June 24, 2025 • 26 mins
The residential property market is about to be split into very clear segments thanks to a wave of generous home loan incentives. For investors, there is a clear opportunity here: Competition will be slim and values will improve in the market categories just above the incentive thresholds. In fact, the government has usefully provided a guide to how and where the opportunities will arise.
Cameron Kusher of Kusher Consulting joins Associate Editor, Wealth James Kirby.
In today's episode, we cover:
* The new opportunity for investors in a distorted market
* Queensland takes the prize for loan incentives with a 2% deposit scheme
* The bad news for those waiting for the apartment gap to narrow
* Capital Gains and Land tax tipped as new tax targets
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:09):
Hello, and welcome to The Australian's Money Puzzled podcast. I'm
James Kirby. Welcome aboard everybody. There's so much I want
to talk to you about this week. I think we're
going to have to actually break it up. We have
some really interesting changes in the property market happening before
our eyes, and to be honest, perhaps not entirely reported
on or fully analyzed yet, and hopefully we can get
(00:30):
you ahead of the pack here on this I'm talking
about changes in relation to property taxes that are coming
down the line, property grants that are coming along, both
federal and state, and also some very really bad results
coming out of the unit and apartments market, which again
we haven't had a chance to talk about on the show.
(00:51):
Just quickly. Also, we had a response, We had a
storm of response I think on Jackie Clark's most recent
featuring on the show, which was the show where she
was talking about crypto, that is, she was talking from
the skeptic side about crypto, and we will deal with
it afresh on Thursday's show. There's a lot to talk
about both the markets and I think perhaps the changing
(01:16):
certainly among our audience here changing response to crypto, But
on property, I want to get straight into it.
Speaker 2 (01:22):
I have.
Speaker 1 (01:23):
I thought I had everything, actually all my ducks in
a row here, and then just as we were about
to start the show, I see the Queensland premiere in
a race, perhaps to exceed the generosity of the Albanesi
government has this morning announced a first home buyer guarantee scheme.
We do you hear this? And all you need is
(01:44):
a two percent deposit up to a million bucks, so
you can buy a million dollar home on a ninety
eight percent deposit and if that is good for the market,
I'm not sure. I know someone who will know, though,
which is Cameron Kusher. How are you Cameron?
Speaker 2 (01:59):
Yeah, I'm both like Gimes. How are you good?
Speaker 1 (02:01):
And good to have you on the show, folks. Cameron
is with Cameron Kusher of Kusher Consulting. He is someone
who is an expert in property analysis and I've known
him for a long time. Goes back to at least
ten years ago with Core Logic, where he seemed to
be there for a decade or so. I would think
he was with Ria or real estate dot com dot you,
a neose core company for several years, and now he
(02:24):
has gone out on his own. And I love when
people go out on their own because they are free
to talk in a much in a much easier fashion
than when they are inside a larger company. And that
goes for anything. If we could, Although I've already teased
people with this home loan guarantee, what's going on there?
I really would like to talk to you about taxes
and property. I'll tell you why. I mean, everyone's always
(02:45):
talked about land tax in property, and that was people
are always unhappy with it, in it on realized gains
basically paper gains that you end up tax on the
unimproved value of the land. And now the new super
tax is a similar sort of thing. But also well
there's the gym Chalmers. It's going to do a major
review of tax. Tell me you've got instinct justical where
(03:07):
property investors will be in this review.
Speaker 2 (03:11):
Look, I think in terms of property investors, there's probably
a risk that tax on investment properties go up. We
have already seen in Victoria obviously that the state government
there has increased taxes on property investors quite substantially. And look,
I think if any tax is going to any tax
change is going to come for the property sector. It's
probably not going to be a blanket move to land
(03:33):
tax and removing stamp duty, although I think that's the
thing that probably makes most sense. I think it would
likely be some sort of increase in taxes on investors,
and I think the reasoning that they would give for
that is that we try to level the playing field
for first home buyers. Whether that actually does happens or
not probably debatable. And I think the other thing when
(03:55):
you lift taxes on property investors is that you get
rests or fewer rental properties. Now that might not actually
be an issue if you're getting more people buying first times.
But at the same time, the federal government and state
governments are giving a lot of tax breaks to build
to rent developers, which are institutional investors from overseas. And
one of the analyzes I'd love to see is how
(04:17):
do the tax breaks that individual investors get for property
stack up to how many tax breaks we're giving overseas
capital as tax breaks to come in and build to rent.
And I haven't seen that analysis anyway.
Speaker 1 (04:31):
Yes, because they do it at a big level, don't they,
And they get some exemptions that people wouldn't be familiar with.
But in terms of the perceived vulnerability if you like,
of the property investment residential property investment sector two tax lifts.
We've seen them in state governments. If Chudres was to
find it a way to do that in property, what
(04:52):
do you think would be the route.
Speaker 2 (04:55):
Look, I think if that was the reasoning for doing
it would, as I said, I think, be about leveling
the playing field. But really it's probably more about revenue raising,
and what you would see is people that own investment
properties currently they would probably change their plans and look
to exit those investment properties and they go and park
their capital somewhere else, and then over time you would
(05:15):
get fewer people investing in property. And I think that's
probably more problematic because yes, there's a big encouragement of
buil to rent here in Australia at the moment, but
it's still very much at its infancy and a lot
of what is being delivered in the build to red
space is premium rental product, so it's actually cheaper than
what the established market already has and it's.
Speaker 1 (05:38):
Not at a big enough scut But in terms of
the tax for investors, what do you think you'd go for?
Is it downe tax, is it stamp duty, negative gearing.
Speaker 2 (05:47):
Look, I think it'll be a move on land tax
and possibly negative gearing. But I don't think he'd be
brave enough to change negative gearing or capital gains tax
discount without taking that to an election first, because I
think if they they did that, they would blow an
awful lot of their political capital. So I think the
most likely one is landtak.
Speaker 1 (06:05):
Okay, all right, yeah, interesting, And I suppose the precedent
is there. They put the superinuation tax up on Riolann's
gains fifteen percent on a month's on earn ex months
above three million, they put it up, they won the election,
so that is a very kind of sound process for
them politically to move the pump. Okay, yeah, interesting. Now
(06:28):
you've said in the past the property isn't effectively taxed anyway, So.
Speaker 2 (06:34):
What's from I view? I think, and not looking necessarily
just from an investor's perspective. Obviously, investors do play land tax,
whereas owner occupiers don't. I think if we look at
the tax system with property, the biggest challenge or the
biggest problem, is that we still rely on stamp duty. Now,
if you look in any given year, only about four
and a half percent of all the properties in the
(06:55):
country transact, and that accounts for the state and local
governments through about twenty five to thirty percent of their
tax revenue, So you're getting so you're basically relying on
four and a half percent of the people that transacted
property a year to fund your coffers. Now, that leads
to very volatile revenue year to year depending on how
(07:15):
the housing market's going. I think you should scrap stamp
duty completely and replace it with a land tax on
all properties, not just on investment properties. That way, state
governments have got guaranteed revenue. In fact, if you've got
land tax in place, one of the ways to grow
that land tax revenue will be to approve more housing
(07:35):
and encourage more people to come and build new houses
in your market. So I think moving the land tax
is both a good efficiency for the housing market, but
it could also really be good for delivering a lot
more housing in the market as well, because you might
find that all of a sudden, local and state governments
become a lot more pro adding new housing supply because
(07:57):
that means more people paying land tax.
Speaker 1 (07:59):
A lot of people on the show I've complained that
in Victoria it's actually a model of what you don't do.
They just stacked property taxes up, ten of them in
a rule on property and guess what, it's got the
lowest investor activity. It's got the worst numbers there is there.
Do you think that's the explanation or do you think
that one led to the other? Look.
Speaker 2 (08:16):
I think in Victoria definitely led to another, but it
was more it was very much just focused on the
investor market. I think that if I think there should
be land tax on all properties, at the moment you're
only paying land tax on investment properties, not on own
or occupied properties. I think it's a much more reasonable
system to have land tax on all properties, but have
it and do away with stab duty.
Speaker 1 (08:38):
Right, So, if we're listening listeners who have investment property
in terms of the outlook for tax, then you what
do you think is this sort of most likely tax
issue forming for them?
Speaker 2 (08:51):
I think that the most likely tax issue forming for
them is that there is an increase in land tax
to investors. But there's no introduction of land tax for
owner occupiers. So we're not going to do away with
stamp duty. But what the federal government potentially looks at
is just lifting land tax further on investors and discouraging
investment further. And I think for investors that's problematic. I
(09:13):
think what we really need to be doing is removing
stamp duty and having a land tax on all properties,
not just on investment properties.
Speaker 1 (09:21):
Okay, very good, and I suppose I know it's unfortunate.
But one thing that backs into what you're saying that
land tax could lift is that there is a precedent
with the supertax where there is unrealized gains tax, and
that is they're sticking with that, so it would actually
be consistent. The last thing I imagine many investors want
to hear. Okay, we'll take short break with me back
(09:42):
in a moment. Hello, Welcome back to the Australians Money.
I'm James Kirby and I'm talking to Cameron Kusher of
(10:03):
Kusher Consulting, a veteran of the property analysis market in
Australia and well known by investors and property professionals alike.
Now we were just talking there just in the first segment.
I think we were talking about tax. What might happen
with tax in this big review in relation to property
for you as an investor and how does that matter.
(10:23):
It's interesting. I talked to Louis Christopher SQM, another very
well known researcher Friday. He said capital gainst tax for sure,
he thought it was a probability over a possibility. Cameron
is actually of the opinion it will be land tax.
And how that would work, of course, is that it
would be fed camer in conjunction with state governments, and
(10:44):
that is entirely possible of course with the current sort
of political alignment that we have across the country. So
stand by. But I think it's pretty clear property is
not going to escape a major tax review. Okay, Now
another thing I wanted to talk to you about. This
oneing Cameron was about the ullnits market. I had no
idea it was so bad. The apartment loss is g
(11:05):
I mean, one in five apartments sold in Melbourne sort
in a loss. Ninety percent of all loss making properties
in Sydney apartments. What's going on?
Speaker 2 (11:16):
Yeah, I mean this is actually a trend that's been
around for a while. I think it's being exacerbated at
the moment by the fact that the Melbourne housing market
is generally quite weak. But this really is driven by
the fact that what drives the increase in property values
is the increase in land value. And when if we
have a look at apartments, they've got a very tiny
(11:37):
component of that property, which is land, so typically they
don't appreciate, and especially when you buy brand new properties,
they will typically depreciate because the idea is you buy
a brand new property, you pay a premium for that
brand new property, and you'd depreciate all the fixtures within
that property and it's generally reduces in price over time.
(11:58):
So I think firstly, from an investment perspective, we find
that apartments tend to not be as good of an
investment as houses because houses sit on land, the land
increases in price. And secondly, I think there is this
big push at the moment to get more housing density
into our cities, get more people living in apartments, and
(12:19):
I think there's a limit to how strong that push
is going to be because I think most people in
Australia want to buy a property and want that property
to increase in price over time to make them feel wealthier.
And I think a lot of people realize if they
go and buy an apartment, they're not going to get
that same level of capital growth as they would get
with a house.
Speaker 1 (12:38):
All right, So it sounds to me I think you're
a faitalistic or whatever, but you're not of only opinion
that this gap has gone to narrow. There was this
theory that, you know, units would surely catch up with
houses and the gap would niril and that maybe first
tom buyers would move in and buy off investors. That's
not clearly not happening in the big cities, no.
Speaker 2 (12:56):
I mean, I think some first home buyers buy an
apartment initially mainly because they want to live close to
a certain area and they can't afford a house in
that market. But I think a lot of the apartments
that are being built now you know you've got smaller
one and two bedroom apartments, there's not a lot of
those being built at the moment. And they might be
good when you're young, when you sing, or when you're
(13:17):
in a couple, but once you get to this point
where you're having kids, they're no longer really viable to
live in those properties. A lot of what else is
being built at the moment is large three and four
bedroom product, and that's largely targeted at people downsizing out
of big homes in premium locations into these and they're
just not affordable for most people that are on a budget.
(13:38):
And realistically, a lot of those new apartments that are
being built, when you look at the price of them
and you compare it to the price of a house
in the suburb they're in, or a house in a
suburb reasonably close by, you're probably going to find the
people are going people that are not downsizing are going
to preference buying a house in a nearby suburb rather
than the apartment in that suburb.
Speaker 1 (13:58):
Right, yes, yeah, yeah, So one of the underlying things
there I think you're saying is that it's also deer anyway,
it's also expensive, and so your yields are poor, right,
its are pretty bad in any event. Yeah, yeah, I mean.
Speaker 2 (14:12):
There's some exceptions. Obviously, Apartments in places like Darwin have
very good yields. Even Canberra has quite good yields on
apartments as well. And surprisingly, or maybe not surprisingly, rental
yields on apartments in Melbourne at the moment are really high.
They're quite strong. So if Victoria didn't have this higher
rate of land tax to invest it, you would probably
actually see quite a lot of people investing in inner
(14:34):
city Melbourne apartments at the moment, I think the yield's
the best it's been in about twenty five years. But
obviously people are not doing I mean that's the gross yield.
The net yield obviously, because you've got that higher land
tax is going to be lower. But just looking at
the figures, it actually stacks up pretty well in Melbourne
at the moment, but you're not getting people investing in
that product type at the moment.
Speaker 1 (14:55):
What are the grosser yields compared to national average?
Speaker 2 (14:58):
So I haven't looked for couple of months, looking at
about five and a half percent in Melbourne at the
moment the groscio for a unit nationally you're probably looking
at about four point four percent, so it is significantly high.
Speaker 1 (15:10):
So half for a city of five million. It sounds
at face value very good. But of course the reason,
as you say, as you imply, the reason is what
the prices have been going nowhere and the gap between
the gross and the net has probably widened. That's very
interesting now at this point, I ask you, so we
know that the market is sort of distorted in various ways.
Like you mentioned, how people will clearly overpay for properties
(15:32):
that are downsized of properties in the suburb they used
to live in. People are not prepared to overpay for
inner city units and we've seen very poor turns in
that market. I guess the backdrop of a passable, relatively
solid market for dwellings generally because that is underpinned by
house prices. Now into this mix we get something that
(15:55):
someone has pointed out to me, which is there's going
to be because we have, first of all, a unit
versal federal first Home Buyer scheme. Now where all you
need is five percent, anyone or you need is five
percent and you can buy your first home anywhere in Australia.
There's no limit to how many people can participate in
(16:15):
the scheme. The only issue is that the limit, there's
a limit, and how much the house is worth. The
deerest the house can be is nine hundred grand in
Sydney and then it drops from there. So this is
going to disturb the market. Then on top of that,
this morning, just this morning, you pointed out that the
Queensland government has just introduced a new scheme, same deal,
(16:36):
excepted to two percent deposit two percent and you can
buy up to a million dollar property that means they
are encouraging people. Yes, they are encouraging people to become
first owners and that's all fine. They are also encouraging
ninety eight percent mortgages. So tell me what will the
impact of that be and what I'm driving towards. Is
(16:57):
it true that there will be a lot of demand
basically immediately below the threshold, and then when you get
to the threshold there's a big drop.
Speaker 2 (17:06):
I think that's Firstly, I think these schemes are going
to be well supported because we know that one of
the biggest barriers to entering home ownership is the fact
that you have to pay. You have to pay lenders
mortgage insurance, and obviously people have a preference to save
a bigger deposits, so they have to pay a lower
amount of lenders mortgage insurance. Now, if you don't have
to pay lender's mortgage insurance, you'll be able to buy sooner.
(17:29):
So the national the federal scheme doesn't start until January
next year. The Queensland budget hasn't actually been announced just yet.
This was a leak from the budget which comes out today.
I suspect it we'll be starting sometime next year as well,
but I think for me, the problem with these schemes
is all they do is encourage more people to buy
(17:51):
at the high prices we've got at the moment. And
also when you're getting the federal government or the state
government involved in housing and effectively on the book for housing,
there's they're going to be more encouraged to push property
prices higher. Now, I know, listen this to these podcasts.
Your podcast are investors, and higher property prices will help investors.
(18:14):
But from a more holistic position, you know, is that
really what we need getting more people into the housing
market at already very high prices. And you know, all
of basically everything that any government in Australia does at
the moment is trying to get more first home buyers
in the market at higher prices rather than lowering prices.
(18:35):
And I think the other challenge is that every time
they do this, next time prices are more expensive, so
you have to give an even greater stimulus. So we're
at a ninety two percent deposit, you know, do we
then get to the zero percent deposit that the government
is actually covering all of your deposit, you don't have
to have any money down. Do we get to the
(18:55):
point where you've got ninja loans like they had in
the US during the GFC, you know, no job loans,
and I feel like it's a slippery slope. When I
first started in property, it was the seven thousand dollar
first home bio grant, then it was fourteen thousand, and
then it was twenty one thousand. Here in Queensland it's
now a thirty thousand dollar first home bio grand. If
(19:16):
you're buying a brand new property and it's a two
percent deposit, I feel like you're just kicking the can
down the road. And every time, you know, every couple
of years, they have to go to something bigger and
more outlandish to try and help people get into the
housing market. And at the end of the day, it's
not actually increasing home ownership rates, particularly for younger people.
So whilst it looks good, it's not really addressing the
(19:40):
slide in home ownership we're seeing here in Australia, and
just on.
Speaker 1 (19:43):
The investment point of view. So is there a merit
in that argument that when you have these schemes, that
it's the strata just above the threshold where the value
is because everybody's competing, but they have the grant in mind,
they know what the top lot is. You can't be
more the nine hundred thousands in Sydney, you can't be
more than a million in Brisbane, and then the million
(20:05):
ten thousand is certainly sort of wide open opportunity I think.
Speaker 2 (20:10):
So I think, you know, for anyone looking to invest
I think there's a great opportunity for them because they
know where these caps are and you know that you're
probably not going to have any, or if you do
have any, it's going to be very little competition from
first time buyers. So it's kind of this forgotten pocket
in the market. So that's where the investor opportunity is.
And obviously the other opportunity for investors is governments have
(20:31):
now got a lot more skin in the game as well, so.
Speaker 1 (20:34):
You think coming back that keep coming back with a
larger space of incentives as you suggest, all exactly. Yeah,
very good, really interesting insights there from Cameron. Thank you Cameron. Okay,
we're going to stick with us for some questions. I
have some very good curated property questions from our ever vigilant,
(20:54):
highly intelligent audience back in the moment. Hello, welcome back
to the Australian's Money Puzzled podcast James Kirby with Cameron
Kusher of Kusher Consulting. You probably know Cameron, You've known
that he's been associated with the both RIA and Chre
(21:15):
logic over the years. Than he is now an independent
consultant in this space. Brest asks, I recently purchased one
hundred acre rural land property outside of Perth. The price
was comparable to bind five acres elsewhere. Seemed like a
great opportunity. However, he now realizes a few things and
(21:35):
he lists them out worth hearing. Number one, insurance is
classified as rural is more expensive. Two, building costs are
cons significantly higher in rural areas. Three, there are ongoing
requirements in terms of maintenance of course over a larger space.
And perhaps most surprisingly, banks seem hesitant to lend on
(21:56):
land of this size. Interesting, he said he'd like to
hear what we have to see about these issues, except
I would just preface whatever coment says that. I'm sure Brett,
you were quite aware that ruralaland was actually rural farmland
has been a hot property, hasn't it. It's been the
best performing over quite a few years until very recently.
(22:17):
Is that right? Comment?
Speaker 2 (22:19):
Yeah, it has. It's been incredibly well performing. But you know,
as Renton's kind of highlighted here, there's certainly some risks
by that property. Your insurance costs are higher, obviously, your
maintenance costs are a lot a lot greater. The build
costs probably depending on how close this property actually is
to Perth, it shouldn't be significantly higher. But you know,
(22:41):
he said it's rural and near Perth. I don't know.
Obviously w A is big. The idea of near to
Perth might be different.
Speaker 1 (22:47):
They might be different than someone else's, Yes.
Speaker 2 (22:50):
But I mean wa in general, you know there's an
undersupplied people building houses. We've seen really rapid escalation and
construction costs over recent years.
Speaker 1 (23:00):
I imagine that's something that probably a general issue that
in genuinely rural areas, obviously the supply skills would be
less and more of an issue to get people. Quite simply,
there's always been the case. This is never investment advice
across information only. All right, thank you Brett, and best
of luck with that. I think it was very useful.
Thank you for writing in and telling the audience our
listeners your experience. Paul are grants for houses and he
(23:24):
also adds house batteries and electric vehicles. These grants are
there always just for people who are working? I think
broadly the answer is yes on that one.
Speaker 2 (23:36):
Yeah, as far as I'm aware, it's mainly for working people,
not for people in retirement phase.
Speaker 1 (23:41):
Yes, yeah, yes, that is the nature that the logic
I supposed behind most of these grants is to assist
certain people and certain demographics at certain times of their lives.
So it's not so much that it's exclusionary, but it
is effectively exclusionary at the end of the day. Okay,
thank you, Paul Carl with the ccarlital gains tax a
key issue for all property investors, and we mentioned on
(24:04):
the show that some analysts believe that capital gains could
be in the sights of the Treasury in this forthcoming
tax review, that it would be perhaps one of the
easier moves on the sector compared to other things like
negative gearing or stamp duty, and the political sort of
politically expedient one is often the one to hang on
(24:26):
to folks. But we'll see. Carlas, can you have a
capital gainst tax with no taxable income if you don't
have a taxable income do you still pay capital gains? Well,
if you have a capital gain, you pay capital gainst
tax and it is autonomous to anything else in your life.
But that's basically it isn't it.
Speaker 2 (24:46):
I don't know of any other loopholes. I think, you know,
if you're making a capital gain, the government wants a
little bit of that capital gain.
Speaker 1 (24:52):
Whether I think you make a capital gain and you're alive,
then you are, you are up for capital gains tax
and you're or nothing else really matters. It's the best
of my knowledge. If anyone can dispute that, let's here
it all right, terrific. Hey, and thank you very much
Cameron Kusher of Kusher Consulting to be on the show
this morning. Thanks for having me, James lovely to talk
(25:14):
to you. Okay, folks, we will, as I say, on Thursday,
we're going to have a look at well, very lively markets.
Actually they're not very lively markets. That's the irony. Very
very lively news, global news around markets that are oddly
complacent and relatively now volatility considering what's happening that we
will cover and also we will cover crypto. And on
(25:37):
the last show we had someone who's skeptical of crypto.
In the next show, I'm going to have Shane Oliver
from AMP and AMP was the first major financial institution
in Australia to actually make a investment in crypto, and
he will actually cover the other side of the argument,
just to be fair. Okay, talk to you soon. Remember
(25:57):
the email the money puzzle at the Australian dot com
dot a U, the s of the Wood, the
Speaker 2 (26:08):
S
Hello, and welcome to The Australian's Money Puzzled podcast. I'm
James Kirby. Welcome aboard everybody. There's so much I want
to talk to you about this week. I think we're
going to have to actually break it up. We have
some really interesting changes in the property market happening before
our eyes, and to be honest, perhaps not entirely reported
on or fully analyzed yet, and hopefully we can get
(00:30):
you ahead of the pack here on this I'm talking
about changes in relation to property taxes that are coming
down the line, property grants that are coming along, both
federal and state, and also some very really bad results
coming out of the unit and apartments market, which again
we haven't had a chance to talk about on the show.
(00:51):
Just quickly. Also, we had a response, We had a
storm of response I think on Jackie Clark's most recent
featuring on the show, which was the show where she
was talking about crypto, that is, she was talking from
the skeptic side about crypto, and we will deal with
it afresh on Thursday's show. There's a lot to talk
about both the markets and I think perhaps the changing
(01:16):
certainly among our audience here changing response to crypto, But
on property, I want to get straight into it.
Speaker 2 (01:22):
I have.
Speaker 1 (01:23):
I thought I had everything, actually all my ducks in
a row here, and then just as we were about
to start the show, I see the Queensland premiere in
a race, perhaps to exceed the generosity of the Albanesi
government has this morning announced a first home buyer guarantee scheme.
We do you hear this? And all you need is
(01:44):
a two percent deposit up to a million bucks, so
you can buy a million dollar home on a ninety
eight percent deposit and if that is good for the market,
I'm not sure. I know someone who will know, though,
which is Cameron Kusher. How are you Cameron?
Speaker 2 (01:59):
Yeah, I'm both like Gimes. How are you good?
Speaker 1 (02:01):
And good to have you on the show, folks. Cameron
is with Cameron Kusher of Kusher Consulting. He is someone
who is an expert in property analysis and I've known
him for a long time. Goes back to at least
ten years ago with Core Logic, where he seemed to
be there for a decade or so. I would think
he was with Ria or real estate dot com dot you,
a neose core company for several years, and now he
(02:24):
has gone out on his own. And I love when
people go out on their own because they are free
to talk in a much in a much easier fashion
than when they are inside a larger company. And that
goes for anything. If we could, Although I've already teased
people with this home loan guarantee, what's going on there?
I really would like to talk to you about taxes
and property. I'll tell you why. I mean, everyone's always
(02:45):
talked about land tax in property, and that was people
are always unhappy with it, in it on realized gains
basically paper gains that you end up tax on the
unimproved value of the land. And now the new super
tax is a similar sort of thing. But also well
there's the gym Chalmers. It's going to do a major
review of tax. Tell me you've got instinct justical where
(03:07):
property investors will be in this review.
Speaker 2 (03:11):
Look, I think in terms of property investors, there's probably
a risk that tax on investment properties go up. We
have already seen in Victoria obviously that the state government
there has increased taxes on property investors quite substantially. And look,
I think if any tax is going to any tax
change is going to come for the property sector. It's
probably not going to be a blanket move to land
(03:33):
tax and removing stamp duty, although I think that's the
thing that probably makes most sense. I think it would
likely be some sort of increase in taxes on investors,
and I think the reasoning that they would give for
that is that we try to level the playing field
for first home buyers. Whether that actually does happens or
not probably debatable. And I think the other thing when
(03:55):
you lift taxes on property investors is that you get
rests or fewer rental properties. Now that might not actually
be an issue if you're getting more people buying first times.
But at the same time, the federal government and state
governments are giving a lot of tax breaks to build
to rent developers, which are institutional investors from overseas. And
one of the analyzes I'd love to see is how
(04:17):
do the tax breaks that individual investors get for property
stack up to how many tax breaks we're giving overseas
capital as tax breaks to come in and build to rent.
And I haven't seen that analysis anyway.
Speaker 1 (04:31):
Yes, because they do it at a big level, don't they,
And they get some exemptions that people wouldn't be familiar with.
But in terms of the perceived vulnerability if you like,
of the property investment residential property investment sector two tax lifts.
We've seen them in state governments. If Chudres was to
find it a way to do that in property, what
(04:52):
do you think would be the route.
Speaker 2 (04:55):
Look, I think if that was the reasoning for doing
it would, as I said, I think, be about leveling
the playing field. But really it's probably more about revenue raising,
and what you would see is people that own investment
properties currently they would probably change their plans and look
to exit those investment properties and they go and park
their capital somewhere else, and then over time you would
(05:15):
get fewer people investing in property. And I think that's
probably more problematic because yes, there's a big encouragement of
buil to rent here in Australia at the moment, but
it's still very much at its infancy and a lot
of what is being delivered in the build to red
space is premium rental product, so it's actually cheaper than
what the established market already has and it's.
Speaker 1 (05:38):
Not at a big enough scut But in terms of
the tax for investors, what do you think you'd go for?
Is it downe tax, is it stamp duty, negative gearing.
Speaker 2 (05:47):
Look, I think it'll be a move on land tax
and possibly negative gearing. But I don't think he'd be
brave enough to change negative gearing or capital gains tax
discount without taking that to an election first, because I
think if they they did that, they would blow an
awful lot of their political capital. So I think the
most likely one is landtak.
Speaker 1 (06:05):
Okay, all right, yeah, interesting, And I suppose the precedent
is there. They put the superinuation tax up on Riolann's
gains fifteen percent on a month's on earn ex months
above three million, they put it up, they won the election,
so that is a very kind of sound process for
them politically to move the pump. Okay, yeah, interesting. Now
(06:28):
you've said in the past the property isn't effectively taxed anyway, So.
Speaker 2 (06:34):
What's from I view? I think, and not looking necessarily
just from an investor's perspective. Obviously, investors do play land tax,
whereas owner occupiers don't. I think if we look at
the tax system with property, the biggest challenge or the
biggest problem, is that we still rely on stamp duty. Now,
if you look in any given year, only about four
and a half percent of all the properties in the
(06:55):
country transact, and that accounts for the state and local
governments through about twenty five to thirty percent of their
tax revenue, So you're getting so you're basically relying on
four and a half percent of the people that transacted
property a year to fund your coffers. Now, that leads
to very volatile revenue year to year depending on how
(07:15):
the housing market's going. I think you should scrap stamp
duty completely and replace it with a land tax on
all properties, not just on investment properties. That way, state
governments have got guaranteed revenue. In fact, if you've got
land tax in place, one of the ways to grow
that land tax revenue will be to approve more housing
(07:35):
and encourage more people to come and build new houses
in your market. So I think moving the land tax
is both a good efficiency for the housing market, but
it could also really be good for delivering a lot
more housing in the market as well, because you might
find that all of a sudden, local and state governments
become a lot more pro adding new housing supply because
(07:57):
that means more people paying land tax.
Speaker 1 (07:59):
A lot of people on the show I've complained that
in Victoria it's actually a model of what you don't do.
They just stacked property taxes up, ten of them in
a rule on property and guess what, it's got the
lowest investor activity. It's got the worst numbers there is there.
Do you think that's the explanation or do you think
that one led to the other? Look.
Speaker 2 (08:16):
I think in Victoria definitely led to another, but it
was more it was very much just focused on the
investor market. I think that if I think there should
be land tax on all properties, at the moment you're
only paying land tax on investment properties, not on own
or occupied properties. I think it's a much more reasonable
system to have land tax on all properties, but have
it and do away with stab duty.
Speaker 1 (08:38):
Right, So, if we're listening listeners who have investment property
in terms of the outlook for tax, then you what
do you think is this sort of most likely tax
issue forming for them?
Speaker 2 (08:51):
I think that the most likely tax issue forming for
them is that there is an increase in land tax
to investors. But there's no introduction of land tax for
owner occupiers. So we're not going to do away with
stamp duty. But what the federal government potentially looks at
is just lifting land tax further on investors and discouraging
investment further. And I think for investors that's problematic. I
(09:13):
think what we really need to be doing is removing
stamp duty and having a land tax on all properties,
not just on investment properties.
Speaker 1 (09:21):
Okay, very good, and I suppose I know it's unfortunate.
But one thing that backs into what you're saying that
land tax could lift is that there is a precedent
with the supertax where there is unrealized gains tax, and
that is they're sticking with that, so it would actually
be consistent. The last thing I imagine many investors want
to hear. Okay, we'll take short break with me back
(09:42):
in a moment. Hello, Welcome back to the Australians Money.
I'm James Kirby and I'm talking to Cameron Kusher of
(10:03):
Kusher Consulting, a veteran of the property analysis market in
Australia and well known by investors and property professionals alike.
Now we were just talking there just in the first segment.
I think we were talking about tax. What might happen
with tax in this big review in relation to property
for you as an investor and how does that matter.
(10:23):
It's interesting. I talked to Louis Christopher SQM, another very
well known researcher Friday. He said capital gainst tax for sure,
he thought it was a probability over a possibility. Cameron
is actually of the opinion it will be land tax.
And how that would work, of course, is that it
would be fed camer in conjunction with state governments, and
(10:44):
that is entirely possible of course with the current sort
of political alignment that we have across the country. So
stand by. But I think it's pretty clear property is
not going to escape a major tax review. Okay, Now
another thing I wanted to talk to you about. This
oneing Cameron was about the ullnits market. I had no
idea it was so bad. The apartment loss is g
(11:05):
I mean, one in five apartments sold in Melbourne sort
in a loss. Ninety percent of all loss making properties
in Sydney apartments. What's going on?
Speaker 2 (11:16):
Yeah, I mean this is actually a trend that's been
around for a while. I think it's being exacerbated at
the moment by the fact that the Melbourne housing market
is generally quite weak. But this really is driven by
the fact that what drives the increase in property values
is the increase in land value. And when if we
have a look at apartments, they've got a very tiny
(11:37):
component of that property, which is land, so typically they
don't appreciate, and especially when you buy brand new properties,
they will typically depreciate because the idea is you buy
a brand new property, you pay a premium for that
brand new property, and you'd depreciate all the fixtures within
that property and it's generally reduces in price over time.
(11:58):
So I think firstly, from an investment perspective, we find
that apartments tend to not be as good of an
investment as houses because houses sit on land, the land
increases in price. And secondly, I think there is this
big push at the moment to get more housing density
into our cities, get more people living in apartments, and
(12:19):
I think there's a limit to how strong that push
is going to be because I think most people in
Australia want to buy a property and want that property
to increase in price over time to make them feel wealthier.
And I think a lot of people realize if they
go and buy an apartment, they're not going to get
that same level of capital growth as they would get
with a house.
Speaker 1 (12:38):
All right, So it sounds to me I think you're
a faitalistic or whatever, but you're not of only opinion
that this gap has gone to narrow. There was this
theory that, you know, units would surely catch up with
houses and the gap would niril and that maybe first
tom buyers would move in and buy off investors. That's
not clearly not happening in the big cities, no.
Speaker 2 (12:56):
I mean, I think some first home buyers buy an
apartment initially mainly because they want to live close to
a certain area and they can't afford a house in
that market. But I think a lot of the apartments
that are being built now you know you've got smaller
one and two bedroom apartments, there's not a lot of
those being built at the moment. And they might be
good when you're young, when you sing, or when you're
(13:17):
in a couple, but once you get to this point
where you're having kids, they're no longer really viable to
live in those properties. A lot of what else is
being built at the moment is large three and four
bedroom product, and that's largely targeted at people downsizing out
of big homes in premium locations into these and they're
just not affordable for most people that are on a budget.
(13:38):
And realistically, a lot of those new apartments that are
being built, when you look at the price of them
and you compare it to the price of a house
in the suburb they're in, or a house in a
suburb reasonably close by, you're probably going to find the
people are going people that are not downsizing are going
to preference buying a house in a nearby suburb rather
than the apartment in that suburb.
Speaker 1 (13:58):
Right, yes, yeah, yeah, So one of the underlying things
there I think you're saying is that it's also deer anyway,
it's also expensive, and so your yields are poor, right,
its are pretty bad in any event. Yeah, yeah, I mean.
Speaker 2 (14:12):
There's some exceptions. Obviously, Apartments in places like Darwin have
very good yields. Even Canberra has quite good yields on
apartments as well. And surprisingly, or maybe not surprisingly, rental
yields on apartments in Melbourne at the moment are really high.
They're quite strong. So if Victoria didn't have this higher
rate of land tax to invest it, you would probably
actually see quite a lot of people investing in inner
(14:34):
city Melbourne apartments at the moment, I think the yield's
the best it's been in about twenty five years. But
obviously people are not doing I mean that's the gross yield.
The net yield obviously, because you've got that higher land
tax is going to be lower. But just looking at
the figures, it actually stacks up pretty well in Melbourne
at the moment, but you're not getting people investing in
that product type at the moment.
Speaker 1 (14:55):
What are the grosser yields compared to national average?
Speaker 2 (14:58):
So I haven't looked for couple of months, looking at
about five and a half percent in Melbourne at the
moment the groscio for a unit nationally you're probably looking
at about four point four percent, so it is significantly high.
Speaker 1 (15:10):
So half for a city of five million. It sounds
at face value very good. But of course the reason,
as you say, as you imply, the reason is what
the prices have been going nowhere and the gap between
the gross and the net has probably widened. That's very
interesting now at this point, I ask you, so we
know that the market is sort of distorted in various ways.
Like you mentioned, how people will clearly overpay for properties
(15:32):
that are downsized of properties in the suburb they used
to live in. People are not prepared to overpay for
inner city units and we've seen very poor turns in
that market. I guess the backdrop of a passable, relatively
solid market for dwellings generally because that is underpinned by
house prices. Now into this mix we get something that
(15:55):
someone has pointed out to me, which is there's going
to be because we have, first of all, a unit
versal federal first Home Buyer scheme. Now where all you
need is five percent, anyone or you need is five
percent and you can buy your first home anywhere in Australia.
There's no limit to how many people can participate in
(16:15):
the scheme. The only issue is that the limit, there's
a limit, and how much the house is worth. The
deerest the house can be is nine hundred grand in
Sydney and then it drops from there. So this is
going to disturb the market. Then on top of that,
this morning, just this morning, you pointed out that the
Queensland government has just introduced a new scheme, same deal,
(16:36):
excepted to two percent deposit two percent and you can
buy up to a million dollar property that means they
are encouraging people. Yes, they are encouraging people to become
first owners and that's all fine. They are also encouraging
ninety eight percent mortgages. So tell me what will the
impact of that be and what I'm driving towards. Is
(16:57):
it true that there will be a lot of demand
basically immediately below the threshold, and then when you get
to the threshold there's a big drop.
Speaker 2 (17:06):
I think that's Firstly, I think these schemes are going
to be well supported because we know that one of
the biggest barriers to entering home ownership is the fact
that you have to pay. You have to pay lenders
mortgage insurance, and obviously people have a preference to save
a bigger deposits, so they have to pay a lower
amount of lenders mortgage insurance. Now, if you don't have
to pay lender's mortgage insurance, you'll be able to buy sooner.
(17:29):
So the national the federal scheme doesn't start until January
next year. The Queensland budget hasn't actually been announced just yet.
This was a leak from the budget which comes out today.
I suspect it we'll be starting sometime next year as well,
but I think for me, the problem with these schemes
is all they do is encourage more people to buy
(17:51):
at the high prices we've got at the moment. And
also when you're getting the federal government or the state
government involved in housing and effectively on the book for housing,
there's they're going to be more encouraged to push property
prices higher. Now, I know, listen this to these podcasts.
Your podcast are investors, and higher property prices will help investors.
(18:14):
But from a more holistic position, you know, is that
really what we need getting more people into the housing
market at already very high prices. And you know, all
of basically everything that any government in Australia does at
the moment is trying to get more first home buyers
in the market at higher prices rather than lowering prices.
(18:35):
And I think the other challenge is that every time
they do this, next time prices are more expensive, so
you have to give an even greater stimulus. So we're
at a ninety two percent deposit, you know, do we
then get to the zero percent deposit that the government
is actually covering all of your deposit, you don't have
to have any money down. Do we get to the
(18:55):
point where you've got ninja loans like they had in
the US during the GFC, you know, no job loans,
and I feel like it's a slippery slope. When I
first started in property, it was the seven thousand dollar
first home bio grant, then it was fourteen thousand, and
then it was twenty one thousand. Here in Queensland it's
now a thirty thousand dollar first home bio grand. If
(19:16):
you're buying a brand new property and it's a two
percent deposit, I feel like you're just kicking the can
down the road. And every time, you know, every couple
of years, they have to go to something bigger and
more outlandish to try and help people get into the
housing market. And at the end of the day, it's
not actually increasing home ownership rates, particularly for younger people.
So whilst it looks good, it's not really addressing the
(19:40):
slide in home ownership we're seeing here in Australia, and
just on.
Speaker 1 (19:43):
The investment point of view. So is there a merit
in that argument that when you have these schemes, that
it's the strata just above the threshold where the value
is because everybody's competing, but they have the grant in mind,
they know what the top lot is. You can't be
more the nine hundred thousands in Sydney, you can't be
more than a million in Brisbane, and then the million
(20:05):
ten thousand is certainly sort of wide open opportunity I think.
Speaker 2 (20:10):
So I think, you know, for anyone looking to invest
I think there's a great opportunity for them because they
know where these caps are and you know that you're
probably not going to have any, or if you do
have any, it's going to be very little competition from
first time buyers. So it's kind of this forgotten pocket
in the market. So that's where the investor opportunity is.
And obviously the other opportunity for investors is governments have
(20:31):
now got a lot more skin in the game as well, so.
Speaker 1 (20:34):
You think coming back that keep coming back with a
larger space of incentives as you suggest, all exactly. Yeah,
very good, really interesting insights there from Cameron. Thank you Cameron. Okay,
we're going to stick with us for some questions. I
have some very good curated property questions from our ever vigilant,
(20:54):
highly intelligent audience back in the moment. Hello, welcome back
to the Australian's Money Puzzled podcast James Kirby with Cameron
Kusher of Kusher Consulting. You probably know Cameron, You've known
that he's been associated with the both RIA and Chre
(21:15):
logic over the years. Than he is now an independent
consultant in this space. Brest asks, I recently purchased one
hundred acre rural land property outside of Perth. The price
was comparable to bind five acres elsewhere. Seemed like a
great opportunity. However, he now realizes a few things and
(21:35):
he lists them out worth hearing. Number one, insurance is
classified as rural is more expensive. Two, building costs are
cons significantly higher in rural areas. Three, there are ongoing
requirements in terms of maintenance of course over a larger space.
And perhaps most surprisingly, banks seem hesitant to lend on
(21:56):
land of this size. Interesting, he said he'd like to
hear what we have to see about these issues, except
I would just preface whatever coment says that. I'm sure Brett,
you were quite aware that ruralaland was actually rural farmland
has been a hot property, hasn't it. It's been the
best performing over quite a few years until very recently.
(22:17):
Is that right? Comment?
Speaker 2 (22:19):
Yeah, it has. It's been incredibly well performing. But you know,
as Renton's kind of highlighted here, there's certainly some risks
by that property. Your insurance costs are higher, obviously, your
maintenance costs are a lot a lot greater. The build
costs probably depending on how close this property actually is
to Perth, it shouldn't be significantly higher. But you know,
(22:41):
he said it's rural and near Perth. I don't know.
Obviously w A is big. The idea of near to
Perth might be different.
Speaker 1 (22:47):
They might be different than someone else's, Yes.
Speaker 2 (22:50):
But I mean wa in general, you know there's an
undersupplied people building houses. We've seen really rapid escalation and
construction costs over recent years.
Speaker 1 (23:00):
I imagine that's something that probably a general issue that
in genuinely rural areas, obviously the supply skills would be
less and more of an issue to get people. Quite simply,
there's always been the case. This is never investment advice
across information only. All right, thank you Brett, and best
of luck with that. I think it was very useful.
Thank you for writing in and telling the audience our
listeners your experience. Paul are grants for houses and he
(23:24):
also adds house batteries and electric vehicles. These grants are
there always just for people who are working? I think
broadly the answer is yes on that one.
Speaker 2 (23:36):
Yeah, as far as I'm aware, it's mainly for working people,
not for people in retirement phase.
Speaker 1 (23:41):
Yes, yeah, yes, that is the nature that the logic
I supposed behind most of these grants is to assist
certain people and certain demographics at certain times of their lives.
So it's not so much that it's exclusionary, but it
is effectively exclusionary at the end of the day. Okay,
thank you, Paul Carl with the ccarlital gains tax a
key issue for all property investors, and we mentioned on
(24:04):
the show that some analysts believe that capital gains could
be in the sights of the Treasury in this forthcoming
tax review, that it would be perhaps one of the
easier moves on the sector compared to other things like
negative gearing or stamp duty, and the political sort of
politically expedient one is often the one to hang on
(24:26):
to folks. But we'll see. Carlas, can you have a
capital gainst tax with no taxable income if you don't
have a taxable income do you still pay capital gains? Well,
if you have a capital gain, you pay capital gainst
tax and it is autonomous to anything else in your life.
But that's basically it isn't it.
Speaker 2 (24:46):
I don't know of any other loopholes. I think, you know,
if you're making a capital gain, the government wants a
little bit of that capital gain.
Speaker 1 (24:52):
Whether I think you make a capital gain and you're alive,
then you are, you are up for capital gains tax
and you're or nothing else really matters. It's the best
of my knowledge. If anyone can dispute that, let's here
it all right, terrific. Hey, and thank you very much
Cameron Kusher of Kusher Consulting to be on the show
this morning. Thanks for having me, James lovely to talk
(25:14):
to you. Okay, folks, we will, as I say, on Thursday,
we're going to have a look at well, very lively markets.
Actually they're not very lively markets. That's the irony. Very
very lively news, global news around markets that are oddly
complacent and relatively now volatility considering what's happening that we
will cover and also we will cover crypto. And on
(25:37):
the last show we had someone who's skeptical of crypto.
In the next show, I'm going to have Shane Oliver
from AMP and AMP was the first major financial institution
in Australia to actually make a investment in crypto, and
he will actually cover the other side of the argument,
just to be fair. Okay, talk to you soon. Remember
(25:57):
the email the money puzzle at the Australian dot com
dot a U, the s of the Wood, the
Speaker 2 (26:08):
S
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