How Housing Became So Broken

Summary

Podcast Summary: How We Got Here with Chris Kohler

Episode: How Housing Became So Broken

Date: August 10, 2026
Host: Chris Kohler
Guest: Alan Kohler (finance and economics journalist, author)

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Overview

In this special intergenerational episode, Chris Kohler sits down with his father, Alan Kohler—Australia’s best-known economics and finance journalist—to unpack why the Australian housing market is so dysfunctional. Using an interactive crossword as a unique scaffolding for their discussion, they traverse the tangled interplay of supply, demand, policy, historical context, and global comparisons. The episode balances candid commentary, current data, and personal anecdotes, offering valuable insight into why housing affordability and accessibility remain so intractable.

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Key Discussion Points & Insights

1. Meet the Guest & Podcast Format

• [02:24–05:00]
  • Chris introduces Alan Kohler, outlining his 56+ years of experience in Australian finance journalism, and the unique dynamic of their father-son collaboration.
  • They decide to use a custom crossword puzzle as the episode’s conversation structure, with each solved word prompting a new key theme.

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2. Supply: The Central Political Focus

• [05:04–09:07]

  • Crossword Clue: "Not enough price is high, too much price is low"—Supply

  • Alan explains the government's National Housing Accord (2022): target of 1.2 million homes over five years (2024–2029).

    • The number is arbitrary and politically motivated: “It’s a political round number...not any prediction of what was required. It was simply a round number.” (Alan, [07:40])
    • Implementation: Divided among states, then local councils—which themselves can only approve permits, not build.
    • Actual completions now run at 180,000 per year, well under the annual target of 240,000, often due to bottlenecks like labor shortages.

  • Graph Discussion:

    • Grattan Institute data shows Australia’s number of dwellings per 1,000 people has barely moved since 2000—unlike countries like Cyprus, Latvia, Bulgaria which saw major increases.
    • “There are some countries have done really well...but there’s no real trend as to how that refers to prices. Prices have gone up and down...” (Alan, [11:22])

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3. Labor & Construction Shortages: The Bottleneck

• [12:12–17:20]
  • Historic contrast: In the 1940s–1960s, Australia deliberately imported construction workers (e.g., “10 Pound Poms”) to build up the sector.
  • Today, construction is on the third tier of skilled migration, limiting inflows.
    • The CFMEU union opposes raising construction migration due to concerns over wages and bargaining power.
    • “There is a shortage of 115,000 workers in residential construction. Overall construction: 300,000.” (Alan, [16:23])
  • Shortage impacts not just new home builds but also renovations—average borrowed amounts for renovations jumped 19% in a year ([16:35]).

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4. Demand: Investment & Population Growth

• [17:23–23:46]
  • Crossword Clue: "A bossy order or the market’s collective desire"—Demand
  • Investment demand spiked post-2000 when the Howard government halved capital gains tax on housing.
    • “A clear connection between the capital gains tax discount and the increase in housing investment which drove housing prices.” (Alan, [18:38])
    • Recent rollback of the 50% CGT discount now causes sector controversy.
  • Immigration’s role: Surges in recent years (e.g., 500,000 in 2022 against a 180,000 forecast) created sudden housing shortages.
    • “A million people came in, roughly, which was a massive blowout in immigration, led to a housing shortage.” (Alan, [21:05])
    • Government neither forecasts nor controls these numbers well.

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5. Australia in Global Context

• [23:06–23:46]
  • Chris and Alan note Australia’s unique set of property investment incentives:
    • No inheritance taxes; capital gains-free primary residences; negative gearing.
    • Alan affirms: “Australia’s among the worst in the world” for affordability ([23:46]), though other countries also struggle.

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6. Density: Urban Planning and Resistance

• [23:56–25:55]
  • Crossword Clue: "How packed is your suburb?"—Density
  • Density—mainly via high-rise apartments—favored by policymakers, particularly near transit nodes, to use existing infrastructure.
  • Popular resistance:
    • Many families don't want to raise children in apartments, and such properties have underperformed as assets due to poor build quality and low appreciation.
    • “People don’t want high rise in their suburbs...They don’t perform as well as assets.” (Chris, [25:41])

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7. Auction Culture: Australian Oddity

• [26:03–28:52]
  • Crossword Clue: "Highest bidder wins the keys"—Auction
  • Unique Australian tradition: in-person residential property auctions, often creating psychological pressure and driving up prices.
    • Alan tells a story about aggressive bidding tactics ([27:25]), highlighting the stressful, sometimes antagonistic nature of auctions.

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8. Incentives: The Main Driver

• [30:37–33:35]
  • Crossword Clue: "Show me the ___ and I’ll show you the outcome."
    • Classic Charlie Munger quote: “Show me the incentive and I’ll show you the outcome.”
  • Major property incentives in Australia:
    • Negative gearing.
    • Capital gains tax exemption for primary residences.
    • Lack of incentives (and presence of disincentives, e.g. stamp duty) for downsizing; lead to inefficient use as elderly remain in large houses.
    • Chris notes: “The lack of incentive for them to sell that house and move somewhere more appropriate is really significant.” ([33:35])

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9. Transport: The Hidden Enabler

• [34:00–36:51]
  • Crossword Clue: "Trains and buses that make a suburb livable"—Transport
  • Lack of fast, frequent commuter rail between cities and regional hubs restricts urban sprawl as a solution to supply.
  • International comparison: Italy, France, and China’s high-speed rail systems facilitate regional living; Australia lags.
    • Alan: “China has the largest fast rail network in the world...here, not so much.” ([36:51])

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10. Developers, Social Housing, and Policy Shifts

• [39:36–42:14]
  • Today, almost all homebuilding, including social/affordable housing, is privatized; governments are “out of the game.”
    • Affordable/social rentals’ definitions are weak, e.g., “25% less than market rent” is still expensive if market rent is high.
  • Employers used to build staff housing; no longer the case.

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11. Investors & Renters: Two Sides

• [42:24–48:48]
  • Crossword Clues: Investor and Rent
  • In Australia, landlord/investor class largely consists of individuals, not institutions (unlike the US).
    • Negative gearing gives individuals an edge; government now trying to attract superannuation funds and large investors through “build-to-rent” projects.
    • Low yield from housing (2–3%) versus shares (4–5% + franking) undercuts institutional appetite.
    • “The experience of tenants tends to be more patchy [when landlords are individuals]...When it’s institutions, there tends to be a continuing culture.” (Alan, [45:58])
  • Rent inflation:
    • Even as house prices slide, rents remain high due to ultra-low vacancy and continued investor exits.
    • Airbnb identified as an exacerbating factor: offers higher per-night yields and more control to owners, drawing stock out of long-term letting.

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12. Every Layer Is Broken: Systemic Issues

• [48:48–53:55]
  • Chris: “Every layer of our country’s housing is kind of in crisis.” ([49:12])
  • Alan: “It’s fundamental to the way society operates.”
    • House price to income ratio has doubled over 25 years (from ~3–4 to ~8–10), driving intergenerational inequality.
    • “Young people can’t really get a house now unless they’ve got a parent who can give them an early inheritance.” (Alan, [49:52])
    • The only realistic path (barring a catastrophic price crash): “20 years of no change” in prices, letting incomes catch up, though some see current price dip as a "buying opportunity" due to supply constraints.

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13. Interest Rates & Immigration Policy: The Levers We Have

• [53:03–56:02]
  • Interest rates remain the biggest near-term determinant of prices; a return to ultra-low rates is unlikely.
  • Alan’s main prescription:
    • “You have to reform the immigration system...so we prioritize construction.” (Alan, [53:09])
    • More construction workers needed, not just more people in general; current skilled migration system doesn’t deliver.

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14. Workforce Training & Apprenticeships

• [56:02–56:48]
  • Only 50% of apprentices finish; living costs and low pay during apprenticeship are major roadblocks.
    • “…the apprentices aren’t paid enough. There’s only 50% of apprentices finishing their apprenticeship.” (Alan, [56:20])

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15. Concluding Reflections—Are There Reasons for Hope?

• [57:28–58:05]
  • Alan: “If you invest in housing, you’re betting against all of the Australian governments...They might fail. But if you buy housing, you’re betting against them. I wouldn’t bet against them.” ([57:49])
  • Chris and Alan agree that while the system is deeply grim and stubborn, incremental improvements or even radical changes in immigration policy and political will could stem the crisis.

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Notable Quotes & Moments

• On Political Targets:
  “The target is a political round number...It was simply a round number.” (Alan, [07:40])

• On Immigration Surges:
  “A million people came in, roughly...the government didn’t even know what was going on.” (Alan, [21:05])

• On Housing’s Central Social Role:
  “It’s fundamental to the way society operates.” (Alan, [49:22])

• On Intergenerational Inequality:
  “Young people can’t really get a house now unless they’ve got a parent who can give them an early inheritance…So what it's done is widened inequality.” (Alan, [49:52])

• On Policy Solutions:
  “You have to reform the immigration system in such a way that we prioritize construction…that is not happening.” (Alan, [53:09])

• On Investment Outlook:
  “If you invest in housing, right now you’re betting against all of the Australian governments...I wouldn't bet against them.” (Alan, [57:49])

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Timestamps for Key Segments

| Time | Theme | |-----------|-----------------------------------------| | 02:24 | Podcast setup, guest intro, format | | 05:04 | Supply—The government’s approach | | 12:12 | Labor shortages and construction issues | | 17:23 | Demand—Tax policy and population | | 23:06 | Australia vs international trends | | 23:56 | Density and urban planning | | 26:03 | Auctions—An Australian oddity | | 30:37 | Incentives—Charlie Munger principle | | 34:00 | Transport and regional development | | 39:36 | Developers and social housing history | | 42:24 | Investors & renters—system structure | | 48:48 | Systemic crisis—every layer broken | | 53:03 | Interest rates and immigration reform | | 56:02 | Workforce training, apprenticeships | | 57:28 | Closing remarks—hope vs reality |

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Tone & Language

• Conversational, candid, often irreverent
• Mix of personal anecdotes and deep analysis
• Frequent use of humor to lighten a complex subject
• Direct, sometimes blunt, but insightful

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Memorable Moments

• Use of a crossword puzzle as a novel framing device for structuring a complex, wide-ranging discussion.
• Alan’s story about being “stared down” at an aggressive property auction ([27:27]).
• The revelation that only half of all apprentices finish their training, due to cost-of-living and wages ([56:20]).
• Charlie Munger’s famed quote surfacing as a guiding principle for the episode ([30:46]).

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Summary

This episode offers an accessible yet comprehensive look into Australia’s “broken” housing system—showing that ingrained policy incentives, labor shortages, flawed targets, and historic decisions have locked Australians into a cycle of unaffordability and inequality. While the hosts caution against expecting sudden turnarounds, they highlight practical levers (like immigration reform focused on construction) as potential paths to relief. The rapport between Chris and Alan, punctuated by wit and lived experience, provides both entertainment and a sobering call to action for policymakers and the public alike.

Transcript

[A]

This episode, I want to talk about housing. I don't think there's a single asset that's changed the world as much in the last two decades or so. And I'm lucky because on top of having covered the housing market and economics for years, my dad is probably the best known finance and economic journalist Australia has ever produced. He's not 100% sure on that. I think that's the case. Alan Kohler is his name. He's someone I'm very proud of. He recently wrote this book, which I think is definitive on the topic of how housing became so broken. So naturally, because this is a podcast called How We Got Here and housing is an issue that spans generations. And because he's an expert, I'm bringing my dad into today's episode. It's the first time we've done something like this together. And he'll be sitting down with me right over there after this message from our partners. The old finance playbook, Secure job, property super and weight is a solid foundation. But these days it's only part of the story. The team behind IG Markets has 50 years in the industry. They know how it works and they've built something to round it out. IG Markets is the modern complement shares, ETFs and crypto all in one easy to use app. No jumping between platforms, no juggling logins, just more ways to put your money to work, starting with whatever you have right now. IG Markets believes every Australian deserves more ways to grow what they've built. And they're here to help you do exact search IG Markets or download the app. IG Markets. This is new money. Crypto is unregulated and high risk. Share trading services by IG Australia Pty Ltd AFSL 515106 crypto services by IG Digital Assets Australia when was the last time you looked at your home loan? Well, most of us check it about as often as we flip the mattress. And your lender's quietly loving that. If it's been a while, Mortgage ch could help you find a better deal. Firstly, Mortgage Choice gives you more choice. Comparing loan options from over 35 lenders and with more than 1000 local brokers Australia wide, expert help is never far away. To get more from your home loan, choose Mortgage Choice. Talk to your local Mortgage Choice broker today.

[B]

Hello, Dad. G', day, son.

[A]

Thank you for coming on how we got here.

[B]

Thank you for having me. I'm delighted to be here.

[A]

This is. This is the first time we've done this before.

[B]

Yeah.

[A]

I said that you're Australia's best known finance and economics journalist, and I may be speaking as a son that you told me you're not sure about that, but I think it's the case. Okay. The reason I say that, and we do have a couple of listeners overseas who might not know that much about you, but a brief backstory for you is you've been doing this for, I think, 57 years.

[B]

56 and a half.

[A]

Okay, fair enough.

[B]

I'm 74. I did start when I was 17, but I quite quickly turned 18.

[A]

Yeah. Okay, fair enough. I'm glad we're not nitpicking off the top. Well, fair enough. But you started off as a copy boy in newspapers. You stayed in newspapers for a really long time. By the time you were my age, which is 37, you were editing the Financial Review.

[B]

I think I had been editor of the Financial Review.

[A]

Beating me already at.

[B]

At that point. Yep. And I became editor of the Age after that.

[A]

Editor of the Age. When I was a little kid. You stayed in newspapers, Chanticleer columnist. You moved to the ABC 730 report, covering finance and economics. And then, of course, you became the ABC Finance guy and have been doing that for decades.

[B]

Yep.

[A]

And to embarrass you a little bit more, you've been doing it so well that you are now Alan Kohler, am Order of Australia.

[B]

That's it. Yeah.

[A]

So that's great. And so obviously good for you. I didn't do that, but. No, you wrote this book as well about housing. And so that's why I thought that it would be so appropriate to talk to you about all this sort of stuff. But the other thing I know. I mean, I know a lot about you. One of the many things I know about you is that you quite like a crossword. So I made you a crossword.

[B]

Yeah, very good.

[A]

I made you this crossword.

[B]

I think it's amazing. You've done a great job. I think crosswords are hard to make.

[A]

Well, throughout my childhood, you were doing a lot of crosswords. You're doing the cryptic ones and the ones that I've never Still can't do. So I think you're gonna find this one pretty easy. But I went onto a.

[B]

Now I do wordle.

[A]

You do wordle? You do wordle? While we're watching the footy?

[B]

Actually, yeah.

[A]

It's okay. Yeah. I just went onto a teacher's aid website and it just spat this one out for me.

[B]

Oh, I see. Right.

[A]

But I thought that this would provide a good scaffolding Cause the problem is you and I talk about housing and related issues and we kind of ping pong in all different directions. And I thought as we go through this crossword, you can answer one of the clues and then we can talk about that issue. Okay, you think it works?

[B]

Oh, yeah. Let's do it.

[A]

Let's do it. Okay, well, you know, I'm in your hands here. You've got the crossword in front of you.

[B]

Three across, not enough price is high. Too much price is low.

[A]

Six letters.

[B]

Six letters. Gotta be supply.

[A]

Supply. Yep, I'm writing it in.

[B]

I'm writing it in too. So supply.

[A]

Supply.

[B]

So that is the key metric that the government is now focusing on.

[A]

The Australian government.

[B]

The Australian government is focusing on supply. And it's been doing that since, in particular since 2022 with the National Housing Accord, which was an agreement between the Commonwealth and the states and a few super funds and the housing industry, the Much Master Builders association and the Housing Industry Association. So they all got together and they did this agreement and they agreed in 2022 to build that they needed to build a million houses over five years beginning from July 2024. So 2024 to 2029, six months later, that was like early then 2023, the Commonwealth government added 200,000 to that. So I made it 1.2 million. So that's the target of the housing accord.

[A]

And these weren't just any houses. They stipulated that to be well located, didn't they?

[B]

That's right, they did. And so I think it's worth pointing out that that housing accord is all about zoning or at least planning approvals. Right. Because that's really all the governments can do. They can't, they don't build houses. So what happened, therefore was that that 1.2 million was divided up among the states. So each of the states had an allocation and then the states divided that up among the councils. Right. So each of the councils has got

[A]

a number, big number, I presume.

[B]

Well, yeah, it is a big.

[A]

Like some of them have to double the number of houses they've been building.

[B]

Right, exactly. The councils can't build houses either. Right. So all they can do is approve applications for, you know, for houses to be built. And so that's what they've agreed to do.

[A]

So they're green lighting a lot at the moment, it would seem.

[B]

That's right.

[A]

But so this whole housing accord, we're a few years in now because we're speaking in mid-2026, and they've been undershooting that Target since it began. And am I right in saying that if they had have built 1.2 million houses over five years, I mean, that's not a silver bullet, that's not going to fix the housing affordability crisis. Right. That the target wouldn't have solved really that much, and they're undershooting it.

[B]

The target is a political round number. Right. It's a. It's a million. Right. So that was not. That didn't have any relationship to any predictions of what was required. It was simply a round number. It was a million sounded nice politically, it was good on a press release. So that's what they did. And then they added, as I said, another 200,000, so it became 1.2 million, another round number. And it actually happens to have be the same number of houses that were built in the previous five years.

[A]

Oh, okay. So they can't replicate what they did in the previous five years.

[B]

Oh. In fact, what's happened is that housing completions have declined. So what they were aiming to do was to do the same in the next five years as they did in the past five years, but they're not doing it. In order to achieve 1.2 million over five years, obviously they need 240,000 houses a year and they're running at about 180,000 a year at the moment.

[A]

Right.

[B]

And have done from. From the beginning of the accord. Right. So they're, you know, they're like 100,000,000 short at this point. When challenged on this stuff, the Housing Minister and the Prime Minister and the treasurer always say, well, look, it's an aspirational number, it's an ambitious number. You know, we don't apologise for being ambitious. Okay, fine.

[A]

Yeah. I mean, I suppose internationally, though, the question of whether or not the solution to housing affordability is, you know, build more of them. I mean, everybody knows in economics there's supply and there's demand. Like, we've got a pretty good graph here. I know you love a graph. We do, and we're going to put it up.

[B]

What a good graph. This is. This is.

[A]

Look, this is hard because if you're listening to this on audio, we're going to have to describe the graph, which is a challenge, but basically what it shows, and it came out from the Grattan Institute, I think, last year. It shows number of dwellings per 1,000 people and it marks it from 2,000, and then it checks in again in 2021. So it's kind of like how it was then and how it was, well now, but a few years ago. And what it shows across.

[B]

And it shows it. You should say that it shows it for a whole lot of countries.

[A]

A whole lot of countries. Right. So down the list, and if you are driving and you want to pull over and have a look at this, by all means, Rob's going to pull this up. France, Portugal, Bulgaria, Finland, Spain, like everybody is on this list. Now. Australia, between 2000 and 2021, the number of dwellings per 1000 people has actually gone backwards slightly.

[B]

That's right. And in fact, there are some countries have done really well, you know, led to a huge increase in houses per 1,000 people. Cyprus, for example, massive increase, big increase in Latvia, big increase in Bulgaria and so on.

[A]

What do you think it is about Australia and Czechia? Iceland. Why. Why are we one of the only ones going backwards?

[B]

Yeah. So there's five countries gone backwards. Australia. I mean, given the sort of the nature of statistics, you could probably say Australia is kind of the same, roughly, but still it hasn't increased the number of houses per 1,000 people. And why is that? Well, the two main reasons, one is that there has been a zoning issue, there has been a planning problem of not enough houses, not enough places being approved by councils, and secondly, that the. We've got a shortage of construction workers, which we'll get onto in a moment. Labor, which is a. Which is a big part of the supply problem. But it's worth noting that, you know, I looked into the experience of these countries that have. That have both increased their supply of housing per 1000 people and gone backwards, and there's no real trend, there's no real indicator as to how that refers to prices. Prices have gone up and down for all sorts of countries, whether they've increased the supply of housing or decreased the supply of housing.

[A]

Well, that makes it murky, doesn't it?

[B]

It does.

[A]

You know, like you want it to be linear.

[B]

It is not linear. It's all over the place. And the reason for that is simply that there are other. A lot of other factors, and supply is one of the factors, but it's not the only one. And you need to do more than supply.

[A]

It's the one that you hear a lot about from politicians. I suppose that means we should move along to some of the other ones. Should we move along?

[B]

Am I allowed to talk about construction labor? Well, no, but I just think it's worth pointing out because one of the things I've been looking into is the difference between now and the 50s and 60s when there was a massive increase in supply of construction labor, which was deliberate on the part of the government at the time. And there was the Immigration Minister, Arthur Caldwell, and the Housing minister at the time, whose name was Nelson Lemon, who doesn't get anywhere near the credit he deserves. Nelson, in my opinion.

[A]

Nelson.

[B]

Nelson Lemon.

[A]

Come on.

[B]

This is under the Chifley government, right? Ben Chifley is the Prime Minister, labor government in 1945. And they actually decided to increase the number of construction workers in Australia because they knew they needed to build a lot of houses. And they basically went around the government, set up offices around Europe and recruited construction workers and they. And you might have heard of the. The. The immigration program called 10 pound palms.

[A]

Yep.

[B]

Very famous English people could come out here for 10 pounds. They're called 10 pound palms. And that was largely to do with construction, to get construction workers into Australia. So it was also part of the broad program to increase Australia's population. Yeah, but it was specifically aimed at construction. But also the. The Snowy Mountain Scheme, which was being built at the time, and they actually were trying to get workers for that as well.

[A]

Your dad was a construction worker at the time, right?

[B]

He was. That's right. He was a. He was a carpenter. He wasn't. He was already here.

[A]

Yeah.

[B]

So his parents immigrated and my grandfather was a flour miller who decided to become a builder.

[A]

But this is the period where it's an attractive. What you're saying is a lot of growth in the construction sector, which makes sense. You go into it.

[B]

That's right. Cause Australia's population was growing massively at the time, needed a huge number of people, huge number of houses to be built, so that they were very focused on getting the right number of construction workers. If you look now at the Australian immigration system, it's absolute nightmare. I mean, the number of. The number of construction workers coming in is minimal. And the reason for that is because they have this tiered system. So they have tier 1, 2, 3, 4 for skilled migration and that determines how many people can come in under each profession. Right. And construction is on Tier 3, which means that the number of construction workers coming in is minimal. Now the Master Builders association and the Housing Industry association are saying, well, we need to get construction up to tier one, so you get more construction workers coming in.

[A]

Seems reasonable.

[B]

Sounds reasonable. Government says, oh, well, you know, there's nothing to do with us. It's all to do with this organisation called Jobs and Skills Australia, which determines where things go. So there's these technocrats who make these decisions and it's not a political decision. Right. Anyway, it's quite clear that a big part of the reason we have very solid limits on construction workers coming in through migration is the cfmeu, which doesn't want it. And they campaign, have been campaigning against a lot of construction migration into Australia and that's been quite successful. They don't want a lot of construction workers coming in because it would lead to lower wages and give them less power. So the.

[A]

I got a cold chill. I'm worried that we're going to get beat up.

[B]

No, no. Well, look, I don't know. Maybe. Who knows? Look, we're truth tellers around here.

[A]

Yeah, we don't care about that. No.

[B]

But the, the, the Master Builders Association CEO Danita Warne says that there is a shortage of 115,000 workers in residential construction. Overall construction, 300,000. So that's the shortage of construction workers we have, which the CFME is very happy.

[A]

So of course, this affects everybody in lots of different ways. I mean, it's keeps house prices relatively high because there's an issue with supply. But even if you own a home and you want to do a renovation, I was looking at some numbers from the housing industry association that said the amount, the average amount borrowed to do a renovation went from 2024 to 2025, up 19% in one year. And that's enormous leap in the amount that it costs you to do a renovation, whether it's an extension or a doo up or whatever. So this is.

[B]

That's right.

[A]

Massive.

[B]

Massive. Okay, what, what next?

[A]

You're in charge of the crossword.

[B]

All right. Okay.

[A]

I can, you know, make suggestions if you like.

[B]

Yeah, One down.

[A]

Yeah. A bossy order or the market's collective desire.

[B]

Oh, it's the opposite of supply, which is demand letters.

[A]

Demand. Also good, right? Demand. Geez, we're not going to be able to do it for as long as we did supply.

[B]

Okay. All right. Well, let's just say there's two elements to demand. Investment demand and the number of people. Investment demand was boosted in 2000, the year 2000, which is where the graph starts, by the halving of the capital gains tax with the 50% discount. Howard government did that on the recommendation of a business tax review which recommended that in order to get people to buy shares, invest in shares. A few months after that, the stock market crashed. Nobody wanted to buy shares. Everyone bought housing instead as an investment. And then the following three years, house prices rose 45%. So there's a clear connection between the capital gains tax discount and the increase in housing investment which drove housing prices.

[A]

So I was in the federal budget lockup in May and they had in the budget papers just a whole lot of information about how that negative gearing had distorted the housing market and the prices and that it was clearly an issue that has led to a lack of affordable housing. And so now they're winding it back. There's been a huge amount of commentary, a lot of angry people about this. What do you reckon the anger is all about?

[B]

The fact that the capital gains, the change to the capital gains tax from the 50% discount back to the previous regime of adjusting it for inflation applies to businesses and shares as well as property. So it's all the business people who are complaining about it. They are asking for it to be separated, for business to be carved out.

[A]

And is the reason that it's not just to get more money. Like, it makes a lot of sense that you should pull things back on housing, but, oh, no, there's a legitimate

[B]

concern that it'll distort. People will kind of make their decisions about what they invest in according to tax. And also the people will use a business structure to invest in property. You know what I mean? I mean, don't forget, by the way, we're not Talking about a 50% discount being removed and you're paying full capital gains tax 100%. It's going from 50% discount to inflation adjustment, which may or may not be more or less than 50%. Yeah, like, it's not a big. It's not that big of a deal.

[A]

Yeah, I'm inclined to agree with that. I think the investment landscape is a landscape you can't look in too specifically at one thing because, you know, there was nothing said about franking credits and that now looks a little bit brighter. I think, you know, there's a lot of incentives that remain, obviously, but.

[B]

Okay, so demand on the other one is numbers. Right. The big increase. We've had a big increase in house prices over the past five years. In 2022, the budget in treasury in the budget papers predicted that the immigration of the following 12 months would be 180,000. Right. Turned out to be 500,000.

[A]

Whoops.

[B]

Year after that, the budget paper predicted 230,000. Turned out to be 460,000. So over two. So what that tells you is people

[A]

need houses, people need to live somewhere.

[B]

That tells you not only is the government did the then and probably now not control the level of immigration. It didn't even know what was going on. Yeah, well, so over two years, a million people came in, roughly, which was a massive blowout in immigration, led to a housing shortage, massive housing shortage. Immigration since then has come down. It's now running at 300,000, but it's still more than treasury is forecasting. Right, which is 225,000 for this year and then 260,000 next year. I mean, well, 225,000 next year. And I think the government order just make that a target. They don't seem to control it, you

[A]

know, but of course we're talking about housing here. But that huge amount of immigration drove a lot of economic growth, broadly. We would have been in a recession without it.

[B]

Yeah, sure, but you know what we're talking about there is gdp, right? Which is. And a recession is when your GDP goes backwards for two quarters in a row, that makes a bad headline. But it doesn't matter to anyone. Like, it's.

[A]

People don't like recessions, dad.

[B]

Yeah, I know, but who cares?

[A]

You know, like, don't even with recessions. You've been through a couple of recessions. Sure, they're ugly, if I'm not mistaken.

[B]

No, but it's not the gdp.

[A]

I know, I know that matters.

[B]

It's the fact that unemployment goes to 10%.

[A]

Yeah, I know. It's like saying, okay, I got punched in the face, but actually it was the broken nose that really hurt.

[B]

Exactly, exactly.

[A]

Okay, fine. Well, yeah, it's all the same though.

[B]

Okay, but. So yes, it is true that without the immigration, you know, it would have been a recession because per capita GDP actually declined for 18 months in a row, mind you.

[A]

Yeah, I mean, that was bad. I mean, good on you, by the way. Like, you know, I got into the property market at a tricky time. You could have played that, that parental generation card of being like, well, when I was young, it was 17% interest rates and you kind of didn't really do that. So I. Thank you.

[B]

I might have mentioned it.

[A]

You mentioned it. Mum mentioned it too. But that's okay because I'm sure it was hard. Just before we move on from demand, this is really, really quick because as I said before, we might have somebody listening in from overseas and if they haven't switched off by now, I thank them for that. We have been talking about Australia, but the point is our policies of discounts on capital gains tax and negative gearing, no inheritance taxes, no capital gains on primary residences, these are. This is a unique situation in Australia. Sure, they don't have this stuff overseas,

[B]

but it is true that there are housing Affordability problems elsewhere.

[A]

Yeah, but they might not be as bad.

[B]

Yeah, no, no, Australia's bad. Australia's among the worst in the world.

[A]

But I think that's important, bit of context and historical context too, because, you know, as we mentioned, these policies have not been around forever. So let's move on though.

[B]

Number five. Five across. How packed is your suburb? Third letter is N from demand. So it's gotta be density.

[A]

Density. I told you you'd smash this. You're good at cryptic crosswords. And this is very. This is not cryptic, but okay.

[B]

Density is the solution to supply that a lot of people come up with, led by the Grattan Institute. And that's fair enough.

[A]

Can you just give us a sense of what is density?

[B]

Density means high rise apartments in suburbs, the existing suburbs. And the reason the government's going for that as part of, as their solution to meeting the requirements of the housing accord that they've all signed up for is that it means that they can use existing infrastructure. They don't have to build new transport infrastructure and water and sewerage and all that because they've already got it there. And so the whole answer is that they're creating these zones around train stations allowing much greater height limits. That's the density solution. I mean, when I wrote the book, I kind of examined that and thought it wouldn't work. They're going to have to do better transport, you know, to regional areas, faster trains to, to allow more sprawl. Because I didn't think density would work.

[A]

I wrote the same thing, but I didn't cop. It wasn't like I was looking over your shoulder, I promise.

[B]

Okay. No, but thing is, people. Firstly, people don't want high rise in their suburbs.

[A]

Yeah.

[B]

Generally people don't want to bring up families in apartments on the whole, you

[A]

know what's another big problem?

[B]

What?

[A]

They don't perform as well as assets.

[B]

They don't.

[A]

That's a huge problem.

[B]

That's right.

[A]

If you're trying to sell these things, you're having a harder time selling one of these because over the last eight to ten years these things have not for the most part, given you much capital appreciation at all.

[B]

Well, part of the problem is that they're shoddy. Well, yeah, often because of. Not well built.

[A]

Not enough good builders.

[B]

Not enough good builders.

[A]

Like your dad.

[B]

Like my. Well, my pop. My dad wasn't the world's greatest builder.

[A]

He was a good builder.

[B]

He was a good man.

[A]

He was a good builder and a good man. All right, should we do two down two. Down is. Highest bidder wins the keys. And it is 1, 2, 3, 4, 5, 6, 7, second letter U, fourth

[B]

letter T. Gotta be auction.

[A]

Auction. Okay.

[B]

So Australia is relatively unique. Not. Not entirely unique, but very unusual to sell much of its houses via auction.

[A]

In the street.

[B]

Yeah, in the street.

[A]

Standing out the front, yelling, numbers out.

[B]

I know, amazing. Well, but most. Most countries, they just advertise the price and then they negotiate. Someone comes and says, you know, no, no, I'll give you 10% less or something.

[A]

Yeah.

[B]

And that's how most countries go about selling houses. Australia does an auction. And I think actually part of the reason for that is that is because. Because house prices have been going up so rapidly, you tend to get a better price because everyone gets a bit panicky.

[A]

FOMO and other feelings at auctions. Yeah, it's really weird. I did a video, a satirical video on this a little while ago where I said, this is kind of how we do it in Australia and all these people overseas. You what?

[B]

I know.

[A]

That's the most absurd thing I've ever heard.

[B]

I was at. I bid on one house at an auction. I was bidding then, you know, you might have been, like 2 years old at the time.

[A]

Yeah.

[B]

And I was bidding against one other guy, and he came over during the course of the bidding, and he stood in front of me, staring at me, and did his bidding. Staring at me.

[A]

Jesus, that's really aggressive.

[B]

It was so aggressive.

[A]

So he was obviously trying to intimidate you. Did it kind of work?

[B]

Yeah, I gave up. I said. I said, oh, Christ, fuck.

[A]

You can have it.

[B]

You can have it. That's fine.

[A]

Was it a house that you really wanted? I mean, you were bidding.

[B]

No, no. Look, I think we ended up with a better house.

[A]

Yeah. Yeah.

[B]

But it was fine also.

[A]

I mean, this is that. Look, you're not one to fight. Neither have I. I've never been in a fistfight.

[B]

But it was so bad.

[A]

But that's. If he had picked someone who was more inclined, they could have come. It could have been a brawl. Yeah, that's bad.

[B]

It was really bad.

[A]

So there are rules. Possibly rules came in after that. You're not allowed to behave like that at auctions. But the point is.

[B]

But no, there's a law. Is no standing in front of someone,

[A]

no impeding, you know. No, basically, don't be a dick rule has been implemented. But I'm surprised the auctioneer let that get. Sort of. Let him get away with that because he, like, your bidding stopped.

[B]

Yeah. Yeah, that's right. Yeah, he would have got a higher price.

[A]

Weird auctions. All this to say auctions are very weird and they're Australian. And they work best because of the behavioral psychology that goes on. The old finance playbook. A steady job, property super and patience got a lot right. It's just not the whole picture anymore. The team behind IG Markets has 50 years in the industry. They've watched that system change and they've built something to sit alongside it. IG Markets is that next piece. Shares, ETFs and crypto all in one app. Simple, accessible and designed for people who want to take a more active hand in what they're building. This is new money. IG Markets believes every Australian deserves more ways to invest. And they're here to help you find the way that suits you. Search IG Markets or download the app IG Markets. This is new money. Crypto is unregulated and high risk Share trading services by IG Australia Pty Ltd AFSL 515106 crypto services by IG Digital Assets Australia what if your home loan isn't as competitive as it used to be? Loyalty is a lovely thing, but let's face it, your bank has never sent you flowers for it. Mortgage Choice can help you find a better deal. With more Choice from over 35 lenders, they'll compare your options and crunch the numbers for you. And with more than 1000 brokers Australia wide, expert help is never far away. Plus, because they're part of realestate.com they know the property market. So when it's time to get more from your home loan refinance with Mortgage Choice, talk to your local Mortgage Choice broker today.

[B]

Six across the.

[A]

You're getting into this now, I can tell.

[B]

Yeah, I am. Show me the blank and I'll show you the outcome. Obviously, this is a quote from Charlie Munger.

[A]

It might not be obvious to everyone. You and I know this quite well.

[B]

Charlie Munger being Warren Buffett's offside and now deceased. Rip rip love Charlie and his saying, well, show me the incentive and I'll show you the outcome.

[A]

Such a good quote. Yep, such a good quote. And I think it applies so broadly across the investing and economic landscape. But we're talking about housing, so I suppose this kind of comes back to what we were talking about with regard to demand. But what would you say? Well, incentives are crucial. Right?

[B]

Yeah, of course,

[A]

yeah.

[B]

No, I'm just trying to. I'm just trying to remember what I was going to say about incentives.

[A]

Well, I mean, to be honest, we kind of covered it with density. I mean, we can move on if you'd like to.

[B]

Well, the incentives in housing were and are still negative gearing. And, you know, I mean, the fact that the primary residence is tax free.

[A]

Yeah, that's a big one.

[B]

Which is a big incentive.

[A]

Like, we take it time.

[B]

We had a neighbor, I don't know if you remember this guy, we had a neighbor who lived in the house that renovated the house two doors up from us and moved out again. And you know, while he was there, we discovered that he does this every two years. He moves the whole family into this house. They renovate it, they sell it.

[A]

Yeah.

[B]

Capital gains tax free.

[A]

So his entire life he's in a renovation zone.

[B]

Yeah, his life is about taking advantage of the capital gains tax free for primary residents, you know.

[A]

Yeah, I remember that guy. Nice guy. But Bill, Bill, you and I have got way more context for each other's lives than other people who are on podcasts together, I think.

[B]

Exactly.

[A]

But just on that, I used to cover auctions every weekend. I used to go to an auction, used to go to a couple of auctions every single weekend just to sort of get us together for the news. And one of the things that I noticed was that increasingly the interesting story was, hey, look at this house. It's falling apart. There's holes in the floor and it's, you know, cold and there's mice running around and it's going to sell for like 2 million bucks. And then out the front there's an auction and everyone's going berserk. But of course, a lot of the time what was going on is that there was someone living in that house until like a month ago when they passed away. Not in very nice conditions. They were always old. And the lack of incentive for them to sell that house and move somewhere more appropriate for them is really significant. And it became this thing that I really was acutely aware of because I felt bad for the people who were living in these crappy but $2 million houses. And I think really that's just about incentives and holes in that incentive network that don't work for people.

[B]

Yeah.

[A]

I mean, okay, if I have a really expensive house and I'm 80 years old, I sell that house, I take the capital, which I've made. Don't get taxed on that, but I have to put it somewhere where it is likely to attract some tax, whether it's an interest in a bank account. Yeah.

[B]

And also there's stamp duty. And so that's a disincentive Right, totally. So you can have, you could have a four down disincentive, but that isn't right.

[A]

We could crudely put that on.

[B]

Four down is trains and buses that make a suburb livable. Transport, right? Transport, yes.

[A]

Yeah. Okay, fine. Back to the. For people who are listening, we are rapidly burning through this crossword. Six across was incentive. Incentive, Z. And then four down was the trains and buses that make a suburb livable. The answer to that is transport. You touched on it before road and rail. Fast rail, in fact.

[B]

Yeah. So I spent a fair bit of time on the road between Melbourne and Geelong. It's all these acres and acres, hectares of open space. Geelong's a big regional city, but there's kind of nothing much between it, between Melbourne and Geelong. I mean, this is just a very regional statement here, but. And the train from Melbourne to Geelong and beyond is a. What's called a V line country train. V line trains are not commuter trains.

[A]

You know, they're increasingly becoming, increasing commuter trains.

[B]

Well, I have to. Because. But, but they're not suited, you know, they're not, they're not built for that. They don't run often enough. I mean, the whole system of transport between Melbourne and regional cities, and I think the same goes for Sydney and other Australian cities is not built for commuting large distances. The trains are too slow, they don't run often enough. So the whole thing doesn't allow for the land to be developed. I mean, it's not just transport that has to be done for these places. They've also got to have water and sewerage, which is expensive, and I get that. But still.

[A]

So when we talk about fast rail in this country, we tend to talk about it as a way to get from one major city to the next, as a way to compete with, you know, airfares being high. You and I both think that's the wrong way to look at it. Right.

[B]

Yeah. So I wrote part of that book when I was in Italy, as it happens, very nice. And we were traveling around by train in Italy. The trains are fantastic. You know, like they just, they're fast. I mean, they're not like 300, 400ks an hour or something, but they're quite, they're quite quick, they're very efficient. And you can get from Rome to Florence really quickly.

[A]

Yeah.

[B]

You know, so I, I was very taken with all that and, and I did catch a fast train from I think Paris to Barcelona or something. It was a TGV or something. And it was, it was really Fast. So yeah, look, I mean, and, and now China has the largest fast rail network in the world. They've got more kilometers of fast rail than the rest of the world combined now.

[A]

Well, they can build stuff efficiently and without it blowing out to a squillion dollars, which we struggle with. But on that front, it comes to me. This is a conversation about work as well, because we found out through Covid that people were quite willing to move out of the capital cities, out of the B ones, go regional, go, go coastal. But then Covid ended and all of a sudden the bosses said, well, you kind of have to be back at work probably three days a week. And then they were stuck on these V line trains or driving for hours and hours, which kind of became a problem. And so people were caught. And I think what that taught us is that if you make it so that you can get from one of these regional or coastal places to a capital city in 45 minutes instead of an hour and a half, then that makes it viable. And in so doing, you take the pressure off the capital city housing market and you pump it into a regional and established city somewhere with good houses, hospitals, schools. I mean, this, I think should probably be the number one priority problem, of course, is price tags. As discussed in China. You can do it pretty well here, not so much. But if you were in charge, if you were prime minister, say, and you said, okay, everyone, I've got a plan for how we're gonna fix housing affordability. And it is that we are gonna spend like half a trillion dollars on fast rail because we're really behind on that and we need to sort that out. And these are all the reasons we're going to do it. I mean, is that, you know, like, it's a huge amount of money, but it would effectively correct the housing affordability crisis. Right? Would it not?

[B]

Of course it would. And I think it would do it. I think it would do it better in a, in a more effective way than building high rise apartments around train stations in the city. Yeah, I do think that, as I say, there's more than transport required, but you know, it would be very expensive. There's no doubt about it. The way things work at the moment, the infrastructure costs of developing new suburbs goes onto the developers. They have a developer contribution, it's called that they have to pay for the infrastructure. And that's a relatively recent impost, which has basically made, I mean, it goes on to the price of the housing, but what it does is, makes the, makes the whole project, the whole business Model of, of developing housing like that, less viable, so it makes it harder for the, for them. And so developers are less likely to do, to do housing estates because of that extra cost.

[A]

They get a hard time housing developers, but they got a lot to worry about. They got a ton to worry about.

[B]

Yeah, that's right. I mean, and you know, obviously one. Another difference between now and the 50s and 60s is that in those days a big part of the housing stock was built by governments themselves. Now governments are completely out of the game. They don't build, they only finance. Or at least the whole housing system has been privatized fully. So even social and affordable housing has to be built by private sector developers as a part of their obligation. And Four Corners recently just had, the other day had a expose on this which was quite interesting about how this isn't really working now. I mean the, the social. There isn't a, there isn't a good enough definition of what affordable housing is. How affordable is it? Also the definitions tends to be for affordable housing that it's a 25% discount against market rent. But when the market rent is really high, as it is in Sydney and Melbourne, a 25% discount still leaves rent high.

[A]

Yeah, I want to talk to you about rent in a minute, but I was reading in the, in your book the other day as I reread it sometimes, that by the late 1970s, really social and affordable housing as we kind of always knew it had been fully dismantled. One of the interesting things about social and affordable housing is the access to opportunity as well. I mean, you want to live in a nice place, you know, place where you can get a good job. That's kind of crucial. And once you dismantle that, it becomes, it becomes an issue that kind of feeds through everything, which I suppose is the issue with housing is that you can't really get a grasp on how extensive the issues are.

[B]

Yeah, a lot of people, including your mother, were brought up in housing commission. That's right. Houses, as they were called, which were built by the state, funded by the government, the Commonwealth government. And Menzies dismantled, began the process of dismantling that.

[A]

Yes, the government did that. But you know, the other thing that that used to seem to happen is that major employers used to build houses for people to live in. My first house in Melbourne was a worker's cottage that was right near a matchbox factory that was built for people to live in there. That seemed to have been a thing because people, employers understood, well, okay, fair enough, you need to live fairly Close.

[B]

That's right. Absolutely did that. That was a big part of what used to happen. But it does not happen anymore.

[A]

Absolutely does not happen.

[B]

Does not happen.

[A]

If I can make a suggestion, read across word here as we've got two more to go.

[B]

Two more to go.

[A]

Can you answer them both? Because I feel like they're both connected.

[B]

They are. So eight across. One who buys to grow wealth and not to live in, obviously. Investor.

[A]

Yup. And then seven down.

[B]

Seven down. Write me a monthly check to stay put. And third letter is N. For four letters, it's rent.

[A]

You've done the crossword.

[B]

We've done the crossword.

[A]

Okay, well, we've just. You've filled in rent and investor, which obviously those are two sides of the same coin.

[B]

So with investor, it's worth noting that in Australia, the property investors are largely individuals because of negative gearing. Negative gearing enables individuals to outbid institutions, whereas in other countries, rental housing tends to be owned, particularly in the US by institutions. That's not the case in Australia because of negative gearing. Now, the government is keen to turn that around and is trying to encourage Australia's super funds in particular, but other institutions, other institutional owners, to do what's called rent, to build to rent as opposed to build, to buy. And build to rent basically means that an institution would build an apartment building, usually, which they would continue to own and rent out as part, just as an investment, a super fund, you know, a pension fund investment. And in order to encourage that, what they've done is they've increased the depreciation allowance from 2.5% to 4%, which is quite a solid tax break. Basically, they, you know, they get to deduct depreciation each year of 4% of the value of the. Of the property against their income.

[A]

That's an important thing because the thing about superannuation is that it's everybody's money for retirement. The government can't just say, hey, you should invest in this. It has to really stack up. And so I suppose the question is, do you think that that will. Do you think that we will see a shift in Australia where super funds or major institutions start buying thousands of houses?

[B]

We are starting to. Yeah, we're starting to. But the trouble with housing is that the income yield tends to be quite low. I mean, if you invest in the share market, you can expect to get 4%, maybe 5% dividend yield from your shares, maybe more. And also it's franked so that there's this kind of tax break for. For frank Dividends, whereas, you know, residential housing yield tends to be 2 or 3%. So you know, you really got to count on the capital gain from housing to, to make your return rather than the, rather than rental yield.

[A]

Yeah, well, I mean this is, this is kind of, to me, this is the forest that we all live in from the seeds that were planted 20 years ago with the whole negative gearing and capital gains tax discount. The thing is, like people who are renters, I think there's a misconception that they're dealing with somebody, their landlord owns 10, 15 properties for the most part, that's that person's main investment and they need it to be a good return and they need it to have solid liquidity options. They need to be able to sell it if they need to. That's why you only tend to see 12 month lease agreements in Australia, whereas in overseas places, places where they have those institutional investors, 10 years, 20 years.

[B]

But also it's worth pointing out, I think that when you have a lot of individual landlords, the experience of tenants tends to be more patchy, you know, because a lot of landlords, a lot of individuals are dickheads. So, you know, they are. But a lot of them are great, wonderful landlords. A lot of them are not. But when it's institutions, there tends to be a continuing culture to the institution that sort of is beyond the influence of individuals. Yeah.

[A]

There's been a real problem implementing minimum standards across rentals, which mightn't be the case with large funds. But that also goes back to our mate Charlie. What's the incentive for a landlord to improve the property? What, what is the dollar that comes back into their pocket? It's unclear.

[B]

That's right.

[A]

Kind of have to create an incentive if you want an outcome.

[B]

Well, that's right. And the incentive they need or would want is higher rent.

[A]

Yeah. And, or, or some sort of cashback

[B]

which, which gets us to seven down. Yeah, which is rent. Which. A couple points about rent is that house prices have come down this year, particularly in Melbourne and Sydney, they're falling. The growth rate in Brisbane, Adelaide and Perth has declined to the point where it's kind of zero now. And so those cities are obviously now going to fall. So the level of house prices, the value of houses is declining across Australia, but rents are still rising. Rents have not peaked simply because the vacancy rate across the country is still 1.6% which is very, very small. And in some places, places that matter, it's still not much more than 1%. So the vacancy there still Is. And also, investors are starting to get out now because of the capital gains tax change, even though it's not much of a change. They're all kind of panicking and chucking up their hands and getting out and so on.

[A]

Can I just ask, is Airbnb an actual issue here?

[B]

I think it is, yes.

[A]

Or is that overblown as an issue?

[B]

Look, I think it's overblown, but it is an issue.

[A]

That is to say that people are switching their long term rental properties into short term holiday rental properties and it's because they're chasing a better return.

[B]

It's a better return sometimes. Yeah. Well, you certainly get a pert. You get, you get a higher rate per night or admin. You just don't rent it out as often. But you get more control.

[A]

Yeah.

[B]

I mean, if you sign a lease with somebody for 12 months, you know, you're stuck with them.

[A]

You're a rental provider, you're a housing

[B]

provider, but with Airbnb, you know, you've got much more control. So I, you know, that's. That is an issue, I think.

[A]

Hey, as we come to the end of this chat, in this crossword, we've gone through supply, demand density, transport incentives, auctions, and then investors and rentals. Seems to me that as an onion, every layer of our country's housing is kind of in crisis.

[B]

It does to me. Yeah.

[A]

Is that a fair statement?

[B]

I think so.

[A]

So it's not like we've got one issue. It's that there are so many issues,

[B]

but also that it's fundamental to the way society operates. You know, I mean, the fact that the fundamental fact that the house price to income ratio has gone from between three and four, 25 years ago to between eight and 10 now. So doubled, at least doubled, has changed society. It just means, you know, that young people can't really get a house now unless they've got a parent who can, who can give them an early inheritance of something.

[A]

Early inheritance is great if it, if it can happen. Not everybody can do that.

[B]

Well, that's right. So what it's done is widened inequality.

[A]

Totally. And it will continue to do so. But I think the other thing is the difficulties that it creates for families as well, because there's no scaffolding for these chats. There's no right. Like it can tear families apart if done wrong. You know, how siblings are going to be able to handle things together, whether or not the parent with the assets is inclined to feel like they want to help them out. It's all totally up in the air. People talk about it as a conversation but really it's kind of one sided in a way I think.

[B]

So when I wrote the book I said that what we don't want is for house prices to fall 50% which is what you'd need in order for the house price to income ratio to go back to what it was. Because a 50% fall in house prices would result in a depression and be catastrophic. So the only real way to deal with it is for house prices not to change for 20 years to allow incomes to catch up. And I wrote recently and I think that it's possible that we are heading into that situation. It may. I'm starting to feel a bit optimistic. I was. I mean that, you know, we will get a period, a long period of time when house prices don't change. Obviously this year they're falling and that's really neither here nor there. Cause house prices do tend to go up and down. What you want is 20 years of no change. And I do think that that's possible. But then I spoke to the chief economist of the Housing Industry Association, Tim Reardon, and he said no, no, this year is actually a massive buying opportunity for property investors because there's is not enough construction labour to turn it around. There won't. So his point of view is that house prices are going to start rising again as soon as this correction is finished. House prices are going to keep rising because there isn't going to be enough supply because there aren't enough tradies.

[A]

Yeah.

[B]

And so. Okay, I think I'll.

[A]

It's hard to know what issue to put at the centre of, of the whole thing.

[B]

Well, I think because you push one

[A]

out and another one comes straight in.

[B]

No, I think the National Housing Accord was fine, that was good and they're off and running. The other factor is interest rates. That's the main thing that causes house prices to go up and down is

[A]

interest rates and access to debt, which we have a lot of debt.

[B]

We have a lot of debt. But look, interest rates are not going to go back to the low levels they were between 2015 and 2022. I mean it just isn't going to happen. So we're in a higher, a structurally higher interest rate environment now which might lead to a suppression of house prices. And so then what needs to happen for Tim Reardon's prediction to be false is for the government to focus on construction, immigration, to actually try to go back to the 50s and 60s of how immigration worked then where they actually did Focus on making sure we got enough tradies.

[A]

So would that be your big suggestion if they. If the government came to you and said, what can we do?

[B]

You have to reform the immigration system in such a way that we prioritize construction? Yep, that's what we have to do. And that is not happening. So that, you know, like, there's a lot of things happening and they're going well with it. But I think that that's the thing now that needs to change.

[A]

Can I. I think that's a great point and one that we'd like to have sort of resonate. But if I could just ask, if you look into the future, you got six grandkids, two of them are mine. Are you hopeful that they're going to have a better go of this property market or is it going to be just awful all the way through? Is it never going to get any better or is there a way that they might have a good. A better.

[B]

I suppose I'm not going to be hopeful unless the immigration system changes. I don't mean just on the numbers, although I think that, you know, the numbers have been too high in recent years. There needs to be, you know, I think the target of the prediction, the forecast of 225 probably needs to be turned into a target just quickly on that.

[A]

This immigration issue has become a left right issue. But you're saying to cut through the middle of it, you just need to tweak the type of skilled labor that we're targeting.

[B]

Well, you need to do two things. I mean, you need to make sure that you don't get that ridiculous blowout that occurred in 2023 and 2022. That can't happen again. But also, you're right, we need to rework the system to ensure that we get enough tradies here. Because at the moment, you know, we got a huge increase in, you know, a lot of immigrations occurring, but they're not, they're not building their own houses. I mean, they're not. Actually the people who are coming in are not construction workers. And part of the problem is that although we theoretically recognize the trade skills of China and India, which are where the most of the immigrants come from, and Philippines and so on, the Asian countries where most of the people coming to Australia now come from, the practical fact is that it's very difficult for them to get work. For tradies in China and India to get work here, it's very difficult. The bar, the bureaucratic form filling and everything is so difficult for them that it Basically doesn't work.

[A]

So we're talking now about intervention and creating a solution. But market economics dictates what I said before, the fact that a renovation's gone up 20% in price over the last 12 months, that should mean that, okay, lots of money's getting made here. Lots of people are gonna head into becoming builders out of high school. They're gonna go to tafe, they're gonna trade, and they're gonna go and do it because the money's there. Is that not gonna happen?

[B]

Well, it isn't happening. I don't know. I mean, there's money being made elsewhere.

[A]

Yeah.

[B]

And, you know, I mean, in order to become a trader, you've got to do an apprenticeship. You know, the apprentices aren't paid enough. You know, there's only 50% of apprentices are finishing their apprenticeship.

[A]

Is that right?

[B]

50%. And part of the problem is that, you know, when. When the apprenticeship system was set up, people were doing it when they were 16 and they were living at home and they didn't have a car.

[A]

Yeah.

[B]

But now everyone's not living at home anymore and they've got a car, so they can't actually afford to live on apprenticeship wages. So they do it for a year or two and they go, this is hopeless. I'm getting out of this.

[A]

And they see their bosses very stressed out, trying to run a business.

[B]

Sure.

[A]

When they can't get labor and materials are expensive and clients don't understand that price has gone up, that'd be stressful, too.

[B]

And the builders are all on fixed contracts, which, you know, they get caught.

[A]

Dad, I get to the bottom. We do this all the time. We get to the bottom of these chats and we kind of like, oh, God, I'm guilty of this. In some of the content that I do that, it's really grim. And I feel a bit grim after having this chat. I don't know what to do about that. I don't think there's anything to be done. We decided to have a chat about housing. And it's a bit grim.

[B]

Yeah, it's a bit grim. But, you know, look, there are signs, I mean, you know, that the government is. And I say to people who ask me whether they should invest in housing, I say, well, yeah, sure. But just remember, if you invest in housing, right now, you're betting against all of the Australian governments. The Australian governments are trying to make housing more affordable, right?

[A]

Yeah.

[B]

They might fail. But if you buy housing, if you buy a house as an investment, you're betting against them.

[A]

Well, we love a bet in Australia, don't we?

[B]

And you know, I don't think I'm going to do. I wouldn't bet against them.

[A]

Yeah, fair enough. You know, so I think that's the

[B]

positive note to end on. The Australian governments are trying to fix it.

[A]

Yeah. Okay. Well, good.

[B]

They're trying to fix it.

[A]

Hey, I've enjoyed this.

[B]

Me too.

[A]

I've had a good time. I liked. I think that for all of my umming and ahhing the crossword actually played, I think it worked. Do you think it worked?

[B]

Oh, I do. It was great.

[A]

Good on you, I think. Get ready. I'm gonna start hitting you up with more crosswords. Cause I know you like them.

[B]

I think you're an actual podcaster.

[A]

Do you think so?

[B]

Oh, yeah.

[A]

This is huge. Cause you've been a podcaster for many, many years.

[B]

I have, yeah. But, you know. Well, I've been playing around. You're. Yeah.

[A]

No, you haven't. No. I see our rankings in the business on Spotify and we're. We're wrestling.

[B]

Are we?

[A]

Yeah, we are. I didn't want to bring that up if I. If I invited you back on for another chat, not about housing, but on. Because, you know, how we got here is usually historical business stories and the sort of the how we got here of the. That pocket of the economy. If I asked you back for another chat, would you do it?

[B]

Of course. What will we talk about?

[A]

All right. We'll figure it out. Okay. We'll talk off Mike. And we will land on one. But I look forward to having you back onto this podcast. Dad. Alan. Thank you.

[B]

Thank you.

[A]

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