EP. 1619 Units Doing Better Than Houses?

0:00First of all, this is the great debate. It's the lounge room conversation, the Barbie banter. Our house is going to perform better than units in the future and how they've gone in the past, which is the better investment station. Good morning, good morning. Mr Josh Wrapshot, aka the economist of property, the guy that's got all of the data, how I are. I'm good, I'm good, how are you, it's going well. Yeah, really good. I'm excited about these chapters. This is a common one we have in the office that with buyers, with sellers, people asking for advice

1:02and what a great forum to share on here. Yeah, definitely. I think this one's been playing through my heads with this week, seeing some extraordinary prices across the unit market and all the beaches, and it just had to be thinking, where are they currently? I'll just go and land over the next five years. Yeah, it's quite crazy if we want to get that off with some guy that has shown the growth of the past five and 10 years mark. Sure. Did you think, oh my god, he top marked, marked, told me so. Did you think that? Did you? Did you? Yeah, well, yeah, I remember the one of the first things as you talk about when I started, no back was the catch up for the units, the housing market over that 10-year plan. And tell you what, over those last two, three years,

2:02we've seen some really strong growth. Did he set it up? Yeah, it's a big factor. Over a five year period, guys, we've had houses that reached 60%. This is like a baseline of median price. Units have run 41. And then on a 10-year time frame, houses have done 112 units have done 94. So I think last time we looked at this, there was a bit of a wide gap over that 10-year plan and it was more 170. Are you sure? What suburb did you use? Just the northern beaches as a general across all the northern beaches, the median price. Wow. So you need to have done, you just

3:06have a bit of a problem, always. Because while we're still alive, I think the problem's on mark side. But yeah, massive growth of units, especially those last three years, we've seen that could be a combination of things like, obviously, affordability, number one. Land tax, we've seen a lot of it is traditionally go for freehold properties moving in to straddle units, which is one of the series of moja on land tax. So that's maybe what we've seen. So I might just be back in, just speak. I was just mentioning about a bit of the transition from investors, traditionally, they're always looking for freeholds with the introduction of new land tax, we've probably seen a bit of a change from those investors going to the Udo market,

4:08would you say? Yeah, definitely, definitely. And look, don't forget, governments got a finger in this pie. I remember I saw a really great article of bio with Harry Triggerboth. He's the biggest apartment builder in the country, and probably one of the most successful prolific property guys in the business. And he said two things. He's one thing that I came out with, two things. He said, I've got the best partners in the business. And then I went, partner, he's also always done in your own, he's like, no. He said, the best partners in the business are the Australian government, the Australian banks. I think when it comes to the forecast of how houses are going to perform and how units are going to perform, I think you've got to look at the posture of government. They have a huge part to play with increasing or decreasing taxes or incentives.

5:09So I think that if you think that the unit market, or the house market, organically just railroads, everyone and everything it doesn't, it has levers and controls. And most of those levers and controls are in the hands of governments and banks. So I think also, guys, when you're thinking, do I invest or buy in a house or a unit, have a look at what the government wants to see in over the next decade or two? And I think you'll find they want to encourage units and that's sort of living in more than houses. For a couple of reasons, I could go into it, but yeah. Yeah, definitely. And I sort of think what we've seen across the unit market is more of that law price. And when we spoke about this in another episode, I really think that build costs has been taken into account for building that new floor level or price in regards to units. We probably haven't seen that in the house,

6:09we haven't yet. But I believe that units are leading the way, especially in this climate we're in now. So I think I'm thinking, you know, are we in for a really good next five, 10 years for property holders in that you know, the home market, the housing market, the free-old property, because what you've sort of seen is that unit pushed the edge due to that construction cost. And does that now follow through to your houses? Because we've seen that start to close. Do they go on? There's also affordability behind that as well. So, you know, sure we've got our taxes and performance and stuff like that. But I think there's just sheer affordability and rental increases that's happening in the marketplace. She's really expensive at the moment. So I think if you can live as well in an apartment as opposed to a house, not bad, not bad, not cool in the 60s and 70s,

7:10very uncool to bring your family up into an apartment where as I think now you may find that there's just that lifestyle on the back of affordability, you know, heading towards apartments a little bit more. But let's not forget, Josh, this morning is about capital growth. It's about saying a unit's going to have better capital growth or our house is going to have better capital growth. Irrelevant to a lot of the stuff, you know, lots of units being built or houses being preferred to living or any of that, we're talking about sheer hard core growth. I think the biggest lesson that I've learnt from people in the marketplace the last 10 or 20 years, 30 years is that supply is the enemy of capital growth. So supply is the enemy of capital growth. How would we apply that to these circumstances

8:14of units and houses? Do you think Josh, the economist? This is exactly what it wanted to bring up. Obviously, we're zoning changes frequently with the change is another government lever you call it that has an effect on the market. And we've seen traditional homes, blocks be turned into unit sites, we'll develop it sites. So I feel as though there's an easier for us to create more supply than unit market, then it would be in the house market. So, you know, you don't see any new subdivisions because of all the beaches you'd see a few apartment blocks. And now they are getting bigger because for developers to take on these sites now, they need to be. It's unbeatable to value your original nine and elevenfold block, I think we'll see a new norm

9:15or a minimum of eight to many apartments in those smaller blocks now. And that's really just due to the cost of construction, land costs and all the red tape that's along with these development films. And I think for me personally, to be real basic street talk for people, I think guys and girls, if you wanna know which one's gonna perform better houses or units, look to the area where there's a strong demand, look to an area where there's a low supply. When I say low supply, I mean over the next 10, 20, 30 years. So when you're in areas where there's a shit ton of supply like Paramata or Chatswood or Ride or areas where there's, you know, there's potentially eight thousand units in the suburb. And now there's gonna be 16,000 units in the suburb. That's a lot of supply. So that's gonna put pressure on capital growth,

10:18that's gonna put pressure on you making money. So people may be chasing a beautiful apartment in these areas. And if you have a look at Paramata last 10 years, I think the capital growth was 11%. So if you bought something from me and Bucks, you would have made a hundred grand, it's just been atrocious. And I think the reason why is because of that model of supply, what I'm talking about, supply as the enemy of capital growth, there's too much supply. So stick to areas where there's not enough supply. And I love what you said, Josh, about the houses. It's pretty hard to get the house supply in sort after areas, in an hour out of Sydney or an hour and a half out of Sydney, pretty easy for houses. But not in these suburb, but not in these metro suburbs. Yeah, I seriously think we're heading into a body area where we'll struggle to find a house on the northern beach is not just pre-million dollars. I think that's the way it would be.

11:18I distinctly remember hitting the two million mark for a basic sort of bedroom house. Our member, when we did it at an auction and everyone fell off their chair and that'll happen for three three million buck marks. That's pretty incredible. It is isn't it? It's a crazy machine for all our ships. And it's hard to predict, but one thing's for sure, property appreciates. We've seen that number 10, after 100 years. So history or a big confusion before we go, what would be your one sentence answer to units doing better than houses? I think, I think, I think I've seen some crazy units prices go through and I think there's a lot of value and very whole property. Because of that supply demand factor. So what about you Mark? I think units in low supply areas,

12:21because guess what? I'm not just looking at the growth from a of the house. I'm looking at what it costs to run the house. I'm looking at straddle ladies. I'm looking at land tax. I'm looking at all the relevant cost associated with it. So I think really I don't mean to divert, divert from the subject, but I'm really looking at low supply areas because it's the enemy of capital growth. And then if I really had to put a micro magnifying glass over it, I'd say that stained a low supplier and I'd go a unit. I think they're just, I think they're the way of the future a little bit of good unit. Want me to buy something? It's good to have two ways to look at it. Thanks for the point Mark. I think it's anything interesting to look back on this in five, 10 years, five years.

13:23Yeah, so you wear her out. And traditionally they've always done similar. Just so you know, in the good areas, they've always done similar houses and units in terms of capital growth. So thanks Josh, have a good day. Have a good day everyone. We do everyone a nice box of that. Bye.