March 24, 2025 • 36 mins
The tug of war between property and shares never ends: But for many investors, one area is more attractive. My guest in this episode has spent a lifetime investing - along with commenting on investment markets - and has come to a clear conclusion.You may not agree, but you should definitely hear him out.
Anthony Keane, personal finance writer for News Corporation joins James Kirby in this episode.
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In today's show, we cover
- Trouble-free' share market investing versus 'bricks and mortar'
- Why property investing should be kept outside of super
- Holding costs - the swing factor for the everyday investor
- Should Adelaide really be more expensive than Melbourne?
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:08):
Hello, and welcome to The Australian's Money Puzzle podcast. I'm
James Kirby from The Australian. Welcome aboard everybody today. I
want to pose a simple, single question, something I will
freely admit I am not the first to ask, but
I can tell you the answer is not set in stone,
and I expect everybody who listens to this show wonders
(00:30):
about the appeal of property versus shares? Is one better
than the others, one easier than the other? I also
want to cover some great questions that have come in
from you, the listeners. My guest today is Anthony Keene.
He's a personal finance writer at News Corporation, regular guest
on the show and has recently written quite a bit
(00:51):
about this and I think on usually four commentations and
writers has come down quite firmly on one side. But
we won't tell you what side that is till we
actually kick it around first. How are you, Anthony, I'm good.
Thanks James, Thank you for coming on the show again.
I know it's a big week, budget week. This comes up,
right property versus shares? Sometimes it comes up in the
guys of whether people should put their money into super
(01:14):
or property. That's something that comes up all the time
of late what people have been saying, and these are
very powerful points. I not the issue of which is easier.
I think traditionally always the thing people said. Look, I
find it all too hard with shares. I don't understand
frank dividends. I don't know one company from another. I
do understand property. It's easier. But in recent times, buy
(01:37):
and selling shares has become terribly easy and much cheaper
as a percentage of how much you're spending. It's become easy,
it's become cheap, hassle free. This is not an advertisement
for exchange traded funds or index funds, but it's beyond
dispute that the creation of exchange traded funds has meant
that you don't have to know a damn thing about
(01:58):
the share market these days to be quite usefully and
diversified in your investment approach through ETFs. What do you
think of that approach that people are starting to talk about.
Speaker 2 (02:10):
I think you're absolutely right, James etf. I mean, they've
been around for a good sort of twenty odd years,
but they just keep going from strength to strength. Warren Buffett,
the famous US billionaire is a big fan of them,
as are a lot of sort of successful investors, because
with every dollar that you put into an ETF, you
don't have to choose a company, you don't have to
(02:31):
research them, you just can track the index. So one
dollar of investment puts you across the top two hundred
stocks on the ASX or the S and P five
hundred index in the US, or whatever you want. So
you're just getting that simple access. And as you said,
there's lower costs as well, and it's great and I
have a lot of them in my personal superfund, and
(02:52):
it is great way just to ride the market. You're
not trying to do stock picking and that sort of thing.
I've tried that over many years. Like most I reckon,
I came out in the red rather than the blacks.
So it's a great way to do it. And at
the same time, I think property to a degree has
become trickier, especially in some states of Australia. There's just
constant changes to the rules for and if we're talking
(03:15):
about residential investment property, which is still with vast majority
of where Ossie's investing rule changes, tax changes, election promises
that may or may not happen. We just don't know.
So that seems to have become more complex over the
last five or ten years as well.
Speaker 1 (03:32):
Yes it does. I mean we don't on the shore
recently about the ten separate property taxes in Victoria and
that they had created two new ones in January. Believe
it or not, I'm out of date. There's a thirteen
tax and they've just announced that the emergency services level
would be higher for property owners than for homeowners. So
there you go, folks, thirteen taxes lined up for you
(03:53):
should you choose to invest in one stage versus another
state like Queensland, which has less taxes. Before we get
into that one thing we're saying, though, we're putting shares
up against property here and asking the question, posing the question,
which is better now when we talk about shares. Of course,
there's a part of it which is so easy. It's
(04:14):
it's hard to underestimate. Like if I own a property
and Anthony, you won't invest in property, so have I
even if you had the managed and I use the
word managed in sneak quotes because even if you have
a property managed, you know the manager is going to
call you a lot and you're walking down the street,
and then you get these calls about details of and
if you have several properties, you get several calls about
(04:36):
several details. So you can't really outsource this in any
substantial way unless you pay. The more you pay, obviously,
the more you can outsource it, then the less you
make on the property. But the marvelous thing about chairs
is that there's so little work. And you mentioned ETFs,
I mean there's absolutely no work with them. Mister. You
(04:58):
go and you bought your straight share market, your US
share markets, you're NASDAK. Maybe you buy a world index,
Maybe you buy a single team that you're particularly interested in,
like say AI or something like that, or electric cars,
whatever you like, you buy them and really you don't
have to do a damn thing month after month. And
(05:18):
that contrasts substantially. And our listeners who have property would
know that. Do I make it sound too easy?
Speaker 2 (05:25):
No? I think it is as simple as that. Still,
obviously there's the issues that you're going to have with
rises and falls in stock markets here and overseas, they
do tend to be a lot more volatile. So but
you're right, the simplicity seems to have gone. It. You
just to seem simple to Number one investment for Ozzie
once I'd paid a bit off their own home, was
(05:46):
to buy an investment property. But it has become more difficult,
as rightly you say, share ownership has become simpler and
cheaper on the Internet has done a lot that not
only to make those processes cheaper, but also provide research
for those who want to do the research.
Speaker 1 (06:03):
And that's a very good point. It was upon a
time you had to be a broker's client to get research,
and now a lot of researchers out there for free,
isn't it on stocks? And they're quite certainly the major stocks,
the top twenty stocks. You can get quite a lot
for free. Or you could just sign up with an
online broker and do very little, like say one of
the major brokers. You don't have to do much trading
(06:24):
with them, and you're on forever and you can still
access what they access and their research. So that's another attraction.
Someone once said, you know, I thought it was very
powerful that you said there about the market's being volatile.
I mean, in truth, if residential property, if every house
had a neon sign across the top which showed in
(06:44):
real time, how much that house was valued per day.
It would move around, of course, just like people. Super
moves around, and people get obsessed with their super and
they're looking at it every day, which they should not do.
I'm not saying they shouldn't look at it all regularly,
but looking at it up simply isn't very healthy. Now. Similarly,
I wonder if we had if every house, by law,
had to have a sign around it, across the top,
(07:06):
a little box where you could see how much it
was valued on that day, would people's attitude above comparing
shares and property change.
Speaker 2 (07:15):
Perhaps a little, But I and maybe I haven't looked
in the right spots, but it's extremely rare that you'll
see a value of real estate by more than fifty percent,
as we saw during their global financial crisis, And so
there is that. And even during the COVID some that
sort of march exactly five years ago, that was pretty
(07:37):
hairy further stock market, but it was also scary for property.
I remember writing stories five years ago how property investors
were selling up everything at the time because they thought
the world was ending. But probably the biggest investment mistake
they made, because it's been generally pretty strong for everyone
since then, some states have done a lot in cities
a lot better than others, but everyone's recovered from that.
(07:59):
So I think properly would move on a daily basis
if it was a way of valuing it. But I
still don't think it would move as much as shares.
But you're dealing with much bigger numbers as well. Medium
sort of house price at or nine hundred thousand only
knows by one percent or whatever, it's still eight or
nine grand that you've lost there, So yes, it probably
(08:19):
wouldn't want to see how much you've made or lost
in a particular day on the real estate market. That's right.
Speaker 1 (08:24):
You see this thing because it is moving up and down.
But maybe people like that fact that there's an element
of blind trust there that you just know over a
lot period of time it's going to go up. It's
also going to go up on the share market. The
problem is, or the issue is that you can see
it every day just turning things around on property. Anthony.
The number of people who've come up to me in
(08:45):
Sydney and Melbourne in the last two weeks or so
and said, and they are older in the mean, and
they have said, I can't see how property is going
to be as good as it were. The number of
people who have had a lifetime and property effectively a
(09:07):
lifetime and property, it was said twenty five to thirty
years investing and have now decided that they've already sold
their property or they've decided to get out. Do you
think that has changed the answer in any way to
which is better?
Speaker 2 (09:23):
I don't know that it has. I think that and
I mentioned before different cities have done differently with property.
But we're lucky in a way. If you look nationally,
you can always play the cycles if you're a serious investor,
and it's not just the house next door to your
own home. If you're a serious investor, you can look
at other states when you save in land tax because
(09:45):
you're your own home in those states, but also different
points of the market. The fact now that people who
have been living in Brisbane or Adelaide have had massive
gains in the last few years, more than coreter of
a million dollars each in their sort of median house
price games, whereas Melbourne and Hobart have literally done basically nothing.
I think that affects the view and I don't think
(10:07):
there's going to be a shortage of property investors coming up.
We've got half a million people coming into Australia every
year dreaming of a better life, and bricks and mortar
has been one of the best wealth creators in the
history of this country.
Speaker 1 (10:21):
I think they used to see residential property doubles in
value every seven to ten years. They said that for
about fifty years. Don't say that anymore, do that. I
think that that's old hat.
Speaker 2 (10:33):
Well, you think it is, given just the high price
of median prices everywhere, even in those cities that have
struggled in recent years. Get talking six seven, eight, nine
hundred thousand dollars median value, and their prizes have grown
so much faster than real wages growth. It just makes
it harder and harder for people to get in there.
One of my properties, i'd spent nine years where it
(10:56):
went absolutely nowhere, but in the last five it's gone
up by fifty percent. And I just kept telling myself
for those nine years, it'll get good, it'll get good.
I have the view that you do invest in property,
you're only one property cycle away or boom away from
being really comfortable with it because your initial loan, even
if you haven't any paid anything off of the principle
(11:18):
of this investment loan. You've just made such a big
capital gain, which obviously there's tax issues later on and
those sorts of things, but more so than an eight
hundred thousand dollar property or versus one hundred thousand dollars
that you might put of your own money into shares.
So there's a lot of pros and cons for both
of them.
Speaker 1 (11:36):
So people they got bigger in property and they take
bigger loans, and maybe that's just part of it. I mean,
maybe if they went as big on shares and took
out loans on shares and negatively geared their shares, the
gap wouldn't be as big.
Speaker 2 (11:48):
Yeah, so you're talking to me who still has post
traumatic stress from the global financial crisis.
Speaker 1 (11:53):
When I did you mentioned this, it's obviously it's going
to be for life, but the.
Speaker 2 (11:57):
Sing is for life when you're borrowed and in investment property.
And obviously property wasn't as expensive back then, but in
twenty ten, but I had borrowings of more than the
size of an investment property loan and watched it drop
by fifty five percent.
Speaker 1 (12:11):
You were negatively geared into shares. Yes, it exaggerated the
difficulties it did.
Speaker 2 (12:17):
And I was listening to the experts. I was a
financial writer back then, so I was talking to economists
and advisors every day, and they were saying, market's down
ten percent, is it it's time to buy Marcus? Down
fifteen percent, time to buy all It's down twenty percent,
it's not going any worse than this, and down fifty
five percent at the end. And it did get worse,
but it was the same as real estate, like I
(12:38):
went for the decade with no growth. You just sit
on it and eventually it comes back over time.
Speaker 1 (12:43):
So you're a believer in the reversion to the mean. Yes, okay, now, folks,
We'll take a short break and then I'm going to
come back and we're going to talk about what Anthony
actually thinks about this issue of property versus shares. I
want to talk to him about the side he's come
down on and why olly back in the Hello and
(13:08):
welcome back to the Australians Money Puzzle podcast. James Kirby
here talking to Anthony Key, my colleague at News Corporation,
personal finance writer based out of Adelaide. And maybe that's
why he's so chirpy about property. Let's test him. So, Anthony,
in recent times, you have come down quite clearly on
one side over the other, property versus shares. Tell us
what your conclusion was and why you came to it.
Speaker 2 (13:31):
It has been property, and it has been property for
twenty odd years. And as I said earlier experience during
the global financial crisis where I negatively geed into shares,
I actually double geed into shares at the time. If
I did not have a stable income at the time
and my wife didn't have a stable income, we would
have been in all sorts of trouble.
Speaker 1 (13:50):
Did you literally get margin calls.
Speaker 2 (13:52):
Or no, no margin calls because we were borrowing against it.
There was margin loans in there, but that was secure
against the property loans. So yes, it got pretty scary
and prett much. But that said, I'm a fan of shares,
like almost all of my superannuation is invested in ETF
shares through ETFs and that sort of thing. But I've
just found that property, and I have been criticized when
(14:12):
I've written this in columns before as well, that property.
I would always choose property over shares because number one,
as we spoke about earlier, the size. You spend half
a million dollars on a property, and that's cheap these days,
I know, But if it rises by ten percent, you've
just made fifty thousand dollars sitting there. I know that
anyone who's bought real estate in Brisbane or Adelaide or
(14:34):
Perth in recent years has made hundreds of thousands of
dollars per property just based on the rise of the
median home price there. So the gains are generally that
much bigger. But as you said, you can put half
a million dollars into the market and that sort of thing,
if you can stomach sort of that volatility. I really
believe you should have both. But if I had a choice,
(14:55):
it would be property. And I actually looked at the
only a week ago in a column the city I
would buy in, and your talk earlier about thirteen taxes
in Victoria's shaken up a little bit. But the fact
that Melbourne prices are just so low compared to where
they have been historically and versus the upper other capital cities.
(15:18):
If I had a spare eight hundred thousand or whatever,
or the capacity for aud it, which I don't, but
if I had that, it would certainly be looking in
that market, whether it's Melbourne or elsewhere in Victoria. But
prices they will have to revert back at some stays
the investors. You can't drive every investor out of the
second biggest city in the country. So there will be
(15:41):
changes of governments, there will be changes and things will happen.
I remember, yeah, a few years ago Hobart's prices were
just way ahead of Adelaide's. Adelaide was the lowest. And
now I've did some sort of numbers as well. Adelaide's
ahead of Melbourne for the average dwelling price and it's
about two hundred thousand dollars medium difference between Adelaide positively
compared to Hobad now.
Speaker 1 (16:01):
So so just to clarify then, as you see, if
I demand the straight answers from you property versus shares,
you say property, Just tell us a little bit more
why property one? You know the poloctivity before.
Speaker 2 (16:15):
Property and the security as well as an investor who
wants to grow their wealth, it is much easier to
borrow against a property, whether it's your own home or
even the equity you have in an investment property after
some growth, much easier and much cheaper, to the interest
rates are a heck of a lot cheaper. There are
(16:35):
obviously more holding costs when it comes to owning real estate,
which are all tax deductible, as is the cost such
as interest.
Speaker 1 (16:43):
Obviously, there there's more work, isn't there, Anthony, I was saying,
it's just more literally labor hours.
Speaker 2 (16:48):
Yes, And whenever the agent rings you, they're on you
to give them more money to do some repairs or
that sort of thing. I don't want to count how
much I've spent on investment property sort of repair.
Speaker 1 (17:00):
Everyone's been through that. I had a properly one time,
and there was a tenant therefore, I can't remember a
year or two and never asked for a single thing,
nothing whatsoever. And I remember thinking, oh, this is really good,
you know, just the place must be quite better than
I thought it was, because the months would go by,
two years, not a thing. Then the tenant left and
another tenant went in, and that tenant asked for something
(17:24):
every month. It was like they sat there and looked
around and tried to think of something. And I remember thinking,
you know, it averaged out probably normal, probably averaged out
as a normal tenant, so that I had one tenant
that never complained and one tenant that never stopped complaining
the same place. So maybe we all have to go
through that. But it sounds to me like that aspect
(17:45):
of property, it doesn't weigh against you. You don't put
much into the easiness of We were talking about the
ETFs and never having to think basically set and forget,
which you can do to some extent of DFS. The
labor part of property, the documentation, the property management, the
tenant management, the huge documentation when it comes to buying
(18:06):
and selling property. That doesn't seem to wear against.
Speaker 2 (18:09):
Chill, no, I think because it's such a long term investment.
I don't think I've sold an investment property for ten
years maybe or more so. It is it's not constant
that side of things, and it's just obviously people will
like to see and touch where their money is. It's well,
(18:29):
you can go and hug a shopping trolley at will
Wors if you own Woolworth shares, or touch the side
of your Commonwealth Bank built which is probably not owned
by them anyway. It's a property trust, but you could
see that. But shares are effectively, in old fashion term,
still a piece of paper whereas owning a house that's
giving somebody a roof over their head and allowing them
to have their pets and their family in this house.
(18:51):
It's the problem is property investors, I think in Australia
sort of become tall poppies and they're easy to have
a go at.
Speaker 1 (18:59):
Well everybody has and who knows what your super etf
is investing in it. I mean, you happen to clue
the worst companies in the world by definition will be
included because they buy everything. So you can kind of
toss that one out the window pretty fast as an argument.
I'm digressing. Okay, Now, one thing that strikes me though,
despite your conviction that property is better than shares, you
(19:22):
don't have any property in your super, really, do you no?
Speaker 2 (19:25):
And that's purely a factor of I've sought as an
investor to use residential real estate to grow, to grow
outside super and I see my super as I mean,
everyone wants to retire early and I've sort of been planning,
hoping for that, hoping slash planning for years and the
plan was to maybe sell a property or closer to retirement,
(19:47):
and then it's pretty easy to get money into a
super fun then just when you're on a full time
wage is probably not the time you want to be
selling an investment property and banking just having to pay
tens of thousand dollars in tax to time to do
that would be from a tax purpose. My view is
when you're not actually earning any other income, so then
that capital gain becomes your income for the year and
(20:09):
you're not being slugged a big chunk of any game
that you get. So I still do hope to hold
property in Super, but while my SUPER is not large enough,
it's all in shares just to have that diversification. I mean,
we talk about property versus shares, but really you should
have both.
Speaker 1 (20:26):
Okay, And the negative gearing, of course is better outside
super than inside SUPER, and I'm sure that's part of Europe.
Speaker 2 (20:33):
Yeah, yeah, negative gearing is good. But I think that
the aim for every property investor should be to be
positively geared as soon as they can so by properties
that the rent is going to cover a lot of
a lot of the costs that you've got. It's become
harder obviously in the last three years when mortgage interest
rates have gone so high, but there are still opportunities
(20:54):
to get close, not to cover it completely, but there
was a heck of a lot of positively geared property
investors back before May twenty twenty two when reads through Yeah,
when race yeah, yes. So now obviously interest has become
their biggest by far their biggest cost.
Speaker 1 (21:11):
With reads roughly twice yields very broadly in the metropolitan cities. Anyway,
is there positive gearing feasible?
Speaker 2 (21:22):
It is, and this is just from personal experience. It
is to get pretty close to being positive, and you
only need to, as we said earlier, how these things
grow over time. What might have been a negatively geared
property five years ago when prices were much lower. As
we all know, rents have gone up a lot in
the last five years as well, that sort of contributing
and someone else is helping a property investor pay off
(21:43):
their mortgage. So it is possible. And as I said,
any property that's maybe been held for five or ten
years is probably going to be positively geed or getting
close to that, purely as a result of prices going up.
Of course, there are pockets where prices have gone nowhere
and interest rates have gone up, and I really feel
for those investors, and I've spoken to a few colleagues
(22:05):
over the years, and I think they experienced that in
certain states and they're selling out. So I'm just tired
of losing money. As we know, negative gearing is losing money.
You're only getting a proportion of that money back from
the tax office.
Speaker 1 (22:21):
So as years go by, you're putting more and more
emphasis on the sale price that you're going to get.
Speaker 2 (22:27):
Yes, you do, exactly, that's right, And I just think
that you've got to have a plan. I don't have
a direct plan I'm doing this at this age and
this at this age, but I do have a plan
that hopefully if I do get to that dream of
retiring a little bit earlier, to sell a property or
more and then get that money into super and maybe
(22:48):
use that for a property within Super purely because of
the benefits of superannuation gives you with you retire after
age sixty and you move it across to your sort
of account based pension and it's tax free capital gains.
It's just the biggest best deal that any investor can have,
I think, And with a lumpy asset like a residential
property or a commercial property or something like that, get
(23:09):
that game tax free in your sixties or seventies is
just huge.
Speaker 1 (23:13):
So listeners, I think with Anthony, if you hear between
the linesbody's saying, obviously he does prefer property over shares.
There's a lot of issues to do with security there.
But there's a couple of issues. I think that's very
clear from this conversation. You're a serious long term investor, Anthony.
You're talking ten to fifteen years. That's a long time,
right With an investment, you like the property to be
(23:36):
outside Super because the tax benefits are better as you
are working to keep it outside Super. But once you
retire in retirement phase, your idea is to get those
properties to take advantage of the tax benefits inside tax
free retirement basically to the extent.
Speaker 2 (23:51):
You can, yes, yes. And also I imagine if I
had more SUPER, I would probably be looking at it
more closely. But being an investor in property outside of
so to then use all of my SUPER to put
towards a property inside Super. And it's quite complex borrowing
within Super as well. It just it gets very messy,
and that's not really good diversification. Having a whole lot
(24:12):
of buzzy real estate outside Super and the only thing
you've got inside is the same thing. So you've missed
out on the global share market growth over the last
sort of ten years or five years if you take
that strategy.
Speaker 1 (24:24):
Okay, we've got questions. Maybe back in a moment. Hello
and welcome back to The Australian's Money Puzzle podcast. James
Kirby here with Anthony Keane, regular guest person, finance writer
across NewsCorp and a guest who is not deliberating, is
(24:47):
not covering what'sor I'm looking for vacillating on this issue.
He is a property investor first and that's an interesting
point of view and very interesting because since I asked
you to come on the show, actually Anthony just pure serendipity.
Louise asks, I love the podcast with Kate. That would
(25:09):
have been Kate Becos, the buyer's advocate who was on
last week, and the talk around investing in shares versus property.
As someone who's had great luck with property, it's been
my go to. However, I'm finding it hard to stom
up investing again when the holding costs are forty six
hundred dollars a week for a standalone property around a
(25:30):
million dollar mark. I know it's possible to add value
to a property, which is why I prefer it over shares.
And it's actually I think the strongest argument Louise, But
she asks, at what point does that argument become redundant
when you can get ETFs to set and forget. I
telling you that is straight from the listener, Louise. It's
(25:50):
like we scripted it, but it's a genuine question that
came in. So what would you say to Louise Anthony.
Speaker 2 (25:57):
I'd like to know where the holding cost of four
to six hundred a week because that is that's getting
pretty scary, those sorts of levels.
Speaker 1 (26:04):
And is that she's including big interest build there.
Speaker 2 (26:08):
Yes, yeah, interest billed as well. But if it's including
interesting probably it may be a bit too low. Who knows.
But obviously there's rental income from a tenant coming in
and with pretty sort of tight rental markets, that's one
thing property investors haven't had to worry about in recent years,
is finding tenants. And it's true ETfr said and forget
(26:29):
and property is not. We're not sure where Louise is from,
so maybe her feelings are colored by the market in
her particular city over the last five years. It would
be a lot different if you were living in Melbourne
than if you were living in Brisbane. I would say
your views on property and also the outlook property is
as you said, it's great to add value to And
(26:51):
I think we covered a lot of the points earlier
when we were talking like discussing this.
Speaker 1 (26:55):
We did it all for you, Louise. But it's a
very topical issue and question, and I think what Anthony
is saying is highly relevant. If you had been in Adelaide,
for instance, which was not a great market for long
stretches of time in the last five years. I mean,
it's so good it would color reviews. And similarly, if
(27:17):
you had been in Melbourne or even parts of Sydney
where your property is doing very little, your yield is
very low, your rates just went up, they would colory
review as well. All Right, we will move on. Thank you, Louise.
I hope the earlier segment of the show was useful
to you. I imagine it was, Lucas there's been an
increased talk of heavy market falls in world markets. I'd
(27:40):
love to hear more advice on steps you can take
to be prepared for this. In particular, what are the
opportunities and how can you take advantage of a crash.
Longtime listener, first time country Abuti, Thanks Lucas. Okay, broadly,
very broadly. Obviously, the rolling answer is diversification, and that
just as we were talking about Anthony and I a
(28:01):
minute ago about having properly in shares that you want.
Let's forget about the tax structures for a moment, but
just if you look back at what Anthony was saying,
he has properly he has shares, He has diversified shares
all around the world in all sorts of markets because
he's in ETFs. So you have that diversification, and I
think that's absolutely rock bottom. How you defend yourself. So
(28:22):
it turns out when things are going badly or they're
of concern, then you have on listed assets, maybe you
have some securitized that, maybe you have some gold, maybe
you have some cash. That part of your investment portfolio
is robust, resilient. Part of it is risk free. You
(28:42):
don't have to worry about when the share market falls
vice versa. When the share market's red hot, you've got
the sphere of missing out. You have shares and you
have risk assets that will move up with the markets
when the market's moving up, so you have that diversity, Lucas,
I think is seriously rock bottom. The answer to your
question as for taking advice when there's a crash and
(29:08):
taking advantage of when there's a crash, this is never advised.
It's information only. But as we're taking advantage when there's
a crash, again, textbook would suggest the answer is to
have cash. Cash is king when the markets crash, but
cash is expensive when the market's doing average because you're
not going to get as good a return as shares.
(29:29):
So that's the sort of fine balance. I think, what
do you think, Anthony.
Speaker 2 (29:32):
Yes, I agree when I saw that question. The two
things that I wrote down as far as being prepared
for it is be prepared not to panic, don't mainly
jerk reactions with these sorts of things. I think we
saw the share market sink ten percent in the matter
of weeks in here and also in the US, and
it would bounce back a little bit since then. But
and the experts, I'm often told by experts you only
(29:54):
make a loss when you sell if you're not panicking,
you're staying the course and you're sticking to your long
term plan. Whether that's hold it for five years or
ten years, oh whatever. Don't panic because these things are
completely normal. Ups and downs are very normal. And the
other thing as far as taking advantage is, as you said,
keep some cash available or if you've got a mortgage
and you've got cash, is better working off that have
(30:16):
some money in your regional facility. If ready to pounce,
then it becomes a timing issue. Do your pounds if
it falls by ten percent or do you wait and
see if it falls by fifteen or twenty percent? You
don't know. I've read something today in the Australian where
one of the most respected economists in Australia was saying
it could quite possibly be a fifteen percent fall here.
So you just keep an eye on that sort of
(30:37):
stuff and hope that if you buy in a fifteen
percent it doesn't go to fifty five percent.
Speaker 3 (30:41):
Trauma, trauma from the GFC is kicking through again. By
the way, what's worth knowing what any's talking about here.
It was the great crash of the Great Recession of
the GFC.
Speaker 1 (30:52):
If you are lucky enough to be young enough not
to be familiar with this, and what happened was the
share market. The Australian share market at all market's piked
November two or seven, and as Anthony says, they fell
fifty percent after that. For what was even almost more
difficult than the fact that they fell fifty percent, was
they took two years to do it. So it's slowly
(31:14):
ground down from the peak in November two or seven
to the bottom in March two oh nine. But it
was worse than a crash, wasn't it, Anthony, because it
just it was never obvious. There was little four starts.
Speaker 2 (31:25):
Oh that's right, and I swear down yes, I'm doing
research on up until then. The big crash we'd had
was the nineteen eighty seven massive crash, but in the
prese that had doubled in twelve months and then halved again,
so it literally you've only lost twelve months again, whereas
the GFC people had lost years and years of gains,
and then it took a good decade or more for
(31:48):
the All Ordinaries Index to get to it recover November
two thousand and seven levels as well. So don't panic.
Keep some powder dry, ready to dive in when you
think it's right. But I wouldn't dive in, go all in,
because at any time you never want to go all
in on anything. I now entrepreneurs will disagree and say
that the big, massive bet that they've made is paid
(32:09):
off in big time. But there's a lot more that
it hasn't than there are those who have.
Speaker 1 (32:13):
They only tell you about the bets that win. I've
never seen anybody in the paper saying I took a
massive bet and I lost all right, as you say,
a measured approach dollar cost averaging. As we've often mentioned
on the show, final statement of all the questions from
Andrew and I make the point that Andrew operates out
of north Haven, which is in Adelaide, and he says
(32:35):
I right. With regards to your podcast on the fifteenth
of October where you were aghast that Melbourne property prices
were on a part with Adelaide despite Melbourne having five
million people, Yes, I was aghast economically, Andrew that a
city of five million that houses in that city should
be considerably lower than houses in another city. What's the
(32:57):
population of Adelaide.
Speaker 2 (32:58):
Roughly one point five I believe, and not a lot
over one point five.
Speaker 1 (33:03):
So eclonumbists would suggest that the bigger city you think
about it, splinder Man, should be more expensive and traditionally
for one hundred years, perhaps two hundred years, that has
been the case. Anyway, Andrew says there's two reasons, actually, James,
you've missed them. There's two reasons. One Melbourne is a
and there's a well known expletive here which basically says
(33:23):
it's not a nice place at all. So he runs
Melbourne down badly as the most unattractive location. And then
he says Melbourneians are both ignorant and arrogant and have
a chip on their collective shoulder and they think the
cafe culture is the standout in Australia. Well, I don't know.
I think about that. It was entirely an economic observation.
(33:45):
What do you think's been based?
Speaker 2 (33:48):
It was very entertaining question. I doing that a lot
of South Australians and I am one of them. We
still have a chip on our shoulder about Melbourne stealing
our Grand Prix for years ago.
Speaker 1 (33:57):
We stole it and stole it. Well we are.
Speaker 2 (34:00):
There's chips on shoulders all over the place. But as
I said earlier, if I was to pick one city
to invest in now with real estate, I would choose
Melbourne purely because I've never seen anything like that. The
latest figures from prop Track, the average dwelling price in
Adelaide is now eight hundred and forty nine thousand, and
in Melbourne it's seven hundred and ninety three thousand. So
(34:21):
not only is it on a par Adelaide's gone fifty
grand ahead of Melbourne. And I just can't see that
staying forever. No matter what various governments try to do
to destroy or spruce up property markets. I just think
that eventually we will revert to the fact where our
biggest cities have our most expensive houses. And that's just
based on your twenty or thirty years of following this so.
Speaker 1 (34:44):
Just could be a lifetime of expertise.
Speaker 2 (34:46):
It could be wrong, but yes.
Speaker 1 (34:47):
Okay Andrews, you heard it here first. But take you
very much for correspondence, and keep them ruling folks, and
keep sending the voice memos to love to get them.
The first few have come in. We really like them.
When you're doing your voice memo, remember you can write
to us on an email or if you like, just
do a voice memo. And when you're doing the voice memo,
just keep it short, you know, thirty seconds. So that's
(35:09):
just for broadcasting purposes for collecting them. Let's have some more.
Let me tell you the people who come in first
with the voice members will get published and I will
deal with their answers. Okay, that's a promise. So if
you really want to make sure your question gets answered,
try a voice membo. All right, Thank you very much,
Anthony Keen. Great to have you on the show again.
Speaker 2 (35:28):
Thanks James, great to be here.
Speaker 1 (35:30):
You're going into the lock up? Yes, do you think
you're going to have enough to do?
Speaker 2 (35:34):
I think yes. They keep me pretty busy. I'm trying
to work out how many I've done. I think I'm
over twenty five federal budgets now, somewhere around the twenty
five mark. I think I reckon from the late nineties.
I started as a business wrider going into budgets, and
I don't think i've missed one since then.
Speaker 1 (35:48):
You're not from the vintage that remembers bringing typewriters into
the lockdowp are you ye?
Speaker 2 (35:53):
Typewriters?
Speaker 1 (35:53):
Now?
Speaker 2 (35:54):
I am from the vintage where we had to share
computer screens in the afternoon approaching deadline. So oh, they're big,
huge behind the Fords in the newsroom waiting for that.
Speaker 1 (36:03):
Yes, are you finished? Excuse me, are you finished that? Story?
I do have this one I must put through in
the next hour. Yes, I've I had a little bit
of that, just a little bit of that in Hong
Kong of old places that. Yeah, I don't listen. Okay,
Thanks Anthony, Thanks everyone for listening. Thank you Leah Samaglue
for producing today's show. Talk to you soon.
Hello, and welcome to The Australian's Money Puzzle podcast. I'm
James Kirby from The Australian. Welcome aboard everybody today. I
want to pose a simple, single question, something I will
freely admit I am not the first to ask, but
I can tell you the answer is not set in stone,
and I expect everybody who listens to this show wonders
(00:30):
about the appeal of property versus shares? Is one better
than the others, one easier than the other? I also
want to cover some great questions that have come in
from you, the listeners. My guest today is Anthony Keene.
He's a personal finance writer at News Corporation, regular guest
on the show and has recently written quite a bit
(00:51):
about this and I think on usually four commentations and
writers has come down quite firmly on one side. But
we won't tell you what side that is till we
actually kick it around first. How are you, Anthony, I'm good.
Thanks James, Thank you for coming on the show again.
I know it's a big week, budget week. This comes up,
right property versus shares? Sometimes it comes up in the
guys of whether people should put their money into super
(01:14):
or property. That's something that comes up all the time
of late what people have been saying, and these are
very powerful points. I not the issue of which is easier.
I think traditionally always the thing people said. Look, I
find it all too hard with shares. I don't understand
frank dividends. I don't know one company from another. I
do understand property. It's easier. But in recent times, buy
(01:37):
and selling shares has become terribly easy and much cheaper
as a percentage of how much you're spending. It's become easy,
it's become cheap, hassle free. This is not an advertisement
for exchange traded funds or index funds, but it's beyond
dispute that the creation of exchange traded funds has meant
that you don't have to know a damn thing about
(01:58):
the share market these days to be quite usefully and
diversified in your investment approach through ETFs. What do you
think of that approach that people are starting to talk about.
Speaker 2 (02:10):
I think you're absolutely right, James etf. I mean, they've
been around for a good sort of twenty odd years,
but they just keep going from strength to strength. Warren Buffett,
the famous US billionaire is a big fan of them,
as are a lot of sort of successful investors, because
with every dollar that you put into an ETF, you
don't have to choose a company, you don't have to
(02:31):
research them, you just can track the index. So one
dollar of investment puts you across the top two hundred
stocks on the ASX or the S and P five
hundred index in the US, or whatever you want. So
you're just getting that simple access. And as you said,
there's lower costs as well, and it's great and I
have a lot of them in my personal superfund, and
(02:52):
it is great way just to ride the market. You're
not trying to do stock picking and that sort of thing.
I've tried that over many years. Like most I reckon,
I came out in the red rather than the blacks.
So it's a great way to do it. And at
the same time, I think property to a degree has
become trickier, especially in some states of Australia. There's just
constant changes to the rules for and if we're talking
(03:15):
about residential investment property, which is still with vast majority
of where Ossie's investing rule changes, tax changes, election promises
that may or may not happen. We just don't know.
So that seems to have become more complex over the
last five or ten years as well.
Speaker 1 (03:32):
Yes it does. I mean we don't on the shore
recently about the ten separate property taxes in Victoria and
that they had created two new ones in January. Believe
it or not, I'm out of date. There's a thirteen
tax and they've just announced that the emergency services level
would be higher for property owners than for homeowners. So
there you go, folks, thirteen taxes lined up for you
(03:53):
should you choose to invest in one stage versus another
state like Queensland, which has less taxes. Before we get
into that one thing we're saying, though, we're putting shares
up against property here and asking the question, posing the question,
which is better now when we talk about shares. Of course,
there's a part of it which is so easy. It's
(04:14):
it's hard to underestimate. Like if I own a property
and Anthony, you won't invest in property, so have I
even if you had the managed and I use the
word managed in sneak quotes because even if you have
a property managed, you know the manager is going to
call you a lot and you're walking down the street,
and then you get these calls about details of and
if you have several properties, you get several calls about
(04:36):
several details. So you can't really outsource this in any
substantial way unless you pay. The more you pay, obviously,
the more you can outsource it, then the less you
make on the property. But the marvelous thing about chairs
is that there's so little work. And you mentioned ETFs,
I mean there's absolutely no work with them. Mister. You
(04:58):
go and you bought your straight share market, your US
share markets, you're NASDAK. Maybe you buy a world index,
Maybe you buy a single team that you're particularly interested in,
like say AI or something like that, or electric cars,
whatever you like, you buy them and really you don't
have to do a damn thing month after month. And
(05:18):
that contrasts substantially. And our listeners who have property would
know that. Do I make it sound too easy?
Speaker 2 (05:25):
No? I think it is as simple as that. Still,
obviously there's the issues that you're going to have with
rises and falls in stock markets here and overseas, they
do tend to be a lot more volatile. So but
you're right, the simplicity seems to have gone. It. You
just to seem simple to Number one investment for Ozzie
once I'd paid a bit off their own home, was
(05:46):
to buy an investment property. But it has become more difficult,
as rightly you say, share ownership has become simpler and
cheaper on the Internet has done a lot that not
only to make those processes cheaper, but also provide research
for those who want to do the research.
Speaker 1 (06:03):
And that's a very good point. It was upon a
time you had to be a broker's client to get research,
and now a lot of researchers out there for free,
isn't it on stocks? And they're quite certainly the major stocks,
the top twenty stocks. You can get quite a lot
for free. Or you could just sign up with an
online broker and do very little, like say one of
the major brokers. You don't have to do much trading
(06:24):
with them, and you're on forever and you can still
access what they access and their research. So that's another attraction.
Someone once said, you know, I thought it was very
powerful that you said there about the market's being volatile.
I mean, in truth, if residential property, if every house
had a neon sign across the top which showed in
(06:44):
real time, how much that house was valued per day.
It would move around, of course, just like people. Super
moves around, and people get obsessed with their super and
they're looking at it every day, which they should not do.
I'm not saying they shouldn't look at it all regularly,
but looking at it up simply isn't very healthy. Now. Similarly,
I wonder if we had if every house, by law,
had to have a sign around it, across the top,
(07:06):
a little box where you could see how much it
was valued on that day, would people's attitude above comparing
shares and property change.
Speaker 2 (07:15):
Perhaps a little, But I and maybe I haven't looked
in the right spots, but it's extremely rare that you'll
see a value of real estate by more than fifty percent,
as we saw during their global financial crisis, And so
there is that. And even during the COVID some that
sort of march exactly five years ago, that was pretty
(07:37):
hairy further stock market, but it was also scary for property.
I remember writing stories five years ago how property investors
were selling up everything at the time because they thought
the world was ending. But probably the biggest investment mistake
they made, because it's been generally pretty strong for everyone
since then, some states have done a lot in cities
a lot better than others, but everyone's recovered from that.
(07:59):
So I think properly would move on a daily basis
if it was a way of valuing it. But I
still don't think it would move as much as shares.
But you're dealing with much bigger numbers as well. Medium
sort of house price at or nine hundred thousand only
knows by one percent or whatever, it's still eight or
nine grand that you've lost there, So yes, it probably
(08:19):
wouldn't want to see how much you've made or lost
in a particular day on the real estate market. That's right.
Speaker 1 (08:24):
You see this thing because it is moving up and down.
But maybe people like that fact that there's an element
of blind trust there that you just know over a
lot period of time it's going to go up. It's
also going to go up on the share market. The
problem is, or the issue is that you can see
it every day just turning things around on property. Anthony.
The number of people who've come up to me in
(08:45):
Sydney and Melbourne in the last two weeks or so
and said, and they are older in the mean, and
they have said, I can't see how property is going
to be as good as it were. The number of
people who have had a lifetime and property effectively a
(09:07):
lifetime and property, it was said twenty five to thirty
years investing and have now decided that they've already sold
their property or they've decided to get out. Do you
think that has changed the answer in any way to
which is better?
Speaker 2 (09:23):
I don't know that it has. I think that and
I mentioned before different cities have done differently with property.
But we're lucky in a way. If you look nationally,
you can always play the cycles if you're a serious investor,
and it's not just the house next door to your
own home. If you're a serious investor, you can look
at other states when you save in land tax because
(09:45):
you're your own home in those states, but also different
points of the market. The fact now that people who
have been living in Brisbane or Adelaide have had massive
gains in the last few years, more than coreter of
a million dollars each in their sort of median house
price games, whereas Melbourne and Hobart have literally done basically nothing.
I think that affects the view and I don't think
(10:07):
there's going to be a shortage of property investors coming up.
We've got half a million people coming into Australia every
year dreaming of a better life, and bricks and mortar
has been one of the best wealth creators in the
history of this country.
Speaker 1 (10:21):
I think they used to see residential property doubles in
value every seven to ten years. They said that for
about fifty years. Don't say that anymore, do that. I
think that that's old hat.
Speaker 2 (10:33):
Well, you think it is, given just the high price
of median prices everywhere, even in those cities that have
struggled in recent years. Get talking six seven, eight, nine
hundred thousand dollars median value, and their prizes have grown
so much faster than real wages growth. It just makes
it harder and harder for people to get in there.
One of my properties, i'd spent nine years where it
(10:56):
went absolutely nowhere, but in the last five it's gone
up by fifty percent. And I just kept telling myself
for those nine years, it'll get good, it'll get good.
I have the view that you do invest in property,
you're only one property cycle away or boom away from
being really comfortable with it because your initial loan, even
if you haven't any paid anything off of the principle
(11:18):
of this investment loan. You've just made such a big
capital gain, which obviously there's tax issues later on and
those sorts of things, but more so than an eight
hundred thousand dollar property or versus one hundred thousand dollars
that you might put of your own money into shares.
So there's a lot of pros and cons for both
of them.
Speaker 1 (11:36):
So people they got bigger in property and they take
bigger loans, and maybe that's just part of it. I mean,
maybe if they went as big on shares and took
out loans on shares and negatively geared their shares, the
gap wouldn't be as big.
Speaker 2 (11:48):
Yeah, so you're talking to me who still has post
traumatic stress from the global financial crisis.
Speaker 1 (11:53):
When I did you mentioned this, it's obviously it's going
to be for life, but the.
Speaker 2 (11:57):
Sing is for life when you're borrowed and in investment property.
And obviously property wasn't as expensive back then, but in
twenty ten, but I had borrowings of more than the
size of an investment property loan and watched it drop
by fifty five percent.
Speaker 1 (12:11):
You were negatively geared into shares. Yes, it exaggerated the
difficulties it did.
Speaker 2 (12:17):
And I was listening to the experts. I was a
financial writer back then, so I was talking to economists
and advisors every day, and they were saying, market's down
ten percent, is it it's time to buy Marcus? Down
fifteen percent, time to buy all It's down twenty percent,
it's not going any worse than this, and down fifty
five percent at the end. And it did get worse,
but it was the same as real estate, like I
(12:38):
went for the decade with no growth. You just sit
on it and eventually it comes back over time.
Speaker 1 (12:43):
So you're a believer in the reversion to the mean. Yes, okay, now, folks,
We'll take a short break and then I'm going to
come back and we're going to talk about what Anthony
actually thinks about this issue of property versus shares. I
want to talk to him about the side he's come
down on and why olly back in the Hello and
(13:08):
welcome back to the Australians Money Puzzle podcast. James Kirby
here talking to Anthony Key, my colleague at News Corporation,
personal finance writer based out of Adelaide. And maybe that's
why he's so chirpy about property. Let's test him. So, Anthony,
in recent times, you have come down quite clearly on
one side over the other, property versus shares. Tell us
what your conclusion was and why you came to it.
Speaker 2 (13:31):
It has been property, and it has been property for
twenty odd years. And as I said earlier experience during
the global financial crisis where I negatively geed into shares,
I actually double geed into shares at the time. If
I did not have a stable income at the time
and my wife didn't have a stable income, we would
have been in all sorts of trouble.
Speaker 1 (13:50):
Did you literally get margin calls.
Speaker 2 (13:52):
Or no, no margin calls because we were borrowing against it.
There was margin loans in there, but that was secure
against the property loans. So yes, it got pretty scary
and prett much. But that said, I'm a fan of shares,
like almost all of my superannuation is invested in ETF
shares through ETFs and that sort of thing. But I've
just found that property, and I have been criticized when
(14:12):
I've written this in columns before as well, that property.
I would always choose property over shares because number one,
as we spoke about earlier, the size. You spend half
a million dollars on a property, and that's cheap these days,
I know, But if it rises by ten percent, you've
just made fifty thousand dollars sitting there. I know that
anyone who's bought real estate in Brisbane or Adelaide or
(14:34):
Perth in recent years has made hundreds of thousands of
dollars per property just based on the rise of the
median home price there. So the gains are generally that
much bigger. But as you said, you can put half
a million dollars into the market and that sort of thing,
if you can stomach sort of that volatility. I really
believe you should have both. But if I had a choice,
(14:55):
it would be property. And I actually looked at the
only a week ago in a column the city I
would buy in, and your talk earlier about thirteen taxes
in Victoria's shaken up a little bit. But the fact
that Melbourne prices are just so low compared to where
they have been historically and versus the upper other capital cities.
(15:18):
If I had a spare eight hundred thousand or whatever,
or the capacity for aud it, which I don't, but
if I had that, it would certainly be looking in
that market, whether it's Melbourne or elsewhere in Victoria. But
prices they will have to revert back at some stays
the investors. You can't drive every investor out of the
second biggest city in the country. So there will be
(15:41):
changes of governments, there will be changes and things will happen.
I remember, yeah, a few years ago Hobart's prices were
just way ahead of Adelaide's. Adelaide was the lowest. And
now I've did some sort of numbers as well. Adelaide's
ahead of Melbourne for the average dwelling price and it's
about two hundred thousand dollars medium difference between Adelaide positively
compared to Hobad now.
Speaker 1 (16:01):
So so just to clarify then, as you see, if
I demand the straight answers from you property versus shares,
you say property, Just tell us a little bit more
why property one? You know the poloctivity before.
Speaker 2 (16:15):
Property and the security as well as an investor who
wants to grow their wealth, it is much easier to
borrow against a property, whether it's your own home or
even the equity you have in an investment property after
some growth, much easier and much cheaper, to the interest
rates are a heck of a lot cheaper. There are
(16:35):
obviously more holding costs when it comes to owning real estate,
which are all tax deductible, as is the cost such
as interest.
Speaker 1 (16:43):
Obviously, there there's more work, isn't there, Anthony, I was saying,
it's just more literally labor hours.
Speaker 2 (16:48):
Yes, And whenever the agent rings you, they're on you
to give them more money to do some repairs or
that sort of thing. I don't want to count how
much I've spent on investment property sort of repair.
Speaker 1 (17:00):
Everyone's been through that. I had a properly one time,
and there was a tenant therefore, I can't remember a
year or two and never asked for a single thing,
nothing whatsoever. And I remember thinking, oh, this is really good,
you know, just the place must be quite better than
I thought it was, because the months would go by,
two years, not a thing. Then the tenant left and
another tenant went in, and that tenant asked for something
(17:24):
every month. It was like they sat there and looked
around and tried to think of something. And I remember thinking,
you know, it averaged out probably normal, probably averaged out
as a normal tenant, so that I had one tenant
that never complained and one tenant that never stopped complaining
the same place. So maybe we all have to go
through that. But it sounds to me like that aspect
(17:45):
of property, it doesn't weigh against you. You don't put
much into the easiness of We were talking about the
ETFs and never having to think basically set and forget,
which you can do to some extent of DFS. The
labor part of property, the documentation, the property management, the
tenant management, the huge documentation when it comes to buying
(18:06):
and selling property. That doesn't seem to wear against.
Speaker 2 (18:09):
Chill, no, I think because it's such a long term investment.
I don't think I've sold an investment property for ten
years maybe or more so. It is it's not constant
that side of things, and it's just obviously people will
like to see and touch where their money is. It's well,
(18:29):
you can go and hug a shopping trolley at will
Wors if you own Woolworth shares, or touch the side
of your Commonwealth Bank built which is probably not owned
by them anyway. It's a property trust, but you could
see that. But shares are effectively, in old fashion term,
still a piece of paper whereas owning a house that's
giving somebody a roof over their head and allowing them
to have their pets and their family in this house.
(18:51):
It's the problem is property investors, I think in Australia
sort of become tall poppies and they're easy to have
a go at.
Speaker 1 (18:59):
Well everybody has and who knows what your super etf
is investing in it. I mean, you happen to clue
the worst companies in the world by definition will be
included because they buy everything. So you can kind of
toss that one out the window pretty fast as an argument.
I'm digressing. Okay, Now, one thing that strikes me though,
despite your conviction that property is better than shares, you
(19:22):
don't have any property in your super, really, do you no?
Speaker 2 (19:25):
And that's purely a factor of I've sought as an
investor to use residential real estate to grow, to grow
outside super and I see my super as I mean,
everyone wants to retire early and I've sort of been planning,
hoping for that, hoping slash planning for years and the
plan was to maybe sell a property or closer to retirement,
(19:47):
and then it's pretty easy to get money into a
super fun then just when you're on a full time
wage is probably not the time you want to be
selling an investment property and banking just having to pay
tens of thousand dollars in tax to time to do
that would be from a tax purpose. My view is
when you're not actually earning any other income, so then
that capital gain becomes your income for the year and
(20:09):
you're not being slugged a big chunk of any game
that you get. So I still do hope to hold
property in Super, but while my SUPER is not large enough,
it's all in shares just to have that diversification. I mean,
we talk about property versus shares, but really you should
have both.
Speaker 1 (20:26):
Okay, And the negative gearing, of course is better outside
super than inside SUPER, and I'm sure that's part of Europe.
Speaker 2 (20:33):
Yeah, yeah, negative gearing is good. But I think that
the aim for every property investor should be to be
positively geared as soon as they can so by properties
that the rent is going to cover a lot of
a lot of the costs that you've got. It's become
harder obviously in the last three years when mortgage interest
rates have gone so high, but there are still opportunities
(20:54):
to get close, not to cover it completely, but there
was a heck of a lot of positively geared property
investors back before May twenty twenty two when reads through Yeah,
when race yeah, yes. So now obviously interest has become
their biggest by far their biggest cost.
Speaker 1 (21:11):
With reads roughly twice yields very broadly in the metropolitan cities. Anyway,
is there positive gearing feasible?
Speaker 2 (21:22):
It is, and this is just from personal experience. It
is to get pretty close to being positive, and you
only need to, as we said earlier, how these things
grow over time. What might have been a negatively geared
property five years ago when prices were much lower. As
we all know, rents have gone up a lot in
the last five years as well, that sort of contributing
and someone else is helping a property investor pay off
(21:43):
their mortgage. So it is possible. And as I said,
any property that's maybe been held for five or ten
years is probably going to be positively geed or getting
close to that, purely as a result of prices going up.
Of course, there are pockets where prices have gone nowhere
and interest rates have gone up, and I really feel
for those investors, and I've spoken to a few colleagues
(22:05):
over the years, and I think they experienced that in
certain states and they're selling out. So I'm just tired
of losing money. As we know, negative gearing is losing money.
You're only getting a proportion of that money back from
the tax office.
Speaker 1 (22:21):
So as years go by, you're putting more and more
emphasis on the sale price that you're going to get.
Speaker 2 (22:27):
Yes, you do, exactly, that's right, And I just think
that you've got to have a plan. I don't have
a direct plan I'm doing this at this age and
this at this age, but I do have a plan
that hopefully if I do get to that dream of
retiring a little bit earlier, to sell a property or
more and then get that money into super and maybe
(22:48):
use that for a property within Super purely because of
the benefits of superannuation gives you with you retire after
age sixty and you move it across to your sort
of account based pension and it's tax free capital gains.
It's just the biggest best deal that any investor can have,
I think, And with a lumpy asset like a residential
property or a commercial property or something like that, get
(23:09):
that game tax free in your sixties or seventies is
just huge.
Speaker 1 (23:13):
So listeners, I think with Anthony, if you hear between
the linesbody's saying, obviously he does prefer property over shares.
There's a lot of issues to do with security there.
But there's a couple of issues. I think that's very
clear from this conversation. You're a serious long term investor, Anthony.
You're talking ten to fifteen years. That's a long time,
right With an investment, you like the property to be
(23:36):
outside Super because the tax benefits are better as you
are working to keep it outside Super. But once you
retire in retirement phase, your idea is to get those
properties to take advantage of the tax benefits inside tax
free retirement basically to the extent.
Speaker 2 (23:51):
You can, yes, yes. And also I imagine if I
had more SUPER, I would probably be looking at it
more closely. But being an investor in property outside of
so to then use all of my SUPER to put
towards a property inside Super. And it's quite complex borrowing
within Super as well. It just it gets very messy,
and that's not really good diversification. Having a whole lot
(24:12):
of buzzy real estate outside Super and the only thing
you've got inside is the same thing. So you've missed
out on the global share market growth over the last
sort of ten years or five years if you take
that strategy.
Speaker 1 (24:24):
Okay, we've got questions. Maybe back in a moment. Hello
and welcome back to The Australian's Money Puzzle podcast. James
Kirby here with Anthony Keane, regular guest person, finance writer
across NewsCorp and a guest who is not deliberating, is
(24:47):
not covering what'sor I'm looking for vacillating on this issue.
He is a property investor first and that's an interesting
point of view and very interesting because since I asked
you to come on the show, actually Anthony just pure serendipity.
Louise asks, I love the podcast with Kate. That would
(25:09):
have been Kate Becos, the buyer's advocate who was on
last week, and the talk around investing in shares versus property.
As someone who's had great luck with property, it's been
my go to. However, I'm finding it hard to stom
up investing again when the holding costs are forty six
hundred dollars a week for a standalone property around a
(25:30):
million dollar mark. I know it's possible to add value
to a property, which is why I prefer it over shares.
And it's actually I think the strongest argument Louise, But
she asks, at what point does that argument become redundant
when you can get ETFs to set and forget. I
telling you that is straight from the listener, Louise. It's
(25:50):
like we scripted it, but it's a genuine question that
came in. So what would you say to Louise Anthony.
Speaker 2 (25:57):
I'd like to know where the holding cost of four
to six hundred a week because that is that's getting
pretty scary, those sorts of levels.
Speaker 1 (26:04):
And is that she's including big interest build there.
Speaker 2 (26:08):
Yes, yeah, interest billed as well. But if it's including
interesting probably it may be a bit too low. Who knows.
But obviously there's rental income from a tenant coming in
and with pretty sort of tight rental markets, that's one
thing property investors haven't had to worry about in recent years,
is finding tenants. And it's true ETfr said and forget
(26:29):
and property is not. We're not sure where Louise is from,
so maybe her feelings are colored by the market in
her particular city over the last five years. It would
be a lot different if you were living in Melbourne
than if you were living in Brisbane. I would say
your views on property and also the outlook property is
as you said, it's great to add value to And
(26:51):
I think we covered a lot of the points earlier
when we were talking like discussing this.
Speaker 1 (26:55):
We did it all for you, Louise. But it's a
very topical issue and question, and I think what Anthony
is saying is highly relevant. If you had been in Adelaide,
for instance, which was not a great market for long
stretches of time in the last five years. I mean,
it's so good it would color reviews. And similarly, if
(27:17):
you had been in Melbourne or even parts of Sydney
where your property is doing very little, your yield is
very low, your rates just went up, they would colory
review as well. All Right, we will move on. Thank you, Louise.
I hope the earlier segment of the show was useful
to you. I imagine it was, Lucas there's been an
increased talk of heavy market falls in world markets. I'd
(27:40):
love to hear more advice on steps you can take
to be prepared for this. In particular, what are the
opportunities and how can you take advantage of a crash.
Longtime listener, first time country Abuti, Thanks Lucas. Okay, broadly,
very broadly. Obviously, the rolling answer is diversification, and that
just as we were talking about Anthony and I a
(28:01):
minute ago about having properly in shares that you want.
Let's forget about the tax structures for a moment, but
just if you look back at what Anthony was saying,
he has properly he has shares, He has diversified shares
all around the world in all sorts of markets because
he's in ETFs. So you have that diversification, and I
think that's absolutely rock bottom. How you defend yourself. So
(28:22):
it turns out when things are going badly or they're
of concern, then you have on listed assets, maybe you
have some securitized that, maybe you have some gold, maybe
you have some cash. That part of your investment portfolio
is robust, resilient. Part of it is risk free. You
(28:42):
don't have to worry about when the share market falls
vice versa. When the share market's red hot, you've got
the sphere of missing out. You have shares and you
have risk assets that will move up with the markets
when the market's moving up, so you have that diversity, Lucas,
I think is seriously rock bottom. The answer to your
question as for taking advice when there's a crash and
(29:08):
taking advantage of when there's a crash, this is never advised.
It's information only. But as we're taking advantage when there's
a crash, again, textbook would suggest the answer is to
have cash. Cash is king when the markets crash, but
cash is expensive when the market's doing average because you're
not going to get as good a return as shares.
(29:29):
So that's the sort of fine balance. I think, what
do you think, Anthony.
Speaker 2 (29:32):
Yes, I agree when I saw that question. The two
things that I wrote down as far as being prepared
for it is be prepared not to panic, don't mainly
jerk reactions with these sorts of things. I think we
saw the share market sink ten percent in the matter
of weeks in here and also in the US, and
it would bounce back a little bit since then. But
and the experts, I'm often told by experts you only
(29:54):
make a loss when you sell if you're not panicking,
you're staying the course and you're sticking to your long
term plan. Whether that's hold it for five years or
ten years, oh whatever. Don't panic because these things are
completely normal. Ups and downs are very normal. And the
other thing as far as taking advantage is, as you said,
keep some cash available or if you've got a mortgage
and you've got cash, is better working off that have
(30:16):
some money in your regional facility. If ready to pounce,
then it becomes a timing issue. Do your pounds if
it falls by ten percent or do you wait and
see if it falls by fifteen or twenty percent? You
don't know. I've read something today in the Australian where
one of the most respected economists in Australia was saying
it could quite possibly be a fifteen percent fall here.
So you just keep an eye on that sort of
(30:37):
stuff and hope that if you buy in a fifteen
percent it doesn't go to fifty five percent.
Speaker 3 (30:41):
Trauma, trauma from the GFC is kicking through again. By
the way, what's worth knowing what any's talking about here.
It was the great crash of the Great Recession of
the GFC.
Speaker 1 (30:52):
If you are lucky enough to be young enough not
to be familiar with this, and what happened was the
share market. The Australian share market at all market's piked
November two or seven, and as Anthony says, they fell
fifty percent after that. For what was even almost more
difficult than the fact that they fell fifty percent, was
they took two years to do it. So it's slowly
(31:14):
ground down from the peak in November two or seven
to the bottom in March two oh nine. But it
was worse than a crash, wasn't it, Anthony, because it
just it was never obvious. There was little four starts.
Speaker 2 (31:25):
Oh that's right, and I swear down yes, I'm doing
research on up until then. The big crash we'd had
was the nineteen eighty seven massive crash, but in the
prese that had doubled in twelve months and then halved again,
so it literally you've only lost twelve months again, whereas
the GFC people had lost years and years of gains,
and then it took a good decade or more for
(31:48):
the All Ordinaries Index to get to it recover November
two thousand and seven levels as well. So don't panic.
Keep some powder dry, ready to dive in when you
think it's right. But I wouldn't dive in, go all in,
because at any time you never want to go all
in on anything. I now entrepreneurs will disagree and say
that the big, massive bet that they've made is paid
(32:09):
off in big time. But there's a lot more that
it hasn't than there are those who have.
Speaker 1 (32:13):
They only tell you about the bets that win. I've
never seen anybody in the paper saying I took a
massive bet and I lost all right, as you say,
a measured approach dollar cost averaging. As we've often mentioned
on the show, final statement of all the questions from
Andrew and I make the point that Andrew operates out
of north Haven, which is in Adelaide, and he says
(32:35):
I right. With regards to your podcast on the fifteenth
of October where you were aghast that Melbourne property prices
were on a part with Adelaide despite Melbourne having five
million people, Yes, I was aghast economically, Andrew that a
city of five million that houses in that city should
be considerably lower than houses in another city. What's the
(32:57):
population of Adelaide.
Speaker 2 (32:58):
Roughly one point five I believe, and not a lot
over one point five.
Speaker 1 (33:03):
So eclonumbists would suggest that the bigger city you think
about it, splinder Man, should be more expensive and traditionally
for one hundred years, perhaps two hundred years, that has
been the case. Anyway, Andrew says there's two reasons, actually, James,
you've missed them. There's two reasons. One Melbourne is a
and there's a well known expletive here which basically says
(33:23):
it's not a nice place at all. So he runs
Melbourne down badly as the most unattractive location. And then
he says Melbourneians are both ignorant and arrogant and have
a chip on their collective shoulder and they think the
cafe culture is the standout in Australia. Well, I don't know.
I think about that. It was entirely an economic observation.
(33:45):
What do you think's been based?
Speaker 2 (33:48):
It was very entertaining question. I doing that a lot
of South Australians and I am one of them. We
still have a chip on our shoulder about Melbourne stealing
our Grand Prix for years ago.
Speaker 1 (33:57):
We stole it and stole it. Well we are.
Speaker 2 (34:00):
There's chips on shoulders all over the place. But as
I said earlier, if I was to pick one city
to invest in now with real estate, I would choose
Melbourne purely because I've never seen anything like that. The
latest figures from prop Track, the average dwelling price in
Adelaide is now eight hundred and forty nine thousand, and
in Melbourne it's seven hundred and ninety three thousand. So
(34:21):
not only is it on a par Adelaide's gone fifty
grand ahead of Melbourne. And I just can't see that
staying forever. No matter what various governments try to do
to destroy or spruce up property markets. I just think
that eventually we will revert to the fact where our
biggest cities have our most expensive houses. And that's just
based on your twenty or thirty years of following this so.
Speaker 1 (34:44):
Just could be a lifetime of expertise.
Speaker 2 (34:46):
It could be wrong, but yes.
Speaker 1 (34:47):
Okay Andrews, you heard it here first. But take you
very much for correspondence, and keep them ruling folks, and
keep sending the voice memos to love to get them.
The first few have come in. We really like them.
When you're doing your voice memo, remember you can write
to us on an email or if you like, just
do a voice memo. And when you're doing the voice memo,
just keep it short, you know, thirty seconds. So that's
(35:09):
just for broadcasting purposes for collecting them. Let's have some more.
Let me tell you the people who come in first
with the voice members will get published and I will
deal with their answers. Okay, that's a promise. So if
you really want to make sure your question gets answered,
try a voice membo. All right, Thank you very much,
Anthony Keen. Great to have you on the show again.
Speaker 2 (35:28):
Thanks James, great to be here.
Speaker 1 (35:30):
You're going into the lock up? Yes, do you think
you're going to have enough to do?
Speaker 2 (35:34):
I think yes. They keep me pretty busy. I'm trying
to work out how many I've done. I think I'm
over twenty five federal budgets now, somewhere around the twenty
five mark. I think I reckon from the late nineties.
I started as a business wrider going into budgets, and
I don't think i've missed one since then.
Speaker 1 (35:48):
You're not from the vintage that remembers bringing typewriters into
the lockdowp are you ye?
Speaker 2 (35:53):
Typewriters?
Speaker 1 (35:53):
Now?
Speaker 2 (35:54):
I am from the vintage where we had to share
computer screens in the afternoon approaching deadline. So oh, they're big,
huge behind the Fords in the newsroom waiting for that.
Speaker 1 (36:03):
Yes, are you finished? Excuse me, are you finished that? Story?
I do have this one I must put through in
the next hour. Yes, I've I had a little bit
of that, just a little bit of that in Hong
Kong of old places that. Yeah, I don't listen. Okay,
Thanks Anthony, Thanks everyone for listening. Thank you Leah Samaglue
for producing today's show. Talk to you soon.
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