It’s a mixed bag in the podcast this week – but there’s a lot of doom and gloom about.
We have the Reserve Bank threatening more interest rate rises in an effort to try to get us to keep our credit cards in our wallets.
There’s a story in a Sydney paper that investors could be paying $17,000 a month AFTER they’ve collected their rent on their property, thanks to interest rate rises.
There’s (our) concerns that a fire in an apartment building garage, which caused the block to be evacuated, will spark unfounded fears about the alleged dangers of electric cars.
And there’s a woman who’s shocked, stunned and disgusted that her parents’ retirement complex has banned large gatherings after her “modest” party of 30 or so – including young kids – took over the common areas.
All human life is here …
Transcript in Full
Jimmy 00:00
Everybody in real estate seems to have been in a state of shock in the past week.
Sue Williams 00:04
Yes, because of the cash rate rise.
Jimmy 00:06
Which just about everybody predicted was not going to happen and then, the Governor of the Reserve Bank went ahead and did another one. There was a theory going around that he was concerned that all this positive talk would have a bad effect on inflation, so it was like another slap, just to remind us not to be going out there spending too much.
Sue Williams 00:31
Because they’re desperate for us to cut back our spending, really. And if there was too much positivity, people would start thinking “oh, it’s nearly finished.” But it is nearly finished; we all know that.
Jimmy 00:42
Just don’t tell anybody. So we’re going to talk about that and we’re going to talk about an article in The Sunday Telegraph, that says that if you buy a certain property at a certain rate, you’re going to be spending $17,000 a month, just to hold onto it.
Sue Williams 01:04
If you’re an investor.
Jimmy 01:05
We are going to talk about a story about a car fire in an apartment block that caused it to be evacuated and how that is related to anti -electric car campaigns. And, we’re going to talk about a party at a retirement home (which is a strata scheme), which has caused the ‘fun police’ (as they’re called by the person who wrote the article), to limit the size of parties in the retirement home. I’m Jimmy Thomson, I write the Flat Chat column for the Australian Financial Review.
Sue Williams 01:36
And I’m Sue Williams, and I write about property for Domain.
Jimmy 01:39
And this is the Flat Chat Wrap.
MUSIC
Jimmy
The Governor of the Reserve Bank slapped us on the wrist last week, to remind us not to get too excited about spending stuff.
Sue Williams 02:05
I think about 75% of onlookers; experts and economists and bank chiefs, were saying the rates would be on pause for that month. And suddenly, we were all taken by surprise when the rate went up. And he foreshadowed in his talk (Philip Lowe, the Governor), that there might be more rate rises in the wings. We all kind of know there’s perhaps one or two more, but most people feel that the top rate is going to be 3.85%, which we’re at now. So even if there is one more rise, it’s probably going to go down again by the end of this year, or very early next year. So there is cause for optimism, really; we shouldn’t get too downhearted.
Jimmy 02:49
There’s an interesting article in The Sunday Telegraph today, which kind of wants us to get downhearted I think, by the look of it. Because it’s saying that if you made the wrong investment at the wrong time, and now are faced with something like a 7% or 8% mortgage rate, it could be costing you $17,000 a month. Now, the figures seem accurate enough; there’s no reason to dispute them, but I think he’s kind of cherry -picked the worst-case scenario. Somebody who bought a house in Kensington for $3.5 million, would be paying on a 90% mortgage, $21,458 a month in mortgage repayments and only getting $4,550 in rent. And there’s your deficit, basically, of $17,000.
Sue Williams 03:51
That’s not much rent is it, $4,550 for what would probably be a five -bedroom house, perhaps, for $3.5 million?
Jimmy 03:59
You would think. In a very nice location, as well.
Sue Williams 04:02
When you think an apartment next to us, a one-bedroom apartment, gets a rent of $1,200…
Jimmy 04:09
That’s $1,200 a week, which is more than this $3.5 million dollar house is allegedly getting.
Sue Williams 04:18
So you kind of have to think, well, a bad investment will always be a bad investment, to be honest. And it would have been a bad investment when interest rates were massive and it would be a bad investment when interest rates were pretty low, too.
Jimmy 04:32
I mean, this is the perfect storm, as far as property investment is concerned, isn’t it? They bought the house when it was at its maximum in the boom, and then they’ve been hit by rapidly-rising interest rates for their mortgage.
Sue Williams 04:49
But at the same time, rents have really been going up as well. Most investment property now, especially with apartments; it’s just not negatively geared, because you’re not making a loss. Most people would be making a profit.
Jimmy 05:02
The interest rates are calculated into negative gearing. I don’t dispute what you’re saying for a second; it just feels like this is kind of worst case scenario, glass half-empty journalism, really.
Sue Williams 05:17
Well, I mean, rents are so eye-watering at the moment. The only place where rents are perhaps not as high, is in Melbourne, in the CBD in the inner-city, for apartments. But most other places, rents are high and are still increasing. So you kind of think well, most people who’ve got an investment property (if they’ve got a decent investment property, and they manage it quite well), most people would be making… It’s always possible not to make a bad investment and not to be doing very well. But I mean, the latest Domain house price report came in to say that unit prices are bouncing back. And it’s often units that are doing really well in more affordable parts of each capital city. You know, in Sydney it’s the southwest and the west and in Melbourne it’s the north and west. In other places, it’s the outlying suburbs where unit prices are going up by the most. The top unit price rise in Sydney, was 15.2% for the year, and that was in the southwest, in Edmondson Park. Most apartments are either going up a bit, or their decline is decelerating.
Jimmy 06:41
Do you mean house prices, or rents?
Sue Williams 06:43
I’m talking about unit prices and in most capital cities, they’re kind of going up. I think there’s good news out there for apartment buyers, whether investors or owner-occupiers, but you just have to be careful. I mean, you always have to be careful, when you invest in a property and you should do all your research and make sure it’s in a location that people want to live in; it’s close to other amenities, it’s in a good state, your property rental as well, and hopefully, it will be a good investment for a long time to come.
Jimmy 07:15
But I think anybody who’s invested in a $3.5 three-million dollar home with the prospect of using that as a property investment, renting it out; they’re stacking the odds against themselves.
Sue Williams 07:26
Well, that’s right. For $3.5 million, you’ve got to make a lot of money. I guess you’re hoping that a rich young family will go in there, or it will be subdivided, and a group of people who are sharing houses will go in. But that’s really out of fashion at the moment, sharing houses. People want to have their own space. So, four young people are much more likely to find four cheap apartments, than to go into a house together, if they can afford it. We’ve got a friend who’s been looking for a rental for a while, and he’s young guy; he’s in his 30s, I think. And he says, it’s really hard, because many people advertise for women only (if it’s a private rental, because legally, you can’t really do that). Is this to share, or for empty rentals? To share. That’s really become a problem for young guys. Investing is always a tricky thing, but if you get it right, it’s fantastic and if you get it wrong, it can be a very expensive mistake.
Jimmy 08:30
Okay, on the subject of parties; there’s a comment piece in the Sun-Herald today, that I think is worth another look, because I think the person who wrote it is wrong, basically.
Sue Williams 08:48
It’s unlike you to be critical of anyone!
MUSIC
Jimmy 08:59
Okay, there’s a feature in the paper by Maree Badgery-Parker, who is a Sydney high school teacher, it says here. She is complaining bitterly that she has fairly recently moved her father and mother into a retirement home. They looked at all the glossy brochures and the TV advertising of ‘the silver foxes having a lovely relaxed time,’ and thought this would be great. Her mum’s in a wheelchair, and her dad’s just getting on a bit and it does sound like it’s a difficult, but good choice to make. They had to leave a big family home that they all used to use, and they’d have big family gatherings. Easter rolls around this year, and she decides that it would be really nice to have their Easter party in this retirement home and they’d bring a lot of kids along, to have an Easter egg hunt and there would be some teenagers there, because there’s a swimming pool. Suddenly, you know, there’s 30 people there. They put on non-offensive music; she says they were playing Frank Sinatra songs, because some of the younger people have taken up swing dancing as a hobby. They thought the older people there would like all this. Now, the strata committee has said, because of their party, they are limiting social events to five or six guests at a time. She has referred to them as the ‘fun police,’ which is your typical comment. I’m thinking that she is the problem, or her family is the problem. You cannot take 30 people of all ages, into a retirement home and expect people just to put up with it.
Sue Williams 10:51
Absolutely, especially with lots of young kids and teenagers as well.
Jimmy 10:56
There’s signs up in the swimming pool, telling people they’re not allowed to do ‘bombs,’ or whatever they call them. But of course, they do, because it’s almost an invitation to do that. I would have thought a sensible person might have gone “you know what, 30 people in a retirement home might annoy some of the people who live there.” You don’t go to a retirement home to have…
Sue Williams 11:19
Other people’s parties.
Jimmy 11:22
If you want to do that, you go to an apartment block. But it did occur to me, the ‘fun police,’ the strata committee; the same thing could happen in an apartment block. You could very well have people saying “you cannot have, or may not have, a party of 30 people around our swimming pool, because there are people who live here, who may not want to be part of that celebration.” So I think she’s being a bit unreasonable.
Sue Williams 11:51
It’s interesting; I mean, we live in a big apartment building and we have a swimming pool. I’m not aware of any big parties that have ever happened there, because it would be frowned on.
Jimmy 11:59
You get people who come in and they bring a couple of their friends in and they have a bit of a swim, or they go into the spa. The worst thing that tends to happen, is some idiot takes glassware in and breaks it in the pool, so the whole pool has to be drained.
Sue Williams 12:17
And the upside of somebody bringing a friend in is that we had somebody here in our building, who was really good friends with Hugh Jackman and he used to come into the spa and people used to rush to the spa, for a glimpse of Hugh Jackman.
Jimmy 12:32
And that was even before he’d done Wolverine. The other thing we’ve had recently is a mysterious white substance in the swimming pool, which somebody thought was spilled suncream, but I guess that’s unavoidable. Well, it’s avoidable, if you don’t spill it. But I just think, you know, people get so sniffy about “oh, the strata committee have said this, and the strata committee have stopped us from having fun.” Well no; the strata committee have stopped you from being idiots.
Sue Williams 13:06
And the strata committee usually wouldn’t do things that the other owners were against. You would think that the strata committee talked to a few other people and said “what did you think of that?” and they received a lot of complaints, and that’s why they acted. If those people that had the party felt that it was really undemocratic, they could go around to the other residence and say “what do you think?” The other residents could go back to the strata committee and say “no, reverse this ban.” The fact that that’s not happening, seems to suggest that most people would be in favour.
Jimmy 13:36
You’ll always get people in any strata scheme that will complain about anything that’s not exactly to their tastes. But, when you’ve got a party of 30 people taking over all the communal areas, and even if they are not doing anything that’s terribly untoward, just their presence there, and kids running around… Nothing annoys older people more than little kids running around, just being little kids (and in this day and age, not often being properly disciplined by their parents, if I may be so bold).
Sue Williams 14:15
I mean, in the right setting, it’s fantastic to have little kids in a retirement home. We’ve all seen those TV shows, where little kids and older people form firm friendships, but little kids in a party setting are not going to be interested in the old people there.
Jimmy 14:29
They’re full of lemonade and sugar and fairy bread and the chocolate from the easter eggs that they found. It’s almost insane. You should call the authorities and have them taken from their parents immediately. I am joking, of course. But yes, I think if you’re going into a retirement home, you’ve got to realise that people are there for a reasons and one of the reasons they are there is they just don’t want any hassle.
Sue Williams 15:00
They may be ill…
Jimmy 15:01
Just tired… When we come back, we’re going to talk about a garage fire, when a car burst into flames, and how that affects electric cars, especially.
MUSIC
Jimmy
Yes, you caught me out, Sue. I was exaggerating; it may not have burst into flames…
Sue Williams 15:31
But we know there was a fire and it involved a car in an underground car park.
Jimmy 15:36
And the building in Zetland, Sydney, had to be evacuated. I’m guessing the reason this story was even in here, was because there’s a picture of a woman in a pink negligee carrying a Chihuahua, which actually takes up more room than the whole story.
Sue Williams 15:56
But the reason you thought to bring it up was that lots of people are talking about EVs in car parks and worrying about the dangers of them possibly bursting into flames occasionally.
Jimmy 16:07
See this is the thing… Everybody who is in love with the petrol engine, comes up with different excuses for why we should not have electric cars in apartments. One of the reasons is that you’ve got to put in the infrastructure, and you’ve got to find ways of charging the cars and you’ve got to find ways of charging the people for using the electricity. But all these things are fixable and we know that statistically, people who live in apartments are more likely to switch to electric cars, and do so sooner. This one that’s come up recently in Flat Chat, is that electric cars are dangerous, because the batteries burst into flames. Now, we have seen stories in the past about these electric scooters…
Sue Williams 16:58
Like what I’ve got…
Jimmy 17:01
Bursting into flames. And apparently, that does happen much more often than electric cars catching fire. Now, the problem with the battery fire in an electric car, is it’s very, very hard to put out. You can’t do it using normal methods.
Sue Williams 17:17
You can use foam, can’t you?
Jimmy 17:19
No, I think it’s powder they have to use. It’s got to get a chemical reaction, because what’s happening with the battery is some chemical thing is happening. It’s a chemical fire, rather than a physical fire, if that makes sense? So people are saying “oh, it’s really, really hard to put out and you could destroy the whole building.” Now the other side of that is statistically, the most dangerous cars that you can have in terms of catching fire, are petrol cars. That’s proven, in terms of the number of cars and the ones that go on fire. So if you’re going to start talking about not allowing cars, because they might go and catch fire…
Sue Williams 18:00
You wouldn’t allow any in.
Jimmy 18:01
No. The ones that are apparently most risky, or more risky than pure electric cars, are hybrid cars, because they’ve got the battery and petrol.
Sue Williams 18:15
If there is a problem…
Jimmy 18:18
It’s hard to stop. But I still think hybrid cars are much less likely to catch fire than petrol-driven cars. People should not be concerned about electric-powered vehicles catching fire. Every car is capable of catching fire, at some point. I think when you don’t have a highly combustible fuel, sloshing around, then the chances of it happening are much reduced. Having said that, we’ll probably find out tomorrow that this was an electric car, but such is life in the podcasting business.
Sue Williams 18:56
There’s a huge conference at the moment in Sydney, on fire prevention and all these fire chiefs from all over Australia have been here. I only know that, because I did a book about burn surgeon Professor Fiona Wood, and her right-hand woman was in town for that conference. She addressed the conference and we met up and said hi, and talked about how they’re still raising money for research into burns and how to prevent burns. It was just a…
Jimmy 19:25
Just a coincidence.
Sue Williams 19:27
I was going to say something as a plug for my book.
Jimmy 19:31
A gratuitous plug for your last book.
Sue Williams 19:35
That was just a gratuitous plug for my last book, sorry. Well, I didn’t actually mention the name of the book, so it’s okay.
Jimmy 19:41
What is the book called, Sue?
Sue Williams 19:42
I think it’s called Under Her Skin.
Jimmy 19:44
The story of Fiona Wood. It wouldn’t be a week on the podcast, if you didn’t plug one of your books.
Sue Williams 19:52
Well, I suppose last week I did mention my new book, didn’t I?
Jimmy 19:55
What’s that called, Sue?
Sue Williams 19:57
That Bligh Girl. We’ve got the launch this week, but it came out last week.
Jimmy 20:02
It’s already in the bookshops;. you’ve been going around…
Sue Williams 20:05
Signing books for people.
Jimmy 20:07
If you want a signed copy of Sue’s book, That Bligh Girl, head out to Dymocks in Sydney, in George Street, Abbey’s Books in York St, or Kinokuniya in the Galleries, opposite the QVB. Alright, enough of this puffery. Thank you very much for breaking into your Sunday, to record the podcast.
Sue Williams 20:37
It’s a pleasure.
Jimmy 20:38
And thank you for listening. We’ll talk to you again soon. Thanks for listening to the Flat Chat Wrap podcast. You’ll find links to the stories and other references on our website, flatchat.com.au. And if you haven’t already done so, you can subscribe to this podcast completely free on Apple podcasts, Google podcasts, Spotify, Stitcher, or your favourite pod-catcher. Just search for Flat Chat Wrap with a W, click on subscribe, and you’ll get this podcast every week, without even trying. Thanks again. Talk to you again next week.
