Is Australia now in the biggest property market correction in decades? | 7.30

So you've had a lot of success over the years predicting what's going to happen in the property market, and you've made a fortune along the way yourself.What's your prediction now for house prices and importantly for rents as well?

Well, I think house prices, they might soften a little bit more, but there's definitely my belief they won't collapse, and that gets down to supply and demand.You're going to have the investors who currently have an investment property They'll retain their 50 % capital gains.Why would they want to sell?So they won't.Less properties are going to come on the market to buy.The first homebuyers, the new cost of housing has gone through the roof.

Since COVID, construction costs have increased by 40%.40%.They'll be going way out of town to buy a two -bedroom basic apartment and paying $800 ,000 to $1 million.Who's going to pay that?So developers don't want to take this risk.So there'll be less building costs.

A lot of the builders have gone broke building houses.They couldn't meet the cost they agreed on.So you're going to find less houses built, the 25 ,000 homes behind every year, it's going to go through the roof, less properties to rent.

So because of a lack of supply, you think prices will remain, what, relatively flat?

Relatively.There'll be little hiccups, 5, 8 per cent, then they pick up 10 per cent, then they...Over five years, In five years, houses will be significantly, I believe, more expensive than today.

So the price will go up over that?I believe so.What about for rent?

Unfortunately, the biggest negative in all of this is rents will go up significantly.Less houses are going to be built.Who's going to take the risk, worried that they won't be able to sell them?You can't rely on just first home buyers.So what's going to happen is less property is going to be built, less housing available for renters, the existing investors with homes that they rent, they'll keep theirs, but the new supply is going to fall through the floor.That's what's going to go down.

You've never been a fan of changes to the negative gearing rules.What do you make of the government's decision here?It argues that this will incentivise new building because you can negatively gear newly built properties.

Unfortunately, that segment is only a relatively not insignificant, but minor segment in the housing story.And what's going to happen is, you know, housing prices must go up.because the builders aren't going to carry 40 % since COVID.Look what's happening in costs of freight, goods.And what's going to happen is people are hurting.You know, I've read where government says, oh, you know, a lot of the investors are rich people.

They're not rich people.You've got people there, husband and wife both working, couples working, they're building up something so they've got something in retirement so they don't have to rely on the government and it saves the government zillions on their retirement.

Yes, there are those families there, but do you accept the majority of the benefit of negative gearing and capital gains tax is going to the top end?

Well, if you call husband and wife both working with normal average jobs, I reckon 30 to 40 per cent of properties that have been sold are to regular mums and dads, not top end people.

But we have seen, since the changes were made to capital,tax in particular in 1999, a doubling of house prices compared to income.So incomes have only risen half as much as house prices.Do you accept that has locked out a lot of young Australians from the market?Yes, but it's kept the government coffers going.

You know, between Land Tax, Stamp Duty, GST, they are They are reaping...It's the biggest single source of income, revenue, for governments, councils, state governments, is new housing.

New housing's going to drop.But young buyers have not been able to get into the market.We've seen a reduction in the number of younger Australians owning homes.Well, the great Aussie dream's gone.

It's now a nightmare.And what my concern is, government comes out with what they think is a quick fix and they say, you know what, we'll let you borrow 95 % and you've only got to have 5%.It's the worst thing they could be doing.These people, one hiccup in the market.We were just saying earlier before, come off maybe 5, 6 % already.What's going to happen?

Finance stress is the greatest contributor to marriage breaks up.And they're going to have a look and say, hey, yeah, we were jacked into it.Government helped us get into it.But they are still on the hook for the whole amount.But aren't you saying prices will go up?I'm saying some prices definitely will be going up because there's a shortage of properties, which means less rent.

Property rents are going to go up significantly, unfortunately, because there's not going to be a big choice.

So finally, what's your advice to anyone wondering right now whether to get into the market?Is it a good time to buy or not?

If you haven't got a good deposit, you're buying to live in, do your best to get into home ownership, because we'vestill got, us New Zealand's got the best tax system in the world as far as your own home goes.There's no tax, there's no inheritance tax.That's the good news.The bad news is we're the highest taxed country in the world on everything else and my advice would be Be very careful right at the moment, I mean these proposed new taxes are going to have to go through Parliament first.It wouldn't surprise me that they back off a bit because really it's got the ability to sink the economy and people won't be able to afford even worse than what it's been, of home ownership, especially first home buyers.

And my advice is do not take, do not get yourself in any property if you've only got 5%.You're exposing yourself, you're punting on the roulette table.If it drops, you're in big trouble.What about you and I, let's buy a property and, you know, we say we break up.Who's going to pick up the rent?Who's going to pick up?

John Simon, thanks for joining us tonight.Thank you.