The Property Trio (formerly The Property Planner, Buyer and Professor)

Got a question for the trio? https://forms.zohopublic.com/propertyplanningaustralia/form/GotaquestionforthePropertyTrio/formperma/zYCQAxzE_24CVlDafP1ozyzwtmB-8m1iCNtCTgDvHXM

The January 2024 data is out, and the capital city league ladder has been changing. But are houses and unit imbalances across capitals skewing the data? Dave explains..

"Data does let us down like that", says Cate and she shares some another example of stock segmentation and purchaser incentives skewing data.

What's happening with the regions? The quarterly data shows that regions have outpaced the capitals. Are we seeing a recovery in some of the regions that suffered during 2023 with the reverse-COVID exodus?

Mike dares to broach the inflation data and asks his co-hosts when they think interest rates will fall. Dave suggests August/September this year, whereas Cate won't be surprised if it's even in 2025. Time will tell!

The national rental index recorded it's strongest monthly rise since April. Could things get worse before they get better? Cate shares her concern about the rate of investor sales and anecdotal evidence from agents' reporting. Cate predicts that rental hikes will eclipse 10% nationally. She also talks about the challenges being tougher for families, as opposed to singles and couples.

We have sales volumes to thank for our 2023 year holding up as it did, but now that sales numbers have increased, will the supply and demand ratio threaten capital growth? It seems not. Buyer appetite is strong and sentiment has ticked up somewhat.

The stock availability, (or lack thereof) has a direct correlation with capital growth, as shown in our charts in the shownotes.

Yet the distressed listings have The Trio intrigued. Is Victoria's data point a green shoot or an anomaly? It's one to watch....

The Westpac Consumer Sentiment data provided some good discussion; what a difference the surprise inflation figures made! But which measure still has Cate worried?

Cate draws attention to the unsecured lending figures and holds concerns about some of the items that people are financing on high-interest credit.

Dave explains how the consumer sentiment index is determined with 50+ sub-groups of people assessed. It's an interesting peek behind the curtain!

Investor activity is up and it has been steadily increasing. Despite the investor-led sales, talk of increased rents and the potential for strong capital growth surges are exciting a cohort of investors.

The three year bonds show that we could see rates drop in the near-term, yet the ten year bonds suggest that rates could sit at similar levels to where they currently are now.

And... time for our gold nuggets...

Cate Bakos's gold nugget: Stop spending on discretionary stuff! And better yet, stop using unsecured debt to do it. We need to bring down inflation.

Dave Johnston's gold nugget: An interesting fact... House values have continued rising at a faster rate relative to units. House and unit median values are at their greatest differential ever.

Mike Mortlock's gold nugget: Don't make it a holiday, make it a toy, and make it second hand.... AND use cash!

Shownotes: https://www.propertytrio.com.au/2024/02/19/ep-245-january-market-update/

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In this innovative, two part series, the Trio canvassed some measures that could be implemented to ease affordability and promote the healthy functioning of the Australian property market.

Mike took some inspiration from an industry friend's article, and Cate and Dave chimed in with their thoughts on some of the initiatives from the article.

In Part 2, the Trio will cover their own ideas and insights to foster a healthy property market.

How do the Trio define a healthy property market? Dave considers the different perspectives from all of the various stakeholders. From developers to renters, first time buyers to investors, NIMBY's, local council, retirees, ... the list is enormous. Cate weighs in with her thoughts on the multiple barriers for acquiring home ownership, in addition to the 'big three'. Our casualised work force, for one is a significant blocker for credit availability for many. Dave cites an insufficient supply of new property.

The Trio step through the six innovations in the article, namely;

• 45 year loan terms
• Phasing out stamp duty
• Balloon payments
• Separating the 'real risk' from 'robotic risk'
• Social housing accountability, and
• Superannuation, LMIU and Family Equity

Dave's insights into loan term increases is enlightening and he chats about the historic changes of loan terms over the decades, and also the impact of the scars inflicted from the GFC. He touches on the stigma of longer loan terms, and essentially, borrower mindset.

"Are all innovations stimulatory?" asks Mike, and he proceeds to cite many examples.

Cate shares some of her preferred initiatives that have been devised to assist first home owners, but she also illustrates the failings of past concessions/grants, and poorly considered incentives.

Dave boldly tackles the concept of Stamp Duty abolition and proposes some thoughtful ways that the State Governments could maintain the revenue stream. He also touches on the possibilities that superannuation offset accounts could open up.

How could balloon payments work? And what are the pitfalls? Dave expands on the possible unintended consequences.

...And our gold nuggets!

Cate Bakos's gold nugget: This is a courageous episode, and lots of people have lots of different ideas on this. What is important is that people in this industry who do care about housing feel like they are in a safe space to speak up.

Mike Mortlock's gold nugget: "We require a national debate on this." The politicians have had their opportunity and they have had quite a few fancy ideas that have exacerbated some of the issues. "Investors are part of the solution."

David Johnston's gold nugget: "Send us your thought on what you think will make a difference to creating a healthy property market for all participants.

Show notes: https://www.propertytrio.com.au/2024/02/12/tackling-housing-affordability-part-one/

Got a question for the trio? https://forms.zohopublic.com/propertyplanningaustralia/form/GotaquestionforthePropertyTrio/formperma/zYCQAxzE_24CVlDafP1ozyzwtmB-8m1iCNtCTgDvHXM

This week's episode features a two great listener questions, the first from Catherine.

"My husband (39) and I (32) are doing well financially and trying to decide our next move. Our goal is to pay off our mortgage but we feel like maybe we should be buying an investment property. In SA western suburbs, our house is worth around $900k and our mortgage is sitting at $290k. We have a spare $3000 monthly (after bills and allowances) that we are putting on our mortgage. If we buy an investment property it will be negatively geared but we aren't sure whether it is worth buying now as we will have to contribute to repayments. To buy a house with some land in a decent area is around $600-700k+. Will the tax deductions be worth it or should we wait and keep smashing our mortgage, pay it off in 5 years?"

Many people feel compelled to pay down debt, but this isn't necessarily the optimal way to build future wealth. The Trio share their individual thoughts around Catherine's dilemma, explaining leveraging, setting financial goals and discussing the positives of good debt. Dave also includes a scenario to illustrate the potential in store for Catherine and her husband.

Dave acknowledges the strain and subjectivity of such a personal decision. Debt aversion can strike many, and as he points out, understanding our surplus cash flow is a critical step to getting it right. The scenario Dave cites is modest, and the modelled outcome spells a $500,000 superior net asset position for our listener couple.

Our second listener question challenges the use of the Land to Asset Ratio as a metric. Lennard's musings are plentiful and Cate, Dave and Mike tackle each one.

If capital growth is maximised by a higher Land to Asset Ratio, why wouldn't an investor just buy land?

And is a million dollar farm in the outback a better investment than a small parcel of land in a blue chip, city suburb?

And how do you quantify the exact land to asset ratio metric? Lennard's questions are probing and they keep the trio on their toes.

They canvas the difference between capital growth returns, rental returns and tax returns. Each also offer examples to help explain the ways in which a Land to Asset Ratio metric can be a helpful measure.

Dave tackles Lennard's question about how a buyer could attribute a value to both the land and the dwelling components of a property. He points out that it's not an exacting science.

When can dwellings appreciate? Dave takes up the challenge and faces it head on, citing scarcity, inflation and maintenance. Mike chimes in with the term "functional obsolescence" and he illustrates depreciation.

Land to Asset Ratio is not static, and nor is there an optimal ratio. It's important for investors to recognise where their own tolerance comfortably sits. .

...And our gold nuggets!

Cate Bakos’s gold nugget - Due diligence counts for so much, and it goes way beyond Land to Asset Ratio calculations.

Mike Mortlock's gold nugget - Value drops and depreciation are two very different concepts.

Dave Johnston’s gold nugget - Land to asset ratio is just one factor when assessing the future capital growth prospects of a property. It is not a valuation methodology at all.

Show Notes: https://www.propertytrio.com.au/2024/02/05/building-long-term-wealth-and-mastering-land-to-asset-ratio/

Got a question for the trio? https://forms.zohopublic.com/propertyplanningaustralia/form/GotaquestionforthePropertyTrio/formperma/zYCQAxzE_24CVlDafP1ozyzwtmB-8m1iCNtCTgDvHXM

The December data is out, albeit in parts after the Core Logic team put out a thinner report over the break. Dave points out that December represented the smallest gain in property growth and he ponders whether the most recent interest rate increase triggered a slowdown at year end.

Dave also draws our attention to the 'tale of two cities', and the two-speed property economy between the mining states and the non-mining states.

Cate questions the relationship between listing activity and growth rates. Is there a correlation? And are we back to the good ol' days when it comes to the summer break and the property industry shutdown?

What's happening with the regions? Dave and Cate shed light on some of the elastic behaviours in certain regions.

Mike shares his press release story about the national rental crisis with the listeners... tune in to hear more.

Was the December rental figure a data blip, or has the rental demand started to ease? Cate demystifies things for our listeners.

Gross rental yields have ticked up to new levels, but as Dave explains, "that's what they used to look like!" Like many other property-related cycles, rental yield, too is cyclic.

Are we expecting a busy listing period over the coming months? Cate shares some coal face intel and some insights into buyer activity currently.

What is the Westpac Consumer Sentiment Index telling us? Have the interest rate increases finally bitten hard? And what direction does the Trio think rate movements will take over the coming months/year?

And Mike asks Dave for some business insights into borrower activity; it's an intriguing overview and it ties in with the data.

Lastly, Cate draws attention to the construction challenges being faced now.

And... time for our gold nuggets...

Cate Bakos's gold nugget: For all those people who are planning on purchasing sub-median priced property in early 2024, stay close to the agents as ex-rental stock emerges

Dave Johnston's gold nugget: Dave emphasis the need to make your own personal decisions based on your own economy.

Show notes:https://www.propertytrio.com.au/2024/01/29/ep-242-december-market-update/

Got a question for the trio? https://forms.zohopublic.com/propertyplanningaustralia/form/GotaquestionforthePropertyTrio/formperma/zYCQAxzE_24CVlDafP1ozyzwtmB-8m1iCNtCTgDvHXM

Pete joins us in the studio! Mike kicks off the Trio's predictions for 2023 and he runs through their January predictions, holding each accountable for their forecasts. What will the market do? Cate admits she was quite bullish on this question, while Dave thought prices would drop 5-8%. It was the Property Professor who got this prediction right.

Which capital cities will be the top performers? According to Mike, the Trio all got this one right in identifying Perth as a top performer. Cate concedes though that Melbourne demonstrated resilience, as opposed to a bounce-back, and she points out that none of them picked Brisbane. And Pete sheds light on some fundamental reasons why Perth was so popular for eastern states investors.

How will the regions perform? With hybrid office working environments, things are changing now, but what will the larger regions do in the short term? Who got it right? And what is in store for office spaces? ...Tune in to find out.

Investor numbers: What did the Trio underestimate? How has credit policy played a role? And how did tax legislation changes impact investor activity? The Trio ponder.

What government intervention could impact the property market? Each of the Trio had a good point, but who got it the 'most' right?

Developers and building - what did the Trio think would be in store for 2023? Why could we see private builders ease their pricing? Does Cate have a valid theory? And Mike sheds some light on the challenges today for volume builders... and it's insightful. Pete adds his insights on the current building pipeline and Dave discusses supply chain woes. Dave was determined the deserved winner of this prediction.

Where will interest rates land at the end of 2023? The Trio concede defeat!

Rents and vacancy rates - where would they end up at the end of 2023? Cate and Pete took out top marks for this prediction: "Record increase in asking rents for 2023. It will shadow 2022, we’re not getting more stock, we’re getting more people. With interest rate increases, some people who were looking at purchasing might be looking at renting instead."

Where did the Trio peg listing and sales volumes by year end 2023? Full marks to Dave! "We’ll see it around the 5 year average this year, first 6 months will be flat, but pick up in the back half of the year.

And what risks did they anticipate could impact the market? From recession to higher unemployment, war/invasion and share market corrections, the Trio canvas some of the possibilities.

Lastly....where did the Trio think inflation would head? Pete speaks candidly about the practicality of reading inflation charts. But did Dave and Cate get it right? Or were they one year too early with their predictions?

....And our gold nuggets!
Peter Koulizos's gold nugget: Borrow as much as you can to buy as much as you can, and hold on for as long as you can!

Cate Bakos's gold nugget: The differences of opinion between the Trio is what makes the show interesting, but it also sheds light on the importance of noting different economists' points of view. We pride ourselves on being fiercely independent.

Shoe notes: https://www.propertytrio.com.au/2024/01/22/2023-predictions-unpacked/

Got a question for the trio? https://forms.zohopublic.com/propertyplanningaustralia/form/GotaquestionforthePropertyTrio/formperma/zYCQAxzE_24CVlDafP1ozyzwtmB-8m1iCNtCTgDvHXM

Cate kicks off the Trio's predictions for 2024 and reminds Mike that he will be accountable in a year's time.

Dave picks value growth of 2-7% nationally in 2024, with the market being weighed down by Melbourne and Sydney, with a comment that he feels we'll see a similar year to 2022. Cate feels that a strong supply of listings in early 2024 will dim the growth potential for the busy cities in the early months. The supply and demand ratio may lead to some great buying conditions during this period.

Cate backs Perth, Adelaide and Brisbane for outperformance growth for the year. Mike leans on Chris Gray's comment, "It will either go up, go down, or stay the same." Yep, thanks for that Mike. Mike does share some economist's updates for our listeners though and challenges Dave with a 7-9% growth estimate. Mike suggests that 2024 could be a year of two halves. Tune in to find out why.

Will 'chicken and egg' impact our markets again? And could this lead to a stock undersupply?

The top three performers.... Who will get it right? And who will be proven wrong? The Trio place their bets!

Cate challenges Dave and Mike with their insights and predictions into investor numbers and government intervention. From vacancy taxes, rent freezes, superannuation, and first home buyer initiatives, they have some fun debating the possibilities. Cate also touches on the tax opportunities that could arise as our baby-boomer generation age.

Mike's insights into developer activity and construction is intriguing. It's a must-listen! Interest rates and inflation.... where do Cate, Mike and Dave think they will land in 2024? Their responses aren't aligned either. The Trio agree that rental vacancy rates aren't likely to improve for renters and Cate gives Victoria a special mention for double digit rental growth for the year.

The Trio also contemplate listing numbers for the new year and the impact that this could have on the markets.

And lastly, Dave, Cate and Mike toy with unlikely and the unpopular as they discuss the biggest potential threats to the market.

....And our gold nuggets! While they've enjoyed putting together this episode, they remind listeners that predictions can be fickle. "Hotspotting is never as important as the planning", says Mike.

Show notes: https://www.propertytrio.com.au/2024/01/15/2024-predictions-and-insights-for-the-year/

Got a question for the trio? https://forms.zohopublic.com/propertyplanningaustralia/form/GotaquestionforthePropertyTrio/formperma/zYCQAxzE_24CVlDafP1ozyzwtmB-8m1iCNtCTgDvHXM

This week's episode features a great listener question from Ben.

"Offset account question I am grappling with. I am nearing retirement and have three investment properties in NE Melbourne, two of which are IO and fully offset. Third is IO and partially offset.

I have a PPOR P&I loan with and offset account set up.

I continually go round the conundrum of whether to park my funds offset against investment IO loans or the PPOR P&I loan.

I fully understand the extra cash flow I get by not paying interest on the IO loans, and effectively have the rent as income (taxable).

And offsetting P&I PPOR actually makes no difference to my P&L unless I do something downstream - sell or refinance. Any thoughts?" Cate offers the layman's view on Ben's predicament.

Can Ben have his cake and eat it too? Dave would suggest that Ben 100% offsets his home loan first, and then he would target placing his surplus funds into the highest interest rate investment loan offset account. Switching his home loan to Interest Only is another good option.

Mike prompts Dave with a question: "What stages of life do you typically see your clients facing this conundrum?" Cate weighs in with some insights based on recent economic and banking changes, relating Ben's conundrum to some of her client's questions. When APRA stepped in, requiring banks to set home loan rates lower than investment rates, things started to change for a few investors. Tune in to hear more...

Cate's simple solution hinges around refinancing his home loan to Interest Only, but is it that easy? Dave weighs in with some of the challenges Ben may face. Dave has a technical solution, but it's not easy and will require some intense concentration!

Mike ponders; can refinancing the existing debt to reduce the minimum loan repayment commitment help Ben's case?

Cate and Dave step through the pro's and cons of the various approaches on option to Ben, highlighting the tax benefits, interest rate differential and long-term benefits.

And the Trio shed light on the benefits of offset against Principal and Interest loans.

...And our gold nuggests!

Dave Johnston’s gold nugget - If Ben can't refinance and can't go to IO, Dave highlights the important points for Ben to consider. Sometimes going backwards from a cashflow perspective isn't always the worst case scenario. Looking forward, doing the maths and not losing sight of the bigger picture is important.

Cate Bakos’s gold nugget - Visibility is everything. If Ben has a dashboard and can get a sense of timeframes, he will get a better sense of perspective. His overall portfolio will likely hold him in good stead, but in the meantime he could do a stocktake of his current discretionary spending, and conduct a health check on his current home loans.

Mike Mortlock's gold nugget - There is no simple answer, but there are a number of ways that he can do this. Knowing what the banks will allow is important too.

Show notes: https://www.propertytrio.com.au/2024/01/08/can-we-retire-at-50-and-how-many-properties-will-we-need-2/

Got a question for the trio? https://forms.zohopublic.com/propertyplanningaustralia/form/GotaquestionforthePropertyTrio/formperma/zYCQAxzE_24CVlDafP1ozyzwtmB-8m1iCNtCTgDvHXM

Happy New Year to our listeners!

Mike introduces James and Lisa's case study. They are both 36 and have a goal of attaining $80,000 of passive income per year into retirement, and scaling back work to 50% by the age of 50 remains an ideal. Their annual combined incomes are $144,000 and they have $90,000 in savings. Can it be done? And what do they need to compromise on to reach their goal?

Cate ponders their plans and discusses the cost disparity between life in the major capitals versus the regions. She also touches on 'overshooting the runway'; a common pleasant surprise for those who make firm plans early in life.

Dave explains how he and his team would typically tackle the determination of subsequent property purchases, timing, budget and buffers. How did James and Lisa's property plan compare to other plans? Tune in to find out what scenario Dave's team recommended to this duo. Do they purchase an investment first? Do they move to their ideal future home location? How many properties do they ultimately need? The alternative options for James and Lisa are an interesting surprise!

Mike and Cate tackle the investment-future use conundrum; a common investor challenge that the Trio see often. And Dave makes a valid point about the differential in post-retirement outcomes when sensible financial decisions are made at the start of an investor's journey. It's little wonder that compound interest is considered the eighth wonder of the world.

....And our gold suggests!

Cate Bakos’s gold nugget - Retirement is not what it used to be. We don't just stop. We have much longer retirements these days and we do have to think about how we wish to enjoy our segments of retirement, well before the 'golden years'.

Dave Johnston’s gold nugget - When modelling out a property plan, setting pathways and determining if a goal is achievable is critical. Decision-making often has to face adjustment as life changes.

Show Notes: https://www.propertytrio.com.au/2024/01/01/can-we-retire-at-50-and-how-many-properties-will-we-need/

Got a question for the trio? https://forms.zohopublic.com/propertyplanningaustralia/form/GotaquestionforthePropertyTrio/formperma/zYCQAxzE_24CVlDafP1ozyzwtmB-8m1iCNtCTgDvHXM

Merry Christmas to our listeners!

AI's Role in Real Estate Investment...

"AI, and particularly generative AI, is a game-changer in real estate investment, even for the average Australian investor."

Mike and Dave explore some of the immediate scope that AI can offer, from generating realistic property images, to creating detailed market reports, and even forecasting future property value trends based on a range of complex factors.

Understanding Generative AI vs. Traditional Machine Learning....

Mike ponders the power of capturing a series of ‘photographic memories’, and details how AI has aided him with his quantity surveying data and identification of trends. Moving forward, can AI predict sentiment? It’s an interesting thought-experiment.

Dave contrasts the take-up of Chat GPT against other advancements such as the World Wide Web, Facebook, and the telephone.

How does AI already exist in the property world? The Trio ponder…

Mike shares some of the practical applications of generative AI for investors

“These AI tools are user-friendly and are designed with the layperson in mind. They can analyse your financial goals and suggest investment strategies, almost like having a personal investment advisor powered by AI."

But Dave reminds listeners that information found on the internet shouldn’t be blindly trusted. Cate talks about the risks to businesses when it comes to AI mistakes.

Can AI predict an outperformance property? Or is this a task that requires human touch? Tune in to find out what the Trio each think.

Cate shares the last paragraph of the episode, which was generated by AI: “AI, and specifically generative AI, is transforming how Australians invest in real estate. It's making sophisticated investment analysis more accessible to everyone."


....And our gold suggests!


Dave Johnston’s gold nugget - Dave ponders the limitations and contradictions associated with AI predicting the best property in the country.


Mike Mortlock’s gold nugget - Mike points out that many price models models and capital growth predictions are often wrong, and he wonders how AI will tackle irrational human behaviour.


Cate Bakos’s gold nugget - Cate challenges the usefulness of chat boxes and scripts when it comes to disingenuous scripting and important client communication.

Show notes: https://www.propertytrio.com.au/2023/12/24/ai-the-future-of-property-investment/

Got a question for the trio? https://forms.zohopublic.com/propertyplanningaustralia/form/GotaquestionforthePropertyTrio/formperma/zYCQAxzE_24CVlDafP1ozyzwtmB-8m1iCNtCTgDvHXM

The November data is out! The headline figures prove that the 'middle sized cities' are still out-performing; Perth, Adelaide and Brisbane. And Melbourne disappointed with the first negative month in a while.

We have seen a new peak in house prices in Australia and for the combined capitals; we have seen a new record high for house prices. Cate and Mike marvel at the volatility, and in particular the disproportionate declines that our markets have experienced in recent years. And Dave pulls apart the weaknesses in median prices when it comes to data segmentation associated with houses versus units.

Have the Victorian regions bounced back? Maybe. But how does wage price index correlate? "If you want a job, work from home. if you want a career, come back to the office." Do you agree with this quote? And how has WFH impacted Australian property?

Cate delves into investor-led sales and how the segmented data is captured. And she asks when policy makers will recognise the rate of investor sales.

The Trio focus on rental increases and vacancy rates; despite the rate of growth relaxing, rental growth is still broadly in positive territory for most cities. And when we consider our new arrivals, and policy around skills, it's questionable that our services-inflation woes are being accurately addressed.

Mike asks Cate about new listings, and she points out a few points of interest in relation to the relationship between new listings and buyer demand. Cate talks about the impact of the most recent cash rate increase and the typical hallmarks of December market conditions.

Mike steers us through the Westpac Consumer Sentiment Index. There have been a few subtle changes, and the Trio attempt to understand the broad attitudes towards timing the market and economic outlook.

Personal, unsecured loans have tricked up and Cate is troubled. Tune in to hear more...

And Dave covers loan approvals, mortgages and decreasing refinancing numbers. Dave reports that this is the lowest read since May 2022.

Lastly, Cate and Dave touch on Sydney vs Melbourne price disparity and some of the reasons why Sydneysiders are taking advantage of the Melbourne market.

And... time for our gold nuggets...

Cate Bakos's gold nugget: For all of those budding purchasers who are focusing on 2024 as their year... take advantage of the buying conditions in the early part of the year. Agents are talking about increased listing volumes and the supply/demand ratio may favour buyers.

Dave Johnston's gold nugget: Dave emphasis the attractive conditions that buyers could face in Melbourne, Sydney and Darwin in the early months of 2024.

Show notes: https://www.propertytrio.com.au/2023/12/18/ep-236-november-market-update/