Q&A session with Paul Glossop – more questions answered! March 2018

By Demii Kalavritinos 01 March 2018 | 1 minute read

Have you been waiting to hear your question on the podcast? In this episode of The Smart Property Investment Show, we bring in buyer’s agent Paul Glossop to give you answers!

Paul Glossop

Tune in as he and host Phil Tarrant discuss topics including if specific suburbs are worth signing for, or if they are ‘digging their own grave’, if its smarter to buy an investment with your partner or a family home as your first purchase, as well as their thoughts on the Victorian State government changes to subdivisions and the requirement for a garden space, and how they thing it will impact affordability and cashflow in the future.  

You’ll hear all of this and much, much more in this episode of The Smart Property Investment Show! 


If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: Facebook, Twitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!



Kippa Ring 



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About the author

Announcer:    Welcome to the Smart Property Investment show with your host Phil Tarrant.

Phil Tarrant: Welcome to the Smart investment show, it's Phil Tarrant here. Hopefully now that my voice is getting quite familiar if you are a regular listener of the Smart property investment how, if you're new, welcome, I hope you enjoy today. We're going to do something that we try to do every month or so a bit of a Q&A session. It's important for us on the Smart Property Investment show to just know what's going on, to understand that your thought, your feelings, your sentiments towards property markets. We want this to be an open forum, so we invited our listeners to get in touch and let us know any questions they had.

            What I typically try to do is find someone who is an expert in this game to come and join to run through them. I've got three good questions in front of me today that we've received through the ... Well a couple, one was via Twitter, SmartpropertyHQ, if that's how you want to send your stuff through. A lot of these do come from email [email protected] We get lots and lots of questions so if we haven't got to your question today, I do apologise but we will do endeavour to get around to them at some point. But what I've done, I've looked at the ones which I think are going to be most relevant to our listeners irrespective of where you are investing in Australia. To help me answer this today I have Paul Glossop. Paul Glossop heads up Pure Property Investment, it's a buyer's agency. Paul hi again and welcome back.

Paul Glossop: Thanks for having me Phil, I'm doing well.

Phil Tarrant: How's business by the way, all right?

Paul Glossop: Busy. As busy as we personally have ever been for all the right reasons. I think a lot of intelligent investors are probably seeing opportunities in certain markets especially people who've probably previously looked in markets such as parts of Sydney and to an extent parts of Melbourne, and I think they're starting to see some really good value opportunities across the country where we really got our finger on the pulse and really securing some amazing properties, which I think over the next five, 10 years are going to pay some very, very handsome dividends.

Phil Tarrant: Okay, that's cool. What I'm going to do I want to pick your brain on some of the markets that I know you're investing in Australia, but probably I don't have enough time for it today, so let's get you back in about a week or so and let's just do a bit of a freestyle chart about the way you've seen the world and tune in everyone if you look, give it about a week or so, we'll make sure we let you know when it's out. But I'll get Paul back on and we'll pick his brain and see what sort of intel we can get out of him and hopefully can help you shape the way you're investing right now.

            It's a Q&A day Paul, we've done this before. We'll run through this and more so than not these questions just pretty much give us a topic or a bit of a theme to chart around. And just for everyone you know the drill, this obviously myself and Paul, Smart Property Investment show, we're not giving you any specific financial advices, it's just a general conversation around investing in property. Our recommendation is before you make any investment decision, to speak with your relevant trained financial professional. Apologies for the disclaimer but I've got to do it. This is just us really giving you a bit of a yarn and understanding of what's going on and hopefully some information that you can go away and get some use out of us.

            First question, Paul. It says, Hi Phil, that's me, I enjoy listening to your podcast and what to thank you for all the good information that you provide ... Sounds like I've written this, isn't it? This is a real question Paul-

Paul Glossop: You do load questions, I'm positive of it. Have your ego stroking everyday I come in here.

Phil Tarrant:  No, this is the first time I've read this by the way, I'm get given this from our producers. We'd like to go freestyle on it and actually straight off the cuff respond to it. So, this person writes. The reason I'm reaching out to you is that I am about to sign a contract on a property in Kippa-Ring, here we go, this is your backyard Paul, you know what's going on there, as I have seen some of the solid fundamentals for growth in the Redcliffe area, do you think I'm digging my own grave? That's regards Salar Salarvand. Salar, thanks for the question, appreciate your sentiments, it's nice to know that we're adding value to you. I do like the feedback and so does the team. The best feedback we get is to know that we're actually making a different, so I do appreciate that.

            But the question here Paul is someone is about to sign in Kippa-Ring and Kippa-Ring is not far from Redcliffe, do you think I'm digging my own grave? By investing in Kippa-Ring are you digging your own grave?

Paul Glossop: I think firstly, I think it's very nice for you to read stuff that strokes your ego and if I was on the other side of the microphone-

Phil Tarrant: Hey remember, I choose who comes on this show, so just be careful.

Paul Glossop: Yeah, I agree. Okay, all right. Kippa-Ring, let's get to the cracks of it. I personally see ... We go back to disclaimers, it depends on what's in your portfolio, I don't know what else is sitting in Salar's portfolios. But if we look at it in isolation, we're looking at Kippa-Ring as a market in isolation here and now. One thing I'd always want people to know first and foremost in that market is that the Moreton Bay regional council government website is always very, very useful when it comes down to information in places like Kippa-Ring.

            There is plenty of probably aspects within those areas, which I'd want to do, make sure you've done all your due diligence in there for a couple of reasons. One of which is mostly flood overlays; there is certainly some flood mapping in that market there, which you need to make you're aware of. There is actually some canals that are being dug and also in place for things such as storm water overlays and they've some easements that come with those, so I think making sure you know that. Make sure you know your zoning overlays because there has been some distinct zoning changes right across the Moreton Bay region but specifically to Kippa-Ring.

            There has been about probably 120 to 150 particular individual houses, which have changed zoning for more density, so depending and what you're buying the property for, if it's owner occupier and you're suddenly seeing changes to zoning that will mean you're going to be seeing four, five, six story units next to you in the next 10 years, that might not be ideal. Conversely, though, if you're going to be buying for the intention of development, you might be in a very good position. But I'd know those zoning overlays as well, if you're unsure, give them a call. The council are very receptive of warning anyone who's looking to invest in their council to make sure you pick their brains. The town planners are on their phones pretty much in any given point in time.

            Fundamentally, one thing with regards to Kippa-Ring, new train station went live there as of October 2016. I was actually just chatting you off air about talking to Anthony Albanese myself two or three days ago, very funny anecdotal story of that. We were talking about infrastructure plans for Badgeries Creek in Sydney, he's a shadow infrastructure federal minister and he actually outline that ... He was just talking about some other infrastructure plans that have gone ahead. The Moreton Bay train extension was first tabled to Federal parliament, would you believe this Phil, in 1895.

Phil Tarrant: Over 120 years ago.

Paul Glossop: This is probably, it's probably a word to wise or anyone who talks about train lines, which have been promised in certain areas and when they start discussion and when they actually happen. And these things they effectively take a long, long time to go through. The good thing about this area is essentially meaning that it is now gone through, it's live, it's active, and there is a lot going on in there. So, fundamentally, good population growth. I think jobs creation is something that still has to happen in that region for me to start to see steady uplift in price. It's still very affordable right across that Moreton Bay peninsula, in particular Kippa-Ring's, rents still very affordable, you are 30 minutes from CBD, you're about 50 minutes by train, you're about five minutes to the waterfront. Again, I think check your zoning overlays, make sure you check your flooding overlays, and there is a couple of other aspects in there with regards to easements. But fundamentally, I'm comfortable with it without obviously knowing the specifics of the address of the property.

Phil Tarrant: So Salar is saying ... There is a comparison with his question between Kippa-Ring and Redcliffe, they're saying Redcliffe has done therefore should Kippa-Ring do well, is that the way it works?

Paul Glossop: Most certainly not. And I think has Redcliffe done well compared to Kippa-Ring, compared to Newport, compared to Clontarf, compared to Margate, all these surrounding areas of that market? It's done relatively well over the last five to seven years comparatively to Brisbane, if you compare it to Sydney or Melbourne, it's paled in significance. But ultimately, I think if you compare it to a sister suburb, yeah there might some flowing, but one thing Redcliffe is got is proximity literary to the waterfront as well as it's also got the hospital adjacent to Redcliffe itself. It's within five to seven minutes away but you're obviously seeing price points significantly higher in parts of Redcliffe. Does that mean you're going to get flow into Kippa-Ring? Look, I would agree you might some get creep and you might get a bit of affordability criteria come in there, but I don't think there is enough there to substantiate the sale all of a sudden that's gone up 10%, so you're going to get this flow because Redcliffe hasn't really done anything astronomical or outside of the norm.

            Personally, I think it's going to be a steady five years in that entire market, I don't think it's going to be insane but I do definitely think that there is good fundamentals. The only real thing I'd probably be concerning myself there with, the investor attention in that market, you're getting to see rental vacancy rates start to increase a little bit, and we personally as a company investing in those markets are probably seeing rents soften a little bit due to investor demand. And obviously what properties were previously owner occupied start becoming investment property. You don't need to develop to increase supply, and that's one thing I think people need to be aware of is that supply can be increased when you transact an owner occupied property and turn it into investment property. And that's happened a fair bit right across that market lately. Make sure you do your sums off a relatively soft rental vacancy that's going to mean that you might factor in one or two extra weeks of vacancy a year.

Phil Tarrant: Why can't you just explain that a little bit more for everyone tuning in? So what you're saying is that an area that transitions from most of the properties being held by owner occupiers into investors, with more investors in the market it means that there is more choice for rental properties and therefore there is less pressure to push up or to even get people into your rental properties and therefore everything softens quite a lot. So this is a transitioning market really in Kippa-Ring right now?

Paul Glossop: Yeah, I'd definitely factor that in. And then the way I explain that is let's say there is 1,000 properties for sale in any particular suburb and 70% of those were owner occupied, so 30% were investor properties. If 20% of those, so let's say another 200 of those properties sell to investors, you will all of a sudden got 50% of the stock is now investor stock without building a single property, so ultimately there's 200 extra properties on the rental market as that transition happens.

            Now that's not necessarily going to change the demand too much from a price point perspective, in fact, it might mean that you've got more competition from investors and owner occupiers, so it might put an upward demand on purchase price but it's probably going to put a softening demand on actual rental because people will ultimately have more choice and more choice means more supply and more supply typically means a softening in price point.

Phil Tarrant: So Kippa-Ring is essentially between the Peninsula, right? All service from Anzac Avenue, is that correct?

Paul Glossop: Yeah, Anzac avenue pretty services it right through all the way from Petrie right along towards Kippa-Ring down …

Phil Tarrant: And the train line terminates at Kippa-Ring?

Paul Glossop: Terminates at Kippa-Ring, so I think there are six stations between where the Petrie junction is, that's going from Kallangur, Murrumba Downs, Mango Hill, Mango Hill East, Rothwell, Kippa-Ring. So you got those stations that have been included, which are only really live for a year and a half. So you've got to the point now where you've seen who've got a commuter belt, they're also going to see some demand come that Petrie University when that goes in in about three or four years time and that's going to increase some more demand.

Phil Tarrant: So there are so many students living in this Peninsula, this sort of Kippa-Ring way?

Paul Glossop: Definitely not at the moment. I'd say if you canvassed it, you'd be expecting to see very, very low amounts of students in general out there. I think that will transition that will change and I think that demand for that smaller one, two bedroom accommodation over the next five to seven years will definitely change there as well. You've got a hospital, you've got a couple of hospitals within that Peninsula, which will probably put some demand on nurses potentially wanting to rent in those markets and anyone in the medical fraternity. But ultimately, it's predominately owner occupied.

Phil Tarrant: An extension of this question, why do you see a wholesale shift of a grouping of suburbs go from being not very attracted to investors, to investors all over it? And which is what we're seeing, I wouldn't say investors are over Kippa-Ring but that sort of belt Anzac Avenue, it's affordable, obviously there is new train along going in, so therefore an infrastructure growth. But what is it that presses the button, and the whole makeup footprint of an area sort of shifts from being owner occupied to investors? We saw it at Mount Druitt sort of across six years ago.

Paul Glossop: Yeah, we're seeing it in Hobart, we've seen it in Hobart over the last 12 months where people weren't even looking at it two years ago, and all of a sudden everyone can't talk about property unless you're talking Hobart as part of that mix. And that will come and go. But really for us it's never one thing, I think ultimately is there's always going to be multiple facets that push up a price point from where they'd be owner occupied centric to then therefore investor centric or a combination of the two.

            One of the big tipping points lately I think, and you've mentioned this on your podcast the last few weeks as well is, I think with now only just in the last probably six months in Brisbane in general, probably not specifically to Moreton Bay but Brisbane in general and South East Queensland is we're seeing a big distinct change in interstate migration. We're actually seeing physically people starting to shift into that market. We're seeing confidence that comes with that on the back of jobs creation as well. Brisbane has been talked about for the best part of five, seven years for investors right across the board, but price growth has been mediocre, house price growth has been okay. Price growth obviously due to the supply issues, is been average. But I think the population growth, infrastructure, as well as the job's creation now starts to become a bit more of a crescendo on the back of two markets being Sydney and Melbourne having a very good, long, and strong run but now starting to take off.

            Investors are starting to look at that from an affordability perspective, a cashflow perspective and saying there is no capital growth coming in those markets for me over the next three to five years, cashflow is coming in at three, three and a half percent growth rental yield, why would I buy there; attention starts to shift to other markets. A part of it is people looking for value, but the other part is fundamentally owner occupiers starting to see I can't afford to buy in this market, I can get a job in that market, it's very affordable, I've got lifestyle, good amenity et cetera.

Phil Tarrant: Yeah. The price in disparity between Sydney and Melbourne versus Brisbane, are you going to see a lot of that and as that migration starting to happen and Core Logic recently put out some information, go and check it out, which gives some insights into that. I think we've done a reasonable response here you Salar. Your sentiments Paul, Kippa-Ring is not a bad place, check it out.

Paul Glossop: Definitely. Do due diligence, talk to the council, talk to anyone else who's going to be surrounded in that, please don't talk to the agents and get their word for it because ultimately they're going to want to sell you what they've got to sell.

Phil Tarrant: So, good basic research, look at the fundamentals right, nice one. Next question says: Hi there, just started to listen to your podcast this week and I have to say it's impressive, here we go, this is great, I love stuff like this.

Paul Glossop: Because you're a simple person.

Phil Tarrant: Yeah I like to make a difference Paul. My wife and I got married a few months ago and have been saving for a house deposit for the last eight months or so. We're looking to buy a house in the eastern suburbs of Sydney. My wife already has an investment property with her sister. We would ideally like to buy a house sometime this year. Should we buy an investment property first using my half of our savings/shares or just save, save, save to buy a more valuable family house? Me thanks in advance, kind regards Simon Street.
            Simon thanks for writing into us. Where you are right not Simon, I think a lot of people have been there at some point in time looking to create a life together with your wife and what that entails, whether it includes children all that of stuff, if that's where you want to go, great, it's cool. You're going to make a choice whether or not you want to have a home or you want to look at potentially realising your savings by creating an investment. And really that's a choice that you need to make; it's not one for us to really touch. There is something very emotive about having a home, about starting a new life with someone, about potentially having children and then living within that home and being a nice, safe, stable place where you can actually build a family.

            Often, property investment always isn't about the numbers, sometimes you got to follow your heart and your emotion, you got to follow what's right for you. So, do understand that a little bit before we actually get into the benefits of investing in a property pool versus a home.

Paul Glossop: Without going to the details just yet, but I mean for me I think you're exactly Phil is that emotion when buying a home is such a hard thing to curtail. I mean, you rent and you invest; I rent and I invest and we both have young families. But that's something I think we've probably modified our mindsets pretty and the peace to be able to do that, and we started investing before we had families. I think it's tough when you are potentially in a different stage in life to maybe think home is where the heart is and you want to make sure you can anchor yourself to that.

            The emotional part is really something that I personally can't answer, you can't answer, and I think they have to really figure out what's important, and is a home the important part, is it a status part, which I doubt would be, or is it going to be more what makes sense for us, and then we can unpack that.

Phil Tarrant: Yeah. It's really tough on Simon, and I look at this and there are some complexities in here because save, save, save that's cool. I don't know how much money you guys own and what you can actually dedicate to savings. But buying a house in Eastern suburbs of Sydney.
Paul Glossop: The word there is house is not a home, so you can define it straightaway off the mark.

Phil Tarrant: You're not going to get any change for-

Paul Glossop: Probably two.

Phil Tarrant: Yeah. At best to actually get in the eastern suburbs for a house is 1+ million dollars, so you're going need a reasonable amount of savings. If you're borrowing at 8%, that's a big chunk of money. And then you've got all your stamp duties or your legals et cetera. So, you're going to need a big chunk of cash. And that's cool if you've got the capacity to save, that's great, but to have your money sitting in a savings account right now at best you might get a percent-

Paul Glossop: Maybe two, if you've got a very happy banker who wants to treat you well as possible.

Phil Tarrant: Yeah, your money is not really working hard for you if you got it packed in a bank account. Then there is little bit of complexity here also where your wife already has an investment property with her sister, so there is potentially quite a lot of unrealized equity in that property. I don't know where it is, and I don't know how long they've had it for, so you've got look at whether or not if you want to move quickly, whether you'd liquidate that asset and use any proceeds from that to actually add to your savings so you can buy a new house, or you keep that and maybe you could potentially refinance that and draw some equity out of that and use it as well. That's probably a question for your bank, or your broker, I would say Paul.

            It's tough one Simon, first to actually give you advice on this, to our original point it's about the emotional investment you need to make versus the financial investment. If you've got money sitting there right now, you can potentially put that into property and hopeful if you put into a high growth property you might be able to realise that increasing equity at a point in time maybe one, two, three, four years time. It's a strategy I follow. I at a point in time will purchase a principle place of residence; it's not really for me right now but rather than have my savings sitting in a bank account and getting one or two percent interest, I've got it working for me in property, so at a point in time I'll draw down on that equity and that is what I would use to be my savings actually getting to a property to buy for the family. You do some similar to me Paul?

Paul Glossop: Yeah. I personally have been renting or investing and renting, rent-investing or whoever you want to put it, for a number of years, a decade pretty close to personally. And built a significant portfolio in the background. Basically by saying my money can work a lot harder. Another time I didn't really know also where and what home would look like, so that's the other part too is that renting for me is a big try before you buy; it's perfect try before you buy and not just for the property but it's location. What's important to you is the schools, is it proximity to transport, is it proximity to work. All of those thing come into play and if you buy, there is a hell lot of transaction cost that goes with buying; it's very expensive to get in and get out. One of the first things I always look, unless you're certain that this is the property, I would really probably really consider that part first and foremost before you even talk about numbers.

Phil Tarrant: So that's sort of that, who else can Simon chat to and actually get some advice around this?

Paul Glossop: We as a company personally ... And I know there is buyer's agencies that I know of who do really good work that try to unpack this questions probably in a little bit more detail and give some numbers to him. Now rather than saying this is what you should do, we can lay out some pretty objective numbers that say ... Well, let's say it's a $2 million house, and let's say at this stage in the Sydney cycle let's realistically expect the Sydney property market to go relatively sideways for the next three to five years somewhere in that shape or form.

            So, if you're putting $2 million worth of debt into something that's going to go sideways as opposed to renting that equivalent asset, which Eastern suburbs will average about 3% growth rent to you on a good day, if you put $2 million that's about 60 grand a year in rent if you're working off 3%. If your property has gone sideways and you've bought it and you're paying four and a half percent on a principle and interest loan, that's about 90,000 a year it's costing you to hold a property that doesn't go up in value.

            I would look at data and say straight away there is $25,000 difference a year that you could otherwise get into another property, much lower price point whilst renting in that market and testing it, and then effectively hopefully with that investment you're going to get out in the sides or in the peripherals getting them working harder than what that property would otherwise do.

            And one thing I would consider is that if your intention over the long-term is to build an investment property portfolio, if you're going to hitch your cart to a big loan for an owner occupy here and now, good luck trying to get additional cash in the next three to five years to invest because you're basically going to become ... Unless there is going to be significant earnings or a windfall of cash, you're going to become one if those statistics of 82% of people only ever owning one investment property. Unfortunately, if you don't pragmatically think about how you're going to access money to keep building your portfolio, that's probably what's going to happen here, as well as the fact that I think your money could work realistically harder as long as you put that money to work in a different market at this surge.

Phil Tarrant: That's good counsel. What Paul is talking about the is the utility of your money. Yes you can buy a house in Eastern Suburbs; it's probably not going to go up in value, and if it doesn't go up in value it means you're never going to be able to potentially extract that realised equity gain and put that in an investment property because it's not going anywhere. And you're talking about a difference of $25,000, $30,000 a year between-

Paul Glossop: Net.

Phil Tarrant: Net interest repayments. And by the way, obviously I had a question for your accountant, there is no deductibility on interest rates.
Paul Glossop: Zero.

Phil Tarrant: Principle place of residency versus something in an investment property. There are some tax consequences of investing in property, so why put your money into a property that's not going to go up in value irrespective as investment property or principle place of residence. Goes back again to our original comment that sometimes you've got to put other priorities ahead of making money and if that's living in a nice home in the eastern suburbs with your wife and potentially creating a home for a family, you got to weigh that out.

Paul Glossop: Absolutely. There are two things that I'd say, one is that there is no shortage of houses for rent and there is no shortage of ways you can negotiate a good lease with a landlord on somewhere were you say, I don't want the insecurities, and usually that's the number one issue with people wanting to rent when they've got a family is can they boot out, are they going to necessarily not allow me to be here for more than 12 months. You can put concessions in place, look through your leases other options et cetera.

            And the other point I would make is, it's funny when we were just talking about that I had big revelation and said, we were basically in this position around 2008, 2009 where we saw this property market in Sydney essentially at the point where it was pretty flat going sideways but there were other markets that were moving. And ultimately you do your numbers and say well, I can buy, I can get no growth for the next two or three years or alternatively I can get my money working in other markets and come back to the Sydney market when the time is right. And that time was probably more like 2011, 2012 where it started its growth. So, like on those three years in the wilderness ultimately there.

            And if you go back there was probably more like seven to eight years in wilderness between around 2004 and 2012 if you factor in inflation. I think having the right plan and strategy in place here as well as a fairly good idea of where your numbers are at, you can do a lot. And I think you guys are in a position where ultimately they could.

Phil Tarrant: Yeah. I hope that helps. Let us know how you get on and who choose to do and if you and your wife want to come on the show and have a chat about this, you're more than welcome, just email the team, same email you contacted before [email protected] Good luck, money doesn't always matter, sometimes you're going to be happy as well, and if a home is happiness for you guys, you can follow that dream.

            Next question. Steven Ly. Steven thanks for this, it's quite detailed, so bare with me and I'll read it out. But obviously the front end, Paul there is a little of vanity here, he enjoys the content…

Paul Glossop: It's a common theme.

Phil Tarrant: Of discussions on your show, great thought provoking, we listen to your show. Excellent. It's cool, I like it. It's great, really makes me happy that people are really that connected and tuning in to us. I appreciate it Steven, thank you.

            I have some questions regarding the Victorian State government changes to subdivisions. More specifically the requirement for inverted commas and garden space. Number one, what's your thought on the legislation? A, will this help housing affordability? B, is the state government trying to cool down the property market? C, will such a scheme ever be reversed, and have there been cases of this in the past? D, with a federal election looming, Bill Shorten is proposing of scrapping negative gearing existing properties, in your view, would this affect your property portfolio and what kind of impact will it have on cashflow equity and growth prospects? Like I said, these are pretty big questions in its own rights, so let's get to the bottom of that later on.

            Essentially this question here Paul, is quite micro and shows me that Steven is right in the market, he's looking at it in terms of all the stuff that you should be looking at when undertaking a subdivision, a lot of rules and regulations and legislation around it and it changes depending on where you're doing it whether it's state based or even local council based. Every local council is got its own requirements for whether or not you can undertake a subdivision, so wherever you're doing that Paul mentioned beforehand when we were chatting about Kippa-Ring, be typing into the Moreton Bay, so actually understanding what their requirements are. So whether you're buying down in Victoria you need to speak to your local council actually understand whether or not you can do a subdivision.

            The specific question from Steven in here, the Victorian State government changes the subdivisions in green space. What do you know about this?

Paul Glossop: Daniel Andrews is part of Labour getting voted in a couple of years back now, which I think is probably somewhat warranted right across the country, is I think they had a very good vision for Victoria in general and probably more specifically the more densely populated areas of Melbourne to want to see probably something that's going to probably outline a landscape that's going to be not necessarily losing the classic backyard, and seeing a very detailed and I think very much a probably town plan of style or a city plan of style vision of the city.

            And as part of that, they changed where the restrictions were on all setbacks as well as minimum requirements of different lands and ultimately they wanted to say we know we're getting population growth, we know we want that, we know we want skilled workers coming in, we got to house them, however we don't want to see literally rows of units on every single street corner that's within 500 metres of a train or train station.

            As part of that, what they made the changes to is that I think they put in ... I'm going to rattle off some memory stuff here, I think 405 square metres, they've got now a minimum garden space of 25% between 500 and 650, they've got a minimum garden space of 30%, and between 650 uncapped, they've got a 35% minimum garden space. But they haven't put requirements or minimum land sizes for dwellings, so ultimately as long as you can fit to the height as well as the minimum garden space requirements, you're going to see more property go in, but intentionally making sure they've got some green space, they've got some usable outdoor areas and they're not just concrete jungle. I think the vision is right.

            Going on to where that looks, if you look at the population growth data, Melbourne or Victoria is ultimately going to see a population just over eight million by 2050, we're talking 90,000 people a year going into that city at the moment.

Phil Tarrant: It's going to be the biggest city in Australia.

Paul Glossop: It's not going to be, if not equivalent to Sydney within 30 odd years. So we're saying that's 90,000 a year, two and a half people per dwelling, that's about 35 of a 1000 new dwellings every year just to meet demand. So if we look at that, we're going to say they going to house these people somewhere, that's a given, this is going to happen. So then we've got to say, well let's do the smart and let's do this in a way that people are going to get really nice and really well accommodating well amenity houses and we're incentivizing people to want to build that, so we don't want to stop them.

            So yes, it's going to affect supply, but I think it's also going to mean that we're building the right types of property right across that market. It's going to give opportunities for developers unequivocally, but it's also going to mean that they're going to have to play within the rules and they're not just going to create a huge amount of rubbish, probably very quickly put together concrete jungle as opposed to well thought through, well landscaped, and well amenities small or boutique accommodation right across the border.

            And I think it's a positive thing and I think it has to happen to make sure we're keeping up with the demand that's coming in. But having some thought all the same we want minimum garden space in all of these lots means every kid that's growing up is going to have something in their backyard as opposed to just been forced into whatever their parents can afford at the time.

Phil Tarrant: So it's about livability it is about. And I'm not that familiar with the state governments details of their strategy down there in terms of subdivisions or in terms of ongoing development, but state government, local governments don't want to create ghettos they want to create suburbs, parts of suburbs, which entail or endanger family values that create livable spaces people to live, work, and proper, the question here will this help housing affordability?

            The way in Australians are living now is very different to how they were doing it 20, 30, 40, 50 years ago there is now an aptitude towards inner city living, high rise living rather than a quarter acre block with a picket fence. That's changing quite a lot of it driven by the diversity of the Australian population, there is quite a lot of migration and people are bringing those values and the way they live into the Australian context and that's cultivating a lot of high rise development, which is where people want to live also. People are being single for longer, or are choosing to be single, families are getting smaller, so we need diversity in the type of dwellings that we have.

            So, will this help the house affordability? I hope the intent is right. The government whether it's federal state or local want to make sure that housing is available to all Australians in some way or another whether that's the dream of owning an Australian home. But what we're going to have moving forward generations of renters where renting is only ever going to be the option. So, we want to make sure there is property which has rental appeal and is affordable for all Australians.

            The question you asked is the state government trying to cool down the property market, I don't think so perse. I think the state government is trying to ensure that there is a diverse property market and there is options for everyone to participate in property, whether it's a place to own or a place to rent. Should such a scheme be reversed, have there ever been a case in the past? Nothing is set in stone; stuff changes all the time. It can change on a weekly, a monthly, or a yearly basis, so irrespective of when you're looking to either secure a property or potentially undertake a subdivision or if you're looking to purchase a property with the purpose of subdivision in mind, if you do some research six months ago it might be very different than what it is today.

Paul Glossop: Yeah, I've got an example on that right now on a personal development that I'm doing where I've recently probably in November secured a property actually in Sydney, which was a development site one block, two titles, which I'm splitting out and building four individual boutique duplexes. Now that was about 1190 odd square blocks split into two, which was just short of 600 square metres per block when I do settle in May.

            Since then the government or the local council in which I bought these properties, it was already spoken about before I bought this but they actually had pressure, they changed their LEP about two years prior to allow no minimum land size for duplexes. And what happened from that is they saw a huge amount of small time developers going putting duplexes into that whole suburb. And ultimately they've had a lot of complaints by local residencies, and as a consequence they've now pushed new legislation to minimise land size to 600 square metres. Now, give that example of mine because I'm doing a subdivision from 600, which is below 600 to where it would be now the new minimum of 600. I mean about six square metres off per block, which is a very big expense to me.

            However, I knew that going in and this is going to be something that has to be gazetted by state government to be able to come back through and be enforced by local government area, which is going to take about 12 months. We've already submitted our DA and we did that intentionally because we knew that this might otherwise change. But you need to be familiar with that because there is a lot of people in that scenario who potentially had thought of, I want to buy this, it's 595 square metres and therefore I'm going to put duplex and my margins look right to all of a sudden potentially buying a property, which can't have anything done to it, and they might be in that scenario. That's something that's changed.

            The other side of the control of myself or anyone else who's in that position where exactly like you said Phil, you need to know but you also need to be well in tune of what's going in that local state and federal market of what they intending to do. And that's a part where development looks very glamorous but there is a lot of people who lose money, mainly for these things, there is a lot that's out of your control whether it be local government area, state government, federal government, and also builders and all the variables that with it.

Phil Tarrant: There is a lot you can't control, and what you can control is your knowledge about a particular area, a particular property to undertake a subdivision. But the smart investors I see that they go down this path ... And we have a number of properties in our portfolio, which we've skewed on the basis that at a point in time we can potentially do a subdivision. But until we choose to do that, and we might not ever realise that opportunity, as a standalone investment it makes sense for us. We have a fallback position as well.

Paul Glossop: And that's the key. I think that you've touched on that there is that you can put it in, look, I was just been off air, we're looking to personally buying a self-managed super purchase, which has a zoning of seven stories now self-managed super purchase. I've got 30 before that's realised, if I did want to develop it myself or anything with that, so I'm playing this as a long game. I'm hedging it because I know it's rented and it gets me about 5% now but you can't bank on this to say this only makes because I can develop it because even if that is the case and unless there is approved DA on it that you can activate straight away and afford to activate, then you really are taking a huge punt.

Phil Tarrant: Yeah, doesn't mean anything until you do it. It goes back to doing your research. And just the last question by Steven, and we're not going to be able to get into detail today, it deserves its own podcast, the one around the federal election looming Bill Shorten.

Paul Glossop: We'll get Bill on.

Phil Tarrant: The question is in your view, this is apolitical show, and we're very bipartisan Paul, we don't support any particular side of politics. In your view, would this affect your property portfolio and what kind of impact would that have on cashflow equity and profile. It'd have a lot of big impact on everything, it would have a big impact on everyone, the scrapping in negative gearing. That said, when we invest in property we don't consider how it's going to look for me after tax perspective, when you invest in property it's always before tax. Irrespective of whether or not negative gearing stays or goes, I know our portfolio intimately on a pre-tax perspective and at pre-tax levels, it still makes sense to me. So if he scraps negative gearing, it's going to change things a little bit but if negative gearing was to go, I'd see opportunities in the market as well. So, Paul, what do you reckon?

Paul Glossop: Yeah, I think you're exactly right. Part of this is I truly personally believe that no one will really know how this will fall if for whatever reason negative gearing was scrapped wholey and soley. Now, do I think it's going to be scrapped? No, I think it'll be potentially tinkled with if the Labour government gets voted in within the time frame of the next federal election. But on that, I think your point Phil is probably the key point, is that if you're factoring in tax exemptions, negative gearing exemptions, capital gains tax exemptions as part of property making money for you, being able to hold it long term then I think fundamentally you're going to run into some issues. We as a company as well, at Pure Property, don't necessarily ever factor in saying this property makes sense as long as you can get depreciation, as long as you can negative gear on your salary because ultimately it's only going to make sense as long as you're earning what you're earning. And that for me is a very, very, very, very risky fallback scenario.

            But if we look at what's that's going to change, and let's say negative gearing is scrapped on all existing properties and are incentivized on new properties, everyone is going to have a theory. But personally in my office out there, and we talk about this pretty regularly, and we're both path of the people board and we talk about this from a lobbying of government perspective in trying to give objective opinion on this, is someone is going to have to pay for affordable accommodation.

            So, unless there is going to be ongoing the intention and the ambition and the appetite for state, federal, local somehow get money going together to keep accommodating these millions and million and millions of additional people coming to our country and living in these city centres, someone has to pay for it. And whether that's new accommodation or whether that existing accommodation or reconstructing existing accommodation, someone has to be able to create it. Investors at this stage over the last 100 odd years have done a very, very good job of that, and really that is on the backboard of how we accommodate all these additional people that come to this country and we have to keep doing it

Phil Tarrant: Spoken like an investor.

Paul Glossop: Well, spoken like a person who grew up in an area as well as yourself that was on the fringe of Sydney at the time and I grew up and I saw that that was an area that expanded dramatically, but ultimately now it's being changed to units and accommodation around that because there is extremely expensive infrastructure that already exist there. If you're not going to incentivize an investor to keep these properties and provide accommodation, I just truly don't know where the money is going to be found when you got an enormous deficit already sitting there.

Phil Tarrant: Yeah. I think that's good, and my observation towards this if you're tuning is that should there be a change in government, and as we potentially near an election, just be very careful about the way in which property might be marketed. Certainly number one, if you're getting glossy marketing material, which is talking about all the benefits of buying that particular property after taxes applied, just be very, very careful. There is some certain areas of the property investment market which with promote property post-tax and my view on this is that often people are investing in property that number one probably shouldn't be on, number two, could be putting their money more effectively elsewhere. So, just be very careful, Paul you agree?

Paul Glossop: Well, I couldn't agree with you more. When I start to see glossy brochures that talk about tax incentives and everything that comes with that property making sense and then and after tax figure it never makes sense to me and I unfortunately always want to ask the question how is that person getting paid and how does this make the most sense from my personal position.

Phil Tarrant: But the fact that you're tuning in means that you're trying to educate yourself on property, so you're down the right path. And remember at the end of the day, we do advocate leaning on some of the very good professional in this market to support you as you go on the path, but fundamentally, you're responsible for what you choose to do in property. So, make sure you're informed and educated and there is no excuse for not been educated this day and age, you've got plenty of podcasts, there is information everywhere just ensure that you're relying all the right information. Paul, I don't want to finish, it's been negative so let's finish on a positive note. I thought was pretty-

Paul Glossop: No negative hearing.

Phil Tarrant: Let's keep it. But it's going to hot up, that whole debate you're going to see everything going on and ... Yeah, but we'll that for another time. We'll get some people in
Paul Glossop: Oh mate, I think coming close to the election we're going to see a lot more discussion and hopefully a lot more information about it. But I think it's exciting, it's good to debate it and I think it's good to discuss the pros and cons of it because ultimately for me property is always going to be a money making vehicle forward, there is going to be different ways to make money. And it will provide different opportunities in the market irrespective of how it falls; it will always provide opportunities.

Phil Tarrant: And one thing you can bank on in property poll is that property market is going to change.

Paul Glossop: Absolutely.

Phil Tarrant: All right, appreciate mate, thanks for your time. It was good; let's do it again soon. And as I mentioned earlier in a pod back in a week or so, just a bit of [inaudible 00:40:41] about what's going on in the market and do tune in on that. Remember if you're not yet subscribing to our daily morning market intelligence, all the latest news around property so you are the first to know what's going on smartpropertyinvestment.com.au/subscribe check it out and let us know what's happening.

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            Thanks for joining us on this episode of the Smart Property Investment show, we'll be back beginning soon. Until then, bye, bye.

Announcer:    The information featured in this podcast is general in nature and it's not taken in consideration your financial situation or individual needs and should not be relied upon. Before making any investment insurance, tax property, or financial planning decision, you should consult a licenced professional who can advise whether your decision is appropriate for you. Guests appearing on this podcast may have a commercial relationship with the companies mentioned.


Q&A session with Paul Glossop – more questions answered! March 2018
Paul Glossop
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