wanting to move into those areas and buy properties at this point.

So is there a less nationwide?

Is there less homes for sale than there was this time last year?

We're seeing The total of these things are fairly similar.

I think from memory they're about within about one percent of where they were twelve months ago.

But if you look in places like Brisbane, Perth, Adelaide, Darwin, they may have increased a little bit.

But if you go back to even early on in the pandemic, the number of properties on the markets down about twenty or thirty percent from what we were seeing early on in the pandemic.

So you've just got really tight supply, and I think there's a few things that are really driving this.

I think firstly, people know that they can sell their property and get a really good price for it.

But the rental market are also so tight that people can't even transition through the rental market once they've sold their property to buy their next property.

So as a result of that, people are just going, I can't find what I want to buy.

I'm not sure that I'll be able to rent a place that I want to are renting or that's appropriate, so I'll just stay where I am.

This is fascinating.

It's a hidden cost of a rental vacancy rate of one percent, which I've never heard before actually, And it's a really original explanation as to why people aren't selling.

Because the irony is that you mentioned when you said people aren't where the stock supply is less, was mapping straight on this areas where the prices were strongest, right wa specifically Brisbane coastal Queensland and you would have said, hey, you know, they've got higher prices, why wouldn't they sell?

So is that a key reason then that they're worried about the transition as you say.

Yeah, I think so.

I mean we were kind of seeing this in Sydney and Melbourne back in twenty twenty twenty two of rectifying itself and if you look at Sydney and Melbourne actually have somewhat higher rental vacancy rates than the other parts of the country.

So we think obviously the tight rental market is really tough for people that are renters and don't own homes.

But a hidden cost of that very tight rental market is that people transitioning through the rental market after they've sold and are looking to buy aren't able to easily do that.

So I think it actually courages people from selling because there's nothing on the market at the moment that they can buy.

But there's also nowhere for them to go once they've sold their property.

Yeah, so they make at a good price, but they don't know if they can rent or if around the corner.

And similarly, they don't know if there will be another property being the type of property they wish to move too, and in numbers on this or is this your Surmari has just been across all the numbers.

It's basically from talking to people.

But if you look at if you look at Perth, Brisbane, well South East Queenslander as a whole and Adelaid in particular, they're the markets that have seen the strong list price growth, they also have vacancy rates of around one percent, and they've also the areas where we've seen the biggest drop in the total amount of stock on the market.

So it plays through that when you think about vacancy rates, you know, typically you're looking in a normal, healthy market at about two and a half to three percent vacancy rate.

So vacancy rates are less than half what they are usually at in a healthy market, and listing volumes are extremely low as well, so it makes it very tough for people.

I mean it's hard to say tough because people have seen a significant increase in the equity in their home.

But I think the other side of this is people don't want to be out of the market.

So if they can't buy and sell straight away, Like what if it takes me twelve months to buy?

I miss out on double digit price growth in the meantime, and people don't want to run the risk of that happening.

That's really interesting and I've never heard that argument before, And then immunity makes sense, very interesting.

I wonder also, I suppose it's been a case for a while, hasn't it.

And there's nothing to indicate that those kind ofs have got a changer immediately.

No, not at all.

I mean, we are seeing obviously more investor we'll find out later this week when we do get the new lending data.

But why all reports there are investors coming back into the market, But you know, new housing supply is still quite low.

Invest that lending is accelerating, but it's certainly not back to the levels we were looking at back in sort of twenty fifteen, twenty sixteen, when there are a lot of investors active in the market.

We also know that a lot of investors are now starting to look outside of these markets and targeting places like Melbourne because prices are cheaper, and targeting more affordable housing markets as well.

So I just don't see that you're going to get the influx of investors or the influx of new housing anytime soon.

To really ease that rental vacancy rate make renting easier in those markets.

The issue for the renters is just their capacity to keep paying more and more rent because obviously inflation's being high, the cost of livings gone enough, everything costs more.

They can only dedicate a certain amount of their income to renting.

I suppose we do see the figures, we don't actually see weather, and this would be very interesting the next phase, if you like, where the investors tradition is zoned in on the inner city, the inner circle, and you mentioned there how they may be looking for opportunities in the mid circle or outer circle where they didn't really hunt before.

Is there some evidence of that starting to occur or becoming a trend.

We're definitely seeing that rental growth and rental demand has moved out of the inner city areas and is moving to the outer areas of the city.

So if you look in in Melbourne, for example, some of the strongest growth in rents, some of the strongest demand for rentals is in places like the southeast.

Now that's not necessarily where you would think people really necessarily want to rent, but I think the cost of renting in those inner city areas is driving people to look for more cheaper alternatives and that's moving further out.

You know, in Sydney, places like black Town are seeing the strongest demand.

Again not sort of intuitively where you would go, that's where people want to rent, but the cost of renting elsewhere has become so elevated that people are having to sacrifice on location in order to fit their budgets.

And similarly in Queensland we're seeing places like Ipswich and Logan City where rental demand is strongest and they're obviously a lot more affordable than the inner city areas of Brisbane, but people can't continue to just keep paying more and more for rents, so they're having to move to more affordable locations.

That really adds up, absolutely, it does.

Okay, we will take a break.

That was some very useful data and interpretation of data for you folks from Cameron.

Back in a moment.

Hello, Welcome back to the Australians Money Puzzle podcast.

I'm James Kirby and I'm talking to Cameron Kusher of Kusher Consulting.

Cameron just on wider picture and houses and house prices and issues around them for the investor there's a couple of things I want to talk to you about.

One is the CGT, the prospect that CGT may be the next target if you like, after super for the government.

The fact that there's a Senate inquiry now into CGT from the Greens.

The fact that inside industry, if you'd like, there is some support or a review of CGT.

For instance, the president of the Tax Institute, who you wouldn't immediately think would be so clear in what he's saying, but he says.

Tim Sanders says, you know, he wants to see a review to see if current settings are appropriate.

And the whole thing being about our CGT discount is it is arguably generous because it was set once upon a time as an alternative to inflation adjusting.

At that time inflation was running at four and a half five percent.

Now it runs even with the slatest spike, you know, we're barely near three.

So the argument being there's been a discount and a discount and it's pushed up home prices, which of course would be the argument to go at it.

What do you think?

Firstly, I think labor would probably not be too disappointed that the Greens have got this inquiry.

So, and we know that in previous elections the Labor Party has taken policies to change the capital gains tax discount and negative gearing.

Yes, I think there's such a focus on productivity in Australia at the moment that I even though they've ruled out changes, I think this will be coming back onto the agenda.

I think, you know, I don't see anything that's really going to boost productivity magically as we are now.

So I think the government is definitely setting things up to have all things on the table and have a discussion about reviewing capital gains tax, reviewing native gearing, reviewing all sorts of taxes coming into the next election.

And obviously, if you look at the opinion polls at the moment, they're in a pretty strong position.

So they probably feel like they've got an even bigger mandate than I did at the previous election to try and take changes such as changes to the capital gains tax discount to the next election.

Yeah, well, it would seem to be a time politically where they have the opportunity that wouldn't arise very often because as you say, they've been re elected stronger than many expected okay.

Now, similarly on the issue of the conditions if you like, or the settings around property from which we must make our investment decisions as investors, I saw what you said recently that they Helped to Buy scheme was released too late, because what happened if everyone is across this the first Home Guarantee scheme which is now a universal scheme that means and eOne can put up their hand and get the access to go and buy their first home with a five percent deposit.

That Leapfrog did be like other schemes which included the Help to Buy scheme, which was supposed to be shared equity, right, and that's got sort of sidelined, hasn't it.

So you were saying that the help to Buy scheme was released two leads?

What did you mean by that?

So initially both the Help to Buy and the Home Guarantee Scheme was set to commence at the start of next year and the government decided to bring forward the Home Guarantee scheme and also make it more generous, so that scheme now has unlimited places, it has no income caps, and the price caps on where you can buy have been lifted substantially and it's very early.

But all the evidence points to the fact that we've seen there was a cohorter first home buyers that rushed in before the scheme went live, and now there's a cohort of buyers that have been waiting for the scheme and they've rushed into the market.

Now, the help to Buy scheme was a much well as it stands at the moment, and maybe they're going to change it, but as it stands proposed at the moment, ten thousand spaces a year, so it is limited.

It also has income caps, and the price caps on the Help to Buy scheme are lower.

So what you've effectively done by bringing the home guarantee scheme forward is pushed up the price for the people they're actually going to use the help to Buy scheme.

Oh, created harder.

It's going to be harder for them, and you would argue that help to Buy scheme is actually better targeted.

So people that really need help to enter the market are going to access the help to Buy scheme rather than the home Guarantee scheme, and now they're going to be paying They're going to be paying a higher price for their property for the luxury of doing so.

So look I don't like either of these schemes.

They're basically just more fuel on the fire and encouraging people to buy at higher prices.

But if you were going to schedule this correctly, I think you would introduce the help to buy scheme first and then bring the home guarantee scheme in off the back of it.

Right, Okay, I want to segue here.

Two more ideas been tossed into the market, which is not exactly the same, but it's close.

Van Guard, the big ETF player, has proposed introduction of a kind of my Superstar investment scheme for young investors where they would basically have this sort of isolated, incubated shelter and they will be able to save inside that for two years or so in a tax protected environment.

This was put forward by the MD event Daniel Shrimsky recently.

Ultimately, this is a leading question, but I think a lot of our listeners would be thinking the same way.

Is there a point at which we have to stop these help schemes because in the end they distort the market so much.

You said you didn't like the existing ones.

For instance, that helps horn buyers.

Just in a nutshell, why don't you like them.

The reason I don't like them is I don't actually address housing affordability.

The way to address housing affordability is the lower prices.

Politically, that's really tough, I understand that.

But what these schemes do is give people more borrowing power to enter the market at higher prices, and they push up overall prices in the market.

So yes, they help people to enter the market, but what ends up happening is you actually have to keep creating bigger support for first home buyers.

So if you remember the first home Buyers the initial introduction of it back in two thousand, it was seven thousand dollars to offset the impostive GST on brand new homes, and it's now evolved into five percent deposits shared equity with the government.

You know, play this forward another ten years.

How much more support is the government going to be providing first home buyers Because these schemes don't work initially, But then they'll stop working as effectively and you'll have to make the bigger So whilst their position has helped, they help people right now, but they make it worse for the next cohort first home buyers coming into the market.

So from a broader context.

I don't think they help.

Yes, and proven to a degree already by your point that this first home deposit scheme universal scheme which was brought forward, has stalked prices at the entry level right literally to the point that those caps cut out.

And ironically the share equity scheme which comes behind us, which is aimed perhaps further down the tree in terms of income, they're looking at hot prices that have been pushed higher by the first scheme, which is really just shows how it all sort of can go terribly wrong.

Okay, very good, We'll be back in a moment, folks.

We have some very good questions.

Hello, welcome back to the Australians Money Puzzle podcast.

James Kirby here with Cameron Kusher of Kusher Consulting.

We've been talking house prices, where they're going and also what's going on inside the market.

I bet you found that pretty interesting.

Just before we move into the questions, I wanted to mention that I've got David Booth on the show on Thursday, who is someone with the most extraordinary history.

He is one of the founding fathers, if you like, of Index and ETF Investing.

He's a co founder of Dimensional and was in that area of the whole Chicago school with Nobel Prize winners family and French and Byron Shows, et cetera extraordinary background that he came from and did some extraordinary things.

So don't miss that, Okay.

Now.

Correspondence is from leafblower Man, who is also known as Stephen Hi James.

I'm sure you were as surprise as I was last week when Jackie Clark on the show said she had never heard of The Millionaire next Door, the best selling investment book from the nineteen nineties.

As a financial journalist, I am sure you are well versed in conducting literature searches before writing and talking about a subject on the issue of spending money without overgeneralizing.

There can be interesting cultural differences with some families sharing or loaning money within extended families to start businesses, for instance.

Thank you very much, Steven.

Yeah, good point.

Yes, Well, you know the book that I mentioned and that you're familiar with, The Millionaire next Door is my personal favorite book of all time on investment, But then I've read loads of them, and to me, it's different because it talks about hanging on to my enough, losing it as opposed to making it, and I didn't think Jackie needed to know all the books that were out there because the thing about Millionaire and next Door.

Of course, it's from nineteen ninety six, which is a while ago.

I do ever heard of it, Cameron Cush, you'll put you on the spot.

I have heard of it.

I haven't read it.

You know some of my favorite books.

I've just got thinking about this.

I've obviously read The Intelligent Investor, and I enjoyed that.

And you got to the end of it, did you, Well?

Not quite.

It is hard work.

I've tried it a few times, but like it's got some really good information in there.

Probably not necessarily an investing book, but one book that is kind of related is the book Die with Zero.

Really enjoyed reading that book.

Yes, not necessarily about investing, but I guess it's more about investing in yourself and your family when they need that help, rather than waiting around and giving your kids money when you're dead and they don't have any memories with you to enjoy from it.

So they're probably.

Terrific principle, actually, isn't it.

Yeah?

Absolutely?

Okay, that was good one.

Thank you for chipping in with that and the other thing I wanted to say funny about the millionaire next door cost.

Someone said to me recently, Yeah, well, you know, big deal millionaire.

You know, the average house price you know, is near a million in many of the cities, and it's such a good point.

But it's nothing to do with the millionaire per ses to do with the principles in that book.

Okay, thank you, Steven.

Next one is from Paul loved the podcast.

An article in The Australian recently said the trustees this is in the First Guardian Shield Investments debacle, and tobaccle is a nice word for it stated that the trustees who were meant to be monitoring the First Guardian and Shield Investments groups are asking taxpayers to foot the bill.

My questions are, this is the mandated role of super trustees to monitor the investment products they offer so that the same investment products are not dodgy and two can the government force the same trustees to compensate the investors who lost their savings.

No, they can't, I would think straight away, Paul.

But Macquarie of course has as immediately volunteered to pay the unfortunate people who were actively and seriously and thoroughly misled by big names that were bandied about basically by First Guardian and Shield.

Interesting I see net Wealth wants the government to pay.

Macquarie has already paid and never even asked the government to do so.

So very different.

Views on it.

Have you.

Are you familiar at all with that particular role of scandal.

Cameron, No, it's not in my wheel house.

Unfortunately, it's not in your wheelhouse.

Yes, indeed, and you're better off certainly not to have had anything to do with those companies.

But it is I think shocking that this sort of thing still happens.

Really, we had thought all this sort of stuff.

Was long gone, but it's not.

And clever operators can still enter the system and be get the tick of approval from established blue chip names, which is of course their power a keep our in ring investors.

We will come back to that another day.

Thanks very much Cameron for coming on the show.

Great to have you, Thank you for having me, good to chat.

Great some really fresh insights there into the residential market, which folks, well, if you'd like to think it's going up nine percent or ten percent in the next twelve months.

I wouldn't disagree with you at all.

They are nationwide figures, of course, and all property is local.

The money Puzzle at the Australian dot com dot au.

For any further correspondent, send them in.

Folks, love to see what you have to say about every show and every subject we talk about.

Until then, talk to you soon.